Friday, November 10, 2006

Interest Rates Are Up (Again)

Interest rates were lifted again today by 0.25%. There was almost a
concensus that this would happen, yet the market drops by 21 points (at
lunch). The market has known this was going to happen for a while and a
bigger issue would have been if the reserve bank had not raised interest

The increase, coming after increases in May and August, brings official
interest rates to their highest level since February 2001.

For those holding variable-rate mortgages with a typical 25-year loan of
$200,000 , the repayment cost is likely to rise by about $33 a month. Those
with $300,000 mortgages can expect to pay about $50 more per month.
Considering the increase has been 0.75% this year that means people are
paying approx $100 more a month then they were a year ago. It is the
eighth consecutive rise without a drop.

Businesses have warned that higher rates could chill spending, especially
as we approach the vital Christmas shopping season.

This will impact earnings on consumer discretionary stocks and those stocks
which have high debt (debt / equity of 30% or more).

Good Luck investing.

No comments: