interest rates!
- Thread starter tamtam
- Start date
Generally, yes. The higher interest rates get, the less people can afford. Interest rates don't just affect mortgages: it increases the payments on credit cards, business loans, etc. as well, so it decreases economic activity as a whole.
The Daily Telegraph had an article last week about how a 0.25% rate rise would break some people. Article below (sorry, don't have the link: moderators please feel free to replace the article with the link if you know it.)
To those people, I say, Good riddence. If you're stupid enough to borrow to the point where a 0.25% interest rates increase will 'break' you, you've obviously bought WAY too much house.
Alex
Don't push us over the edge
The Daily Telegraph
By ANGELA SAURINE and JOHN ROLFE
April 28, 2006
HOMEOWNERS Kerrie Sheehan and Mark Cordingley have a message for the Reserve Bank board - an interest rate rise will break us.
As financial markets began betting it was likely the RBA would lift rates by 0.25 per cent when it meets next week, families were yesterday bracing for their worst nightmare.
Ms Sheehan and Mr Cordingley are barely making ends meet, with their household budget already strained by sky-high petrol prices and mortgage payments of $2600.
A 0.25 per cent rate rise would add another $60 to their monthly expenses.
"If interest rates go up then we don't buy petrol or we don't eat," Mr Cordingley said.
"It makes it really tough. I can't buy an engagement ring because I can't afford it."
The prospect of the first rate hike since March last year increased dramatically yesterday, with the futures market predicting a 56 per cent probability the RBA will increase rates next Tuesday. That is up from a 32 per cent possibility on Wednesday and just a 5 per cent chance just three weeks ago - with the market reacting to renewed fears of inflation.
Only last month economists from institutions including Westpac were predicting rates would not rise at all in 2006.
But in a double blow to homeowners, there is now an intensifying prospect of a second 0.25 per cent rise by November.
Official data this week showed prices were rising faster than the Reserve Bank is willing to accept.
"There is a consensus building that there will be a rate increase" next month, HSBC chief economist John Edwards said.
This would be a harsh blow to Mr Cordingley and Ms Sheehan, who paid $380,000 for a three-bedroom house in Greystanes with an in-ground pool just over a year ago.
After working part-time for six months after the birth of their first child Tyla, who is nearly one, Miss Sheehan had to return to work full-time three months ago.
"We almost can't do anything but pay the mortgage and put enough petrol in the car for Kerrie to go to work," Mr Cordingley said.
The couple, who are both graphic designers, have a combined income of just over $100,000. Mr Cordingley's entire wage goes on the mortgage.
"In the tax bracket that we're in we've had no relief for I don't know how long," he said.
Housing Industry of Australia managing director Rob Silberberg yesterday said the RBA needed to consider average householders.
"Suggestions that a rate rise is necessary are not only unfounded but fail to consider the implications for those Australians struggling to meet mortgage repayments," he said.
A 0.25 per cent rise adds more than $40 a month to repayments on the average NSW mortgage of $258,000. For first homebuyers in Sydney, who typically borrow $450,000, it would push up repayments up by $70 a month.
From: Ian A.
Comment: I can't understand how the Reserve Bank can consider putting up the interest rates on Australian families. We are being hit with increased petrol prices, lower wages due to new workplace agreements and now a possible increase in interest rates. This is starting to sound like coup between the government and banks to take our hard earned homes from us.
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Comments so far:
From: Alex
Comment: Taking on a mortgage and leaving no room for interest rate movement in your budget is sheer stupidity. They have pushed the limit in terms of the property they could afford at a time with a historically low interest rate, and will now pay the price like many other greedy Australians. They should have bought a smaller cheaper property and budgeted for a rate increase. Crazy not to.
--------------------------------------------------------------------------------
From: Paul X
Comment: Just about everyone committing to a mortgage over the past few years knew that they had to plan on nine or 10 per cent mortgage rate. Media, financial advisers and institutions have been saying this for a very long time. Secondly, just about everyone (including you) know that neither the Government nor the Reserve Bank control long term interest rates. The key drivers are the international economy, private sector expenditure and private sector debt.
--------------------------------------------------------------------------------
From: Maggie
Comment: Is anyone else getting tired of moaning parents every day in the paper. If you buy a three-bedroom house with a pool and have a kid guess what - you have to make sacrifices. Our parents got nothing from the government when they had us but I never recall them moaning nor did any of my friends' parents. Can't afford petrol - start walking or getting public transport. No-one owes you anything. Get over it and get on with living without the whinge.
The Daily Telegraph had an article last week about how a 0.25% rate rise would break some people. Article below (sorry, don't have the link: moderators please feel free to replace the article with the link if you know it.)
To those people, I say, Good riddence. If you're stupid enough to borrow to the point where a 0.25% interest rates increase will 'break' you, you've obviously bought WAY too much house.
Alex
Don't push us over the edge
The Daily Telegraph
By ANGELA SAURINE and JOHN ROLFE
April 28, 2006
HOMEOWNERS Kerrie Sheehan and Mark Cordingley have a message for the Reserve Bank board - an interest rate rise will break us.
As financial markets began betting it was likely the RBA would lift rates by 0.25 per cent when it meets next week, families were yesterday bracing for their worst nightmare.
Ms Sheehan and Mr Cordingley are barely making ends meet, with their household budget already strained by sky-high petrol prices and mortgage payments of $2600.
A 0.25 per cent rate rise would add another $60 to their monthly expenses.
"If interest rates go up then we don't buy petrol or we don't eat," Mr Cordingley said.
"It makes it really tough. I can't buy an engagement ring because I can't afford it."
The prospect of the first rate hike since March last year increased dramatically yesterday, with the futures market predicting a 56 per cent probability the RBA will increase rates next Tuesday. That is up from a 32 per cent possibility on Wednesday and just a 5 per cent chance just three weeks ago - with the market reacting to renewed fears of inflation.
Only last month economists from institutions including Westpac were predicting rates would not rise at all in 2006.
But in a double blow to homeowners, there is now an intensifying prospect of a second 0.25 per cent rise by November.
Official data this week showed prices were rising faster than the Reserve Bank is willing to accept.
"There is a consensus building that there will be a rate increase" next month, HSBC chief economist John Edwards said.
This would be a harsh blow to Mr Cordingley and Ms Sheehan, who paid $380,000 for a three-bedroom house in Greystanes with an in-ground pool just over a year ago.
After working part-time for six months after the birth of their first child Tyla, who is nearly one, Miss Sheehan had to return to work full-time three months ago.
"We almost can't do anything but pay the mortgage and put enough petrol in the car for Kerrie to go to work," Mr Cordingley said.
The couple, who are both graphic designers, have a combined income of just over $100,000. Mr Cordingley's entire wage goes on the mortgage.
"In the tax bracket that we're in we've had no relief for I don't know how long," he said.
Housing Industry of Australia managing director Rob Silberberg yesterday said the RBA needed to consider average householders.
"Suggestions that a rate rise is necessary are not only unfounded but fail to consider the implications for those Australians struggling to meet mortgage repayments," he said.
A 0.25 per cent rise adds more than $40 a month to repayments on the average NSW mortgage of $258,000. For first homebuyers in Sydney, who typically borrow $450,000, it would push up repayments up by $70 a month.
From: Ian A.
Comment: I can't understand how the Reserve Bank can consider putting up the interest rates on Australian families. We are being hit with increased petrol prices, lower wages due to new workplace agreements and now a possible increase in interest rates. This is starting to sound like coup between the government and banks to take our hard earned homes from us.
--------------------------------------------------------------------------------
Comments so far:
From: Alex
Comment: Taking on a mortgage and leaving no room for interest rate movement in your budget is sheer stupidity. They have pushed the limit in terms of the property they could afford at a time with a historically low interest rate, and will now pay the price like many other greedy Australians. They should have bought a smaller cheaper property and budgeted for a rate increase. Crazy not to.
--------------------------------------------------------------------------------
From: Paul X
Comment: Just about everyone committing to a mortgage over the past few years knew that they had to plan on nine or 10 per cent mortgage rate. Media, financial advisers and institutions have been saying this for a very long time. Secondly, just about everyone (including you) know that neither the Government nor the Reserve Bank control long term interest rates. The key drivers are the international economy, private sector expenditure and private sector debt.
--------------------------------------------------------------------------------
From: Maggie
Comment: Is anyone else getting tired of moaning parents every day in the paper. If you buy a three-bedroom house with a pool and have a kid guess what - you have to make sacrifices. Our parents got nothing from the government when they had us but I never recall them moaning nor did any of my friends' parents. Can't afford petrol - start walking or getting public transport. No-one owes you anything. Get over it and get on with living without the whinge.
tamtam said:
I pondered the same question and one research document that I found suggests that this ain't necessarily so:
http://www.residex.com.au/index.php?content=article7
In summary, there wasn't a strong correlation with interest rate rises and prices; however, there was a time lag correlation with rates and supply - less vendors selling.
An interesting read and food for thought - waiting for rates to rise may mean a false expectation of cheaper prices, coupled with less choice.
Cheers, Barracuda
The attached comments say it all.
The people who are in these articles, (which no doubt try to convey the "Aussie Battler Does It Tough" image to make for good, emotional reading), are those who make poor decisions, (whether they knew it was a poor decision or not), and then whinge about it.
The people who are in these articles, (which no doubt try to convey the "Aussie Battler Does It Tough" image to make for good, emotional reading), are those who make poor decisions, (whether they knew it was a poor decision or not), and then whinge about it.
if it is the reported 0.25% it will have a very short term effect though my guess is 2 months later if no further rise the supply and demand equation will be back to what it is today
I just managed to put $70 dollars in my Petrol tank yesterday and it wasn't empty . Normally around about $50.
Small rise in interest rates , increasing petrol prices , increase transport prices ( as mentioned elsewhere ...) > increase in food prices . More and more people will start feeling the pinch.
Maybe a short term slow down ? who knows ... Puts the economy into a more fragile position.
The shares market does appear to be more volotile and much of this is occuring on increasing commodity prices which have also been volotile.
Makes for a more unstable situation. At the momement the SS Aussie is avoiding the rocks but they are out there.
See Change
Small rise in interest rates , increasing petrol prices , increase transport prices ( as mentioned elsewhere ...) > increase in food prices . More and more people will start feeling the pinch.
Maybe a short term slow down ? who knows ... Puts the economy into a more fragile position.
The shares market does appear to be more volotile and much of this is occuring on increasing commodity prices which have also been volotile.
Makes for a more unstable situation. At the momement the SS Aussie is avoiding the rocks but they are out there.
See Change
The thing I can't understand and perhaps someone could explain it to me. In 2003 the housing market was overheated and borrowing was high, thus increases were justified.
Why would the RBA need to lift rates? Surely the increased costs of petrol, which translates to higher food and transport costs is enough? Why does the RBA need to put the boot in as well?
Why would the RBA need to lift rates? Surely the increased costs of petrol, which translates to higher food and transport costs is enough? Why does the RBA need to put the boot in as well?
I drive a little 1.5L Mazda with a 40litre tank and had to stop at $50! However if it was even $2 a litre I would still need to drive so would still spend the money. For most people with a car its usually a necessity for at least part of their life so I can't see high petrol prices curbing peoples spending habits.
On the up side although I am paying more for my mortgage I am also in the market to buy more Ips, so I see it as a blessing in disguise.
Greg
FrankGrimes said:
People are still spending and borrowing too much, couple with high petrol price will blow out inflation.. RBA make first move to slow it down before things are out of control.
Interest alone wont do it, reform need to be put in place to tackle it in a long term but reform take along time and interest is a quick way to slow thing down
Now the only people that are in trouble are the one that over spend over borrowing. RBA and Treasurer has warned many time over, limit your spending, be responsible borrower and factor in a few percentage point in your borrowing strategy.
if you have done all that and factor in 2%, a few more .25 rise wouldnt even hurt you 1 bit.
They only have themselves to blame and no one else if they dont stick to their own discipline fiscal policy.
Those who cannot learn from history are doomed to repeat it
dont go to far back just the 80s and look at those who over commit and cant afford repayment..I still remember it when I was in my very early teens
Hi
In reply to original Question i dont believe that average house prices will drop noticeably however I know that there are people out there now already trying to sell and finding it hard as it is. I know i will be making some low offers. There will be more desperate people out there that will just want to cut there losses and move on fearing another rate rise down the track. Already there are so many properties for sale and very little sales. We shall see what happens. I will defintly be raising the rent on my IP though.
In reply to original Question i dont believe that average house prices will drop noticeably however I know that there are people out there now already trying to sell and finding it hard as it is. I know i will be making some low offers. There will be more desperate people out there that will just want to cut there losses and move on fearing another rate rise down the track. Already there are so many properties for sale and very little sales. We shall see what happens. I will defintly be raising the rent on my IP though.
Hi TjamesX,
Possibly but at the moment the Australian economy still growing due to resources etc but if the adverse was to happen then definitly will occur I think. Stagflation occurs when the economy isn't growing but prices are and although we havnt seen direct increases as a result of the petrol increases I think they will kick in soon after this rate rise. This, along with rent increases and so on may lead to this.
Wait and see
Possibly but at the moment the Australian economy still growing due to resources etc but if the adverse was to happen then definitly will occur I think. Stagflation occurs when the economy isn't growing but prices are and although we havnt seen direct increases as a result of the petrol increases I think they will kick in soon after this rate rise. This, along with rent increases and so on may lead to this.
Wait and see
Its time for the lemming cull for the greater good of the nation as a whole.
Its just a fact of life that some ppl will be tipped over by the interest rate rise because of their personal financial situation.
Some will get burnt, some will benefit.
Its the start of lemmings season.
I still predict another .25 rise before the end of the year.
kp
Its just a fact of life that some ppl will be tipped over by the interest rate rise because of their personal financial situation.
Some will get burnt, some will benefit.
Its the start of lemmings season.
I still predict another .25 rise before the end of the year.
kp
i was talking to hubby about the sob stories last night and my opinion is ... if .25% increase in rates would force them to sell or get repossessed, then they had no right to buy in the first place.
my opinion only. although it was interesting to see the whingers on aca last night - man, they had nice furniture and fittings, not like my scruffy old lounges and dented wooden pieces!
my opinion only. although it was interesting to see the whingers on aca last night - man, they had nice furniture and fittings, not like my scruffy old lounges and dented wooden pieces!
I wouldn't own any property if i didn't have the ability to earn more if needed.
What will happen when rates go up to 10% and they will, if you only have a few dollars a week left over now what then? There must be a lot of very nervous home owners and investors that work for Bosses now with the new IR laws. Here today gone tomorrow.
Robo
What will happen when rates go up to 10% and they will, if you only have a few dollars a week left over now what then? There must be a lot of very nervous home owners and investors that work for Bosses now with the new IR laws. Here today gone tomorrow.
Robo
