2017 may well be the year that the RBA begins raising rates.

2017 may well be the year that the RBA begins raising rates.

Mortgage lenders are anticipating higher interest rates in the not so distant future, and have started raising rates on fixed and variable mortgages.

This is probable to mean the end to the era for lower rates and could mean bad news for the stock market, this could also mean even worse news for highly-leveraged property investors.

Higher interest rates are typically bad news for stock markets as it makes non-share assets such as term deposits and bonds look more appealing. That typically means a flow of money out of the stock market into those other asset classes.

Yet, given interest rates are previously so low, small increases might not be the providers of disaster that you many expect. Investors could possibly gain some self-assurance from higher rates, predominantly if it means inflation is rising. That typically means larger values for goods and services and more revenue for companies.

This could also see Australia’s large cap stocks start to generate stronger growth, predominantly the big four banks ANZ, CBA, NAB) and Westpac.

Banks hurt when interest rates are low as it affects their margins. Higher interest rates might also see more cash flow into deposits, which are usually a low-cost foundation of funding for the banks.

Posted in: Property market

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