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.