I've seen some posts skeptical of a 2009 FHB bubble, so I put some figures to paper and came up with the below:
Jane & Johnny
Income $35k pa (each), $30k net ($2500 pm, $5k net combined pm)
In all scenarios $7k will be subtracted from deposit for stamp duty/costs to borrow/pest & building inspection
Borrowing Calculator Used: http://www.aussie.com.au/home-loan/calculators/borrowing-calculator.htm
Rates Used From: http://www.loansense.com.au/historical-rates.html
25 Year Loan Term Used For Example
July 2007
Rate: 8.05%
Saved Deposit: $15k
FHOG: $7k (-$7k costs)
Total Deposit: $15k
LVR: 100%
Serviceability Allows: $347k
Deposit Allows: $N/A
Purchasing Power (Including Deposit): $362k
July 2008
Rate: 9.45%
Saved Deposit: $15k
FHOG: $7k (-$7k costs)
Total Deposit: $15k
LVR: 100%
Serviceability Allows: $312k
Deposit Allows: $N/A
Purchasing Power (Including Deposit): $327k
July 2009
Rate: 5.55%
Saved Deposit: $15k
FHOG: $14k (-$7k costs)
Total Deposit: $22k
LVR: 95%
Serviceability Allows: $429k
Deposit Allows: $418k
Purchasing Power (Including Deposit): $440k
January 2010
Rate: 6.66% (using Dec rate)
Saved Deposit: $15k
FHOG: $7k (-$7k costs)
Total Deposit: $15k
LVR: 95%
Serviceability Allows: $389k
Deposit Allows: $285k
Purchasing Power (Including Deposit): $300k
What effect would the Westpac 87% max LVR have on this couple if they were new to the bank?
January 2010
Rate: 6.66% (using Dec rate)
Saved Deposit: $15k
FHOG: $7k (-$7k costs)
Total Deposit: $15k
LVR: 87%
Serviceability Allows: $389k
Deposit Allows: $115k
Purchasing Power (Including Deposit): $130k
Some other figures:
Approximately 30% of housing finance in mid 2009 was provided to FHBs, that dropped to 20% by years end and with the FHOG reduced further Jan 1st 2010 it will continue to fall (IMO).
Approximately 50% of FHBs in mid 2009 were borrowing with LVRs above 90%.
I haven't tried to twist the figures to make them work out this way, I honestly just picked a couple of average looking wages and used the first figures I came up with. Feel free to counter them with your own if you think you can provide a more reasonable scenario...
Someone on Hot Copper mentioned the stamp duty costs were too high and that they are very low/non-existent for FHBs, so here are the 2009/2010 examples again with $3k costs:
July 2009
Rate: 5.55%
Saved Deposit: $15k
FHOG: $14k (-$3k costs)
Total Deposit: $26k
LVR: 95%
Serviceability Allows: $429k
Deposit Allows: $494k
Purchasing Power (Including Deposit): $455k
January 2010
Rate: 6.66% (using Dec rate)
Saved Deposit: $15k
FHOG: $7k (-$3k costs)
Total Deposit: $19k
LVR: 95%
Serviceability Allows: $389k
Deposit Allows: $361k
Purchasing Power (Including Deposit): $380k
Obviously the figures are a little closer in this example due to the 2009 buyers hitting the serviceability limit before the deposit limit.
Investors are going to have to do a lot of buying to fill the hole that these FHBs are leaving/have left...
How would the purchasing power look with further increase in interest rates or a 90% LVR becoming the norm as the banks tighten up their lending?? Do the figures and work it out
Jane & Johnny
Income $35k pa (each), $30k net ($2500 pm, $5k net combined pm)
In all scenarios $7k will be subtracted from deposit for stamp duty/costs to borrow/pest & building inspection
Borrowing Calculator Used: http://www.aussie.com.au/home-loan/calculators/borrowing-calculator.htm
Rates Used From: http://www.loansense.com.au/historical-rates.html
25 Year Loan Term Used For Example
July 2007
Rate: 8.05%
Saved Deposit: $15k
FHOG: $7k (-$7k costs)
Total Deposit: $15k
LVR: 100%
Serviceability Allows: $347k
Deposit Allows: $N/A
Purchasing Power (Including Deposit): $362k
July 2008
Rate: 9.45%
Saved Deposit: $15k
FHOG: $7k (-$7k costs)
Total Deposit: $15k
LVR: 100%
Serviceability Allows: $312k
Deposit Allows: $N/A
Purchasing Power (Including Deposit): $327k
July 2009
Rate: 5.55%
Saved Deposit: $15k
FHOG: $14k (-$7k costs)
Total Deposit: $22k
LVR: 95%
Serviceability Allows: $429k
Deposit Allows: $418k
Purchasing Power (Including Deposit): $440k
January 2010
Rate: 6.66% (using Dec rate)
Saved Deposit: $15k
FHOG: $7k (-$7k costs)
Total Deposit: $15k
LVR: 95%
Serviceability Allows: $389k
Deposit Allows: $285k
Purchasing Power (Including Deposit): $300k
What effect would the Westpac 87% max LVR have on this couple if they were new to the bank?
January 2010
Rate: 6.66% (using Dec rate)
Saved Deposit: $15k
FHOG: $7k (-$7k costs)
Total Deposit: $15k
LVR: 87%
Serviceability Allows: $389k
Deposit Allows: $115k
Purchasing Power (Including Deposit): $130k
Some other figures:
Approximately 30% of housing finance in mid 2009 was provided to FHBs, that dropped to 20% by years end and with the FHOG reduced further Jan 1st 2010 it will continue to fall (IMO).
Approximately 50% of FHBs in mid 2009 were borrowing with LVRs above 90%.
I haven't tried to twist the figures to make them work out this way, I honestly just picked a couple of average looking wages and used the first figures I came up with. Feel free to counter them with your own if you think you can provide a more reasonable scenario...
Someone on Hot Copper mentioned the stamp duty costs were too high and that they are very low/non-existent for FHBs, so here are the 2009/2010 examples again with $3k costs:
July 2009
Rate: 5.55%
Saved Deposit: $15k
FHOG: $14k (-$3k costs)
Total Deposit: $26k
LVR: 95%
Serviceability Allows: $429k
Deposit Allows: $494k
Purchasing Power (Including Deposit): $455k
January 2010
Rate: 6.66% (using Dec rate)
Saved Deposit: $15k
FHOG: $7k (-$3k costs)
Total Deposit: $19k
LVR: 95%
Serviceability Allows: $389k
Deposit Allows: $361k
Purchasing Power (Including Deposit): $380k
Obviously the figures are a little closer in this example due to the 2009 buyers hitting the serviceability limit before the deposit limit.
Investors are going to have to do a lot of buying to fill the hole that these FHBs are leaving/have left...
How would the purchasing power look with further increase in interest rates or a 90% LVR becoming the norm as the banks tighten up their lending?? Do the figures and work it out