Have you fixed your home loan? Yes or No?

[professor_frink]

Pretty much thanks to the "system" average Australians are financially Illiterate, hence only 21pc of owner occupied mortgages being fixed .....

I think the "sheeple" take literally politicians pledges of keeping Interest rates low .....

Understanding the financial system should be mandatory before people are allowed to leave school or emigrate to Australia ....

Im sure 4 interest rate rises would push thousandsand thousands already at peak debt into the abyss

Why would you say that only financially illiterate people wouldn't fix their interest rate

 

[numbercruncher]

Why would you say that only financially illiterate people wouldn't fix their interest rate

Im not saying that , my point is saying most people arnt taught anything about how things such as Inflation and Interest rates work, they watch the Television and listen to politicians pledging low Interest rates and take it as gospel. Bit of economic/political study should be compulsary while at high school.

It was becoming blatantly obvious about a year ago that we are entering a period of High Inflation and rising Interest rates.

Johnny can take the brunt of the blame imho

Heres an article relating to the point im making ...

A COMBINATION of confusion and lack of financial literacy is keeping Australians trapped in expensive home loans.

Research by online home lender MyRate.com.au shows that a quarter of Australians are so confused about home loans that they will not bother shopping around.

http://www.news.com.au/business/money/story/0,25479,22905956-5013952,00.html

 

[numbercruncher]

THE major banks are stealing as much market share from mortgage brokers as they can before putting up their variable-rate home loans.

The banks raised the value of new home loans approved in October by 5 per cent, while the value of loans offered by non-bank lenders fell 16.2 per cent.

Both groups of home loan providers have been hit by the rise in funding costs as a result of the world financial turmoil from the US sub-prime market.

But the major banks have large retail deposits to draw on, and depend on the wholesale markets affected by the sub-prime turmoil for only about a quarter of their funding.

Deutsche Bank chief economist Tony Meer calculates that the market share held by mortgage brokers and other non-bank lenders has dived from 13.3 per cent to 8.2 per cent since July, with the banks raising their share by 5.2 percentage points to 84.9 per cent.

All the major banks have warned they would have to pass on some of the increase in their wholesale funding costs, which have risen by about 40 basis points on top of the two increases from the Reserve Bank since August.

http://www.news.com.au/business/money/story/0,25479,22904053-5013952,00.html


Sneaky banks eh ?

 

[Judd]

I'm sure I read a survey somewhere that showed that on average those on variable rates do better than those on fixed over the long term.

Anyway fwiw I am on a 'no frills' variable that gives 0.7% discount off from the standard variable rate.

I recall it was published about two years ago. Unfortunately, I forget which University did the work. It was an analysis of 3 year fixed rates versus standard variable rates over a 20 year period. The upshot was that due to timing issues most would have been better staying with the variable rate. However, I don't believe that the analysis took account of the basic variable rate as those items were introduced part way through the survey period.

In our case, we have not fixed as we have no debt. However, when we did have a mortgage it was the basic variable and never bothered hunting for deals. Main reason was that when we took out the loan we had a large deposit and we calculated the repayments as if we had bowwowed the entire purchase price. Still in the same house.

 

[2020hindsight]

so is 3 years the recommendation?
(I'm still on variable rate - must be financially illiterate in nc's eyes )

 

[tech/a]

Originally Posted by numbercruncher View Post
Pretty much thanks to the "system" average Australians are financially Illiterate, hence only 21pc of owner occupied mortgages being fixed .....

I think the "sheeple" take literally politicians pledges of keeping Interest rates low .....

Understanding the financial system should be mandatory before people are allowed to leave school or emigrate to Australia ....

I'm sure 4 interest rate rises would push thousands and thousands already at peak debt into the abyss

Cruncher!

Hmm I don't know about that.
Have you actually looked into that or are you just taking a literate guess, making what you believe to be a logical assumption?

I think the latter is the case!

Got any stats even graphs to back your argument.
if so I'd love to see them.

Just to get this very clear in my and everyone's mind that fixing interest rates for 3 to 5 yr terms is so far superior to staying with variable rates that you'd have to be financially illiterate not to!

 

[Smurf1976]

Bit of economic/political study should be compulsary while at high school.

It was becoming blatantly obvious about a year ago that we are entering a period of High Inflation and rising Interest rates.

Johnny can take the brunt of the blame imho

Can't argue with that. First thing I learnt about finance was in primary school grade 5. And that was only because the teacher knew the subject, understood it's importance and also knew full well that this was the only time any of us would be taught anything about it at school.

I actually remember him making that point quite firmly. Pay attention now because this won't be covered at high school. Then he proceeded to teach about interest rates, bank charges, compounding, bonds, shares etc.

I didn't recall the detail but it was damn useful since at least by the time I needed to know when I got my first job, I remembered enough to know what I needed to find out about in detail. That put me ahead of probably 99.9% at that stage.

No other class in the school did anything on finance to my knowledge. Neither did they do any of the science, environment, electronics and computer programming that we did. He even had us at the market running a stall on Saturday morning to teach about business. And yes, that was grade 5 in a public school. One of the few truly good and committed teachers IMO.

I had a wonder through the school grounds a couple of years ago. The nature "compound" that we built is still there but it's in ruins unfortunately. Looks essentially untouched since that time but it's just fallen down and grown over with weeds etc. Shame...

 

[numbercruncher]

Hello Tech,


Just to be clear Im not saying people who consciencely make the decision to be variable or fixed are financially illiterate or finacially superior.

Im saying the bulk of mortgages are variable because the bulk of people have absolutely no idea, they dont understand or indeed even think about concepts such as economic cycles, Inflationary enviroments, or banks out to rob them etc.

Most people simply dont do their own research, they listen to politicians on the Idiot box and take as gospel the pledge of low Inflation and low interest rates, they listen to the lenders like they are some sort of expert on which loan to choose (experts do 20 hour courses to reach expert status nowadays)

Im not implying anyone personally reading this thread is inferior for whatever choice in loan product they made, anyone using this forum im sure has a reasonble understanding and doesnt act on impulse or bad advice from "experts".

I know the benefit of hindsight is a great thing, but did anyone really think a year or two ago that Interest rates could possible go any lower considering the booming economy etc ?

I read a good piece of advice the other day " never bet against the Fed "

Now maybe the same can be applied to our RBA, they have a mandate (that I assume they will stick too) of keeping Inflation between 2 and 3pc, US and China imho are going to be exporting Inflation for some time. I think the only thing that will change the RBAs course is an economic crisis , which doesnt seem to be off the cards either.

Thanks

ps. Sorry if my " Illiterate " comment has offended anyone, none intended.

 

[numbercruncher]

Number of fixed mortgages on the rise big time, over 50pc increase in two years according to this.

Recent interest rate hikes, and the prospect of more to come, has seen the popularity of fixed rate mortgages take off, new figures suggest.

Data from financial research service Cannex showed that in November last year more than 28 per cent of all Australian mortgages had their interest rates locked in.

That was up from 27 per cent in October and about 17 per cent two years ago.

http://news.smh.com.au/fixed-mortgages-growing-in-popularity/20080111-1lfw.html

 

[tech/a]

Hey I agree most people are financially Illiterate.

The more literate I become the more illiterate I become.

But to Mortgage rates.

In fact staying variable over time has shown to be slightly better in terms interest paid than fixing loans,even by trying to time that fixing.

Have a look



Oh and for those who don't know the answer to which political side has the best results with interest rates have a look at this!

Maybe there is NO BETTER time than now than to fix interest rates for as long as you can!

 

[numbercruncher]

I see the exact opposite of what the pro Liberals see in that graph.

I see Labor Inheriting a rising Interest rate enviroment, then the Liberals inheriting a lowering one, and now back at square one.

And this new fandangled thing that everyone seems to love " Globalisation " will give them even less control than they thought they had.

I still think timing is everything, but yes if your in for the long haul 20 year grind the mortgage then variable I concede looks better from a historical view.

 

[Smurf1976]

Looks like the Liberal supporters haven't worked it out yet. That was the sort of nonsense that lost them the election...

 

[theasxgorilla]

I see the exact opposite of what the pro Liberals see in that graph.

I see Labor Inheriting a rising Interest rate enviroment, then the Liberals inheriting a lowering one, and now back at square one.

And this new fandangled thing that everyone seems to love " Globalisation " will give them even less control than they thought they had.

I still think timing is everything, but yes if your in for the long haul 20 year grind the mortgage then variable I concede looks better from a historical view.

I agree to an extent. The trends were largely in place irrespective of the party in power. What I would instead pose as a question is what came first: chicken or egg? I think that combinations of economic conditions create a propensity for certain economic parties to be elected into power.

That the elections occur every 4 years and rates can be raised ever 2nd month by varying degrees means that correlation between the two is pretty futile. If you could take interest rates from other western countries and super impose them over the top of Australia you would probably find very similar trends. That says to me it can't be the political party, but rather that the other economic factors that determined the interest rates also determine that a particular party would be voted into power.


BTW, globalisation ain't new anymore, it's been here for a decade at least. If you're not involved with it in someway then you're already behind.

ASX.G

 

[2020hindsight]

ps. Sorry if my " Illiterate " comment has offended anyone, none intended.

lol - no probs m8 -
Personally I treat these things as yet another gamble.

I usually go with the option that requires the least trips to the bank to change things over lol.
"financially lazy as well as illiterate"

In the same way, as often as not, I sell just before dividend payment with shares - saves me having to bank the cheque lol. And the shares inevitably go down by about the same value afterwards - sorta
disclaimer - do not take this "advice" / comment as gospel.

 

[numbercruncher]

I think a decade is very new in the grand scheme of things, seems we are only just beginning to stress test the new system out

Whats the old saying, Privatise the Profits , Socalise the losses , adjusted for Globalisation, could it be Socialise the losses across the entire Globe ?? or will they all of a sudden become Nationalistic when/if the perverbial Poo hits the fan ?

Time will tell!

We live in Interesting times ( i think )

 

[numbercruncher]

In the same way, as often as not, I sell just before dividend payment with shares - saves me having to bank the cheque lol.

LMAO I often do that to for the same reason, Long Live the Financially Lazy, woot!

 

[2020hindsight]

:topic nc, - as for avoiding dividend cheques - I think in my case it's something to do with the fact that you get an e-copy of a certificate of a share trade, (which is difficult to lose) whereas you don't for a cheque
SMSF, etc etc - audited etc etc

 

[numbercruncher]

Some more evidence of the consumer feeling the sqeeze .....

Online home loan inquiries up 300%
Monday Jan 14 09:59 AEDT
Internet-based home loan provider Myrate.com.au says it has experienced a record increase in inquiries since the last of the major Australian banks raised interest rates last week.

Myrate.com.au, an internet mortgage lender funded by ING Bank (Australia) Ltd, said it recorded a 300 per cent increase in daily inquiry volumes in one week.

http://news.ninemsn.com.au/article.aspx?id=345255

 

[nioka]

Don't be tempted to look at borrowing in an overseas currency to lower your interest rate.When the interest rates in the 80's got to 20% a certain financial adviser ( who is still in business with a daily newspaper) convinced me to change my borrowing to swiss franks where the interest rate was less than 8%. The only problem was that the $350,000 I borrowed blew out to $990,000 in a matter of months with a fall in the Aussie dollar in "the recession we had to have". I attended a seminar with my bank manager we he showed us it was bullet proof, with fancy graphs to prove it. You have been warned as the saying goes.

P.S.I fixed my home loan by selling property, paying all my debts and never trusting banks or financial advisers again.

 

[numbercruncher]

Inflation data 'points to rates rise'


Unofficial inflation data released today could put pressure on the Reserve Bank to increase interest rates at its board meeting next month.

The TD Securities-Melbourne Institute Monthly Inflation Gauge shows a 0.5 per cent rise in underlying inflation to 3.6 per cent for December.

That is well above the central bank's target range of between 2 and 3 per cent.

http://www.abc.net.au/news/stories/2008/01/14/2137812.htm


Inflation running 20pc above the target maximum.

Seems they have absolutely no choice in Feb ! maybe they shouldnt muck around and just go .5pc.