A Little Quiz on Interest Rates
It’s that time again – a market and political economy quiz.
The recent Essential Poll showed that only 35% of the population knew interest rates were lower now than when the Labor Government was elected in 2007 and a stunning 20% thought that interest rates were higher. The others presumably had no idea or interest in the interest rate matter.
This prompted me to frame a quick quiz for those interested in the interest rate issues.
The standard variable mortgage interest rate was 8.55% when the Labor Government won the November 2007 election. After the June cut in official interest rates, what is the average mortgage rate of the big banks?
How much is the annual savings in repayments on a $300,000 mortgage with interest rates at 6.80% versus 8.55%?
A: $4,100 a year.
The June cut from the RBA saw the official cash rate fall to 3.5%. When was the last time a Coalition or Liberal Party controlled Government presided over a cash rate this low and who was Prime Minister at that time?
A: 1965; Robert Menzies.
When was the last cut in official interest rates during the Howard Government?
A: December 2001.
What happened to official interest rates during the final 6 years of the Howard Government?
A: Interest rates only rose – there were 10 straight interest rate rises from a low of 4.25% in December 2001 to 6.75% by the time of the November 2007 election.
If the futures market is correct, where will the official cash rate be at the start of 2013 and what does this imply for the level of mortgage rates?
A: Around 2.25% to 2.50% for the official cash rate, which implies a standard variable mortgage rate around 5.75% to 6.00%.
What was the average official cash rate under the Howard Government? (April 1996 to November 2007)
What is the average official cash rate under the Rudd and Gillard Governments? (December 2007 to June 2012)
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