A huge amount has been written and discussed over the last few months and the scare mongers are certainly talking doom and gloom for the economy.  But is it all doom and gloom, or is it simply an adjustment in the economy that will have a stabilising effect and allow for continued steady growth?  One hundred economists will answer this question in one hundred, different ways depending on what factors they see as being more imperative than another.

Why have interest rates risen?

The key reason behind the increase in interest rates is due to a perceived upward pressure on inflation in the economy.  The dictionary will define it as "A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services."  In layman's terms we are spending too much and the price of goods is increasing at the same time.

A number of key factors in the economy are positive.  One key factor is unemployment and this is running at a very low rate and all predictions are that this will continue to be the case.  Interest rates, even with another rate rise, are still historically lower than they have been in recent memory.  Exports are very strong this is set to continue.  Most of the key factors in an economy health check would get the stamp of approval.

So are rates going to continue to rise or not?  I can't give a definitive answer of yes or no, but one thing to keep in mind is that as a whole the economy is perfoming soundly.

With the recent rate rises it is important if you run your own business to know how these rate rises are going to affect your business.  What is the additional cost of equipment finance?  How much extra will it cost on your mortgage?  We have put together the following information that will provide those figures for your consideration:

• Average value of MKP equipment finance transaction:  $75,000
• Most common structure:  60 months term, with nil balloon.
• Increase in monthly repayments with a .25% increase in rates:  $8 per month

• Average value of MKP property finance home loan:  $350,000
• Most common structure:  30 year prinicpal and interest term
• Increase in monthly repayments with a .25% increase:  $85 per month

So as you can see the strain added for equipment funding is minimal and probably would not alter a buying decision for most people.

The increase in home loan repayments can not be down played and will reduce the level of spending that should have the flow on effect to decrease inflation and the potential of another interest rate rise.

Important things to remember in these times is that with your equipment purchases all your rates are fixed** so you will be protected against any further rate rises.  With property finance often banks will not sell you the "Propack" options and discounts for existing home loan facilities.  This can be reviewed by a qualified MKP property finance broker to lower than that you were paying prior to the latest rate rise.

Ring MKP and talk to one of our property finance team about an obligation free assessment of your home loan.  You may well find that you can save thousands.

If you are thinkging of funding any type of plant call MKP for personalised service to assist in funding the purchase.

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**All of MKP equipment finance facilities are fixed rate.  Some financiers are offering variable rate facilities.  So that if rates do move up, so do your payments.