Rates down 5% !!!!!!
Reply: 1.1.2.1.1.1.1.1.1.1.1.1.1.2.1.1.1
From: Les .
G'day all,
Noted the following from one of the links provided above. Do take note of the content, won't you (newbies especially).
This Sheehan bloke makes sense - do the numbers, see for yourself.
>> "The NSW president of the Australian Property Institute, Mr John Sheehan, warned buyers against getting in over their heads. A 1% rates rise could result in a jump in loan repayments of up to 20 per cent: on a $100,000 loan at 5 per cent, the repayments would be $5,000 a year, rising to $6,000 at 6 per cent."
How do we make something BOLD !! Let me extract it .....
"A 1% rates rise could result in a jump in loan repayments of up to 20 per cent !!!!!!"
In fact, let me improve the syntax of that sentence - "A 1% rates rise WOULD result in a jump in loan repayments of 20%" - unless you are a P&I advocate. But for those with IO loans, 20% IS FACT!! And the P&I people won't be too far below that either (15% - 18%, depending on your loan, probably).
IMHO, this is one insidious fact of finance - insidious because it is "touted" as a 1% rise. Because it is mentioned in this way, the facts tend to get lost.
Of course, if the current Interest Rate was 10%, then a 1% increase is REALLY only a 10% increase, not 20%. So a 0.5% lift at a base rate of 5% is twice as effective as a 0.5% lift at a base rate of 10%.
And THIS FACT shows the obvious nervousness of Alan Greenspan when (twice) he dropped rates by 0.5% WITHOUT waiting for the official meeting - with the base rate already down in mid-single figures (6%?) THESE were HUGE cuts. Is it 6 times he's cut them (4 of them at 0.5% if my memory has it right) in a 9 month period???? People, that is bigger than HUGE, it's bloody GARGANTUAN !!!
We've been on the good side of this for the last 9 months - DON'T count on them being cut again - and ready yourselves for the next change. It will probably mean a 5% lift in actual outgoings to you, but it could be 10%. (i.e. 0.25% or 0.5%)
Keep this in mind as you chart your course - it could save a lot of grief.
Regards,
Les
Reply: 1.1.2.1.1.1.1.1.1.1.1.1.1.2.1.1.1
From: Les .
G'day all,
Noted the following from one of the links provided above. Do take note of the content, won't you (newbies especially).
This Sheehan bloke makes sense - do the numbers, see for yourself.
>> "The NSW president of the Australian Property Institute, Mr John Sheehan, warned buyers against getting in over their heads. A 1% rates rise could result in a jump in loan repayments of up to 20 per cent: on a $100,000 loan at 5 per cent, the repayments would be $5,000 a year, rising to $6,000 at 6 per cent."
How do we make something BOLD !! Let me extract it .....
"A 1% rates rise could result in a jump in loan repayments of up to 20 per cent !!!!!!"
In fact, let me improve the syntax of that sentence - "A 1% rates rise WOULD result in a jump in loan repayments of 20%" - unless you are a P&I advocate. But for those with IO loans, 20% IS FACT!! And the P&I people won't be too far below that either (15% - 18%, depending on your loan, probably).
IMHO, this is one insidious fact of finance - insidious because it is "touted" as a 1% rise. Because it is mentioned in this way, the facts tend to get lost.
Of course, if the current Interest Rate was 10%, then a 1% increase is REALLY only a 10% increase, not 20%. So a 0.5% lift at a base rate of 5% is twice as effective as a 0.5% lift at a base rate of 10%.
And THIS FACT shows the obvious nervousness of Alan Greenspan when (twice) he dropped rates by 0.5% WITHOUT waiting for the official meeting - with the base rate already down in mid-single figures (6%?) THESE were HUGE cuts. Is it 6 times he's cut them (4 of them at 0.5% if my memory has it right) in a 9 month period???? People, that is bigger than HUGE, it's bloody GARGANTUAN !!!
We've been on the good side of this for the last 9 months - DON'T count on them being cut again - and ready yourselves for the next change. It will probably mean a 5% lift in actual outgoings to you, but it could be 10%. (i.e. 0.25% or 0.5%)
Keep this in mind as you chart your course - it could save a lot of grief.
Regards,
Les
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