Interest rate is the price of money. The price of Australian property changes depending on the level of interest. Rate. For instance, in the year 2015, the interest rate was fell causing a fall in the price of houses. In most economies, the purchase of a property in the property market is done through mortgaging. This is the process in which an investor or a consumer buys for instance a house on a loan basis. The buyer of the property gets the ownership of the property and uses it as he/she continues to pay the mortgage. The amount of loan taken is less than the accumulated monthly payments after the mortgage has been fully paid. This is because some interest rate is attached to the monthly payment so as to compensate for the time value of money and for the risk taken. Many investors are attracted to the Australian property market owing to the rising value of the properties (Oliver, 2015). The demand for houses has gone up. What some people are not aware of is that higher prices of houses may have a great influence on the interest rate which might in turn push the mortgage rate. If the mortgage rate goes up, the future returns from these investments will be low.
Interest rate is an important factor in the economy as it’s a monetary policy tool of the government which is influenced any time the Reserve bank of Australia (RBA) needs to stimulate macroeconomic indicators such as unemployment rate, inflation rate and the economic growth. The government sometimes lower its cash rate to stimulate the demand for house (Chande, 2015). In order to stimulate consumption and investments, the RBA changes cash rate so as to lower the interest rate. However, the macroeconomic policy of low interest rate is harmful to an economy as it results in a greater demand for money. This stimulates the investment level and may result in an economic bubble. Most of this investment are poured on the stock and real –estate markets.
The percentage charged for money use is the interest rate. When money is borrowed, the interest is charged based on a stated interest rate which is payable when the loan is being paid. The lender charges a borrower a proportion of the total loan amount as an interest rate. The interest rate is stated in monthly, quarterly, semi-annually or annually. The expensiveness of the loans advance by banks is caused by the interest rates. During periods of high interest rates, the amount of money available in an economy falls since people are avoiding the borrowing since servicing of the debt is more expensive. For this reason, the consumer demand is reduced. However, the returns on savings are high when the interest rates are high, thus, investors saves more and invests less. At higher interest rate, the mortgage interest is high causing a rise in the prices of houses (Simon, 2015). Consequently the demand for houses falls. Similarly, at lower interest rate, the mortgage interest is low which makes the price of houses to fall. According to Koukoulas (2015) and Business.uq.edu.au. (2014), the housing prices is Australia stopped rising and investors was uncertain whether this was the beginning of the collapse of this market.
Millar (2016) noted that sustained low interest rate has raised the affordability of houses due to capital availability and this has resulted in a rampant fuelling of the Australian property market. She noted that the Australians have a natural appetite for properties. However, she questioned the sustainability of this growth in the Australian property market owing to the global unrest, the end of the mining boom and the slowing of the Chinese economy. She also noted that there is a fall in the prices of commodities on the board and thus a widespread in the market instability.
The major aim of this project is to determine the impacts caused to the Australian property market as a result of interest rate volatility. The objectives below indicates what the project is meant to achieve in line with the aim.
In order to fully achieve the intended goals of this project, the following methodology will be used;
Brown, S. (2016). Australian Resi Property Market Update – April 2016 - Stanford Brown. Stanford Brown. Retrieved 5 April 2017, from https://stanfordbrown.com.au/australian-resi-property-market-update-april-2016/
Business.uq.edu.au. (2014). Is the house price bubble about to burst? | UQ Business School. Business.uq.edu.au. Retrieved 5 April 2017, from https://www.business.uq.edu.au/momentum/house-price-bubble-about-burst
Chande, M. (2015). The impact of interest rates on the property market. Property Week. Retrieved 4 April 2017, from https://www.propertyweek.com/opinion/the-impact-of-interest-rates-on-the-property-market/5077199.article.
Helliar, C. (2005). Interest Rate Risk Management. Burlington: Elsevier.
Koukoulas, S. (2015). We're almost certainly a million miles away from a house price collapse. ABC News. Retrieved 4 April 2017, from https://www.abc.net.au/news/2015-10-22/koukoulas-are-we-really-heading-for-a-house-price-collapse/6873812
Millar, S. (2016). Q&A: How will the global economy affect the housing market? - realestate.com.au. realestate.com.au. Retrieved 4 April 2017, from https://www.realestate.com.au/news/qa-how-will-the-global-economy-affect-the-housing-market/.
Oliver, S. (2015). Australian home prices and interest rates. Ampcapital.com.au. Retrieved 4 April 2017, from https://www.ampcapital.com.au/article-detail?alias=/olivers-insights/april-2015/australian-home-prices-and-interest-rates
Simon, J. (2015). Low Interest Rate Environments and Risk | Speeches | RBA. Reserve Bank of Australia. Retrieved 4 April 2017, from https://www.rba.gov.au/speeches/2015/sp-so-2015-10-08.html
To export a reference to this article please select a referencing stye below:
My Assignment Help. (2018). The Impacts Of Interest Rate Volatility . Retrieved from https://myassignmenthelp.com/free-samples/the-impacts-of-interest-rate-volatility.
"The Impacts Of Interest Rate Volatility ." My Assignment Help, 2018, https://myassignmenthelp.com/free-samples/the-impacts-of-interest-rate-volatility.
My Assignment Help (2018) The Impacts Of Interest Rate Volatility [Online]. Available from: https://myassignmenthelp.com/free-samples/the-impacts-of-interest-rate-volatility
[Accessed 05 April 2020].
My Assignment Help. 'The Impacts Of Interest Rate Volatility ' (My Assignment Help, 2018) <https://myassignmenthelp.com/free-samples/the-impacts-of-interest-rate-volatility> accessed 05 April 2020.
My Assignment Help. The Impacts Of Interest Rate Volatility [Internet]. My Assignment Help. 2018 [cited 05 April 2020]. Available from: https://myassignmenthelp.com/free-samples/the-impacts-of-interest-rate-volatility.
MyAssignmenthelp.com has appointed best assignment experts who are wizards of words. Our writers know every trick of crafting high quality write-ups within a short period. With years of experiences, we have become one of the most prolific assignment help services in the USA. We deliver custom-made help to students with writing different types of assignments. We guarantee total need-based and timely service, and this is why increasing numbers of students prefer to buy assignment online.
Answer: The rate of underutilization is the sum of unemployment and underemployment. For this reason, it can be said that the rate of underutilization will be higher compared to the rate of unemployment. Unemployment takes place when a person is actively searching for jobs and is unable to find any job. Unemployment can be measured by measuring the rate of unemployment where the people who are unemployed are divided by the number of peop...Read More
Answer: Introduction In this essay, the prospective effect of drought on macroeconomic equilibrium of Australia has been discussed. Drought indicates a dry climatic condition resulted from insufficient rainfall in a specific region. Drought affects an economy by influencing mainly supply side variables. Farms, business and common people are likely to suffer due to drought. Based on intensity the effect of drought might be local, regional or e...Read More
Answers: 1. The three main forms of unemployment are structural unemployment, frictional unemployment and cyclical unemployment. The first two represent natural unemployment while the third occurs due a decline in demand during recession. Structural unemployment The labor market suffers structural unemployment due to a shift in the economic structure creating divergence between skills that workers possess and the skills that employers...Read More
Answer: a. In a perfectly competitive market, firms are price taker as none of them can change the market price. New firms can enter into the market without any restrictions and each of them sells similar products. Therefore, each firm possesses a very small portion of the entire market. According to the characteristic of this market, each firm and each consumer has perfect knowledge of others (Cowell, 2018). If one of them change price then ...Read More
Answer: Workshop Question 1 The UNDP describes development on the basis of three essentials, which includes the ability for a country’s population to have long and healthy life, have a decent standard of living and quality education (Frugoli et al, 2015, p.370). Through the Human Development Index, a country’s overall well-being can, therefore, be easily measured. It’s a social measurement as it takes into consideration the...Read More
Just share your requirements and get customized solutions on time.
Our writers make sure that all orders are submitted, prior to the deadline.
Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.
Feel free to contact our assignment writing services any time via phone, email or live chat.
Our writers can provide you professional writing assistance on any subject at any level.
Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.
Get all your documents checked for plagiarism or duplicacy with us.
Get different kinds of essays typed in minutes with clicks.
Calculate your semester grades and cumulative GPa with our GPA Calculator.
Balance any chemical equation in minutes just by entering the formula.
Calculate the number of words and number of pages of all your academic documents.
Our Mission Client Satisfaction
Excellent head start for a larger paper that I need to do. Thank you very much for your assistance.
The writeup was good. i would definitely use this my assignment and recommend it to my friends
very good, help me get a great grade, very quick response and detailed answers! I would highly recommended to another student
Absolutely awesome !!! You guys are great !!! I will be using your services for the rest of my semester and will recommend to my friends!!