I'm more worried about what will happen to these FHB when rates rise again.
House prices to keep falling for years
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I'm more worried about what will happen to these FHB when rates rise again.
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Well it will be a disaster, I'm not sure under what circumstances rates will rise again though, I thought they'd stay down for years while the rolling recession/depression is still with us.
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Alot of them will get smashed - maybe not immediately - But I imagine alot of FHB will lock in rates for 3 to 5 years while there low. However when they move from their fixed rate to a variable rate, they could see the interest component payable double and unless they prepare for it well..... they will face a worrying future.
Hopefully in 2 years when I decide to buy interest rates will still be low. Basically my plan will be to work out what is affordable at a realistic interest rate of say 7.5 to 8.5%. After I know how much I can afford at that rate I will lock in for 5 years at the lower rates (that will hopefully still be available in 2 years)
Once i come off my fixed rate, even if interest rates are 7.5 - 8.5% I will still be able to afford my loan.
In addition, because most fixed loans dont allow extra repayments I will start a savings account on the side for additional payments (aim for maybe 5 to 10K per year). After the 5 year fixed rate I will have $25 to 50k savings to put straight onto the mortgage to reduce my exposure to the higher rates that may be around.
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At the moment people on fixed rates locked in before the rate fall are trying to get out but my understanding is that it costs a lot of money simply because the mortgage providers locked in the money from their sources at the higher rates. Thankfully mine is variable and nearly finished.
I am also informed that many on variable rates are reducing their repayments to the full amount each time. This I would consider bad planning as they will only be screaming again when the rates rise . Myself I crank up each time they rise and freeze the repayments at the same level when they fall
I am also informed that many on variable rates are reducing their repayments to the full amount each time. This I would consider bad planning as they will only be screaming again when the rates rise . Myself I crank up each time they rise and freeze the repayments at the same level when they fall
Difference on a "typical" FHB loan of $300k would be going from $392 @ 5.5% to $532/wk @ 8.5%. I am sure a couple can cope with that extra $140/wk..
If they go stupid and borrow $400/500k right now then good luck to them. I don't think that is the typical scenario, and I doubt the banks will lend that much without factoring at least a 2% rise in rates for each applicant.
Where it would drive a lot under is if the rates went up to 9/10%+, but can't see that happen until a good few years, if ever. 9% seemed to be the limit last time where everybody nearly died of rate shock.
If they go stupid and borrow $400/500k right now then good luck to them. I don't think that is the typical scenario, and I doubt the banks will lend that much without factoring at least a 2% rise in rates for each applicant.
Where it would drive a lot under is if the rates went up to 9/10%+, but can't see that happen until a good few years, if ever. 9% seemed to be the limit last time where everybody nearly died of rate shock.
I generally agree, but this is where we could find ourselves in trouble. As the economy starts to level out and rates start to rise again alot of people could find themselves in mortgage stress especially if we see any sort of collapse in house prices in the next few years - even if it is only a 15-20% decline, this could then drag out our recovery.
Paul most fixed loans allow about an extra $10,000 per year in repayments - mine did at least.
You have obviously given alot of thought to this and have planned accordingly, I just wonder how many other FHB have done the same.
Three developments go t1ts up on the goldcoast.. owing $145M.
http://www.brisbanetimes.com.au/articles/2009/02/12/1234028198391.html
Guess the fancy website and slick marketing wasn't quite enough: http://www.ilanahaqua.net.au/index2.html
http://www.brisbanetimes.com.au/articles/2009/02/12/1234028198391.html
Guess the fancy website and slick marketing wasn't quite enough: http://www.ilanahaqua.net.au/index2.html
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I wonder who the bank was that financed it.
Glen48
Money can't buy Poverty
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This is the way to control debt:
I’m really scared of what could happen, because I bought property here,” said Sofia, who asked that her last name be withheld because she is still hunting for a new job. “If I can’t pay it off, I was told I could end up in debtors’ prison.”
With Dubai’s economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills). Some are said to have maxed-out credit cards inside and notes of apology taped to the windshield.
The government says the real number is much lower. But the stories contain at least a grain of truth: jobless people here lose their work visas and then must leave the country within a month. That in turn reduces spending, creates housing vacancies and lowers real estate prices, in a downward spiral that has left parts of Dubai ”” once hailed as the economic superpower of the Middle East ”” looking like a ghost town.
From Patrick.net
I’m really scared of what could happen, because I bought property here,” said Sofia, who asked that her last name be withheld because she is still hunting for a new job. “If I can’t pay it off, I was told I could end up in debtors’ prison.”
With Dubai’s economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills). Some are said to have maxed-out credit cards inside and notes of apology taped to the windshield.
The government says the real number is much lower. But the stories contain at least a grain of truth: jobless people here lose their work visas and then must leave the country within a month. That in turn reduces spending, creates housing vacancies and lowers real estate prices, in a downward spiral that has left parts of Dubai ”” once hailed as the economic superpower of the Middle East ”” looking like a ghost town.
From Patrick.net
You may wish to consider fixing half of the loan and instead of having a savings account you could put that extra cash into paying off the variable loan. This option gives you a little flexibility.
Canadian employment punched in the knackers... http://www.cbc.ca/money/story/2009/02/06/januaryjobs.html
Good one to keep an eye on, as we have a similar economy to theirs in many ways..
And their housing market now coming under pressure.. "we've never seen this many foreclosures"
http://www.calgaryherald.com/Homes/...+mortgage+defaults+Calgary/1279897/story.html
3 months ago Canada was actually holding up (based on articles I was reading at the time)... how things have changed quickly!
I've been thinking today.. one reason I think for the relatively boyancy in our employment figures so far is that it's going to take a while for those laid off in the last quarter to spend all their redudancy payments. A large percentage will have left with such payments, most especially full-time employees!
Most probably won't even be listed on the unemployment register until their cash has run dry. Some employers (especially banks and larger co's) pay several months of salary to those retrenched. Worth keeping in mind, even those out of work may have it fairly easy until mid this year. After then.... ?
Good one to keep an eye on, as we have a similar economy to theirs in many ways..
And their housing market now coming under pressure.. "we've never seen this many foreclosures"
http://www.calgaryherald.com/Homes/...+mortgage+defaults+Calgary/1279897/story.html
3 months ago Canada was actually holding up (based on articles I was reading at the time)... how things have changed quickly!
I've been thinking today.. one reason I think for the relatively boyancy in our employment figures so far is that it's going to take a while for those laid off in the last quarter to spend all their redudancy payments. A large percentage will have left with such payments, most especially full-time employees!
Most probably won't even be listed on the unemployment register until their cash has run dry. Some employers (especially banks and larger co's) pay several months of salary to those retrenched. Worth keeping in mind, even those out of work may have it fairly easy until mid this year. After then.... ?
Does the official "unemployment" figure include those people who are unemployed, looking for work and not on the dole (Newstart) or only those being paid the dole (Newstart) ?
So many people misunderstand how ABS unemployment stats are determined. They periodically sample a larg-ish number if people, chosen using statistical techniques, and ask them questions like" did you work in the last week", "were you employed full time in the last week", "were you seeking employment in the last week" etc etc. Based on the results they extrapolate to estimate the total employment picture nationally. So it's not in any way based on whether people have registered for the dole etc etc.
Part of the current "controversy" (if you want to call it that) with ABS employment stats is that due to budget cut backs the SIZE of the sample used for these figures each month has been reduced, therefore increasing the standard deviation in the results - that's why the bears here all jumped on the "positive full time employment rise" aspect of the latest figures. Equally, the same variability/error would exist in any negative figures (when they come) as well. That's why the important part of the stats to look as is the TREND.
Cheers,
Beej
numbercruncher
Beware of Dropbears
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More fantastic news ....
Foolish banks for lending so much money to these glorified gamblers .....
I see in the article there was a 900 hectare development planned for Canungra, lovely quiet hinterland area - really doesnt need a development of that scale - not to mention the loclas would of been cringing, half the town turned out to protest coles wanting to open shop.
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When banks work out your borrowing capacity, they add 2% onto their standard variable rate to determine repayments at the higher rate so you should get a reasonable guide from some of the online calculators.
Wysiwyg
Everyone wants money
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There is some point, if not now, where a) interpreted present house prices in your district cease to be interpreted lower (i.e. demand for houses has started to return) and b) mortgage interest rates go no lower.
It would be perfect to lock in a fixed rate at the low AND house prices at interpreted levels have stagnated or begin increasing in demand (value).
I mean one will only drop the price until buyers interest returns which would coincide with a market bottom.
Good indicators are what I wonder?A chat with your local real estate agent about sales over recent months or closely monitoring advertised prices in the local newspaper.Even attending auctions to gauge buyer interest.
It would be perfect to lock in a fixed rate at the low AND house prices at interpreted levels have stagnated or begin increasing in demand (value).
I mean one will only drop the price until buyers interest returns which would coincide with a market bottom.
Good indicators are what I wonder?A chat with your local real estate agent about sales over recent months or closely monitoring advertised prices in the local newspaper.Even attending auctions to gauge buyer interest.
this might give you the clues...clearance rates at auction of 89%
****properties below $600,000 the figure was 89 per cent, according to Australian Property Monitors
The first-home buyer market has become Sydney's strong point, estate agents reporting demand for property priced up to $600,000.
Last weekend's auction clearance rate averaged 75 per cent - but on properties below $600,000 the figure was 89 per cent, according to Australian Property Monitors.
little by little...bit by bit...hey
http://www.smh.com.au/national/slow-then-steady-on-housi ...
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****properties below $600,000 the figure was 89 per cent, according to Australian Property Monitors
The first-home buyer market has become Sydney's strong point, estate agents reporting demand for property priced up to $600,000.
Last weekend's auction clearance rate averaged 75 per cent - but on properties below $600,000 the figure was 89 per cent, according to Australian Property Monitors.
little by little...bit by bit...hey
http://www.smh.com.au/national/slow-then-steady-on-housi ...
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Just re-posting your link which seems to be broken: http://www.smh.com.au/national/slow-then-steady-on-housing-20090213-8769.html
It's a good article which as well as price info also talks about total sales volumes etc.
Cheers,
Beej
thank you Beej,
it might also be a clue for those posters who suggest they can wait a couple of years to get the cheaper homes...I doubt the combination of cheaper interest rates and low priced homes will be available.....but interest rates around 7% is not bad..but loans at 4-5% is a bargain IMO
am also of the opinion that there are always bargain houses out there...at anytime....and the young ones may be only using the median price as a guide for buying.....when there are properties below 250,000 if they care to look
the 600,000 price suggests to me that people are upgrading from the first home to the next bigger home with these low rates....
cheers
it might also be a clue for those posters who suggest they can wait a couple of years to get the cheaper homes...I doubt the combination of cheaper interest rates and low priced homes will be available.....but interest rates around 7% is not bad..but loans at 4-5% is a bargain IMO
am also of the opinion that there are always bargain houses out there...at anytime....and the young ones may be only using the median price as a guide for buying.....when there are properties below 250,000 if they care to look
the 600,000 price suggests to me that people are upgrading from the first home to the next bigger home with these low rates....
cheers
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