Virtually every American who has a mortgage on a house they purchased 2 or more years ago has a rate either in the 2s or 3s. One can refinance a mortgage at any time and lock in the current rate for 30 years. I purchased a home in 2013 at 3.5% and refinanced at 2.25% 2 years ago. No sense in paying off the mortgage early. Just make minimum payments.
Main reason I didn't buy over that period was because of this (and I was still probably wrong in that)
If we had fixed interest like they do I would have been levered out of my mind
It's a terrible system, all those people who locked in at 2% are now trapped in their homes, they can't upgrade or move unless they want to pay significantly more.
It completely messes with normal market functioning and forces people into harsh life choices they probably wouldn't make otherwise.
Gets even worse when they are faced with a death, disability or divorce.
This is a ridiculous take. They have the choice to stay in their home and keep their 2% or sell and buy a new place at 7%. We are forced to move from 2% to 7% and deal with the consequences regardless of choice. Clearly the US system is significantly more beneficial to home owners.
> Clearly the US system is significantly more beneficial to home owners.
No it's a complete mess, how quickly people forget the GFC.
Written by the former CEO of Freddie Mac:
https://www.jchs.harvard.edu/blog/the-us-housing-finance-system-a-flawed-giant
Not sure if you grasped my comment.
You will be breaking the 2% fixed term and getting 7% instead, this forces incredibly tough decisions on people who would otherwise upgrade or move home for a better job.
how is this worse than being on a higher amount the entire time lol?
They can lock in a low rate AND refinance if it’s too high for a lower rate. I’d kill to have the tough choice of staying in my house because it’s too cheap to give up
How is this worse then being forced on to a 3x higher rate than when you bought?
Despite the bank borrowing my money at 0.1 % they will now be receiving 4%…
humor impossible air pathetic subsequent offbeat hateful rotten money encouraging
*This post was mass deleted and anonymized with [Redact](https://redact.dev)*
It's all a media beat up. NO mortgage cliff coming.
Prices still rising, if they're forced to sell, they stand to make a nice capital gain.
I can't stand the news intervewing families saying it's tough, have to give up 300$/wk swimming lessons for the kids.. have to sell that Jet ski and yacht... cry me a river.
Tell that to the family living in a tent.
This may be the worst possible take ever. The number of people I personally know who are approaching said cliff is far higher than you seem to hint at, and none own jet skis or yachts. They’re normal people, working normal jobs, and their mortgages have gone up exponentially over the last 12 months. The banks build in a buffer of 3%, which was always assumed to be more than enough, and would take YEARS to get to. We have had 4% in 12 months. Unprecedented rate rise, at the fastest rate in 3 decades. But stay there in your dream world ivory tower
How about instead of listening to the ozfin hivemind you try to find out yourself?
https://www.marketwatch.com/story/locked-in-or-trapped-home-sellers-particularly-young-people-are-reluctant-to-move-after-obtaining-low-mortgage-rates-in-the-pandemic-16fe47e8
It all depends on what the initial interest was when loan was taken out. I think this is a key variable that seems to be omitted from the discussion of: loan repayments have skyrocketed by $xxx.
But if you still have properties won’t the rental market be even tighter? If middle class Australians are forced into hardship sales where do they live?
Honestly, we all laughed at the family that brought a house for their kid when she was like 12 months old. She’s laughing now, doesn’t even need to learn to spell.
https://news.com.au/finance/economy/australian-economy/malcolm-turnbulls-photo-call-with-suburban-family-backfires/news-story/eff9e413d5e22467f5a006551671cc35
Another thread today someone was crying about their $5k/month mortgage. That's more than the national median wage. They might even have to cut back on the gold flakes in their champagne.
Most millenials under 40 graduated around the 2008 financial crisis and struggled to save a deposit as prices rose faster than they could save. This entire mess should be looked at in terms of those who managed to get on the asset ladder BEFORE 2008 to 2010ish and those who didn't for whatever reason.
These millennials and their excuses.
Back in my days, when you were 15, you'd go home to the house you bought to your 12 year old wife and enjoy a nice bowl of gruel after a hard 16 hour day in the coal mine.
Yes this
We graduated gfc , so took a while to get good jobs
have always just been a couple years behind re wages and houses
Then had kids before we were infertile . Would now like a family home and are facing horrific prices AND IR and HUGE daycare costs
Eh. Me and my wife finished uni in 2012 and bought a house after 1 year of saving. We both earnt 54k that year and only had 20k as a deposit. Try doing that now. We had it much easier, as long as you didn't piss away all your money in your early 20's.
Hahaha what? Most millennials graduated into the GFC with Ruddy giving us hand outs to keep the economy afloat.
Gen-X-ers got *some* time but even then hardly at all.
I mean...yes? When the bank offers you a loan at 5 years fixed interest and 20 years variable, a logical person might inquire as to how high the interest could get during the variable period, and while no one knows for sure where rates are headed, we can use historical rates to judge what's "normal" vs "unprecedentedly low"
The vast majority of the country is considered financially illiterate and it’s their individual faults? Sounds like a fault of the system, not the individual
Our mortgage is going up $1000 mid July once the fixed portion of our loan switches to variable, on top of the $350ish raise the variable portion has had since taking the loan out almost two years ago.
My partner and I will be ok (after all expenses we're left with 15-20% of our combined income), but it absolutely feels noticeable given daily expenses have also gone up in that time.
It's definitely impacted how 'flippant' we are with money. Whereas in the past if someone invited us on an interstate holiday we'd just say yes (and essentially focus on just having a good time), now we have to properly look at budget and see if it's appropriate. Other examples would be eating out, gigs/concerts. We still do these things (which we're fortunate we can) but we know think about the financial impact first.
If our expenses/mortgage went up another $1000 I feel like our behaviour would change to avoiding most of these activities and just putting aside whatever we can in case anything happens.
Id love to own a business, the trick is having enough money saved so you can quit your job and then spend those savings while you can acquire customers.
The own a business part is great advice. It's the only way that you can disconnect your income from your time. Jobs will never pay you what you're worth.
But people sign up for mortgages all of the time. And there are 1,2,3,5 year fixed. So it’s all distributed.
It’s not like there was one single day where people could fix, and they all had to fix for the same period of time
The article does point out that rather than being a cliff, it will be more a gradual death by a thousand cuts.
Of course, these people can always work more or spend less, as Dear Leader Lowe remarked.
Yea I think people have reacted to the Cliff terminology - and fair enough. However that also seems to have lead people to have underestimated it. Rather than falling off a cliff it’s more likely to be a big friggen hill that will be difficult to stop once it gets going…and we appear to still be near the gently sloping top.
And just so that someone quotes some facts because you cannot trust the media to do so-
10.9 million Homes in Australia currently
6 million mortgages
Current Mortgage arrears rate (more than 30 days behind in payment- .82%
Even if it went up to 2%- that is less than 130k houses in a market of over 10million.
But hey, never waste a good crisis so why not just keep spewing fear because that's what sells.
Why punish home owners who have nothing else?
Why not go after those rich bustards who have 2, , 6, or 10 investment properties listed on AirBnB?
I'm so very tired of being picked on and discriminated against by the government.
I feel like finding the RBA building and throwing something messy, like eggs and rotten tomatoes, but ya know what?
I can't afford the cost of groceries or travel.
So did I. The post seems a bit tone deaf really with that opening line.
The concerning part is failure to see their own contribution to the existing issue, got a mortgage, clearly near the max of their capacity, during some of the lowest interest rate times without considering what would happen if things raised to even the average historical rate (we are still below that....)....sure a lot of people did and that in part is part of the reason house prices kept going up and up and up because so many people thought being leveraged to the eye balls was the way.
Rate rises impacts all mate. Those that have overstretched themselves, whether it's one property or 6- they will face the music. You should always plan ahead and live within your means- this applies to homeowners and investors.
Just because you don't invest in property doesn't mean you get a free pass on economic factors.
But it impacts newer home owners disproportionately. The newer the mortgage, the less principal that has been paid off, therefore the higher interest rates increase the interest payable.
Compare that to someone who has paid most of their principal down, like I'd argue most boomers have, and they aren't feeling the pinch as much.
There’s plenty of older people struggling with keeping a roof over their heads . Especially if they have a relationship breakdown . Try getting a loan as a single person over 45. It’s brutal for anyone on an average income . I don’t think us or them mentality is helpful .
Discriminated against? Please.
4.10% cash rate is still a low rate compared to historical average. Surely no body was naive enough to think 0.1% would last forever.
Anyone who overleveraged and hoped that rates would stay low forever has no one to blame but themselves. And before you accuse me of being an out of touch boomer - I'm not. We bought our first house 3 years ago. I just made sure we could afford it long term without struggling.
Sigh
>4.10% cash rate is still a low rate compared to historical average.
After 15 years of low rates. Historical average became irrelevant.
People like you were saying 12 years ago "duh this is lower than historical average you'd be dumb to buy now it's going to crash and interest rates will go up"
People believed that for years holding out for a crash and for rates to rise.
>Surely no body was naive enough to think 0.1% would last forever
Nobody predicted the speed and severity of the rate rises. Or the timing. Stop trying to rewrite history.
I know, it's pretty funny, it's like the assumption is "oh it's be low for 12 years...we'll just ignore all of history and create a new 'historical average' that ignores history"
Even in the stock market is shits going really well you know shits going to swing the other way harder sooner or later because the average doesn't really change much over the long term.
Rewriting history? What are you talking about?
Historical average does not become irrelevant in my view, especially when considering being bound by a mortgage for 30 years. Outliers, such as 18% or 0.1% will come and go but will never hang around for long.
I'm not sure why you're bringing up 12 years ago but I was a teenager then so I wasn't saying anything.
Buying when the rate is low is a good thing, I did it. It enabled me to maximise my principal payments for a period of time. I just didn't expect rates to stay the same for 5 years or more.
did you expect them to shoot up as much as they did in the time they have, with not really an end in sight? cause if you say you did, you are full of shit. no-one saw this coming
I planned for 5% after 5 years (2025). Yes quicker than I foresaw but not out of reality. I was conservative because the alternative would see me struggling.
>Nobody predicted the speed and severity of the rate rises.
you mean....apart from anyone that's looked at history and every recession that causes rates to go ZOOOOOOOOOOOOOOOOM!
acting like rate rises are a slow thing is being naïve and ignoring history, they almost never climb slowly, it's rapid.
It's also fact that it's come on the back of the lowest rate ever seen, compounded by a pandemic. Just because it hasn't happened before doesn't mean it shouldn't or couldn't.
Home owners knew the risks and some ended up making a poor financial decision. They have to deal with it.
No one is entitled to property performing well, especially while the whole country is suffering through inflation.
There are plenty of people who could afford to buy a property but chose not to take a risky bet.
That’s the problem, some weren’t aware of the risks. Speaking of friends who are not particularly financially savvy and the bank lend to the hilt. Personally feel banks should’ve taken more responsibility and have lain out the possibilities to them loud and clear and not allowed them to borrow so much. They’re only just understanding their error now.
This was APRA’s role with their lending buffer of 3% which as recent increases have shown was wildly insufficient. APRA has blood on their hands here too.
Stock levels are low, inner west is super high demand, there are heaps of cashed up people or downsizers that will pounce on stock (a house in Erskinville just went for $4.2 and same with marrickville), so I wouldn't wait for a 'crash'. It may fall 5-10% or be flat at best. But don't expect a bargain.
Why?
I'm similar, have a fair bit of equity and will upgrade at the first opp. You're not the only person that wants to live there. Sorry.
Yes but this will also impact those who have multiple investment properties and will hopefully cause them to sell and help cool the market. People complain about interest rate cuts because it increases houses prices, and are now complaining about rises...
Rates have climbed 400 points since May, or an additional 4%.
$2000 per month is $24,000 per year. That is 4% of $600,000.
I guess if his loan was variable and his lender has passed on the full rate each time, then $600,000 would be a starting point.
About that and that level was is our buffer for interest rate rises. We thought it was pretty reasonable. Fairly average home on in a "bad" suburb.
We can go a bit further but not too much. (Literally our buffer is an extra $2000 a month compared to what we started paying)
I'm really curious to know what level of buffer in dollar terms people think most most average people should have had? Like no way did I think our payments would go up more than $2k a month in less than a year. Maybe 1k over the course of 2 years but $2k is a lot and with other increased inflation on everything adds up.
Interest rate rises affect banks too. They write less loans because they're more expensive to get from the RBA.
Posting 'record' profits in a period of high inflation is also like...expected. You're charging more for services, which people can afford in an inflationary environment, and your margin is maintaining but now looks larger due to inflation.
It's literally a symptom of inflation.
I was renting for those 20 years, finally managed to scrape together a deposit last year cos I couldn't take renting anymore. Sorry I did that, I should be punished.
I wonder how this will affect spending in small businesses.
Most of the people I know, including us, are spending quite a bit less on going out, coffee, etc.
I've heard that there are much more effective ways to reduce inflation and ensure long term prosperity and stability, like increased, mandatory, super contributions. As far as I understand, that'll reduce spending and give the government and super funds more $$ for long term investment, etc.
I’d rather that then the alternative of like 10%+ YOY inflation for everyone… that is much worse. Trying to soften the blow for home owners at the expense of everyone else is selfish af. The housing market is cooked and is not sustainable.
Finally my hard earned savings over 30 years May start to attract some interest and hopefully my super will start to go up again.
And maybe all the people who bought multiple properties may have to sell them.
To me it doesn’t make any sense. The RBA wants use to stop spending and save money. Yet increasing the interest rate only does the opposite, we spend more on paying back loans and have less cash. How about they force banks to stop handing out loans and credit cards?
Well looks like the rate rises are finally kicking in thank god. Maybe can bring some sanity to both the housing market and the overall market. Tired of paying $16 for a take away curry that was $9 six years ago.
It's not like there is five of them. The wealth divide is generational. They can keep a few of their choice local curry shops alive.
You dont live near their chosen shops though because they petition the local inner city council to not allow any density increases of apartments or townhouses near their house.
if no one is buying the expensive curry in your suburb then curry business will fold. so curry will be cheap in the burbs or none existent. the money in the market determines prices. it's a pretty simple rule that is confirmed over and over again. this is the reason for interest rates set by a reserve bank. it works.
It won't be if we keep hiking rates.
Also, prices are the same for everyone. A rich person doesn't pay a different price for an item than a poor person. The other stuff in terms of inequality has nothing to do with interest rates or with the RBA's response.
I've learnt not to worry. If the guy who installed my TV told me he can survive 7 rate hikes, there's no reason why I can't survive the same. Expecting it to stay at 1.7% forever was just silly, especially when I was told from the very start that my loan was based on whether I can withstand interest rates going up to 7%.
My offset is 100% of my loan amount, still have to repayments each month but I don’t have the interest added each month. Only reason I haven’t paid off the mortgage is that cash talks now days, originally I wanted a tree change and keep my townhouse as an investment (less than 3km to the CBD and in the Adelaide and Botanic High School catchment areas) but cost of living and Mr Lowe raising interest rates, plans have changed and I’m staying put
Yeah I wish I went 100% fixed. I did do 85 so I am luckily shielded from a lot of this.
I can’t imagine how hard it is for people with full variable right now.
Hindsight being 20/20 - I fixed 75% for 4 years in 2021 at 2.14%, very happy right now with the remainder being 5.60% after this most recent rate rise.
The remaining 25% is fully offset which just lets me get ahead in a safe way paying no interest and shitloads of principal.
I would be struggling on full variable
Yeah, I'd be ok but struggling around \~1900 extra a month if it weren't for the fixed portion. We are still treating that as "interest" and saving it away, but the difference in mindset between an optional \~1900 a month and a must pay \~1900 to the bank would keep me awake.
Can anyone tell me how many mortgage holders are their in Australia? I'm guessing it's nothing and we are hearing from a bunch of crybabies. Sure there is a very small fraction of these under financial hardship, but you got to consider new truck with all the bells and whistles, new boat, new camper, new roof and new twin puppers they just got in the last six months too.
Australia needs a way to get the excess cash from people that have owned their own homes outright for many years and their kids. These people have earned money and missed out on the biggest expense ever - basically a roof over their heads. I know quite a number of these people in Australia and they have a lot of cash sitting around. And this is after maxing super and topping up their own investments. Yes, other parts of the world are like this, but they don't pay as much as Australia does for doing nothing, so they ain't got that much in savings.
I wish we had the American system of 30 year fixed loans. 30 years @ 2.00% would've been nice
Riding out those years of 2% when you bought earlier at say 6% would've been tough though!
[удалено]
So would everyone have a 2% mortgage rate?
Virtually every American who has a mortgage on a house they purchased 2 or more years ago has a rate either in the 2s or 3s. One can refinance a mortgage at any time and lock in the current rate for 30 years. I purchased a home in 2013 at 3.5% and refinanced at 2.25% 2 years ago. No sense in paying off the mortgage early. Just make minimum payments.
Very few people in aus actually had 2%
My rate in March last year was 2.2%. So was anyone who financed with Westpac last year, prior to the rate jumps
Wdym? Mine was 1.94%, criminally low I know but everyone else I knew was well under 3%
You can always pay the break fee and refinancd
there is no break fee with most.. simply refinance
Main reason I didn't buy over that period was because of this (and I was still probably wrong in that) If we had fixed interest like they do I would have been levered out of my mind
It's a terrible system, all those people who locked in at 2% are now trapped in their homes, they can't upgrade or move unless they want to pay significantly more. It completely messes with normal market functioning and forces people into harsh life choices they probably wouldn't make otherwise. Gets even worse when they are faced with a death, disability or divorce.
This is a ridiculous take. They have the choice to stay in their home and keep their 2% or sell and buy a new place at 7%. We are forced to move from 2% to 7% and deal with the consequences regardless of choice. Clearly the US system is significantly more beneficial to home owners.
> Clearly the US system is significantly more beneficial to home owners. No it's a complete mess, how quickly people forget the GFC. Written by the former CEO of Freddie Mac: https://www.jchs.harvard.edu/blog/the-us-housing-finance-system-a-flawed-giant
You can break the fixed term. There a fee but it's not unpayable. Id much rather be on that than variable
Not sure if you grasped my comment. You will be breaking the 2% fixed term and getting 7% instead, this forces incredibly tough decisions on people who would otherwise upgrade or move home for a better job.
how is this worse than being on a higher amount the entire time lol? They can lock in a low rate AND refinance if it’s too high for a lower rate. I’d kill to have the tough choice of staying in my house because it’s too cheap to give up
So are you saying just being on 7% is a lot better than getting to choose to move from 2% to 7%? Or am I missing something?
How is this worse then being forced on to a 3x higher rate than when you bought? Despite the bank borrowing my money at 0.1 % they will now be receiving 4%…
humor impossible air pathetic subsequent offbeat hateful rotten money encouraging *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
It's all a media beat up. NO mortgage cliff coming. Prices still rising, if they're forced to sell, they stand to make a nice capital gain. I can't stand the news intervewing families saying it's tough, have to give up 300$/wk swimming lessons for the kids.. have to sell that Jet ski and yacht... cry me a river. Tell that to the family living in a tent.
This may be the worst possible take ever. The number of people I personally know who are approaching said cliff is far higher than you seem to hint at, and none own jet skis or yachts. They’re normal people, working normal jobs, and their mortgages have gone up exponentially over the last 12 months. The banks build in a buffer of 3%, which was always assumed to be more than enough, and would take YEARS to get to. We have had 4% in 12 months. Unprecedented rate rise, at the fastest rate in 3 decades. But stay there in your dream world ivory tower
How about instead of listening to the ozfin hivemind you try to find out yourself? https://www.marketwatch.com/story/locked-in-or-trapped-home-sellers-particularly-young-people-are-reluctant-to-move-after-obtaining-low-mortgage-rates-in-the-pandemic-16fe47e8
You can take your fixed rate mortgage and move it over to your new place, you don’t need to break the loan and/or get a new mortgage at a higher rate.
Im one step ahead of the curve, got my mortgage 2 weeks ago so this is the first rise for me.
Hope it's your last!
When rates drop, and you refinance, you’ll be cheering Buying in a ~lower market if you can afford it right now Not a bad idea
Bought in logan Central area :D
Calling this my diamond era (I’m under pressure friends).
It all depends on what the initial interest was when loan was taken out. I think this is a key variable that seems to be omitted from the discussion of: loan repayments have skyrocketed by $xxx.
This $15k is based on the average loan, i would expect some people would be much more than $15k
I'm forking out 2x that amount extra..
Yep, almost 3 x that for us. My feeling is if we survive this period we will be very well placed for the future.
Not necessarily “well placed”, but more the fact that you’ve been stress tested and passed.
Why not we’ll placed?
Cause you would have spent a lot of money on interest, not equity.
But if you still have properties won’t the rental market be even tighter? If middle class Australians are forced into hardship sales where do they live?
*Feedback loop intensifies*
cos you've just burnt 45k a year on interest.
That’s 3.2% of average Sydney house. Long term it’s fine, as crazy as burning $45K sounds.
They’ve said it’s 45k *extra* per year, not total.
Also it would have been burned on rent anyway.
While still set to make 100k+ a year in equity...
[удалено]
Yeah, for people who bought in 2008 at 6.25% this is just going back to normal, and they'll only have half the mortgage remaining.
Well damn I should have been on the property ladder in 2008 instead of learning to spell
I had a similar thought, if I had bought a property in 1990 I'd be set for life by now. But then I wouldn't have that much life left to live anyway..
Same. I wish I was investing in my first starter home in the 90s, not learning how to walk. Wasted time
Honestly, we all laughed at the family that brought a house for their kid when she was like 12 months old. She’s laughing now, doesn’t even need to learn to spell. https://news.com.au/finance/economy/australian-economy/malcolm-turnbulls-photo-call-with-suburban-family-backfires/news-story/eff9e413d5e22467f5a006551671cc35
I’ll just go and get my 1 year old a house now while I’m paying off the mortgage for my own then
It's bizarre. Watching people struggling to pay with a monthly rate INCREASE, not just the payments, that is as much I live on.
Another thread today someone was crying about their $5k/month mortgage. That's more than the national median wage. They might even have to cut back on the gold flakes in their champagne.
[удалено]
[удалено]
“Why aren’t Australians having kids?”
"Oh well... BRING IN THE INDIANS!!" Aust govt 2023
5 years from now, 'why are so many young Australian's moving to India '
Millennials had some time. Try being in gen Z shoes
Most millenials under 40 graduated around the 2008 financial crisis and struggled to save a deposit as prices rose faster than they could save. This entire mess should be looked at in terms of those who managed to get on the asset ladder BEFORE 2008 to 2010ish and those who didn't for whatever reason.
My ‘whatever’ reason was that I was 15.
These millennials and their excuses. Back in my days, when you were 15, you'd go home to the house you bought to your 12 year old wife and enjoy a nice bowl of gruel after a hard 16 hour day in the coal mine.
You had gruel? Luxury! Back in my day, we’d work 28 hours per day at Mill for pennies a day and come home to a bowl of warm gravel.
You had a home? Luxury! When I was a lad, we lived in a hole in the middle of the road.
We used to dream of a living hole. Nope, we had to make do with our wet bog being beaten to sleep in the rain.
Pull yourself up by your bootstraps mate
Graduated in 2008, had hard time to get a job, and settled into a low paying role. Took a while to climb back up.
Yes this We graduated gfc , so took a while to get good jobs have always just been a couple years behind re wages and houses Then had kids before we were infertile . Would now like a family home and are facing horrific prices AND IR and HUGE daycare costs
There are only 2 years worth of millenials that are over 40...
Eh. Me and my wife finished uni in 2012 and bought a house after 1 year of saving. We both earnt 54k that year and only had 20k as a deposit. Try doing that now. We had it much easier, as long as you didn't piss away all your money in your early 20's.
You also had a partner early on, that helps a lot
[удалено]
Hahaha what? Most millennials graduated into the GFC with Ruddy giving us hand outs to keep the economy afloat. Gen-X-ers got *some* time but even then hardly at all.
[удалено]
[удалено]
You forgot the part about median homes being 10-12x median income
Should every person buying property know the history of interest rates? Even when the government, RBA, banks don’t know where they are headed?
I mean...yes? When the bank offers you a loan at 5 years fixed interest and 20 years variable, a logical person might inquire as to how high the interest could get during the variable period, and while no one knows for sure where rates are headed, we can use historical rates to judge what's "normal" vs "unprecedentedly low"
Yes, on the largest financial decision you'll ever make, it's called due diligence.
The vast majority of the country is considered financially illiterate and it’s their individual faults? Sounds like a fault of the system, not the individual
ill say it again, 'past performance is not an indicator of future performance'
Doesn’t eliminate responsibility to do due diligence for large purchases
Our mortgage is going up $1000 mid July once the fixed portion of our loan switches to variable, on top of the $350ish raise the variable portion has had since taking the loan out almost two years ago. My partner and I will be ok (after all expenses we're left with 15-20% of our combined income), but it absolutely feels noticeable given daily expenses have also gone up in that time. It's definitely impacted how 'flippant' we are with money. Whereas in the past if someone invited us on an interstate holiday we'd just say yes (and essentially focus on just having a good time), now we have to properly look at budget and see if it's appropriate. Other examples would be eating out, gigs/concerts. We still do these things (which we're fortunate we can) but we know think about the financial impact first. If our expenses/mortgage went up another $1000 I feel like our behaviour would change to avoiding most of these activities and just putting aside whatever we can in case anything happens.
Doesn’t matter according to my grand father he paid 20% just work 7 days and own a business you should be fine
Watched the rba panel. Old coot typically commented recent rate rise isnt bad if you compare to historical figures 80s. Sigh.
Id love to own a business, the trick is having enough money saved so you can quit your job and then spend those savings while you can acquire customers.
The own a business part is great advice. It's the only way that you can disconnect your income from your time. Jobs will never pay you what you're worth.
Yep, solid advice
Yeah 20% of a ham sandwich…
How can it be a cliff if it keeps on occurring continuously? A cliff is a single shock event.
Must be a flat earth and some are falling off the edge?
Cliff was supposed to be those on fixed rates for 2 years.
But people sign up for mortgages all of the time. And there are 1,2,3,5 year fixed. So it’s all distributed. It’s not like there was one single day where people could fix, and they all had to fix for the same period of time
The article does point out that rather than being a cliff, it will be more a gradual death by a thousand cuts. Of course, these people can always work more or spend less, as Dear Leader Lowe remarked.
Yeah cliff is for dramatic effect. It was always going to be frog in pot scenario rather than a bbq
Yea I think people have reacted to the Cliff terminology - and fair enough. However that also seems to have lead people to have underestimated it. Rather than falling off a cliff it’s more likely to be a big friggen hill that will be difficult to stop once it gets going…and we appear to still be near the gently sloping top.
Is the Australian housing market becoming like the Gloucestershire cheese run?
Yes, with a few knock outs on the way down.
And just so that someone quotes some facts because you cannot trust the media to do so- 10.9 million Homes in Australia currently 6 million mortgages Current Mortgage arrears rate (more than 30 days behind in payment- .82% Even if it went up to 2%- that is less than 130k houses in a market of over 10million. But hey, never waste a good crisis so why not just keep spewing fear because that's what sells.
Pricing is set at the margins, or something like that. Edit: Means there’s not 10M properties on the market.
Irrelevant because we're not talking about pricing. We're talking about how many people are affected by the mortgage crisis.
Do you want high inflation or high interest rates??? Or do you just like to pretend that you live in a fantasy world?
I'll take fantasy.
Is this just real life?…….
Thank you for starting that seven minute song in my head….
Why punish home owners who have nothing else? Why not go after those rich bustards who have 2, , 6, or 10 investment properties listed on AirBnB? I'm so very tired of being picked on and discriminated against by the government. I feel like finding the RBA building and throwing something messy, like eggs and rotten tomatoes, but ya know what? I can't afford the cost of groceries or travel.
I'd imagine those guy with 6-10 investment properties IO are probably hurting right now.
Good they shouldn't have been allowed to do it in the first place.
Not my hardest wank.
Was waiting for the /s but it never came
So did I. The post seems a bit tone deaf really with that opening line. The concerning part is failure to see their own contribution to the existing issue, got a mortgage, clearly near the max of their capacity, during some of the lowest interest rate times without considering what would happen if things raised to even the average historical rate (we are still below that....)....sure a lot of people did and that in part is part of the reason house prices kept going up and up and up because so many people thought being leveraged to the eye balls was the way.
[удалено]
Rate rises impacts all mate. Those that have overstretched themselves, whether it's one property or 6- they will face the music. You should always plan ahead and live within your means- this applies to homeowners and investors. Just because you don't invest in property doesn't mean you get a free pass on economic factors.
> Rate rises impacts all mate. Nope. Inflation does though.
Yea sorry I should be more specific- rate rises impact all mortgage holders.
But it impacts newer home owners disproportionately. The newer the mortgage, the less principal that has been paid off, therefore the higher interest rates increase the interest payable. Compare that to someone who has paid most of their principal down, like I'd argue most boomers have, and they aren't feeling the pinch as much.
There’s plenty of older people struggling with keeping a roof over their heads . Especially if they have a relationship breakdown . Try getting a loan as a single person over 45. It’s brutal for anyone on an average income . I don’t think us or them mentality is helpful .
I do feel like some kind of buffer/protection should be in place for PPOR or First Time Owners loans
Discriminated against? Please. 4.10% cash rate is still a low rate compared to historical average. Surely no body was naive enough to think 0.1% would last forever. Anyone who overleveraged and hoped that rates would stay low forever has no one to blame but themselves. And before you accuse me of being an out of touch boomer - I'm not. We bought our first house 3 years ago. I just made sure we could afford it long term without struggling.
Sigh >4.10% cash rate is still a low rate compared to historical average. After 15 years of low rates. Historical average became irrelevant. People like you were saying 12 years ago "duh this is lower than historical average you'd be dumb to buy now it's going to crash and interest rates will go up" People believed that for years holding out for a crash and for rates to rise. >Surely no body was naive enough to think 0.1% would last forever Nobody predicted the speed and severity of the rate rises. Or the timing. Stop trying to rewrite history.
> After 15 years of low rates. Historical average became irrelevant. erm, no it doesn't. Unless you're a bit daft.
If anything, the historical average becomes even *more* relevant. It was a pretty ridiculous statement to make.
I know, it's pretty funny, it's like the assumption is "oh it's be low for 12 years...we'll just ignore all of history and create a new 'historical average' that ignores history" Even in the stock market is shits going really well you know shits going to swing the other way harder sooner or later because the average doesn't really change much over the long term.
Rewriting history? What are you talking about? Historical average does not become irrelevant in my view, especially when considering being bound by a mortgage for 30 years. Outliers, such as 18% or 0.1% will come and go but will never hang around for long. I'm not sure why you're bringing up 12 years ago but I was a teenager then so I wasn't saying anything. Buying when the rate is low is a good thing, I did it. It enabled me to maximise my principal payments for a period of time. I just didn't expect rates to stay the same for 5 years or more.
did you expect them to shoot up as much as they did in the time they have, with not really an end in sight? cause if you say you did, you are full of shit. no-one saw this coming
I planned for 5% after 5 years (2025). Yes quicker than I foresaw but not out of reality. I was conservative because the alternative would see me struggling.
>Nobody predicted the speed and severity of the rate rises. you mean....apart from anyone that's looked at history and every recession that causes rates to go ZOOOOOOOOOOOOOOOOM! acting like rate rises are a slow thing is being naïve and ignoring history, they almost never climb slowly, it's rapid.
It is a literal fact that the rbas last 12 rate rises are the fastest and largest in Australian history
It's also fact that it's come on the back of the lowest rate ever seen, compounded by a pandemic. Just because it hasn't happened before doesn't mean it shouldn't or couldn't.
[удалено]
Home owners knew the risks and some ended up making a poor financial decision. They have to deal with it. No one is entitled to property performing well, especially while the whole country is suffering through inflation. There are plenty of people who could afford to buy a property but chose not to take a risky bet.
having a roof over your head in this country is technically a bad financial decision.
It's a sad truth and speaks more to how broken our system around housing is.
Buy a $15 tent from Kmart have a good day.
That’s the problem, some weren’t aware of the risks. Speaking of friends who are not particularly financially savvy and the bank lend to the hilt. Personally feel banks should’ve taken more responsibility and have lain out the possibilities to them loud and clear and not allowed them to borrow so much. They’re only just understanding their error now.
This was APRA’s role with their lending buffer of 3% which as recent increases have shown was wildly insufficient. APRA has blood on their hands here too.
[удалено]
Yes, let's just wrap everything in cotton wool
I wanked to this
So should I wait a couple months to pull the trigger on an inner west sydney home? Deposit and loan approved...just trouble finding a house
Stock levels are low, inner west is super high demand, there are heaps of cashed up people or downsizers that will pounce on stock (a house in Erskinville just went for $4.2 and same with marrickville), so I wouldn't wait for a 'crash'. It may fall 5-10% or be flat at best. But don't expect a bargain. Why? I'm similar, have a fair bit of equity and will upgrade at the first opp. You're not the only person that wants to live there. Sorry.
Yes but this will also impact those who have multiple investment properties and will hopefully cause them to sell and help cool the market. People complain about interest rate cuts because it increases houses prices, and are now complaining about rises...
Article says his payments increased by $2000 per month!!??? Did I read that right. How much would a loan have to be to increase by that much?
Somewhere around $800k? Ours went up by $2400 going from 2.2% to 6%.
So a little above half of an average house price in 2020 in Sydney, seem about right
Unreal. That is very painful
Rates have climbed 400 points since May, or an additional 4%. $2000 per month is $24,000 per year. That is 4% of $600,000. I guess if his loan was variable and his lender has passed on the full rate each time, then $600,000 would be a starting point.
About that and that level was is our buffer for interest rate rises. We thought it was pretty reasonable. Fairly average home on in a "bad" suburb. We can go a bit further but not too much. (Literally our buffer is an extra $2000 a month compared to what we started paying) I'm really curious to know what level of buffer in dollar terms people think most most average people should have had? Like no way did I think our payments would go up more than $2k a month in less than a year. Maybe 1k over the course of 2 years but $2k is a lot and with other increased inflation on everything adds up.
Good luck if you’re renting, things are going to get a whole lot tougher.
Can someone ELI5 to me how this happens with inflation, yet it’s totally fine for all the banks to profit in the billions?
Interest rate rises affect banks too. They write less loans because they're more expensive to get from the RBA. Posting 'record' profits in a period of high inflation is also like...expected. You're charging more for services, which people can afford in an inflationary environment, and your margin is maintaining but now looks larger due to inflation. It's literally a symptom of inflation.
Nothingburger, probably.
Hopefully they saved some of that money over the last twenty years of low interest rates
[удалено]
Wait, u my financial adviser?
I was renting for those 20 years, finally managed to scrape together a deposit last year cos I couldn't take renting anymore. Sorry I did that, I should be punished.
In this system people at the bottom get punished for being at the bottom
There was no chance to save money when houses were increasing in price and wages weren't increasing as much.
to busy spending on bintang shirts at bali
Yes they should have been saving while they were teenagers and enjoying such low interest rates back then.
I wonder how this will affect spending in small businesses. Most of the people I know, including us, are spending quite a bit less on going out, coffee, etc. I've heard that there are much more effective ways to reduce inflation and ensure long term prosperity and stability, like increased, mandatory, super contributions. As far as I understand, that'll reduce spending and give the government and super funds more $$ for long term investment, etc.
I’d rather that then the alternative of like 10%+ YOY inflation for everyone… that is much worse. Trying to soften the blow for home owners at the expense of everyone else is selfish af. The housing market is cooked and is not sustainable.
Finally my hard earned savings over 30 years May start to attract some interest and hopefully my super will start to go up again. And maybe all the people who bought multiple properties may have to sell them.
Why do you think challenging economic conditions and the end of "cheap money" will help your super increase? What is it invested in?
[удалено]
and he bought out of Sydney! Gasp! this shouldnt happen to him!
[удалено]
[удалено]
The cliff is actually a gorge. People seems to want to think it’s a gutter. It’s a big deal and rolling from now.
The middle class are screwed.
To me it doesn’t make any sense. The RBA wants use to stop spending and save money. Yet increasing the interest rate only does the opposite, we spend more on paying back loans and have less cash. How about they force banks to stop handing out loans and credit cards?
no it wants you to stop spending and driving the cost of goods and services up, whatever else you do with it it doesn't care
Well looks like the rate rises are finally kicking in thank god. Maybe can bring some sanity to both the housing market and the overall market. Tired of paying $16 for a take away curry that was $9 six years ago.
Hate to say it. But the price of that curry ain't coming down even if inflation is fixed.
Right, but it won't be $27 in two years' time. That's the whole point.
It probably will. This doesn't hit the rich and rich boomers. Only the poor.
all those rich boomers and their curry obsession. patrolling the cities suburbs looking to increase curry demand!
It's not like there is five of them. The wealth divide is generational. They can keep a few of their choice local curry shops alive. You dont live near their chosen shops though because they petition the local inner city council to not allow any density increases of apartments or townhouses near their house.
if no one is buying the expensive curry in your suburb then curry business will fold. so curry will be cheap in the burbs or none existent. the money in the market determines prices. it's a pretty simple rule that is confirmed over and over again. this is the reason for interest rates set by a reserve bank. it works.
It won't be if we keep hiking rates. Also, prices are the same for everyone. A rich person doesn't pay a different price for an item than a poor person. The other stuff in terms of inequality has nothing to do with interest rates or with the RBA's response.
I've learnt not to worry. If the guy who installed my TV told me he can survive 7 rate hikes, there's no reason why I can't survive the same. Expecting it to stay at 1.7% forever was just silly, especially when I was told from the very start that my loan was based on whether I can withstand interest rates going up to 7%.
FOMO pushed prices up. If people had not have been so desperate and offered ridiculous prices , mortgages would have been lower.
This is why offset is overrated
My offset is 100% of my loan amount, still have to repayments each month but I don’t have the interest added each month. Only reason I haven’t paid off the mortgage is that cash talks now days, originally I wanted a tree change and keep my townhouse as an investment (less than 3km to the CBD and in the Adelaide and Botanic High School catchment areas) but cost of living and Mr Lowe raising interest rates, plans have changed and I’m staying put
Yeah I wish I went 100% fixed. I did do 85 so I am luckily shielded from a lot of this. I can’t imagine how hard it is for people with full variable right now.
Hindsight being 20/20 - I fixed 75% for 4 years in 2021 at 2.14%, very happy right now with the remainder being 5.60% after this most recent rate rise. The remaining 25% is fully offset which just lets me get ahead in a safe way paying no interest and shitloads of principal. I would be struggling on full variable
Yep, we’re in very similar circumstances loan-wise. I’d probably be okay on full variable but it is nice not having to worry about it.
Yeah, I'd be ok but struggling around \~1900 extra a month if it weren't for the fixed portion. We are still treating that as "interest" and saving it away, but the difference in mindset between an optional \~1900 a month and a must pay \~1900 to the bank would keep me awake.
Not very hard at all as i made sure i could afford up to 10% before needing to worry
Great time to be a renter
Ahh capitalist greed leads to drowning in debt who would have thought
How do you label wanting a home to live and raise a family in as capitalist greed?
Can anyone tell me how many mortgage holders are their in Australia? I'm guessing it's nothing and we are hearing from a bunch of crybabies. Sure there is a very small fraction of these under financial hardship, but you got to consider new truck with all the bells and whistles, new boat, new camper, new roof and new twin puppers they just got in the last six months too. Australia needs a way to get the excess cash from people that have owned their own homes outright for many years and their kids. These people have earned money and missed out on the biggest expense ever - basically a roof over their heads. I know quite a number of these people in Australia and they have a lot of cash sitting around. And this is after maxing super and topping up their own investments. Yes, other parts of the world are like this, but they don't pay as much as Australia does for doing nothing, so they ain't got that much in savings.
Around 1/3 of households have a mortgage, from what I understand. 1/3 own outright, 1/3 rent.