Interest rate is the proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding, “An interest rate definition”. Will interest rate really helps to fuel the housing bubble? Will it encourages people to spend money on home improvements? Is it the health of the economy?

Nowadays, many are pessimist and many are expected the property in Australia but has not yet. House price is slightly high and it doesn’t mean that we have housing bubble because of the high prices. Interest rate is already low and it can cause inflation and make business loans more affordable.

According to Greg Jericho, “Another interest rate cut will fuel a housing bubble in danger of bursting.” When interest rate is high, it means fewer people and business can afford to borrow. It also reduces the capital required to business expansion. When interest rate cut, it will boost the economy and attracts investors. When the interest rate cut happens, it can cause recession and it cures inflation.

http://www.theguardian.com/business/grogonomics/2015/apr/06/steady-on-with-cutting-interest-rates-it-will-fuel-a-housing-bubble-on-the-edge-of-bursting


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More than any other cities, house prices in Perth have fallen by 0.2% in the March quarter. The median price is Perth fell and the rental vacancy rate has returned to 4%. The fall came because of the low interest rate.

According to new data from the Real Estate Institute Western Australia (REIWA), “Perth housing sales dropped in March quarter while the median house price dipped slightly.”

 

Lower Interest rates were failing to drive up values. It stimulates the housing market and quells any additional market exuberance. The market was much quieter last March which supposedly expected to boom because it is summer period. The rental properties continued to grow for we have many vacant properties at the moment. Despite the cut in mortgage interest rates, house values across Perth fell through February. REIWA anticipates the rest of 2015 will continue the growth of house price and median prices remain steady.

http://www.abc.net.au/news/2015-04-07/perth-house-sales-drop/6376182/?site=perth

 


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