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Hope you can off-load that mortgage!

Discussion in 'The Pub' started by pro-pilot, Sep 18, 2007.

  1. How is this going to affect my mortgage ? Why should I get rid of it ?
  2. If Greenspan farts the world stockmarkets buy up on greenhouse gas producing coal.
  3. the only people who lose through this sort of thing are those that over borrow and can't afford to keep property when it goes through it's lows....if you keep it, IT will make money at some point in the future. Always has and always will
  4. Real basic, possble that your interest rates will double with a year.


    Basically people in the US and UK are defaulting on mortgages big time.

    Banks are overextended on their credit margins and calling in many finacial instruments to bolster their cash position.

    This means rates rise and people are withdrawing their deposits fast!

    The bank lends you money based on the deposits it has in its coffers which are being quickly erroded.

    The Aussie banks all have investments in the US and UK / Europe markets and will follow in a bull whip effect.

    Means you can expect the rates on your mortgage to go through the roof if the bottom falls out of these markets.

    Plus a massive braking of the economy due to lower trade and cash flow volumes as people start spending less.


    Check out this four corners program from last night, with replays this week


    11.35 pm Tuesday 18 September; also on ABC2 at 9.30 pm Wednesday and 8 am Thursday.
  5. So pro-pilot when are you going ot rename yourself Chicken Little, the sky is falling the sky is falling!

    C'mon guys the idea of a doubling of retail mortgage rates is overhyped, rates go up and down.
  6. It is not People that make or break banks, it is companies (Yes I know made up by people)
    But the domestic banker is a speck on the ballance sheet of banks, corporate money is billions per day in transactioons. Untill there is a drop in the curent resource boom, and untill the increased IT Restructuring across the world slumps there is going to be vast amounts of money moving, these are teh things that drive econamies. i think there will be a progressive Interest increase, but we are not looking down teh barrel of a bust just yet.
    Then again We have set our morgage up to be able to handle up to a doubleing of the interest rates without hurting to much, so are prety well protected (for the moment)

  7. yep completely agree, i am not sure they will double any time soon, but i do agree they will raise again soon...if you have budgeted for a increase in the rates it just means a little less in your pocket....if you are on the border line then yeah i agree things could get tough and thats how people end up losing property :(
  8. Always wonder about media reports on companies. I mean if a major publication states that say a bank is going broke then everyone's going to pull their money out - causing that bank to become broke. Still I wouldn't be surprised if a lot of people get caught out by interest rates in the next few years - especially with the number of people being encouraged to borrow money for investment properties.
  9. If the interest rate you pay on borrowings rises, doesn't that also mean the interest rate you receive on savings/investments rises too!!!
    No mortgage here, offloaded it years ago, so if I get a higher rate for my savings I sure won't be complaining.
  10. Yet again, more media driven fear...

    Its not only the US and the UK who are defaulting on their loans...
    Last financial year, the default rate increased significantly here is Aus especially for "low doc" loans... Meaning little and/or no evidence of income is required to obtain a loan...

    Absolutely fantastic product for self employed people etc however there are those who, lets just say... dont tell the whole truth when applying for this particular type of loan and get themselves into trouble...

    Also another factor is that the average income hasn't increased enough to cover the rising cost of living i.e. rents, food etc...

    Just my 2 cents...
  11. A Quote from Sneakers (1992)
    Cosmo: Posit: People think a bank might be financially shaky.
    Martin Bishop: Consequence: People start to withdraw their money.
    Cosmo: Result: Pretty soon it is financially shaky.
    Martin Bishop: Conclusion: You can make banks fail.
    Cosmo: Bzzt. I've already done that. Maybe you've heard about a few? Think bigger.
    Martin Bishop: Stock market?
    Cosmo: Yes.
    Martin Bishop: Currency market?
    Cosmo: Yes.
    Martin Bishop: Commodities market?
    Cosmo: Yes.
    Martin Bishop: Small countries?
  12. Hey nothing in it for me here. Just collating what's playing out globally.

    I am sure there is a debate about the media's contextualising of this.

    I currently am doing work in a financial institution around their retail strategy and products, and one thing that is obvious is the margins on deposits to loan managed rates is stretched.

    Many major companies are re-investing in resources such as gold and crude. Uranium is also starting to drive a lot of investment.

    Even the big boys are pulling out of retail.


    All I can say is that understanding the impacts of your own financial model is pretty prudent at this time.

    Markets are affected more by sentiment and perception than science.

    Watch this space is all one can do, and make sure you have adequate space to manoeuvre financially if things do go south.

    We can all debate and add fuel to a discussion. But its more of wait and see.
  13. I think the problem with all of the information out there is that it is myopic. Interest rates will rise due to a myriad of inter-related issues. Interest rises are less reliant on customer deposits (look at the non bank lending institutions) and are more reliant on the inter bank lending rates. As the cost of borrowing money from other institutions increase the increases will be passed on to you. The official interest rate rises will depend upon the economic climate in Australia and is not related to bank lending.

    Still, I never understood how people mortgaged themselves so much and did not consider the effects of rate rises down the track.
  14. Some more "hysteria"


    Australian housing debt to reach crisis point claims expert

    September 18, 2007 04:05pm
    MORTGAGE debt will rise to crisis point in less than two years, an economics expert has predicted.

    People were addicted to debt and borrowers would soon face a repayment burden similar to when interest rates stood at 17 per cent in 1990, University of Western Sydney economic and finance professor Steve Keen said.

    Releasing his paper, Deeper in Debt, at Sydney's Centre for Policy Development, Prof Keen said if debt continued to climb at such a swift rate, the income to repayment ratio would be unsustainable.

    "(Australia) has six times as much debt as compared to income as we did back in the 1960s," Prof Keen said.

    "While house prices have doubled, debt has increased fivefold. We're talking debt levels of a level we've never seen before.

    "The repayment burden of debt in 18 months' time will be the same as it was back in 1990 when interest rates were 17 per cent."

    Prof Keen also warned of a fall in house prices - bad news for investors expecting an appreciation on their asset.

    Australian Property Monitors general manager Michael McNamara said a growing number of home buyers were "living on knife's edge", depending on two incomes to meet repayment obligations.

    "If you need two incomes to service your debt and if someone loses a job,or a woman in a couple gets pregnant, it's game over," Mr McNamara said.

    "Property prices have increased 250 per cent since 1996 but mortgage debt increased by five times in the same period.

    "People are foregoing lifestyle to pay out ever-increasing mortgage."

    Mr McNamara said Australia is experiencing "unprecedented levels of bankruptcy and repossession and loan defaults" and that action must be taken to reduce the risk of that outcome.

    Prof Keen called for government intervention to regulate mortgage lenders and a full public inquiry into Australia's household debt, taking in the impact of lending standards, housing affordability, negative gearing and capital gains tax.

    "Mid-1965 - that's how long ago debt started to rise in the debt to output ratio. We've had plenty of warning," Prof Keen said.

    "Neither (political) party really has any idea what the hell to do. The politics around it are: `Don't talk about it before the election'."

    Prof Keen said the lack of public housing and tenuous position of renters needed to be dealt with to reduce the incentives for people to take loans they could not afford.

    He has also suggested a regulation of lending principles where a borrower must have the capacity to make repayments rather than display asset wealth.
  15. There's no doubt that property prices are overvalued in the US, and even more so here in Australia, compared to OECD average.

    However, given the relationship of aussies and their houses thats unlikely to change until the mass offload of investment properties by baby boomers happens.

    There is so much money tied into the property market, and so much money poured into the property market by negative gearing (yes, as taxpayers we subsidies those making a sh1tload on their investment properties to the tune of BILLIONS per year) that there is no way you will see a worse scenario than we had in 1990-1991.

    The US federal reserve will cut interest rates .25% tomorrow. That will make a small change, btu the most important thing to remember is we are no longer so tied to the US market as we once were, and in fact we havent been for a very long time.

    The most important thing to realise is that what is going on in the "subprime" (as in dodgy loans) market, and in the hedge funds (who deserve a very good kicking for their ridiculous return rate promises and excessive acquisition rate) isnt the same as the prime mortgage market. None of the central banks are in any trouble, only those who tried to get greedy on the side.

  16. You mean that the 2.9% supposed inflation rate isnt real? Geez, with my 11.37% increase in electricity rates THIS BILL alone I would never have guessed......

    No wonder when I get offered a 3% per year pay rise and feel worse off I feel so cynical.
  17. I'm very interested in all of this. Things are so interrelated that I seriously can't fully wrap my head around them, but I do know that I've planned for rate rises enough so that the only pain I'm likely to feel will be the whining of my bank account about it's slightly emptier belly.

    Even with a US recession on the way (infact USAs already feeling it), there's still heaps of opportunity to still make money through property in Australia, just gotta be on the ball, do the maths & do the research. I'm playing the waiting game for a little bit longer & am also going to see my mortgage broker, but I'm keen to buy my 2nd property within the next 6mnths-1yr.

    The thing that scares the crap outta me, is the idea of a full-on depression in the US. Recession will impact us enough (because I _do_ believe that Australasia is pretty tied in to the US financially) already.. a full on depression.. hmm. Could be scary! But, *shrug* ya gotta roll with the punches.. no use hiding in a cupboard, eh?!
  18. Let it all go to hell in a handbasket, I'll buy cheap at teh low in the cycle and tough it out for 12 months!
    Doubt it will be a recession though!

    Regards, Andrew.
  19. US has not been our biggest trading partner for a long time now.

    In some ways, a lowering of the US interest rates will have an inflationary effect here and therefore continue to push up our property market - much of the money going into the discount lending bucket is because hedge funds (amongst others, major US and Japanese banks use it too) funnel the money down here where they can get far higher returns.

    As such, discounted interest rates below what the RBA is trying to set.

    Wheels within wheels.