Discussion in 'Finance & Banking' started by Simon Hampel, 8th Aug, 2007.
RBA lifts rates to 10-year high | NEWS.com.au Business
Interest rates jump to 6.5pc - ABC News (Australian Broadcasting Corporation)
Looks like Steve and the crew at Navra will have to work 1/4% harder for us
I reckon they will be strongly considering raising them again next month too.
This isn't going to help the current govt with an election looming
With interest rates at a 10yr high and housing affordability out of reach of many.....would this be comparable to the interest rate days of 16-17-18% when you look at current median house prices, wages, portion of wage going to loan payments etc?
Isn't it funny that when interest rates are (considered) low, the government in power crow about how THEY have kept the rates low, but as soon as the rates start to sneak up they are quick to point the finger at the opposition
so when would margin lending and borrowing for IP's become ineffective? There would have to be a point its not worth borrowing anymore?
surely all rates will move up (where they are giving us interest they might drag their feet a bit longer to change rates as opposed to when they are taking interest off us)
so the basis % has gone up 0.25, would we see that same .25 flow to all financial products?
thats correct, even on saving accounts like ING accounts and term deposits.
Rate rises isn't such a bad thing, its only bad if you haven't fixed your home loan, and you don't have any savings!!
Well marging lending would not be worthwhile once the interest charged after tax deductions is higher than the return received after tax paid.
As for IPs it would mean that you would be more negativley geared if your interest was variable and that your projected CG needed to be even better. (cash flow negative property)
If you were only investing for a cash flow positive property with little CG, it would mean the rent chargeable after tax paid would need to be higher than the interest cahged after tax deductions.
Nope. Got an email last night from INGDirect announcing a 0.15% rise ....
I guess its a good thing my villa unit is fixed for another 3.5 years at 6.74% and at the end of the year that will be our only debt. (if the wife can learn how to pay off the credit card each month)
Size of loans make rate rise worse
August 9, 2007
WHAT hurts more? Paul Keating's 17 per cent mortgage rates in 1989 or John Howard's 8.3 per cent in 2007?
The answer is much more complex than it seems.
Every borrower welcomes lower interest rates but something has changed dramatically since 1989: the relative cost of houses.
Property prices have gone up so much in the past two decades that mortgage repayments now soak up 9.5 per cent of all disposable household income compared with 6 per cent in 1989. As a community we are now forking out a much bigger proportion of our incomes to pay the interest on our mortgages than when rates were an eye-popping 17 per cent.
Over the past two decades, the average price of an Australian home, including land, has risen from about four times pre-tax annual wages to about seven times, the Macquarie Bank economist Rory Robertson estimates.
The benefits of low interest rates have been swamped by the surge in house prices.
The sharp and sustained deterioration in measures of housing affordability tell the story.
For example, the Housing Industry Association-Commonwealth Bank affordability index shows houses are less affordable now than in 1989, even though interest rates are still half of what they were in those days.
Families who took out loans with small deposits near the peak of the housing boom in 2002 and 2003 are likely to be the most pressured by yesterday's rate rise. Interest rates have risen by more than 2 percentage points since then, adding significantly to monthly repayments.
A new mortgage "Stress-O-Meter", launched yesterday by Fujitsu Consulting, shows 70,000 households are experiencing mortgage stress across Australia - a rise of 52 per cent in the past 12 months.
Parts of west and south-western Sydney, where the housing market has been weak for an extended period, will be hit hard by yesterday's rate rise. Hundreds of families in those regions have already been forced to sell their homes, or have had them repossessed and sold by lenders, in the past year.
Dara Dhillon, a real estate agent in Ingelburn, said the rate rise would cause more "misery" in the area.
"This will be tipping point for a lot of borrowers," he said. "It will be like hitting a panic button."
However, highly geared borrowers will not be the only ones to feel the pain of higher rates. It's also bad news for renters. A report by the Urban Development Institute of Australia this week estimated NSW has a supply shortage of 30,000 dwellings, putting upward pressure on rents. Yesterday's rate rise was a further blow to investor sentiment that could intensify the shortage of rental accommodation.
The Housing Industry Association's managing director, Dr Ron Silberberg, said the rate rise would aggravate the rental crisis and hurt low-income renters who had a high incidence of housing-related financial stress.
"The private rental sector is already in a mess," he said.
Thanks for that link Redwing. Food for thought indeed- especially concerning not only the amount of increasing disposable income that we're now spending on mortgages (easier finance has contributed largely to this as well) but also on what amounts.
The rental crisis, especially here in Sydney, though not evident in all areas, will continue to pose a concern, and will eventually result in some type of govt intervention- with an election coming up, there's lot of talk (or should I re-phrase that to hot air?) that usually tails off after the show is all over, however, so it will be enlightening to see what the party who wins comes out with next
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