Home Loan Interest Rates.

[markTHEblake]

Thought you home owners might like to know, that after a year or so of Fixed rates decreasing, in the last week, two of the majors have lifted their Fixed Rate loans by between .15 to .20 % citing "changes in wholesale rates".

I have no doubt the rest will follow soon enough.

The fixed rates usually change up and down in advance of what the Reserve Bank is about to do with the official rate. The rumour mongers are hinting towards a .25% lift in March.

As Fixed rates are now at historical lows the last few months, like 6.49% , its still not too late to get on that bandwagon. I would suggest that if your on a variable rate then it would be wise to ring your bank and see what your options are right now - do it tomorrow, before you miss the boat.

[AndyP]

I would suggest that if your on a variable rate then it would be wise to ring your bank and see what your options are right now - do it tomorrow, before you miss the boat.
Thanks for the heads up, Blakey.
Although the majority of my loan is fixed, there is still quite a chunk in variable. I might have to change some of that to fixed too.

Now where the hell was my banking friend on that one. He'll probably have some p*ss-poor excuse about his wife giving birth last night or something.

[markTHEblake]

Just announced: for the 2nd week in a row ANZ has increased their Fixed rates, by up to .15% again. So thats .30% in total.

So far only ANZ and CBA have increased fixed rates. I reckon the snowball has just started rolling.

[amanda]

Well - rates are up 0.25%

I calculated and it adds $11 per fortnight to our variable loan. Nothing serious over the year. I'm glad we've been paying extra back on our loan now.

Blakey - how long after an official rise to banks wait to raise their rates on variable loans?

[markTHEblake]

how long after an official rise to banks wait to raise their rates on variable loans?

within a week usually. Nobody wants to be the mug and be the first. Others are thinking about not passing on the full hike, but want to wait and see as well. Some may not increase at all. But when the first one cracks, just watch, the rest will follow with a few days.

Pricing committees tend to meet on Fridays, with new rates coming into affect on the following Monday.

The only rates that 'should' be affected are the Standard variable, which was 7.07% or loans with a fixed margin discount to that rate.

Other loan types such as fixed and basic variable (like 6.45%) are not set according to the Official rate set by the reserve, but by wholesale rates, ie market demand. The impact on these rates 'should' be minimal, but that only tends to happen when rates are falling.

[amanda]

Thanks Blakey - we are on one of those basic variables - I might arrange to pay a little bit extra anyway!

[markTHEblake]

Couple of the major banks (Comm & Wpc) have today announced increases 3, 4 & 5 year fixed rates by .16 to .24 %, bringing the rates up to 6.95ish.

This change is against the trend of a year or so of slight decreases in the fixed rates. Typically once a couple of banks change the rest follow.

If you were ever thinking of switching from variable to a fixed rate, then this week may be a better time than next week.

There are still some 6.59's and 6.65's around, depending on who your with now.

[Moe Norman]

i'm on 6.19 fixed for 10 years - suckers!

[markTHEblake]

crikey, where (and when) did you pick that up? as a guess it would have to be a few years ago now.

[Moe Norman]

When I worked for Suncorp.

When I left I had the option of remaining on the Staff Rate (5.94%) for another 12 months from the date I resigned or lock in the introductory rate 6.19% for a fixed period.

Obviously I made a wise decision, I know heaps of people who took the staff rate. Idiots!

[markTHEblake]

If you were ever thinking of switching from variable to a fixed rate, then this week may be a better time than next week.

now wasnt that the understatement of the month. - Fixed rates up again for the 2nd time in 3 weeks :-x (not to be confused with the variable rate increase last week)

most of the Lenders have today increased Fixed Rates again by on average around 0.2%, the 3 year rate is typically now around 7% up from as low as 6.65 a month ago.

Now i am confused :? fixed rates movements tend to predict where the official rate is expected go, but i dont get the double rise? I really hope this is a knee jerk reaction by the money market and it will settle back soon.

If you were thinking of getting a fixed rate, then it may be best to do it today, not tomorrow, not Friday, not next week, as there is a handfull of lenders (inc CBA/Suncorp still 6.7x%) who havent changed yet but i am sure it wont be long. You would need to lodge an application and pay a nominal rate guarantee fee immediately.

On the other hand, as i am writing this Gold has gone up $15 in the last hour, to reach another 30yr or so high. Gotta take the good with the bad i suppose.

[Fishman Dan]

Not reading all of this, but...

If you think that interest rates will continue to increase, then panic now and get onto a fixed rate. If you think this is a passing phase, then do nothing. Basically by changing to a fixed (higher) rate, you have to do the maths and work out if it's worthwhile in the long run, it could take 10+ years for the break-even with the different interest rates.

Don't let media hype scare you into a move that might cost you. Do some homework.

Mind you, the interest rate hikes shouldn't be a problem for those who borrowed within their means!!

[markTHEblake]

Spot on the money fish on all points fish.

[BrisVegas]

...the interest rate hikes shouldn't be a problem for those who borrowed within their means!!

ahhh, so that's where I went wrong. Remind me never to trust a mortgage broker again.... :-D

[markTHEblake]

If you think that interest rates will continue to increase, then panic now and get onto a fixed rate.
If you are that person that wants to fix, for your info the Commonwealth bank is the last lender to increase their fixed rates as of today.

However they have given a grace period, if you lodge an application by 5pm thursday you can get the old rates which are about 0.25 to 0.35% lower than the rest of the banks on average. 3 yrs 6.74% and 5 yrs 6.84%

Bear in mind what Fishy said above, and Fixing an interest rate is not about "beating" interest rates. Its about giving the borrower the comfort that his repayments will not change for a defined period and therefore he can manage his cash flow. for example if your income is fixed (rental income) then it makes sense to fix your repayments regardless of the overall trend in rates.

[Jarro]

Blake, shouldn't you be busy updating the POTY money-list or something :roll:

[Fishman Dan]

Blake - remembering of course there are going to be charges/fees associated with changing from variable to fixed, and even more if you go from one lender to the next (if possible).

So factor that in to your sums.. at a guess it can be up to 10 years or more for the break-even point.

[markTHEblake]

at a guess it can be up to 10 years or more for the break-even point.
Thats a common misconception, total costs for changing banks is likely to be around $500-600 total (closer to $500 if your in NSW), unless you have a loan with significant penalties.

if your converting to a fixed loan with your own bank, cost would be between $0 and $300 typically.

that puts your break even point at between 6 and 12 months if you have a rather small loan like <$200k. I have never seen a deal anywhere near 10 years, probably 18 months at the worst.

[amanda]

but don't you also need to pay stamp duty to register a new mortgage (and a fee to discharge the other one)? or would that be included in the $500?

[Webster]

but don't you also need to pay stamp duty to register a new mortgage (and a fee to discharge the other one)? or would that be included in the $500?

It varies from state to state. No S/D on mortgages down here.

[markTHEblake]

but don't you also need to pay stamp duty to register a new mortgage (and a fee to discharge the other one)? or would that be included in the $500?
No Mortgage Stamp Duty on a Mortgage for refinance in NSW or Qld (other states i dont know ). The State Govts granted an exemption around 10 years ago in order to reduce refinance costs so that people will shop around for better deals.

Govt costs for discharge and then registration of new mortgage is $77 each. Outgoing bank will charge a fee of $250-350. So in NSW $504 for a refinance, Qld add $80.

[markTHEblake]

Good news; Fixed Interest rates have been dropping for the first time this year.

Starting from about 1 week ago, the Lenders have begun dropping their 3-5 year rates, by varying amounts. I'd say about half have changed rates by now. Seeing 3 yr rates at around 7.2% ish now down from the 7.3%ish or more.

This is after 6 waves of increases to fixed rates since early this year amongst the 2 increases to the Official Cash Rate.

Fixed rates are set by the money market, not the RBA, ie supply and demand, and from what i usually see, movements in Fixed rates typically give an indication of whats coming (or just passed)

In this case I am more inclined to think the money market over reacted to the last Official Rate movement (IMHO the medias fault) and has now setlled down into thinking that the medium term outlook is not so bad.

[Bruce]

Those that locked in early this year when the talk was 'when' rather than 'if' for the interest rate rises are probably feeling like chumps now. Things are gunna hve to turn pretty sharply upward in a very short time for them to get value from the premium they are paying now. And all signs point to that being unlikely.

[Fishman Dan]

In this case I am more inclined to think the money market over reacted to the last Official Rate movement (IMHO the medias fault) and has now setlled down into thinking that the medium term outlook is not so bad.

Another rise today, and already talk of more expected in the first quarter next year.

With our resident financial expert in self-imposed exile, anyone else want to make any bold predictions?

[3oneday]

anyone else want to make any bold predictions?yes I will, another rise next year will cost Howard and the Libs bigtime ;)

[Fishman Dan]

Fingers crossed huh ;)

Uh oh, politics discussion coming up!!

[AndyP]

Yeah, Labour have a great record of keeping interest rates down, don't they?

[Fishman Dan]

Yeah, Labour have a great record of keeping interest rates down, don't they?

:-#

[3oneday]

Yeah, Labour have a great record of keeping interest rates down, don't they?so, give the greenies a go then ??? 10 years is a long time to hold a grudge, most voters will vote with their pockets as they are filled today, not yesteryear.

;)

[Jarro]

How much will a 1/4% rate rise affect a normal home loan anyway ??

20-30 bucks a month ???

[BrisVegas]

Those that locked in early this year when the talk was 'when' rather than 'if' for the interest rate rises are probably feeling like chumps now. Things are gunna hve to turn pretty sharply upward in a very short time for them to get value from the premium they are paying now. And all signs point to that being unlikely.
I don't feel like a chump at all. I'm locked in at a good rate (6.85%) and the current rates are way over that now. As for a "premium", the fixed & variable rates were 0.04% apart when I locked in.

[3oneday]

I don't feel like a chump at all. I'm locked in at a good rate (6.85%) and the current rates are way over that now. As for a "premium", the fixed & variable rates were 0.04% apart when I locked in.picking interest rate rises is fairly similar to picking Melbourne Cup winners, more luck than skill I reckon ;)

and Jarro, $20 to $30 per month could be looked at a couple of ways, added to the previous 3 (or 4 ?) and it could see some folk go to the wall, at worst it's 8 to 10 schooners less per month ;)

[PeteyD]

Interest rates will only be an election issue within a couple of months of the election. the rate is still well below what I was paying when I first bought 10 years ago.

Anyone going to the wall with official rates at 6.25% is seriously over exposed.

[BrisVegas]

picking interest rate rises is fairly similar to picking Melbourne Cup winners, more luck than skill I reckon ;)

and Jarro, $20 to $30 per month could be looked at a couple of ways, added to the previous 3 (or 4 ?) and it could see some folk go to the wall, at worst it's 8 to 10 schooners less per month ;)

whilst i appreciate the slight dig, I locked in at a rate I could manage on one income as my wife was leaving the work force. I didn't want any surprises whilst the $$ situation was tight. I could have taken a "punt" that rates may not have gone up, but as it was, the fixed rate was not far above all-time lows and I was happy to lock in for the peace of mind.

Those $20-30 increases they quote on TV are only ever for $200k mortgages. People with **ahem** slightly larger mortgages are impacted much more greatly. Completely agree with the cumulative effect of the past 3 or 4 small rises... It can add up to serious money!

[just]

I would think most home mortgages today are over the $200k mark. I would suggest the average would be in the $250-$350k mark. Its pretty hard to get in to a major city market under $250k these days. So most people would pay more than $20-30 per month.

The people who are most likely swing voters, people in the 25-45 age bracket have most likely been in the market less than ten years and can't remember higher interest rates of previous times-they will be hurting to various degrees and will look to take it out on someone.

[3oneday]

Anyone going to the wall with official rates at 6.25% is seriously over exposed.true to you and I maybe, but if you combine increasing rates with decreasing values it is easier now to overcommit, given the number of higher than 90% lends allowed these days.

Credit cards are too easy to obtain, people get home loan increases to consolidate, house drops in value, nowhere to go except out backwards ;)

We act for a major lender in serving default notices, work spikes with every interest rate rise.

No dig at all Bris ;), no one can predict interest rates 100% of the time, there are too many influences or variables that can't be measured.

[PeteyD]

Very true. Decreasing values is the major concern, though not up here yet. Deregulation made lotsa credit too easy to get. I am surprised at the spikes in defaults, but suppose I really should not be.

[poidda]

hmmmm, Renting is cheap and a lot less stress!

[Golf_Novice]

Gotta love renting :D

[BrisVegas]

I would think most home mortgages today are over the $200k mark. I would suggest the average would be in the $250-$350k mark. Its pretty hard to get in to a major city market under $250k these days. So most people would pay more than $20-30 per month..

Friends I work with are trying to buy their first home, close to the city (Paddington). They're looking at post-war shitboxes that need a lot of work and the prices are high-400's. For a couple with no deposit, paying mortgage insurance and borrowing $480k, I can tell you they are sweating each 0.25%. Sure they can afford it while their both working.... but you can see how couples end up putting off kids until their 40's...:sad:

[poidda]

Australian has become to spoilt. I bet all these people complaining about the extra $40 month wont disconnect Foxtel, or miss a game of golf or two?

[Iain]

Friends I work with are trying to buy their first home, close to the city (Paddington). They're looking at post-war shitboxes that need a lot of work and the prices are high-400's. For a couple with no deposit, paying mortgage insurance and borrowing $480k, I can tell you they are sweating each 0.25%. Sure they can afford it while their both working.... but you can see how couples end up putting off kids until their 40's...:sad:

Why are they looking at Paddington then??

That to me is just crazy....

[just]

I agree Poidda, Australians are spoilt to some degree but this is what we have come to expect as 'normal' lifestyle. Consumer goods are more readily available and slightly cheaper and we want them. What respectable household doesn't have a big screen TV etc. Not a criticism just the way it is. Just think of your average golfer of 20-30 years ago probably would change irons and drivers every 10-15 years, now everyone feels compelled to get new ones every couple of years to keep up with the latest technology.
Lifestyle has become important and we all want to buy in and paying mortgages aren't as important when you can rent a nice house for much cheaper and have the lifestyle.

[Golf_Novice]

It's true - people take the easy way out... My sister and her husband have just sold their 3 bedroom house in Everton Park for over double the price they paid for it about 6 years ago!! Now they are renting this ENORMOUS house at McDowall whilst saving money to buy another house and shopping around for what they want.

A few years back people used to just settle for second best coz' they didn't have too much to choose from. With all these developments happening daily, you can choose from no deposit homes/build your own/rent/etc....

What happened to "keeping up with the Jones'"??

[amanda]

Australian has become to spoilt. I bet all these people complaining about the extra $40 month wont disconnect Foxtel, or miss a game of golf or two?

Or stop buying takeaway, or new clothes every week, or spending $150+ on their mobile phone.

Anyone who is looking to make some small changes that can result in serious savings should check out:

www.simplesavings.com.au (http://www.simplesavings.com.au)

The cost to join and look at all of the hints & tips for saving money is $47 - but you can save that amount in 1 week!

As an example, we were spending about $400-500 per month on groceries, fruit & veggies, household supplies. By buying some things in bulk from wholesalers (such as laundry powder), using natural alternatives (for cleaning supplies - vinegar has amazing powers & is cheap) and shopping smart (at the weekend fruit markets, no impulse buying, monthly menu plans) - we spend at most $260 per month.

[PeteyD]

Or stop buying takeaway, or new clothes every week, or spending $150+ on their mobile phone.

Anyone who is looking to make some small changes that can result in serious savings should check out:

www.simplesavings.com.au (http://www.simplesavings.com.au)

The cost to join and look at all of the hints & tips for saving money is $47 - but you can save that amount in 1 week!

As an example, we were spending about $400-500 per month on groceries, fruit & veggies, household supplies. By buying some things in bulk from wholesalers (such as laundry powder), using natural alternatives (for cleaning supplies - vinegar has amazing powers & is cheap) and shopping smart (at the weekend fruit markets, no impulse buying, monthly menu plans) - we spend at most $260 per month.

But you guys are tiny!! ;)

[BrisVegas]

the simplesavings $47 joining fee can be won if you come up with an innovative savings tip. Our 2007 subs are paid for thanks to my brilliance. 8)

[miro]

As of next month we will be mortgage free -its an interesting idea -our salaries are ours to waste in whatever way we see fit. Of course living in Sydney that simply means we will buy a new house and get a new even larger than before mortgage. :)

Oh well we will enjoy it while it lasts.

[Moe Norman]

Vegas - why on earth are they looking at Paddington if they have no deposit.

Its no reason at all to be putting off kids. They are basically choosing a nice suburb over the financial stability that will allow them to have children.

My attitude when me and Lauren were married was that if we wait till we can afford kids, we'll never have them.

[Golf_Novice]

Its no reason at all to be putting off kids. They are basically choosing a nice suburb over the financial stability that will allow them to have children.

My attitude when me and Lauren were married was that if we wait till we can afford kids, we'll never have them.


I know someone else like that!! :evil:

[Eag's]

We have been looking at the housing market recently just to see if it would be a viable option to head back into real estate.
I have done the callculattions based on a loan of around $250000 and the repayments under the current interest rates were quite sobering :shock:

Looks like we will continue to rent for now and keep pumping our money into the share market (which is going gangbusters at the moment :smt002 )
Hopefully there may be a few bargains around in another 12 months :)

[amanda]

Of course living in Sydney that simply means we will buy a new house and get a new even larger than before mortgage. :)

Why move at all? If you're happy where you are (especially after putting in that new chipping and putting green).

[BrisVegas]

Vegas - why on earth are they looking at Paddington if they have no deposit.

Its no reason at all to be putting off kids. They are basically choosing a nice suburb over the financial stability that will allow them to have children.

My attitude when me and Lauren were married was that if we wait till we can afford kids, we'll never have them.

heheh, I don't know either. FWIW, I've tried to sway them to the idea of the Centenary Suburbs, or God Forbid, the outer suburbs like me.... but the guy is resolute about living as close as possible to the CBD. He'd happily live in an apartment, but she wants a dog and a small yard.

$480k can buy you a heck of a house if you don't mind going a bit further out. :shock:

[Speirsy11]

hmmmm, Renting is cheap and a lot less stress!

Except 20 years of renting gets you...........

[peter_rs]

Well if you invest the difference its close to $1.6M (invest well and it could be more). so even if you only invest half you can live the high life and pay cast in 20 years. So I have been told by my accountant

[just]

Pete
The only problem with that is very few people invest the difference-they either live the high life on it or alternatively they can't afford the mortgage so the extra left after rent is used for the necessities. You have to remember that most people use the mortgage as enforced savings-the only savings or investment most Australians have. If you go by your figures in 20 years time $800k might only just get you into the market.

BrisVegas
Send them to Sandgate. $480k will get you a nice place in the avenues, close to the water and only 1/2 hr on a train to the city-heaven!
Just

[BrisVegas]

BrisVegas
Send them to Sandgate. $480k will get you a nice place in the avenues, close to the water and only 1/2 hr on a train to the city-heaven!
Just

Mate, I seriously considered Sandgate (& Reddy Bay) before choosing Brookwater. Sandgate's a great little village, but it's way overpriced nowadays. My brother just bought another place there in 7th Ave with water views for a little under that sort of money. Nice location, but I wouldn't live in the sort of house I could afford there. If only I'd bought some Qld'ers out there 6-8 years ago when he was nagging me about it. No way was I gonna spend $200k for a crappy old timber house...#-o

[PeteyD]

No way was I gonna spend $200k for a crappy old timber house...#-o

I know your pain!!

[BrisVegas]

Come to think of it, the subject of missed real estate opportunities is worthy of it's own thread!

I'm sure there are some corkers out there...

[Moe Norman]

in some ways i wish i was 10 years older, because people made money in real-estate who didn't even try to simply because they got lucky!

i can;t see another boom like it within the next 15 years when i could do with the money!

[miro]

Why move at all? If you're happy where you are (especially after putting in that new chipping and putting green).

Amanda,

The wife and I are both in the Property game. Buying, building and selling on a 5 yearly basis is part business part pleasure.

However, the next place must have significant water views and room for a larger putting green. We have now been underbidder twice on places in the past 4 months -both times only two bidding parties!! If only the other guy had not turned up on one of those occasions we would have grabbed a bargain!!

IMO now, and perhaps the next 6-9 months is a great time to be buying in Sydney.

[amanda]

Man - I'm not looking forward to moving in about 12 months time (all the packing, unpacking) - imagine doing it every 5 years!

We are building our dream home and staying put - you'll have to bury me next to the golf course ;)

[Fishman Dan]

IMO now, and perhaps the next 6-9 months is a great time to be buying in Sydney.

Precisely. While some people (unfortunately) flounder and stumble due to being mortgaged to their eyeballs, those who planned better should see a few 'panic sale' properties come onto the market.

I don't accept the media hype that this rise is sending people to the wall. If people can't afford to pay their mortgage, then they need to sell up and move into something more appropriate for their budget - not their ego.

[BrisVegas]

We are building our dream home and staying put - you'll have to bury me next to the golf course ;)
I thought that way, but I still look at display homes and get ideas for things I'd do differently, so won't rule out doing it all again. I like the area and the golf course, so it would be hard to leave now. Especially with Meghan enrolled in the school over the road and the new shopping centre and electric train etc.

[miro]

I must admit Amanda the idea of living next to a course is very tempting and would be a great lifestyle. Maybe if we move to Qld one day.

[just]

Mate, I seriously considered Sandgate (& Reddy Bay) before choosing Brookwater. Sandgate's a great little village, but it's way overpriced nowadays. My brother just bought another place there in 7th Ave with water views for a little under that sort of money. Nice location, but I wouldn't live in the sort of house I could afford there. If only I'd bought some Qld'ers out there 6-8 years ago when he was nagging me about it. No way was I gonna spend $200k for a crappy old timber house...#-o
Vegas

I agree its not cheap, don't know about overpriced although if someone was to like new brick then I could see how they could think an old timber Queenslander that need renos is overpriced. I like walking the dog on the waterfront and being able to walk to the train and the fact the trains only 1/2 hr to the city and I'm only 10 minutes to the airport. I'm obviously willing to make compromises though and I live in a two bedroom shack with a barely there kitchen and bathroom.(only a couple hundred metres from your brother.)
Overpriced is the semi I rented in Neutral Bay in Sydney in 1999, 1 bedroom unrenovated with rising damp and it had just sold for slightly over $500k.

Amanda

Moving not so bad-it makes you get rid of all the extraneous crap.

[BrisWesty]

The Greens can say whatever they want because they know they will never win power on their own.

[just]

The Greens can say whatever they want because they know they will never win power on their own.

What the?

[Golf_Novice]

Man - I'm not looking forward to moving in about 12 months time (all the packing, unpacking) - imagine doing it every 5 years!


Amanda - I have moved 37 times and I'm only 24!!! You get used to it. Last time I moved I still had boxes packed from the last time I moved. And the place I've just moved into is the first house in 6 years that is only one story!!!

[BrisVegas]

Vegas

I agree its not cheap, don't know about overpriced although if someone was to like new brick then I could see how they could think an old timber Queenslander that need renos is overpriced. I like walking the dog on the waterfront and being able to walk to the train and the fact the trains only 1/2 hr to the city and I'm only 10 minutes to the airport. I'm obviously willing to make compromises though and I live in a two bedroom shack with a barely there kitchen and bathroom.(only a couple hundred metres from your brother.)
Maybe "overpriced" is not the right term. Markets set prices (usually), so houses in Sandgate are obviously "worth" what they're getting, can't argue with that.

I guess my problem was reconciling the standard of house with the price. I'm not handy at all and have no renovation aspirations. I couldn't handle paying that much to live in a delapidated old house with no space, poor plumbing, no insulation etc etc etc...

I completely agree with you though. I love Sandgate as a location. I'd move there in a heartbeat if I could build a modern home close to the water. The train is fantastic for commuting, the proximity to the highway and Nudgee GC (my old club) are bonuses. Plus, the weather is much milder out there than in the wild west where I'm at now.

[PeteyD]

Our next move is likely to be to somewhere in the wynnum area as the kids are going to Moreton Bay College and Boys college.

Somewhere near the golf course would be nice.

[3oneday]

Somewhere near the golf course would be nice.I have two golfcourses within 10 minutes drive of my place and hate them both ;)

[Iain]

I have two golfcourses within 10 minutes drive of my place and hate them both ;)

Snob....

[PeteyD]

I have two golfcourses within 10 minutes drive of my place and hate them both ;)

I live with 5 minutes drive of my course (reddy bay) at the moment. If we move to wynnum I want to be walking distance to the course.

I like both tracks. I prefer reddy bay over wynnum, and this is only pipedreaming at the moment anyway.

[amanda]

I must admit Amanda the idea of living next to a course is very tempting and would be a great lifestyle. Maybe if we move to Qld one day.

Yep - I'm looking forward to wandering 300m to the practice range or going over our property boundary and playing a few holes after work :) (or in the worst case scenario - refilling the esky with alcohol after a bad 7 holes!)

they were selling some nice land with golf course and water views near Randwick - but the course aint that nice.

[miro]

Did I mention that I could not possibly consider leaving the leafy north shore. Its enough that I have to work with people from the East let alone live near them. ;)

[TS]

The wife and I are both in the Property game. Buying, building and selling on a 5 yearly basis is part business part pleasure.



Moving every 5 years won't work for me as it took me more than 10 years to move all the stuff out of my last house. And I had collect a bit more rubbish and golf clubs since then.

[Grunt]

If all the stories from my dad's side of the family are true yours truely is sole Heir to a house on Bay Parade Malabar, 200m from Randwick Golf Course and only a street between the front yard and Long Bay (Malabar Bay) & The Pacific Ocean.
My Aunties have been telling me this for about 10 years at least. With my dad being only son and myself the same the house/land has only ever been owned by my Family and has been passed generation to generation, the current home is about 25 years old and would be valued somewhere in the range of 1 to 1.5 mil (a guess).
Until this family rumour comes to fruition Grunt will continue to live in South Western Sydney as I can't afford anywhere else. One day I may move back to the place I grew up.
I used to think anywhere west of Anzac Parade was too far west. (I am talking when I was 21) Don't things change as we age.

[Fishman Dan]

I'm just a little worried you refer to yourself in the third person!

[3oneday]

I'm just a little worried you refer to yourself in the third person!I personally would be attempting to confirm the rumours... anyway, who/what was this thread about again ?

[Moe Norman]

i think its about everyones near misses on the property market

[Grunt]

I think it was something to do with oweing the bank money and how much we would have to repay.
It soon turned into a thread anbout how little or nothing that we owe the banks.
I owe them heaps!!!!! and now I will take longer to pay them back!!!

[Fishman Dan]

Play less golf? Could cut years off your mortgage ;)

[3oneday]

Play less golf? Could cut years off your LIFE ;);)

[Grunt]

;)

Have to agree there Pete,
Why live life for tomorrow when today could be the last?

[Fishman Dan]

Grant - your last 2 comments sum up this entire thread.

Rates go up, no ones happy and potentially we all have to make sacrifices.... except for Foxtel, golf, eating out, 4WD vehicles, cars with aftermarket modifications........

[3oneday]

Grant - your last 2 comments sum up this entire thread.the one where he says "have to agree there Pete" ???

:lol: :lol:

[just]

Grant - your last 2 comments sum up this entire thread.

Rates go up, no ones happy and potentially we all have to make sacrifices.... except for Foxtel, golf, eating out, 4WD vehicles, cars with aftermarket modifications........


I can see your point and I think most on this thread have not said they are hurting, I think most of us have made sacrifices to ensure we are not going to go to the wall.

The people who will potentially change their vote and/or go to the wall are one stupid enough to believe "we will keep rates low" slogan. If they were dumb enough to believe this, then they were dumb enough to borrow beyond their ability to pay back and/or get mortgaged to the hilt.

You have to achieve balance in your life between paying your way in the world and enjoying life.

[AndyP]

I have a mortgage, but am not a rate watcher. I have a balance of fixed and variable. The rates are beyond my control, so I don't worry about it.

[Moe Norman]

johnny said he will keep rates low and they are low.

[Grunt]

I have a mortgage, but am not a rate watcher. I have a balance of fixed and variable. The rates are beyond my control, so I don't worry about it.

If you have to worry about it then you are over your head!
END OF STORY!!!!!

Live for today, if you spend your whole life worring about tomorrow you will end up having a pretty miserable life.

[Toolish]

Only way it affects me is that we will paying less extra off our loan each payment.

We got into the loan allowing about 1.5-2% rate rise before we run into any trouble. At the moment it has risen .75%, and I think our initial estmates were a bit conservative. Could cover another 1% easy, if it rises another 2%+ then we would have to cut back a bit, but that is still better than renting!

It is crazy the amount banks will lend now though, there is no way we could afford the repayments on amounts they offered us, if we were stupid enough to use all that money we would be in all sorts of trouble now!

[Moe Norman]

it sure is rediculous the maount i got quoted recently when i went in to extend the loan for some reno's to the home was something i wouldn't even consider borrowing.

there is a girl in my office who makes $28k PA as the marketing assistant, Westpac just gave her a Gold Credit Card with a $20k limit. Banks should have some responsibility for their actions!

[Golf_Novice]

This is why SO many people are in debt!!!

[Fishman Dan]

Moe - it's more the fact that people borrow $500k or more on a house that's wrongly priced in the first place, only to find that they can't make the payments, OR sell the house for anything near the price they paid for it.

No Doc loans are to blame - people with little or no income getting loans in excess of $200-300k without having to provide any proof they can make the payments.

I heard a valid comment on the radio the other day - once upon a time we feared debt and would do anything to get out of it or reduce it significantly. Today we live well beyond our means and don't look back.

It doesn't sound like anyone who has posted here is in that predicament thankfully.

[AndyP]

With Colorado being taken over, and the shares I had now sold, I'm essentially left with one share (and another worth bugger all) in my "portfolio", which is a bit too much exposure for my liking.

My financial advising mate recommended that I either use the equity in the home to get an investment line of credit and buy a fair bit more
OR sell it and just invest it in the loan.
With variable interest rates at 7.57%, I don't think the gain in shares would be that much greater after tax. Plus, with a single income period next year, it's probably a good idea to keep on top of the variable part of the loan now.

[TS]

With Colorado being taken over, and the shares I had now sold, I'm essentially left with one share (and another worth bugger all) in my "portfolio", which is a bit too much exposure for my liking.

My financial advising mate recommended that I either use the equity in the home to get an investment line of credit and buy a fair bit more
OR sell it and just invest it in the loan.
With variable interest rates at 7.57%, I don't think the gain in shares would be that much greater after tax. Plus, with a single income period next year, it's probably a good idea to keep on top of the variable part of the loan now.

Andy. Do the smart thing and buy some new clubs.

[AndyP]

When I sell them I'll put a little away on the side for clubs. The missus will never know, right?

[TS]

My wife always ask me why I keep losing money in the stock market.

[Webster]

With variable interest rates at 7.57%, .

You should be paying a lot less than that Andy.

[AndyP]

I have my loan accounts with CBA.
Fixed @ 6.54%
Variable @ 7.57% (increased in May, Aug, Nov)

[Fishman Dan]

My wife always ask me why I keep losing money in the stock market.

Does she ask "why" or "how"? There has been substantial growth over the last 18 months (that i'm aware of) led by the banks and resource sectors.

[3oneday]

Does she ask "why" or "how"? There has been substantial growth over the last 18 months (that i'm aware of) led by the banks and resource sectors.I think you missed something in his post Fush :p

[TS]

I think you missed something in his post Fush :p

At least you know what I mean.

[Fishman Dan]

I didn't pay any attention to his post-flush. You're sick!

[Grunt]

Up again today, some very different ideas if this is the last of the line or not. Some analysts are saying they will peak next August and others are saying that is it.

[terryand]

6 inerest rate raises for a total of 1.5% isn"t bad in the "boom" times. When I first bought my house we went through 6 raises for 6%, big difference :-s

Terry.

[PeteyD]

I can remember 2.5&#37; increase over 3 months.

[kpac]

that's right, and they're reporting it like it's the worst interest rate rise sequence ever. Get a grip 1.5&#37; people, that happens in 2 months in other countries. I'm pretty happy with our economy right now, but i do hope this is the last one for a while..... (all depends on the election for the immediate future of the rate i suppose)

[3oneday]

that's right, and they're reporting it like it's the worst interest rate rise sequence ever. Get a grip 1.5% people, that happens in 2 months in other countries. yes, but that doesn't sell papers now does it ;)

[markTHEblake]

Fixed rates are looking to go up by 0.2&#37; over the next week. This is dissapointing as they have been creeping up over the last 2 months anyway, but it always happens anyway.

I think in the time we have seen variable rates go up by 1.00% the fixed rates have gone up 1.50%

[Webster]

Fixed rates are for chumps Blakey.....

By the way, dont you love how the press always puts out their little tables showing how much everyone's monthly payments go up by when rates rise? And they always assume everyone is paying full rack rate on their home loans - anyone who was paying 8.32&#37; and is now going to 8.57% is a muppet!

[markTHEblake]

Fixed rates are for chumps Blakey.....

Today yes, but my customers who have fixed at <7.00% love me now.

I reckon the timing is perfect, rates should be coming down in 2009


By the way, dont you love how the press always puts out their little tables

Current Affair do it the best :roll:

[Webster]

Blakey, you cant churn them if they are locked in at 7&#37;.....

[markTHEblake]

Blakey, you cant churn them if they are locked in at 7%.....

Thats for the scumbag peroxide porsche driving scammers of Surfers Paradise. I am a honest mortgage broker.

[Webster]

...of course you are....

[3oneday]

I am a honest mortgage broker.if that's true, my hat is off to you, a very rare commodity in your industry.

[Jarro]

They're all criminals !!

[Webster]

They're all criminals !!

nice call, luggage thief...

[goughy]

He only wears the camel outfits Jack, he doesn't take them home!!

[Jarro]

At least i can sleep well at night

[Webster]

I thought you slept during the day??

[Moe Norman]

my loan costs the bank money at the moment, shame I'm moving and my fixed rate runs out at the end of Nov :(

[Fishman Dan]

My interest rate in this thread has gone down by at least 1&#37;.

[Webster]

my loan costs the bank money at the moment, shame I'm moving and my fixed rate runs out at the end of Nov :(

I thought you were smarter than that Thommo. You clearly have no understanding of the concept of monetary hedging...

[Moe Norman]

you're right Jack, I don't.

I locked in a fixed rate (6.19&#37;) 2 years ago for about 75% of my mortgage and have had variable on all other loans and the balance of my mortgage.

I have just bought a new house (although it would be nice if my current one would f#cking sell soon, so I don't have to terminate the contract) so I I am in the process of refinancing.

Given the current situation I'm most likely locking in a 3 year fixed rate with St. George of 7.67% (surely a loss leader?)

what would you reccomend I do?

[Webster]

my loan costs the bank money at the moment, shame I'm moving and my fixed rate runs out at the end of Nov :(

This is the bit I had an issue with.

Go variable, you will almost certainly be better off in the long run. If your broker is telling you otherwsie, then you need to talk to one that knows his stuff..

[Fishman Dan]

Get a room you two.

[markTHEblake]

you're right Jack, I don't.

In really simple terms, when you take out a 2 year loan for 6.19% fixed, in order to give you that money the bank took out a 2 year loan for say 5.19%. (it aint that simple but I cant explain it any better :-), nor could most people understand it )


Given the current situation I'm most likely locking in a 3 year fixed rate with St. George of 7.67%

Unless you have paid a rate lock fee previously, that fixed rate is 7.99% it went up yesterday. (though they do have a product with a .15% discount on the rate)


what would you reccomend I do?

Read this article from the Age (http://www.theage.com.au/news/Business/Odds-against-fixed-loans-since-90-data/2007/11/04/1194117861839.html)that suggests over the last 17 years Fixed rates have cost consumers more.

However as you know already, anyone who took out a fixed rate 2 years ago or so, has beaten the variable rate by a long shot. So the article is a little bit misleading, but I do think the timing of the story is right.

I still remember people that Fixed their loans at >12% and then when rates dropped they cried when they they saw what the fee was for early repayment (circa 1992)

I cannot make any reccomendations because I dont have a Financial Planning license to give advice. Except to say that the motivation to fix an interest rate should never be an attempt to beat the Reserve Bank, becuase you probably wont. But rather to ensure that your repayments over time do not change. This is a good strategy if you are offsetting your repayments against a fixed income, like rent.

[markTHEblake]

Commbank has increased their fixed rates by a whopping 0.30&#37; today, bringing their 3-5 year rates to about 8.64%.

This means that CBA fixed rates have gone up about 2.2% since about 18-24 months ago, when the variable rate has only changed by 1.25% and thats an impressive change.

Whilst the variable rate is set by the RBA, the fixed rates are led by the money markets. The CBA might just be wanting to price themselves out of the fixed rate market or there is some more interest rate movements in the short term. Given that they have been outspoken (and NAB) on the possibility of a Variable Rate increase outside the RBA rate i think that this is almost a dead cert by February now.

This Subprime issue is supposed not to affect us - I suspect our lenders are telling us lies. And they see this as an opportunity to increase margins, funny that the only two banks to mention this are the ones that make the most $$$

With a bit of luck a lot of the lenders will hold out against this kind of increase, and market pressure will prevail.

[Peter]

Are the Banks also lying about the increase in their funding costs? I was under the impression that their home loan margins were being squeezed at the moment, with the desire for increased market share the only factor restraining further rate increases.

[amanda]

Surely banks have some room to move with record breaking billion dollar profits?

[Peter]

Their obligation is to their shareholders - what CEO wants to announce a profit next year that is significantly lower than this years because they chose to not pass on increased costs?

[amanda]

Yeah - I know - there is a lot of research that shows negative share price reaction associated with a negative earnings surprise.

However, there are calls from some think tanks in the US about responsible levels of profit - that is, not always a big increase every year - but a sustainable level of profit. However - unless all companies in a particular segment of the market take it up - there's no way any one company can.

Perhaps after ethical investment funds etc become the norm - those managing the big bucks can move on to this! (yeah - and Japan will one day stop killing whales for "scientific research")

[BrisVegas]

However as you know already, anyone who took out a fixed rate 2 years ago or so, has beaten the variable rate by a long shot. So the article is a little bit misleading, but I do think the timing of the story is right.

I cannot make any reccomendations because I dont have a Financial Planning license to give advice. Except to say that the motivation to fix an interest rate should never be an attempt to beat the Reserve Bank, becuase you probably wont. But rather to ensure that your repayments over time do not change. This is a good strategy if you are offsetting your repayments against a fixed income, like rent.

They were talking about this on ACA last night (so it must be true!). The gist of it was that people should hold their nerve and resist the temptation to fix their mortgages as the analyst thought that there would be 1-2 more rate rises before things flattened out and then headed back down again in 2009.

Does anyone believe mortgage rates will drop back below 7 or even 6 percent again in the next few years???

[poidda]

A couple of my mates are Mortgage Brokers and they both swear by variable. You will always be better off in the long run as long as you budget for it when borrowing. If you budget for a loan a couple of % dearer than what it cuurrently is, then interest rates going up 1/4 percent isn't going to bother you one bit.

[Grunt]

My bank went further than the .1 and put rates up .15&#37;. Now paying 8.20%, might be time to re-finance.

[markTHEblake]

Are the Banks also lying about the increase in their funding costs?

The Standard variable home loans are funded from cash deposits - and therefore the price is set by the RBA cash rate, under strict guidelines by APRA

It is the basic discounted loans funded by 'alternative' sources that has been affected by the rising cost of funds legacy the Sub Prime meltdown. Lenders like Rams can only raise funds this way.

Unless something has changed with the way the the funding works and the APRA regulations, Yes, the Banks are lying.


Surely banks have some room to move with record breaking billion dollar profits?

Thats funny coming from an accountant :lol: Banks make a lot of money, but its a pittance when compared to their size - around 5% for the likes of Nab who have around $100B in assets. I wonder what the likes of Google are making?


A couple of my mates are Mortgage Brokers and they both swear by variable.

Todays interest rate of 8.77% is the highest ever experienced by the Mortgage Broker industry. So far its been an easy ride to make that statement.

(Not suggesting your mates give that dodgy advice, i understood that is likely to be their personal opinion)

[markTHEblake]

My bank went further than the .1 and put rates up .15%. Now paying 8.20%, might be time to re-finance.

Grunt, what your considering as a reason for refinance is about $100 more per annum for a $200k loan (about average size these days). Its cheap to refinance now but I am not sure that $100 is worth the effort just for that.

FWIW there are some lower rates than 8.07 (best rate from a major) around

Its important to consider the non bank lenders have not been putting up their rates as they did the subprime knee jerk a couple months ago, who knows if they will do it again.

My advice is if your only reason to refinance is spite over the increase, is dont talk to greedy brokers right now, rates are too volatile to make a rational decision on price. Brokers will happily switch you to a new lender quickly and guess what, you might cop an increase and you could end up paying more than you were paying originally!

wait 2-4 months for all this volatility in pricing to settle down, then do some comparisons on whats available.

[Peter]

Unless something has changed with the way the the funding works and the APRA regulations, Yes, the Banks are lying.
Mark,

Were CBA lying at their profit announcement this morning?

[3oneday]

Mark,

Were CBA lying at their profit announcement this morning?why, how much did they make this year, over a billion ?

Any profit will be met with derision after their latest act ;)

[Peter]

Just under 2.4bn. Would have been higher if they had passed on increased funding costs to customers instead of absorbing them (all other things being equal).

[3oneday]

Damn, shareholders must be wetting themselves with glee :roll:

[Peter]

Share price went down.

[3oneday]

Share price went down.really ? I'm not into the sharemarket but is that profit lower than expected ? why would it go down ?

[TS]

2.4b may sound a lot. But since capitalisation if around 65b, return is only around 7&#37;.

And there is the unknown factor of sub-prime exposure. That is why the whole banking sector been sold down.

[Grunt]

Banks shares dropped as the RBA said yesterday that the interest rate would go up further during the year. It dropped the entire share market. I just think the banks were hit a little harder.

[markTHEblake]

Mark,

Were CBA lying at their profit announcement this morning?

I dont know, havent read it, dont plan on it either. Which part are you referring to

[Moe Norman]

Banks shares dropped as the RBA said yesterday that the interest rate would go up further during the year. It dropped the entire share market. I just think the banks were hit a little harder.is this is a serious post?

[Bruce]

So here's a dumb question asked by a guy who didn't do any high school economics.

With US interest rates at about 3&#37; and rumours going around of a drop of a full 1% down to 2%, and the dollar at record highs...

Why can't I go to Citibank or some other US based bank with a branch here and refinance at their rate? I'm sure there must be a good reason for it.

[kpac]

So here's a dumb question asked by a guy who didn't do any high school economics.

With US interest rates at about 3% and rumours going around of a drop of a full 1% down to 2%, and the dollar at record highs...

Why can't I go to Citibank or some other US based bank with a branch here and refinance at their rate? I'm sure there must be a good reason for it.

Good in theory i suppose - i guess the US banks would have a laugh though if you wanted them to take security over and Australian property.

[Bruce]

Given the cash they've thrown around to idiots with no chance of ever paying them back I reckon they would be falling over themselves to get in on the action.

[BrisVegas]

here's another silly question....

Given that I'm currently halfway thru a 5 year fixed rate of 6.85&#37; and current variable rate is 8.5-9%.... shouldn't my bank be bending over backwards to get me to cash out my loan so they can lend that money to someone else at a better rate? And yet, they charge (as yet undertermined) early termination fees..... I don't get it.

[AndyP]

I think the majority of my debt comes off 5 year fixed this year. That might suck.

[BrisVegas]

yes indeedlydoodly andy.

[Grunt]

Just got my latest home loan upgrade notice. .4&#37; up :(

[kpac]

Just got my latest home loan upgrade notice. .4% up :(
ooooo :shock: ouch that's a pretty hefty hit.

[Grunt]

New rate 8.85&#37;

[kpac]

New rate 8.85%

hardly seems to be affecting the house values from what i've seen... anyone shed light on their own area and any ill effects of the rate rise. Or is that still a while off when the owners start to struggle a little more?

[Grunt]

Not far off a repo sale in my suburb. I may be able to ride it out but many won't

[Toolish]

Prices have stabilized and are start dropping in Lara and Mildura...hence we are renting for a while to see if a bargain pops up. In the 8 weeks I have been in Mildura houses that were going for 225-230 are more like 215-220 now.

[kpac]

ok well maybe queensland is yet to cop it quite as bad. Be interesting what blame is laid on the government if banks start selling off a few houses around the place. (nnot that i necessarily see that it is their doing. I'm a bit skeptical about getting back into the property market at the moment but i HATE renting.

[Grunt]

The sales are happening down here. Will be lots of places that are now worth less than what they owe.

[Rusty]

So here's a dumb question asked by a guy who didn't do any high school economics.

With US interest rates at about 3% and rumours going around of a drop of a full 1% down to 2%, and the dollar at record highs...

Why can't I go to Citibank or some other US based bank with a branch here and refinance at their rate? I'm sure there must be a good reason for it.

Bruce, that's a good question. i think the answer is purely profit motivated - what bank would lend at 3% when it can lend at 8.8%? (i think even that differential would definitately cover the currency hedging cost).

[poidda]

ok well maybe queensland is yet to cop it quite as bad. Be interesting what blame is laid on the government if banks start selling off a few houses around the place. (nnot that i necessarily see that it is their doing. I'm a bit skeptical about getting back into the property market at the moment but i HATE renting.

Well as an example I bought just before xmas in Morningside, and everything was being sold the day it came in for asking price or better. A mate has just signed a contract on a very similar place in the next street and it has been for sale for the past 6 weeks. He looked at plenty and all weren't selling. He offered 30k less than the asking price of 380k, and the seller played games for 2 weeks, but my mate stuck to his offer. He eventually signed the contract for his original offer.

Prices might not be falling here in Queensland (yet), but the market is nothing like it was 3 months ago.

[kpac]

Well as an example I bought just before xmas in Morningside, and everything was being sold the day it came in for asking price or better. A mate has just signed a contract on a very similar place in the next street and it has been for sale for the past 6 weeks. He looked at plenty and all weren't selling. He offered 30k less than the asking price of 380k, and the seller played games for 2 weeks, but my mate stuck to his offer. He eventually signed the contract for his original offer.

Prices might not be falling here in Queensland (yet), but the market is nothing like it was 3 months ago.

Agree - the properties sure aren't selling anywhere near as fast a the were last year, i'm just starting to think that the south east queensland probably wont be the market to find the "bargains" in unfortunately or fortunately depending which side you're on. So i'm looking at the markets elsewhere around the country.

PS $350 seems a pretty good price for morningside anyway!!! tell me it's a unit or a townhouse..... prices on the goldie are shitting me.

[poidda]

Agree - the properties sure aren't selling anywhere near as fast a the were last year, i'm just starting to think that the south east queensland probably wont be the market to find the "bargains" in unfortunately or fortunately depending which side you're on. So i'm looking at the markets elsewhere around the country.

PS $350 seems a pretty good price for morningside anyway!!! tell me it's a unit or a townhouse..... prices on the goldie are shitting me.

Yeah it's a 3 bedroom townhouse. A little older, but still great buying I believe.

[kpac]

3 bedroom townhouse. A little older, but still great buying I believe.

huh, i'd hate to see what 3 bed town houses down here you'd get for $350k, i agree he's done pretty handy there!

[poidda]

huh, i'd hate to see what 3 bed town houses down here you'd get for $350k, i agree he's done pretty handy there!

When I say a little older, I'm only talking 15 years. New carpets and a lick of paint and all sweet.

[Eag's]

Here is some sobering news for home owners, at least 300,000 people will lose thier homes and 750,000 will be put under servere morgage stress buy the end of this year :shock:

Kind of glad we didn't end up buying a place now especially with a few more rate rises on the cards very soon.

[Grunt]

I think I will be one of the 750000

[goughy]

And we're looking to build or buy! I figure if we can't afford it now, we couldn't have afforded it if we'd bought a year ago. Listen to anyone in the know and they reckon the reserve bank has gone silly. Yet more talk of rate rises.

I heard that during the high rates in the 80's (like 17&#37;) the average was about 25% of your income to you house payments. It's at over 30% now days, and for us that will pretty much wipe out one take home.

We heard in highfields (where we're looking) there are over 200 homes on the market. Still can't find one quite right!

[perci]

I just came off 3 yr fixed at 6.49 now paying 8.74 Wahoo!

[AndyP]

Here is some sobering news for home owners, at least 300,000 people will lose thier homes and 750,000 will be put under servere morgage stress buy the end of this year :shock:And in a lot of cases that would be bad planning. If you can't afford interest rises, you shouldn't be buying a house.

[goughy]

In my case I just work longer hours ;)

[Grunt]

And in a lot of cases that would be bad planning. If you can't afford interest rises, you shouldn't be buying a house.

How about when you have had no pay rise for 3 years due to EBA negotiations stalling? Hopefully it will come to an end soon. Is starting to get really tight.

[poidda]

And in a lot of cases that would be bad planning. If you can't afford interest rises, you shouldn't be buying a house.

That's right Andy. People these days want the best of everything and stretch themselves to far. We live in a greedy world these days that's for sure.

[markTHEblake]

With US interest rates at about 3% and rumours going around of a drop of a full 1% down to 2%, and the dollar at record highs...

actually thats the kicker isnt it Bruce. If the cost of sourcing funds is going up because of the subprime issues, and all international transactions are conducted in USD, how come cost of funds are not falling for existing loans when the funds were sourced at <0.70 exhange rate?

Actually what i also heard was the money that funded the subprime loans in USA was all from Europe - probably Germany.


Why can't I go to Citibank or some other US based bank with a branch here and refinance at their rate? I'm sure there must be a good reason for it.

You can. St George will do loans at USD, SGD, GBP, NZD and probaly Euro. It doesnt make a lot of sense for you to do so unless you are receiving your income in that currency - otherwise you leave yourself exposed to too much risk of currency losses.

USD home loan from Stgeorge 5.75% (australian property for security)
http://www.brokers.stgeorge.com.au/interest/rates/foreign.asp



Given that I'm currently halfway thru a 5 year fixed rate of 6.85% and current variable rate is 8.5-9%.... shouldn't my bank be bending over backwards to get me to cash out my loan so they can lend that money to someone else at a better rate?

when they lent you the money, they got the money from somewhere else, and they fixed that. Bank is making a steady profit margin on your loan regardless of rates.


And yet, they charge (as yet undertermined) early termination fees..... I don't get it.

You will pay the scheduled fee, $300 for example, but the "economic cost" will be $0 in this current interest rate situation. If rates were going down you would be up for a significant penalty. Roughly calculated as: Original fixed Rate minus current fixed rate x months left.

Mind you the bank would pocket a bucket load of cash internally if you paid out your fixed rate loan now. In the early 90's NAB policy was to pay the economic cost in both directions, but rates were on decline so it never happened.. It wasnt until rates started moving upwards they started giving up the credits, they realised this and changed policy to be, no refunds, but penalties remain. Now thats a scam.


I just came off 3 yr fixed at 6.49 now paying 8.74 Wahoo!

Probably a good time to tough it out.I wouldnt be comfortable hitting fixed rates now. Read a good article that based on RBA strategies of managing the economy in the long term that Borrowers should fix below 7% and variable above, over the long term that will be a good balance.

[AndyP]

How about when you have had no pay rise for 3 years due to EBA negotiations stalling? Hopefully it will come to an end soon. Is starting to get really tight.Time to tighten the budget. Join the Simple Savings website. They have a Camping theme going at the moment with their weekly emails.

[Eag's]

And in a lot of cases that would be bad planning. If you can't afford interest rises, you shouldn't be buying a house.

Correct hence why I am still renting and investing instead ;)

[gazgolf1]

Time to tighten the budget. Join the Simple Savings website. They have a Camping theme going at the moment with their weekly emails.

Back on the LA Cola hey Pee? ;)

[AndyP]

Coke, but there's too many calories in soft drink anyway. It's evil. And I'm too lazy for a budget.
It was advice for Grunt before he blows all his money on camping gear.

[Peter]

Australian banks aren't using this crisis as an opportunity to gouge customers - anyone who believes that doesn't understand what is actually happening. If anything, they are letting margins compress to rip customers back from non-bank lenders who are hurting even more.

[damoocow]

Australian banks aren't using this crisis as an opportunity to gouge customers - anyone who believes that doesn't understand what is actually happening. If anything, they are letting margins compress to rip customers back from non-bank lenders who are hurting even more.

Have deposit rates gone up in line with loan rates ?

[Peter]

Of course not - they're a business, not a charity. I'm not saying banks don't gouge customers in general, simply that they aren't doing so here.

How much have funding costs increased relative to home loan interest rates?

[markTHEblake]

How much have funding costs increased relative to home loan interest rates?

off the top of my head the margin between deposits and homeloans has increased by about 0.4&#37; to 0.5%

[Peter]

Off the top of your head can you name one bank that funds its entire book from deposits?

[damoocow]

Does the bank give you any time off to play golf Peter ?

[Peter]

I don't work at one of those banks - but the answer is no, not much.

[Moe Norman]

Does the bank give you any time off to play golf Peter ?no plane ever hit the pentagon, right?

[damoocow]

no plane ever hit the pentagon, right?

I'm sure this makes sense to someone, but not me...

[markTHEblake]

Off the top of your head can you name one bank that funds its entire book from deposits?

No - i stopped working in a bank just before they began finding alternative sources of funding, so not in that loop anymore. Its my understanding that initially (post year 2000), the standard home loans were funded by traditional deposits and discounted loans by origination and other methods. One example was when NAB set up Homeside as its origination model.

I also understand that Capital Adequacy requirements have changed and are due to change in a biger way again soon, but not familiar with how much its changed so far.

If i really cared that much i would look up a big 4's balance sheet. it wouldnt be too hard to work out how much they are lending over their deposits book.

[Moe Norman]

I'm sure this makes sense to someone, but not me...
just an observation that you're a bit of a 'f#ck the man' conspiracy theorist.

[BrisVegas]

People these days want the best of everything and stretch themselves to far. We live in a greedy world these days that's for sure.

Damn Straight! Now seriously, do you reckon a bali hut or a timber skillion gazebo would look best at the end of my new lap pool!
:smt023

[poidda]

Damn Straight! Now seriously, do you reckon a bali hut or a timber skillion gazebo would look best at the end of my new lap pool!
:smt023

hahaha.

[kpac]

skillion

[poidda]

skillion

Yeah that's what I said. Bali Huts are soooo tacky. Just my opinion though.

[BrisVegas]

I'm going the skillion, don't panic poidda. something like this (http://www.landmarkpro.com.au/Members/files/k304e0c.jpg) but smaller...

[perci]

Gee that makes your place look big in the background Dion!

[amanda]

Time to tighten the budget. Join the Simple Savings website. They have a Camping theme going at the moment with their weekly emails.

A membership is also discounted at the moment - $33 for the first year (instead of $47) and $17 each year after to renew. I saved the membership fee in my first grocery shop - definitely worth while.

[AndyP]

I got a subscription, Mandy, and didn't really use anything off the site. It just wasn't inspiring me. But it would definitely saves people money following the tips.

[BrisVegas]

we have quite a social network now through simplesavings and we use the communicare service regularly. good site.

[markTHEblake]

Off the top of your head can you name one bank that funds its entire book from deposits?


Further to this, I asked a mate who worked for 20 yrs for a major and is now with a securitiser (who ironically, just closed the doors) as he would have a better perception of the industry changes.

I still beleive the majors are also reclaiming margins lost to competition that started mid-90's.

Good question and I think that you are right about the Majors. My only assumption is that lending demand far outweighs deposits so all Lenders need to go to the capital markets to raise additional monies to lend. Until the sub-prime crisis, Bond rates and the RBA's cash rate usually ran in alignment, maybe the Bond rate was 0.02% to 0.05% higher than the cash rate. Now the gap is much wider with Bond rates up to 1% higher than the official cash rate. This has led to the increased costs of funds. Obviously it is not as major an issue for the Majors who continue to have deposit funds to fall back on but even then they have to complete more aggressively to gain new deposit funds further reducing margin as they attract new investors with higher returns.

Non-Bank Lenders such as ourselves are totally reliant on securitisation and unfortunately there is not as many Investors so liquidity has become a major issue or you have to pay top dollar for funds.

[amanda]

I got a subscription, Mandy, and didn't really use anything off the site. It just wasn't inspiring me. But it would definitely saves people money following the tips.

Really - wow! I found the following really useful
* home made stain remover
* lentil recipes
* using cloudy ammonia, vinegar or bicarb for cleaning
* bulk meat locations & cheap veggie locations

Plus the forums online are excellent when you have a query! Or need to vent when your family calls you a tight-a*&se (I usually take it as a compliment - nobody got rich spending money!)

[AndyP]

It's not that the stuff isn't useful, I just couldn't be bothered looking through everything.

Plus it's hard for me to look at good shopping tips, when I don't do the shopping.

[Moe Norman]

time is money AP.

most of that stuff is common sense, the only reason people don't employ alot of the tips is because we are essentially lazy!

[AndyP]

Exactly.

I just paid my car insurance. I intended to shop around and see what some other prices were. But in the end, I was too lazy and stayed with my current insurer.

[BrisVegas]

Thought you home owners might like to know, that after a year or so of Fixed rates decreasing, in the last week, two of the majors have lifted their Fixed Rate loans by between .15 to .20 % citing "changes in wholesale rates".

I have no doubt the rest will follow soon enough.

The fixed rates usually change up and down in advance of what the Reserve Bank is about to do with the official rate. The rumour mongers are hinting towards a .25% lift in March.

As Fixed rates are now at historical lows the last few months, like 6.49% , its still not too late to get on that bandwagon. I would suggest that if your on a variable rate then it would be wise to ring your bank and see what your options are right now - do it tomorrow, before you miss the boat.

Thanks for the tip blakey. :smt023

[TS]

Exactly.

I just paid my car insurance. I intended to shop around and see what some other prices were. But in the end, I was too lazy and stayed with my current insurer.

Andy

Or you can save money on car insurance like I do, just forgot to pay because the policy was undernealth a pile of other papers.

[markTHEblake]

Thanks for the tip blakey. :smt023


I didnt even take the tip myself - couldnt get my own crap organised in time and didnt eventually get it done until the fixed hit 6.95. Still glad i did though :-)

btw, fixed rates are about 8.9&#37; now (for 3-5 years)

[markTHEblake]

Watch Four Corners tonight "Debtland"- ABC 8.30pm tonight, 11.35pm Tuesday, ABC2 8am Tuesday

This isn’t America’s sub-prime meltdown – it’s Australia’s debt debacle


should be an ok story - it aint Current Affair :-)

[amanda]

ANZ cut it's fixed rates today in anticipation of a rate cut next month.

Not sure what this means in the overall picture of things. We were sort of looking forward to a building slump so that we could bargain a bit harder ;)

[markTHEblake]

Yeah thats most of the majors reducing the fixed rates this week now, by about 0.25% which is the first time in a long long time, I expect the rest will follow suit shortly.

Whilst the fixed rates are simply a market driven rate, so not linked at all to the Reserve Bank cash rate all, they do tend to pre-empt future Cash rate changes and follow its trend.

[AndyP]

I'm an "elitist", what do I care? ;)

[Grunt]

Reckon the banks will pass on any cuts in full?

[poidda]

Reckon the banks will pass on any cuts in full?

I know my Credit Union will. That's a no brainer.

[markTHEblake]

Its been in the news for days that the banks will pass on the cuts in full, and they have done so. What has surprised me this time that they have done so immediately.

Historically banks have passed on increases immediately but reductions held back for one month. I forgot the marketing rationale they spewed out to explain the fiscal reasons for that, but it had more holes in it than Vyvvyans (Young ones) underwear.

[henno]

Actually, historically Wizard has moved BEFORE the official announcement of decreases, and this case is no different.

Although St George also dropped their rates but up to 0.76% yesterday.

Note: My mortgage is not with either Wizard or St George (in fact, my rates are yet to be reduced)

[markTHEblake]

Although St George also dropped their rates but up to 0.76% yesterday.

Not really relevant, because thats their fixed rates and all the banks have dropped their fixed by around that margin or more starting 2-3 weeks ago.

[henno]

Very true. In fact, fixed rates should be far lower than the variable rate in the current economic climate.

But my point regarding wizard stands.

[markTHEblake]

Great news today, but the headlines wont be so big, Fixed rates have come tumbling down. Last week the typical 3-5 year fixed was around 8.5% +/- 0.1%

Today WBC and NAB have announced massive cuts of over 1.2%, even offering a 6.99% for 3 and 2 year Fixed respectively. No doubt the rest will follow with the low 7's at least.

This is not directly related to the Reserve bank 1% cut which impacts the Variable rate, which should be around 7.9% now (if you are on the standard rate of around 8.6%, you are getting ripped). Fixed rates are not set by the Reserve Bank Cash rate, but rather its a reflection partly on the markets medium term view, and probably some string pulling by the powers that be, amongst other things.

IMHO this is even better news for borrowers than the 1% cut to the cash rate last week.

[BrisVegas]

6.99 is almost back to where things were at 3 years ago when we fixed at 6.85. Good news indeed. If rates are in the 6's again we will fix again I'd say.

[henno]

6.99 is almost back to where things were at 3 years ago when we fixed at 6.85. Good news indeed. If rates are in the 6's again we will fix again I'd say.

More importantly, it's a sign of where the banks are forecasting that the variable rate will be in the short to medium term.

[OMG]

I know a guy who works at a bank and he is part of the 'forecast' team. He was saying that the banks are looking at 5%, so fixed loan rates should come down further still.
He seems pretty reliable.

[Webster]

The RBA is expected to reduce the cash rate today by .75 to 1.0%, which would knock retail home loan rates down to between about 6.0% to 6.25% (if the buggers pass on the lot).

Anyone owning up to being locked into fixed rates way above this level with all the panic that went on earlier this year / late last year?

[Jarro]

The RBA is expected to reduce the cash rate today by .75 to 1.0%, which would knock retail home loan rates down to between about 6.0% to 6.25% (if the buggers pass on the lot).

Anyone owning up to being locked into fixed rates way above this level with all the panic that went on earlier this year / late last year?

Yep, we're locked into a fixed rate for at least another year :(

[goughy]

The last time my bil had a fixed rate was when it was at about 10% and the rates started to nose dive. Cost him a bundle to get out of it. Now he has a block of land and has also just purchased a house, and to get it all he had to fix one of the loans for 3 years!! Oh well.

Me, I've never had a fixed rate in 12 years, and sure as heck won't be having one yet either!!!

[3oneday]

Anyone owning up to being locked into fixed rates way above this level with all the panic that went on earlier this year / late last year?

I did, I fixed at 7% (I think). We held off for a while but at the end of the day as the only income earner we would have been struggling, unless we decided to also change our lifestyle, which we didn't wish to do at the time.

[AndyP]

(if the buggers pass on the lot). Bwahahahaha. It's almost guaranteed that they will skim a little more off, isn't it? Especially the big boys.

[markTHEblake]

So many people were saying "Labour govt means interest rates up" which wasn't really clever considering they started out their term on the back of a long upward trend of something like 5 years or more. Even without the crisis rates were due to turnaround eventually.

I am pretty sure that the only fixed rates that were under 7% were short terms, like up to 3 years, and they would be maturing already or soon. I got into mine at 3yrs 6.9 when they started going up and i have about 8 months left.

IMHO any fixed rate under 7% is worth considering, as historically a 5 year rate under that mark is very rare.

[BrisVegas]

I did, I fixed at 7% (I think). We held off for a while but at the end of the day as the only income earner we would have been struggling, unless we decided to also change our lifestyle, which we didn't wish to do at the time.

Me too, I fixed at 6.8 for 5 years, 3 years ago. At the time, we just had our first bub and were expecting to be on one wage for at least 5 years and needed the security of a known repayment. We've been ahead of the curve now for 3 years so if we end up paying over the odds for the next two, well I guess that's fair. Hopefully when we come off fixed, there'll be some nice low rates around still. I think, like blakey said, that rates under 7% are historically very low, so I'd be tempted to fix again under that.

[Moe Norman]

I'm fixed at 7.64% for another 2 years. After coming off a fixed rate of 6.19% it was hard decision but for the 12 months up to now I needed it to be a fixed figure as I was already pretty cash poor at the time, and we are pretty much one single income for the forseeable future now.

[Coffs_Hacker]

We are hoping to buy within the next 3-6mnths so hopefully there will be another .5-1% drop after todays. Wouldn't mind locking in for 5yrs at 5.5%

[3oneday]

I'm fixed at 7.64% for another 2 years.
I just rang my mob and mine is at 7.75% til November next year.

I'll do the sums after they tell me a break cost and see if it's worth breaking. I'm still happy enough not to have paid 9% for the period it was up though !

[Grunt]

Full 1% Cut by Reserve Bank

Reserve Cuts Rates (http://business.smh.com.au/business/rba-slashes-rates-20081202-6pgb.html)

[Webster]

CBA and NAB passing on the full 1.00%, but scummy Westpac only 0.80%. ANZ not announced as yet.

So we now have plummeting interest rates and fuel prices (broken through the $1.00/litre mark here today). Happy days! (as long as your job is secure)

[Grunt]

Was a tough period in the middle of the year with Rates looking like going the other way and the whole deal with work not looking good. What a difference 6 months makes? Rates plunge, wages increase and everyone is happy. Will just have to use this time to knock a big lump off the mortgage.

[Webster]

Will just have to use this time to knock a big lump off the mortgage.

Correct - get well ahead of the run rate whilst the field is "up"

[Jarro]

Surely the rates can't get much lower ?

[Webster]

Surely the rates can't get much lower ?

of course they can (and don't call me "Surely")

[Grunt]

Talk of getting as low as 2.5% mid next year.

[Jarro]

Cool, my fixed rate term will be up by then :mrgreen:

[chappy1970]

I don't know much about the financial markets, but as long as my job is secure and the cuts keep coming I'm happy. A naive view, I know but it's where my focus is presently.

My interest payment (before the latest cut) is $180 per/m less than it was in September of this year.

[kwantfm]

Nightmare scenario is debt deflation where everybody is rapidly retiring debt, interest rates become truly negligible and asset prices continue to fall. Think Japan.

[3oneday]

Talk of getting as low as 2.5% mid next year.that would be the cash rate ? So Home Loan rates would be what ? 5% ?

[Grunt]

Maybe even lower but once they get to 6, I doubt the banks will pass much on at all. We may even see credit card rates below 15% soon.

[chappy1970]

I have never really understood people's fascination with Credit cards and the rates associated with them.

I have a VISA linked to my mortgage, it has an interest free period of 45 days and a limit of $6K. It's paid off monthly and I haven't paid interest on a credit card for years.

[Grunt]

Some of the biggest debt in the country is credit cards Chappy

[goughy]

Our house should be ready about May next year, when rates should be at their lowest. It's tough at the moment when we're still paying this place, paying for things as the new one's being built and Rob's dad just sold the property we rent for work and the new owner is upping the rent 100%!!!! He knows I can't afford to do anything else until I move the bastard.

At least when we move and take the business home what I'm paying for in business costs associated with renting a premises will be worth about $1500/month towards our repayments!

But yes, scummy Westpac!!!

[Grunt]

Last big Cut. (http://www.theaustralian.news.com.au/business/story/0,28124,24740131-36418,00.html)

That sort of kills off the talk of rates dropping to 2.5%, Still time to take what we can get.