Philip Lowe's days are numbered?

[qldfrog]

Well 35% of homes in australia have a mortgage on them, and obviously some people have more than 1

Home Ownership Rate in Australia decreased to 66 percent in 2020 from 66.20 percent in 2018. source: Australian Bureau of Statisticsso
2/3 ownership is no minority.
renters remaining a HUGE minority.

 

[Warr87]

Home Ownership Rate in Australia decreased to 66 percent in 2020 from 66.20 percent in 2018. source: Australian Bureau of Statisticsso
2/3 ownership is no minority.
renters remaining a HUGE minority.

As I said, 35% have a mortgage. If you don't have a mortgage, then what would it matter?

 

[Smurf1976]

So go and borrow up to the eyeballs on the hope in 2024 you can sell it at a profit and when that idea falls on its ar$e look for someone to blame for your gamble.
BOM says that it looks like el nina is over:

Having paid serious attention to them in the past, I'll observe that the BOM's long range weather outlooks are much like the RBA's long range financial outlooks.

They're based on probability taking into account all information available at the time but that's all they are, probabilities.

For example at present the BOM sees a 65 - 70% probability of Sydney exceeding its median rainfall during the March to May 3 month period.

That's not a forecast of a flood and it's not a guarantee of above average rainfall. It's a 65 - 70% chance of above average, meaning there's a 30 - 35% chance of average or below average.

For Perth the outlook is for a 25 - 30% change of above median rainfall during the same period. That says it's most likely to be dry but it doesn't mean a flood is impossible. The probability of below median is 70 - 75%, it's not 100%.

I've stuck with your weather analogy since it's one most can easily understand but same applies to finance. The RBA is dealing with probabilities not certainties, hence the statement that interest rates not rising until 2024 was the central scenario. There are, of course, also other scenarios which involve interest rates rising sooner, later or not at all.

My view, at the risk of sounding a bit arrogant, is that we don't need a new governor of the RBA. What we need is better maths education in schools.

 

[qldfrog]

As I said, 35% have a mortgage. If you don't have a mortgage, then what would it matter?

I just objected to that very sentence in your post:
"Our society is more than just a minority of people owning houses."
I thought for a sec that we were now below 50% ownership..
And obviously the rates affect even mortgage free home owners as if you want to move ,up or down size, you have to sell before buying.
Long gone is the time you would buy your first place and die in it.
And down the end of the chain is a mortgage be it for ppor or investment
So yes rates matters
Now back to the subject core

As a saver , I am not sure I am happy with current rates giving me TD at 4% with an official inflation at 7 or 8 and a real one probably double compounding a 12% actual purchase power loss per year quickly bring your retirement savings to not much

 

[over9k]

Says who? Apart from people who borrowed beyond their means and the media playing on it.

Says anyone who knows how the system actually works and how inherently fraudulent/rotten to the core/fudged the official numbers actually are.

The way in which the ABS measures inflation, which is the key data point that the RBA responds to/with, is absolute bull****. Anyone who knows anything about this stuff at all knows this.

So if you get a fudged inflation number saying inflation is only X when we all know it's really Y, then you're mandated to respond to the official number (not the actual real one) and thus will not raise rates when you really should, and so house prices will continue to run on the cheap credit being used to bid them up.

Again, I have absolutely now doubt that lowe is all too aware of this.

 

[over9k]

Lowe made the prediction on the information that was available at the time, circumstances changed due to Putin, inflation took off.
Dick wits borrowed to the hilt at 0.5% interest, when the long term average in Australia is 5-7%, now its someone else's fault when they are returning to the long term average. They are in for a real shock if a real tragedy happens IMO.

10/10 statement. This is exactly what has happened to the letter.

As I said, 35% have a mortgage. If you don't have a mortgage, then what would it matter?

Well you've got 15 negatively geared investment properties that you thought were a risk free investment that are instead now (quite rightly) getting pummeled and so you're kicking up a stink about it.

What we need is better maths education in schools.

0% probability. You think it's an accident we don't learn even the most rudimentary of money skills in school?

Nobody screwing you over is going to give you the knowledge necessary to deduce how they are doing it, are they?

 

[Smurf1976]

The way in which the ABS measures inflation, which is the key data point that the RBA responds to/with, is absolute bull****. Anyone who knows anything about this stuff at all knows this.

Take the official data and apply it to any real world situation.

You'll be left wondering why you can't get the numbers to add up.

0% probability. You think it's an accident we don't learn even the most rudimentary of money skills in school?

Analysis and statistics was taught at one time.

 

[qldfrog]

10/10 statement. This is exactly what has happened to the letter.

Well you've got 15 negatively geared investment properties that you thought were a risk free investment that are instead now (quite rightly) getting pummeled and so you're kicking up a stink about it.

0% probability. You think it's an accident we don't learn even the most rudimentary of money skills in school?

Nobody screwing you over is going to give you the knowledge necessary to deduce how they are doing it, are they?

And same on critical analysis and history
If you do not know numbers and how to treat them, are unable of critical
analysis,and on top of it, fed BS by the media, SM included
you are a sxcker and that is a huge majority of the western population in 2023.
COVID, Ukraine, UFO shot down,etc etc
So not sure I blame a lambda citizen for taking a HL mortgage at 1% and thinking:. worse case scenario 2%. ..
It will hurt and have to, maybe a chance to wake up a rotting corpse but I somewhat doubt : DA got reelected in Victoria, Macron in France, etc.
Zombies forever
As for the role of the RBA, let's be honest, they are puppets, following their masters that we elected, and the US feds ....
The governor could just be a fuse, a well paid role I am ready to take if offered ?

 

[over9k]

Analysis and statistics was taught at one time.

And housing used to be affordable at that time too didn't it?

The people in charge learned from that mistake didn't they?

So not sure I blame a lambda citizen for taking a HL mortgage at 1% and thinking:. worse case scenario 2%. ..

This is where all the regulatory etc arguments come in but here's a little fun fact for you about the here & now of the banks and how worried they are about more rate spikes, the economy at large etc etc:

I've been eyeing off an investment property. Now, if you want to take out an investment loan and let them secure it against your assets and the investment goes bad they don't necessarily sell the property that the loan is for, the assets to be liquidated are at their discretion and so they can conceivably sell your main residence to pay for the investment property gone bad and I knew this so when applying for a loan I specifically told them I would not put anything else on the line, it will be secured against the investment and the investment alone, where does that land us?

The bank would then only lend approximately 40% of the purchase price for an investment property. I ran the sums, the expected rent on the place (that the real estate agents were willing to put in writing) would pay a roughly 800k loan (the place is only about 850k) and they would only lend me 330k. They effectively wanted a $520,000 deposit on an $850k property, or a 61% deposit.

That's how worried about the housing market just in general the banks are at the moment - they want a 60% buffer (or 150% if you want to look at it as 60/40 leverage) against what they'll loan you. 60%.

A few years back pre-pandemic when my parents made a similiar enquiry about an idea that they'd been spitballing (in the same way, with their main residence off the menu etc and my parents were retired so there's no income to borrow against) the banks were willing to lend them 90% of the purchase price.

So we've gone from banks being so confident in the market that they're willing to lend 90% of a place's purchase price, to it now being less than 40%. They're now factoring in/keeping a buffer of a potential 60% crash in house prices vs the 10% buffer they were working on previously, so in other words, 6x the room for error they were working with previously.

They are THAT worried.

 

[Cam019]

I've been eyeing off an investment property. Now, if you want to take out an investment loan and let them secure it against your assets and the investment goes bad they don't necessarily sell the property that the loan is for, the assets to be liquidated are at their discretion and so they can conceivably sell your main residence to pay for the investment property gone bad and I knew this so when applying for a loan I specifically told them I would not put anything else on the line, it will be secured against the investment and the investment alone, where does that land us?

The bank would then only lend approximately 40% of the purchase price for an investment property. I ran the sums, the expected rent on the place (that the real estate agents were willing to put in writing) would pay a roughly 800k loan (the place is only about 850k) and they would only lend me 330k. They effectively wanted a $520,000 deposit on an $850k property, or a 61% deposit.

There would be other ways to get this across the line. First and foremost, I would never cross collateralize securities. It's too dangerous and the bank actually has recourse to retain profits generated from the sale of a security property tied up in a cross collateralized loan to pay down remaining debt.

Secondly, depending on other assets owned, LVR, security property type, available equity, and whether you can service the debt... you could release equity from your PPR (as an investment split) for your contribution towards the purchase of the investment property without having to cross collateralize your investment property and PPR together. I'd also go and see a good mortgage broker. The good ones will structure this correctly, as I have outlined above, and won't cross collateralize the properties together. You also have the benefit of the broker having numerous lenders on panel with different policies and risk appetites to suit.

 

[Cam019]

So we've gone from banks being so confident in the market that they're willing to lend 90% of a place's purchase price, to it now being less than 40%. They're now factoring in/keeping a buffer of a potential 60% crash in house prices vs the 10% buffer they were working on previously, so in other words, 6x the room for error they were working with previously.

This is a vague overstatement. Banks are still willing to lend up to 90% everyday of the week - it just depends of the type and structure of the application. There are so many variables you haven't mentioned. Applicant age/s, incomes, credit scores, OO or INV loan, security property type, who the lender is, what the postcode is, etc. These all affect how much you can borrow against a particular security. It all depends on a lenders risk appetite. So, if you went to a few banks direct and they'll only lend you 40% of the assets worth, that's not representative of the whole lender marketplace.

 

[over9k]

This is a vague overstatement. Banks are still willing to lend up to 90% everyday of the week - it just depends of the type and structure of the application. There are so many variables you haven't mentioned. Applicant age/s, incomes, credit scores, OO or INV loan, security property type, who the lender is, what the postcode is, etc. These all affect how much you can borrow against a particular security. It all depends on a lenders risk appetite. So, if you went to a few banks direct and they'll only lend you 40% of the assets worth, that's not representative of the whole lender marketplace.

Go and find me a bank willing to lend 90% of the value of an investment property to someone with no income and unwilling to put up any collateral other than whatever deposit the bank requires into the home. Go on.

 

[Cam019]

Go and find me a bank willing to lend 90% of the value of an investment property to someone with no income and unwilling to put up any collateral other than whatever deposit the bank requires into the home. Go on.

Impossible. Hence, my comments about all the variables you failed to note.

 

[over9k]

Impossible. Hence, my comments about all the variables you failed to note.

You've missed the point completely. I am comparing like for like then vs now. At no point did I say a bank won't lend you >80% to buy your first house or whatever. I wasn't talking about buying your first house as a young couple or any other variable you mentioned, I was comparing like for like before vs after and showing how much less a bank will now lend under the same circumstances.

 

[Warr87]

Well you've got 15 negatively geared investment properties that you thought were a risk free investment that are instead now (quite rightly) getting pummeled and so you're kicking up a stink about it.

Well they'd only be negatively geared if you have a loan associated with them. So that would fit in the 35%. I did think that 'hey, with negative gearing people are going to have some pretty low taxable income this year ....'. The silver lining, I guess .

As for prices being pummeled. Definitely. If I was trying to sell a house and prices were going down, sure I'd be annoyed. But like when I trade my shares, when the price doesn't go in my way I don't blame others. I wish it had gone my way, and move on. If its catastrophic and outside of the norm then I look at what happened. But prices have been skyrocketing for a while. No bull market lasts forever. Probably why I get a bit annoyed with the general sentiment (no one specifically, that is): no bull market lasts forever, all investments carry risk, don't risk more than you can afford. The fact it's realestate shouldn't change this--it's just a different asset class--the principles are the same.

 

[farmerge]

Well they'd only be negatively geared if you have a loan associated with them. So that would fit in the 35%. I did think that 'hey, with negative gearing people are going to have some pretty low taxable income this year ....'. The silver lining, I guess .

As for prices being pummeled. Definitely. If I was trying to sell a house and prices were going down, sure I'd be annoyed. But like when I trade my shares, when the price doesn't go in my way I don't blame others. I wish it had gone my way, and move on. If its catastrophic and outside of the norm then I look at what happened. But prices have been skyrocketing for a while. No bull market lasts forever. Probably why I get a bit annoyed with the general sentiment (no one specifically, that is): no bull market lasts forever, all investments carry risk, don't risk more than you can afford. The fact it's realestate shouldn't change this--it's just a different asset class--the principles are the same.

Warr87 well put sentiments. A tick from me.

 

[bsnews]

Some people are just wanting to buy there first home and on the Call of the RBA with even a bit of fat build in are now in a worring financial position. Through no fault of there own. Not eveyone one is buying investment property.
The RBA know that they should be increasing by min .50% but they are scared to do it as how many ships will they sink.

 

[Warr87]

Some people are just wanting to buy there first home and on the Call of the RBA with even a bit of fat build in are now in a worring financial position. Through no fault of there own. Not eveyone one is buying investment property.
The RBA know that they should be increasing by min .50% but they are scared to do it as how many ships will they sink.

100% agree.

 

[frugal.rock]

Brazil makes the RBA decision making look static.
In this day and age with technologies available, the RBA should have it's finger on the pulse much better than it does.

Note how much earlier Brazil moved?
I consider the mechanics of Brazil's economy to be not that far removed from ours, largely by the fact they are an exporting economy of similar products to us.

 

[sptrawler]

So @frugal.rock , if those graphs are on the same scale and you say we have a similar economy, you would prefer there numbers?