The first cut is the deepest

This week on my Money Coach spot on ABC radio 702 in Sydney, I talked about various interest rates available on different products in the market. But I made what I think is a telling point for anyone in the business of making money - access expert help.

What's the action plan?
Right now there would be a lot of people panicking as interest rates go higher and talk of more rises still make it into the press. And so I asked the ABC audience: who has done anything about it? For example, have interest rate worriers sought help from, say, a mortgage broker or a lender famous for lower interest rates? I recall about three months ago there was one bank offering a honeymoon rate for 12 months of 5.9%! Sure, you revert back to the going standard variable rate of interest after a year but if you're facing a cash crisis, a year's break could be enough to get you through until the next interest rate cut.

Going up or down?
So when might that happen? There are two views.

The current run of economic data has a number of economists telling us that the interest rate rise we were expecting before Christmas now should be forgotten.

Consumer ups and downs
Though consumer confidence dived 16.2% in August it regained some of its lost ground, rising 12.5% in September. The new level is 101.2 and a reading below 100 means pessimism outweighs optimism. And while consumers might feel good, they haven't started spending yet and construction still remains in the doldrums.

Let's hear it from an optimist
On the positive front, the country's average price of petrol has fallen from highs of around 138 cents a litre since mid-year to be currently hovering at 129 cents a litre. In some areas, or with the use of discount vouchers, petrol is closer to 120 cents a litre, thanks to falling world oil prices. And CommSec thinks we'll see 100 cents -110 cents signboards this year, though more will show115 cents a litre. This has great inflation consequence and in turn affects interest rates.
"The Reserve Bank will continue to stay on the interest rate sidelines in 2006 with
inflationary pressure subsiding as business costs are falling in the face of falling world oil
prices," says CommSec's hot shot analysts.

A 'going down' supporter
AMP's Shane Oliver also is also a bearer of good interest rate news. He thinks the next move will be down. He believes the US economic slowdown and the falling inflation outlook will mean the Reserve Bank will hold off on rises in interest rates this year and by next year the global slowdown will create the circumstances for interest rate cuts in the USA and then here.
This will then sow the seeds for an eventual economic recovery with house prices looking a whole lot more healthy by 2008 and 2009.

Brace yourself for this gem
By the way, Oliver doesn't see a recession on the upcoming horizon, which, of course, is good news. Against this, on the eve of his retirement, the Governor of the Reserve Bank, Ian Macfarlane, told the ABC's Maxine McKew that we will have to brace ourselves for higher interest rates when we think of normal interest rates in the future.

He says the last few years were an aberration and that future rates will hover around higher levels. Of course he could be wrong but the Big Mac does know a thing or two about interest rates and it might be silly to ignore him.

However, if both Oliver and Macfarlane both turn out to be right then, when interest rates fall in the next twelve months it might be time to think about fixing your interest rates if you are worried about your debts and cash flow.

Switz's tip
Get yourself a loan expert or become one yourself, as our money world is changing.

Click here to visit Peter Switzer's website