Mortgage Cliff?

[Tyre Kicker]

‘Crash’ hey?

Rates are returning to normal levels and the world is ending.

Geez.

I’ll be surprised if the RBA doesn’t go 50bp next meeting.

 

[Value Collector]

Not going to happen in my view.
There will be mortgage stress but not to the entire mortgage population.

They will find a way as we did.

Second or third job. Over time asking and in most cases getting a wage rise.
If they are smart all of the above.

I agree, unless retail interest rates rise closer to 10%, then we might see some trouble, but we will get through it.

 

[Sean K]

I agree, unless retail interest rates rise closer to 10%, then we might see some trouble, but we will get through it.

I agree with you and @tech/a that we'll get through high interest rates, but what effect does it have on the stock market and property prices? I think everything went sideways for 10 years or so back then. Let's hope rates don't go back to 17%, or whatever it was. I assume our parents weren't expecting that to happen. Good if you've got a pile of cash I suppose.

 

[Value Collector]

I agree with you and @tech/a that we'll get through high interest rates, but what effect does it have on the stock market and property prices? I think everything went sideways for 10 years or so back then. Let's hope rates don't go back to 17%, or whatever it was. I assume our parents weren't expecting that to happen. Good if you've got a pile of cash I suppose.

Property and stock market prices would be lower, which might cause some people to be upset, especially those who planned on dis-saving and consuming their capital during that time period.

However, for those in the accumulation phase that are in the process of building up their portfolios it’s a god send, lower prices and higher dividend yields, rental returns and interest earnings means they will be able to grow their portfolios faster than ever.

For those people like myself that live of the income generated by their assets and don’t need to sell will not really be affected. However if like me you reinvest part of your returns, then like the people in the accumulation phase it will be a positive outcome.

 

[Knobby22]

Property and stock market prices would be lower, which might cause some people to be upset, especially those who planned on dis-saving and consuming their capital during that time period.

However, for those in the accumulation phase that are in the process of building up their portfolios it’s a god send, lower prices and higher dividend yields, rental returns and interest earnings means they will be able to grow their portfolios faster than ever.

For those people like myself that live of the income generated by their assets and don’t need to sell will not really be affected. However if like me you reinvest part of your returns, then like the people in the accumulation phase it will be a positive outcome.

Good for investors, rent rise, better tax offsets. Bad for young home owners. Tough titties for them.

 

[divs4ever]

However, for those in the accumulation phase that are in the process of building up their portfolios it’s a god send, lower prices and higher dividend yields, rental returns and interest earnings means they will be able to grow their portfolios faster than ever.

yes , that is how i look at it also ( even though i probably should have rotated out of the accumulation phase , since i am retired )

i still participate in DRPs ( fully or partially ) in many ,holdings ,

i am persisting in the accumulation to try to resist the consequences of inflation

this is probably assisted by the fact i live a low-profile lifestyle ( so keep lifestyle costs lower )

 

[Value Collector]

Good for investors, rent rise, better tax offsets. Bad for young home owners. Tough titties for them.

Yes, if they over extended them selves at the peak, it might be tough for home owners for a little while, But most will make it though and eventually see lower rates and higher prices again, if they have to eat beans and rice for a while, that’s kind of par for the course. I don’t think any generation has completely escaped bad parts of the cycle over their lives.

If you are signing up to a 30 year loan you kind of have to expect to have some periods of high rates.

For young people looking to enter the market after the crash, we’ll it’s good for them.

 

[againsthegrain]

Yes, if they over extended them selves at the peak, it might be tough for home owners for a little while, But most will make it though and eventually see lower rates and higher prices again, if they have to eat beans and rice for a while, that’s kind of par for the course. I don’t think any generation has completely escaped bad parts of the cycle over their lives.

If you are signing up to a 30 year loan you kind of have to expect to have some periods of high rates.

For young people looking to enter the market after the crash, we’ll it’s good for them.

I don't think currently rates are high, historically they are actually low. In a healthy economy I don't think we should be holding our breath for them to get close to covid lows ever again. Of course if you mean the rates will get to 7-10% then sure eventually some relief will come to those that bought at the peak. But they will be ok either way the banks would of assessed their capacity for 6 or 7% rates when they took out the loans anyway

 

[divs4ever]

But they will be ok either way the banks would of assessed their capacity for 6 or 7% rates when they took out the loans anyway

time will tell , banks have been lax on that several times in the past ( often as a policy decision to increase market share )

 

[againsthegrain]

time will tell , banks have been lax on that several times in the past ( often as a policy decision to increase market share )

like VC said rice and beans, not the end of the world without uber eats

 

[divs4ever]

like VC said rice and beans, not the end of the world without uber eats

but i have already stocked up on dried beans ( and peas ) and rice ( and have been adding for six months )

the end of the world comes after Uber Eats collapses and many discover they can't cook ( either no skills or no heating source or both )

( one of the over-looked snippets in the WEF promo , the own NOTHING , rent EVERYTHING one )

 

[wayneL]

yes , that is how i look at it also ( even though i probably should have rotated out of the accumulation phase , since i am retired )

i still participate in DRPs ( fully or partially ) in many ,holdings ,

i am persisting in the accumulation to try to resist the consequences of inflation

this is probably assisted by the fact i live a low-profile lifestyle ( so keep lifestyle costs lower )

A humble healthy lifestyle is happier, even with boxes if cash sitting around the house, IMO ?

(Humble can still be expensive too)

 

[wayneL]

but i have already stocked up on dried beans ( and peas ) and rice ( and have been adding for six months )

the end of the world comes after Uber Eats collapses and many discover they can't cook ( either no skills or no heating source or both )

( one of the over-looked snippets in the WEF promo , the own NOTHING , rent EVERYTHING one )

Be careful on what type of beans you have, mate. Some of them have lectins which are bad juju for your body. (eg red kidney beans... the worst)

 

[divs4ever]

i ascribe to the 'cash is trash ' theory ( at best a stepping stone to extra assets )

i don't mind splashing the cash to acquire 'better quality ' where 'better quality ' translates to more durable and reliable

 

[Sean K]

I don't think some punters are considering the second and third order effects of the huge number of people jumping into the real estate sector during Covid on crazy cheap rates locked in for 3 or so years waiting for those loans to be refinanced later this year on at least double the rates. Sure; stop ordering UberEats, going out to the pub, going on a holiday, or buying a new smart phone in order to get through it. But, that has significant consequences down the pecking order. Maybe I'm being a bit bearish.

 

[divs4ever]

Be careful on what type of beans you have, mate. Some of them have lectins which are bad juju for your body. (eg red kidney beans... the worst)

strangely i had avoided them ( red kidney beans ) already , i hope that doesn't mean i am racist , am more a fan of mung beans and chick peas , but do diversify when prices are cheap , should probably bulk up on fish hooks , though ( even though i know a few tricks to substitute for them )

 

[divs4ever]

Maybe I'm being a bit bearish.

probably not as bearish as me

but indeed , refinancing might be a BIG problem ( and not just higher interest rates , many incomes are NOT keeping pace with inflation , even if job stability holds firm )

a LOT can happen in three years

 

[divs4ever]

Housing Data Shows Bubble Much Larger Than 2008

https://yewtu.be/watch?v=5CmrYMcLp6o

 

[Value Collector]

I don't think some punters are considering the second and third order effects of the huge number of people jumping into the real estate sector during Covid on crazy cheap rates locked in for 3 or so years waiting for those loans to be refinanced later this year on at least double the rates. Sure; stop ordering UberEats, going out to the pub, going on a holiday, or buying a new smart phone in order to get through it. But, that has significant consequences down the pecking order. Maybe I'm being a bit bearish.

Think of all the folks that years of low interest rates has caused them to be way ahead in their payments, I think it’s a relatively low portion that will get into real drama.

Of course we will see plenty of poor me stories though.

Keep an Eye on the annual reports and presentations of the Banks, particularly the CBA, they generally show a lot of real world data. It will be interesting to see this years report.

 

[Sean K]

Think of all the folks that years of low interest rates has caused them to be way ahead in their payments, I think it’s a relatively low portion that will get into real drama.

Of course we will see plenty of poor me stories though.

Keep an Eye on the annual reports and presentations of the Banks, particularly the CBA, they generally show a lot of real world data. It will be interesting to see this years report.

Agree, a lot of people would be way ahead in their repayments.

Is CBA going to hide any issues with their loan book somehow? No way.