Mortgage Stress? How Are OzBargainers Fairing ?

• 

  AlienC on 24/08/2017 - 05:19

  You should add "I don't know what a mortgage loan rate is nor do I have one but at least I got chicken and lemonade so I am not so bad."

• 

  Nugs on 24/08/2017 - 06:33

  +3

  always do the 'what if rates hit 12%' before committing to loans

  • 

    enzioFirenze on 24/08/2017 - 06:47

    unless something (profanity) bad happens, this is unlikely to happen, 6-8% would be a more realistic rate I guess

    • 

      Euphemistic on 24/08/2017 - 06:51

      +2

      While this is true, interest rates have been as high as 17%. Be prepared for the worst and you will survive if global finance goes to *^%#^

      • 

        enzioFirenze on 24/08/2017 - 06:53

        +2

        yeah that is true, but then again, I don't think 90% of the population will be safe with a 12% hike in interest rates

  • 

    Trying2SaveABuck on 24/08/2017 - 12:36

    12%!!

    97% businesses in this country would go under from the levels of debt they have

    And

    I'd say most home loans would default

    • 

      Nugs on 24/08/2017 - 12:57

      1990 - not just time for Guru

      https://www.google.com.au/imgres?imgurl=http://www.loansense…

      • 

        Trying2SaveABuck on 24/08/2017 - 12:59

        Yea average house price was sitting around 100-200k

        You now have a situation where people have loans 5, 10, 15 possibly even 20 times that now it isn't sustainable in the current market.

        Wages to housing cost were sitting at like 7 times the average i think that is almost 19 times average wages now in some parts of Australia. When you look at data you need to look at the whole picture and that is what the RBA will do

• 

  Aniseed Steed on 24/08/2017 - 06:45

  +1

  What about adding the "I own my home outright" option?

  Also, "faring" instead of "fairing".

  • 

    Euphemistic on 24/08/2017 - 06:53

    +11

    Or 'I've nearly paid it off so don't care'. Last month we paid just under $3 in interest. If rates go up, we might need to dig around the back of the couch.

    • 

      Trying2SaveABuck on 24/08/2017 - 13:02

      Good on you man i wish i was in your situation!!

  • 

    eclaw on 24/08/2017 - 14:44

    Last I checked those who own their houses outright do not hold a mortgage.

• 

  [Deactivated] on 24/08/2017 - 08:28

  +1

  Rent an apartment in one of the inner city highrises.

  Cost 1/4 if my post tax income.

  Have no car - no real large expenses.

  0 stress

  • 

    [Deactivated] on 24/08/2017 - 08:46

    +3

    do you also eat smashed avo on toast on the daily?

    • 

      [Deactivated] on 24/08/2017 - 11:35

      +2

      Only on weekends.

      Doesn't fit my macros.

• 

  theHMASfriendship on 24/08/2017 - 09:02

  +2

  Candy homeowner reporting in. Everything is dandy.

• 

  bitesized on 24/08/2017 - 09:58

  It is difficult to pinpoint a specific 'stress' rate with so many types of loans out there (Owner Occ, Investment, Principal & Int, Int. only etc.), not to mention the various discounts people are getting.

  A more accurate gauge might be to ask "At what increase on your rate will you start to feel worried?"

  • 

    narbe on 24/08/2017 - 12:00

    That's basically what the poll is asking. At what rate will you "feel" stressed. The discounts are irrelevant since no matter what rate your on a some point you will be stressed.

    Obvious exception is people who own the home outright or have very little mortgage left. However this isn't meant to be a brag thread.

• 

  redfox1200 on 24/08/2017 - 10:37

  8-9% interest now would probably be equivalent to 17% back then

  • 

    narbe on 24/08/2017 - 12:01

    Probably depends on your loan amount. 8-9% of a million dollar + loan well….
    Back then houses were cheaper, so relative I don't know the prices back when interest rates were 17%

    • 

      Mrbean007 on 24/08/2017 - 14:45

      Houses back then where around $50.000 out west and probably $150.000 city now you look out west there near the mil if not over a good doco on 4 corners showed some in perth and queensland already defaulting i give it 2 years to see what will really happen in oz

• 

  Heracles26 on 24/08/2017 - 10:40

  +1

  I deposit almost all my income into my offset account, use a CC to pay for whatever I need and then pay it out of the offset

• 

  tsunamisurfer on 24/08/2017 - 11:09

  I think 30% is a low mark for Mortgage Stress especially for property markets like Melbourne or Sydney.

  Nonetheless mortgage stress is something homebuyers should prepare for throughout the life of a 25 year commitment.

  There is going to be sickness, children, job loss, markets going bad, rental income not coming in, maintenance bills, rising costs of living, rising interest rates and many more.

  I would hope everyone plans ahead when determining whether a mortgae of a particular size is right for them, there are many that don't which is why we are seeing mortgage delinquencies going up.

  • 

    narbe on 24/08/2017 - 12:03

    +2

    Hence the poll, I saw on the news for QLD about 20 suburbs will be stressed if interest rates go up 0.5%
    These are not just outer suburbs, many inner suburbs as well….

    And this is QLD were prices are still deemed "sane"

    Well for melb and syd might be another story

• 

  Trying2SaveABuck on 24/08/2017 - 12:33

  I reckon if it hits 5.5% the market will crash RBA knows this dont expect it the cash rate to surpass 2-2.5% in the next 5 years.

  I'd still think the rate is more likely to be cut oppose to rise

  P.s

  'Im a centerlink warrior' LMAO

  • 

    narbe on 24/08/2017 - 13:10

    My opinion is that crashes happen when there is no choice but to lift interest rates suddenly and quickly combined with sudden increase in unemployment
    After all as long as you can make repayments? why would you sell. (banks will chase you forever in Australia)

    Interest increased gradually by itself and to some extent quickly might not "Crash" the economy but correct a little bit.

    In any case I think a black swan event from "outside" of Australia ie. Trump being dumb, North Korea, China collapsing etc ; will be the cause of a lengthy recession in Australia. Ireland and Spain have had bubbles similar to ours, however our economy is more like Canada.

    Quote:

    Real estate prices experienced similar manic action, with prices in Tokyo’s prime neighborhoods rising to levels that made them 350 times more expensive than comparable land in Manhattan, New York (Investopedia, 2010). The land underneath the Tokyo Imperial Palace was rumored to have been worth as much as the entire state of California in the same year (Impoco, 2008).

    Makes you wonder what the government was doing ? when prices rise 350x the next most expensive city in the world…

    Lost 30 years that economy…

    • 

      Trying2SaveABuck on 24/08/2017 - 14:11

      I agree with most of your statement

      but this "if you can remake the repayments why would you sell?"

      The truth is you dont sell to default lets look at the GFC and a real a bet unlikely scenario in todays over priced market with 2 groups of home owners for a second imagine a market with houses only valued exactly at a million dollars no other price exists.

      Group A in 2017 Buys a houses for 1million dollars making repayments of 50k per year

      Group B also buys houses for 1million in 2017 making repayments of 50k per year

      In 2019 Interest rates rise and everyone in Group B defaults and a influx of supply of houses comes on the market as a discounted rate ie the 1million dollar houses are being sold for half a million means the repayments adjusted to the the new interest rates being 50k.

      At the same time people who are in group A are making repayments of 100k per year on a house that is only now worth half am million due to the defaults in group B driving the market down.

      So even though the people in group A can make the new 100k repayments they say f*** it im not paying for this because it isnt worth paying and im better off defaulting and taking the consequences opposed to losing the 50k extra in repayments im paying compared to people buying the same product for half the cost. further in-fluxing the over supply resulting in houses losing further value

      So now in 2020 a house that in 2017 was worth 1million is now worth 300k this can easily domino effect the whole housing market and result in a number of issues in the economy ie collapse in a number of building companies, a large number of bankruptcies etc.

      This is a simplistic scenario of a much wider problem but in Sydney and Melbourne a sharp interest rate could cause this, which is why the RBA will not increase interest rates quickly and in all honesty i think a hold in the next 10-20 rate calls would be the more likely 1 rate rise a year is also some what likely in the medium term.

      Thus people saying the 'market is going to crash' dont realize the true impact of a market crash and housing prices going up (modestly) is actually a good thing (though if you are a 1st home buyer or renter it might not seem like that, for the wider economy it is good).

      • 

        narbe on 24/08/2017 - 14:28

        Interesting assessment. However I would bet the reality of the situation is they would still make the repayments?
        Why?

        Because Bankruptcy really isn't about just "handing the house back" and even then it wont be just stigma but the practicality of not owning a home at all since your records might prevent you from even renting.

        If you own one home and that is your only home Im willing to bet most people will hang on for dear life. Since you are not absolved of the debt if you go bankrupt. They can collect your home as collateral and your personal belonging and then own you some more.

        Unless the individual or the household decide to move back to their parents places it will be a impossible situation. But guess what more and more folks are pulling out equity to put up a deposit for their kids. (debts can also be chased across joint-names and guarantors)

        The fact is unless the homes are investment homes , the willingness to let go will be much lower unless you absolutely have to.

        EDIT:

        interesting read for you
        https://www.afsa.gov.au/insolvency/i-cant-pay-my-debts/what-…

        ---

        From the government site:

        Which debts does bankruptcy cover?
        Unsecured debts
        An unsecured debt is not tied to specific property, like a house.

        Bankruptcy covers most unsecured debts, such as:

        credit and store cards
        unsecured personal loans and pay day loans
        gas, electricity, phone and internet bills
        overdrawn bank accounts and unpaid rent
        medical, legal & accounting fees.

        Bankruptcy doesn't cover all debts, including:

        court imposed penalties and fines
        child support & maintenance
        HECS & HELP debts (government student loans)
        debts you incur after your bankruptcy begins

        unliquidated debts (e.g. a debt where you and your creditor are yet to determine the amount).

      • 

        Trying2SaveABuck on 24/08/2017 - 14:42

        @narbe: Oh 100% there is a sentimental and simply moral reasons to own a home but more then 30% of the population are investors and they wouldnt be holding on to a dud investment if it is costing them money on loan high loan repayments and making a capital loss.

      • 

        narbe on 24/08/2017 - 15:00

        @Pastry:

        Yes I have no doubt investor homes will be the first to go.
        The most probable being negatively geared apartments then negatively geared houses by medium income earners as repayments will exceed their expectations, they will need to let go if repayments increase materially for them.

        However investors negatively gearing with incomes in the 47% tax bracket, may not let go since well negative gearing will become even better when interest rates go up. They will have more incentive to go long on their investment.

        EDIT: no bubble popping unless theres a huge needle.

• 

  Mrbean007 on 24/08/2017 - 14:17

  Im sure if it goes 7+ australia will be in meltdown
  For a lot buyers :(

• 

  momov3 on 24/08/2017 - 16:36

  +1

  Don't pummel me but I am about to tell you I paid 18.25% under Keating. And because the Commonwealth Bank did not like me and my partner as we had not established any relationship with them, the nice manager tagged on a 0.25% penalty rate on top! We borrowed 75% of the house price and that too we had to beg, he wanted to give only 70%. He was predicting we would default because we were a young couple sure to have kids one after another in the next few years. The first five years we were paying off interest only, nothing we paid came off the loan. But house prices then…..

  • 

    narbe on 24/08/2017 - 16:39

    Wow , someone who lived through that era !

    Do you genuinely think with houses prices these days and interest rates so low

    vs back when house prices were cheap but higher interest rates.

    Which one is harder to pay off ?

    • 

      momov3 on 24/08/2017 - 16:43

      Neither. Your rates would need to be about 9% which it will never be for you to go through the same as us. I get this feeling many of the worried people are also investors who have more than 1 investment property and are highly geared. The group that has over committed themselves. Let's not pretend they are all homeowners on their first mortgage.

      • 

        narbe on 24/08/2017 - 16:50

        That's really interesting , 9% on the loans maybe plausible but probably in the far future unless something big happens.

• 

  momov3 on 24/08/2017 - 16:39

  Why are people fearing a housing bubble crash (will never happen to the extent described) when a stock market crash is 10X more likely to happen.