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RBA Glossary definition for Real interest rate

Real interest rate – The real interest rate refers to the cost of borrowing money (i.e. the nominal interest rate) net of inflation. It takes account of the fact that part of the nominal interest that borrowers pay to lenders represents compensation for anticipated inflation. The remaining �real� component better reflects the economic cost of borrowing and the return to lending.

RBA Glossary definition for interest rate

interest rate – The term used to describe the cost of borrowing money or the return to the owner of the funds which are invested or lent out. It is usually expressed as a percent per annum of the amount of money borrowed, lent or invested.

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Appendix A: Data Details

12 Sep 2014 RDP 2014-06
Ryan Fox and Peter Tulip
equals Real interest rate (r). 3.3. Council rates. 0.3. plus repairs. ... A.7 Expected Inflation. To present interest rates and expected appreciation in real terms we need a measure of inflation expectations.
https://www.rba.gov.au/publications/rdp/2014/2014-06/appendix-a.html

Estimates

12 Sep 2014 RDP 2014-06
Ryan Fox and Peter Tulip
Estimate. Post-1955 expectations. Ten-year average expectations. Real interest rate (r). 3.3. ... He notes that simple measures – such as the change in house prices – which can be driven by changes in rents, interest rates and so on, are difficult to
https://www.rba.gov.au/publications/rdp/2014/2014-06/estimates.html

Introduction

12 Sep 2014 RDP 2014-06
Ryan Fox and Peter Tulip
We decompose housing values into contributions from rents, interest rates, expected appreciation and other factors, which we hope will be directly useful to potential buyers. ... That has implications for lending and prudential standards. Interest rates
https://www.rba.gov.au/publications/rdp/2014/2014-06/introduction.html

The User Cost of Housing

12 Sep 2014 RDP 2014-06
Ryan Fox and Peter Tulip
where P represents the price of the property; r the real interest rate (a composite of the mortgage rate and the opportunity cost of owner's equity); c represents other running ... Equation (4) is similar to the widely-used Gordon model of share price
https://www.rba.gov.au/publications/rdp/2014/2014-06/the-user-cost-of-housing.html

Conclusion

12 Sep 2014 RDP 2014-06
Ryan Fox and Peter Tulip
Download the Paper 1.14. MB. Real house prices have increased at an average annual rate of slightly less than 2 per cent since 1955. ... In that case, at current prices, rents, interest rates and so on, the average household is probably financially
https://www.rba.gov.au/publications/rdp/2014/2014-06/conclusion.html

Is Housing Overvalued?

14 Jul 2014 RDP 2014-06
Ryan Fox and Peter Tulip
We find that if real house prices grow at their historical average pace, then owning a home is about as expensive as renting. ... We decompose house prices into contributions from rents, interest rates and expected capital gains, which may help
https://www.rba.gov.au/publications/rdp/2014/2014-06.html

Sensitivity

12 Sep 2014 RDP 2014-06
Ryan Fox and Peter Tulip
Real disposable income per household (labelled ‘HHDY’) has grown at an average annual rate of 1.6 per cent since 1960. ... discussed in Section A.7), to give an expected rate of real appreciation of constant-quality houses of 1.1 per cent.
https://www.rba.gov.au/publications/rdp/2014/2014-06/sensitivity.html

Data Summary

12 Sep 2014 RDP 2014-06
Ryan Fox and Peter Tulip
For interest rates, we use the average fixed 10-year mortgage rate, less a term premium of 1.3 percentage points. ... markets. We assume that the opportunity cost of owner's equity is close to the real mortgage rate, so leverage can be ignored.
https://www.rba.gov.au/publications/rdp/2014/2014-06/data-summary.html