How Many of You Are Really Feeling The Raise in The Interest Rates?

Dr-StrangeLove on 03/08/2022 - 22:45
Last edited 03/08/2022 - 22:45

I guess this question is mostly for home owners (investment/ppor/both)

I assume a lot of folks here own at least one home I’m hoping this resonates with some of you. We recently purchased our first home in the peak of high housing prices (not sure if that’s what it had been called from a long time now) but the raise in interest rates are really making me think of out decision to buy was wrong or should we have postponed it a little longer. We have been planning to buy a family home from quite sometime and it isn’t easy with the current craziness in the market. We purchased a $1.4 mil house with 88% lvr 4 months ago. Bank approved the loan and now we are feeling the heat. Monthly payments have gone up by $1500. It’s taking a toll on our mental health. Is anyone else in a similar boat? How are you handling yourself? Any suggestions how to cope considering more rate hikes?

Financial

Comments

      • bio on 05/08/2022 - 15:30

        What will your budget look like at 5%, 7%, 10%, and 13% interest rates? (If you're young: no, that's not an exaggeration, it's been 17% before).

        True, but obviously if the rates hit 17% your salary (or the price of whatever you sell for a living) can't stay the same either. I'm not saying that you will get a 17% raise every year, but it won't be static either.

        • Matt P on 06/08/2022 - 23:49
          +1

          17% also happened when there was a lower participation rate by "homemakers" in the workforce - lower multiples of annual income spent on housing etc..

          IMO the equivalent for the current generation would be rates hitting 10-12%

          • TEER3X on 09/08/2022 - 19:02

            @Matt P: They're not going to destroy the economy by doing that. Inflation will take another year to control then rates will start coming down again.

            • Antikythera on 09/08/2022 - 19:19

              @TEER3X: i don't understand why home owners don't want inflation.

              extreme example of inflation:

              before inflation.
              1m loan - 100k salary.

              after inflation.
              1m loan - 200k salary.

              inflation is the only way current generations will compete with the Boomers. Assuming the Boomers are no longer earning incomes.

              stop complaining about interest rate rises and start asking for pay rises.

  • ULT on 04/08/2022 - 01:49
    +39

    Hello mate, we're all feeling the pain, you're not alone. I am not going to give the BS cliché judgement and say you overextended your hand (cos that honestly helps no one), as the bank would have done due diligence and took a calculated risk on you being able to keep up with your payments; they're essentially risk management businesses so its more likely you can handle the interest rate hikes, albeit the "pain". Just need to reduce discretionary spending and save more of your income into your offset account to help with the interest rate pain. Stop watching and reading the news, they always get it wrong, they were calling for a massive reduction in house prices at the start of lockdown and were so wrong it was unbelievable. Play it by ear and keep in touch with your loved ones, cos when shit hits the fan you'll realize how blessed you really are and life is worth all the suffering.

    To cope with the hard times; get out of the house, go for a walk by the beach, work out, hang out with friends, have a drink, you need to do something within the domains that keep you sane in order to escape the demons or the thoughts will crush you.

    • ItsMeAgro on 04/08/2022 - 10:32
      +29

      The sentiment is well-meaning, but I think we should be honest to OP.

      we're all feeling the pain

      Not true. Many of us only bought houses we could afford. When people told us record-low interest rates can't last forever, we didn't ignore them.

      I am not going to … say you overextended your hand (cos that honestly helps no one)

      What OP needs now more than anything is the truth. OP seems unaware how high interest rates are likely to go, and may have to face the facts, do the maths, and budget like crazy, or even sell, in order to avoid much worse outcomes (like defaulting after a slide in house prices).

      the bank would have done due diligence … calculated risk … its more likely you can handle the interest rate hikes … Just need to reduce discretionary spending

      No. The bank has less risk, and will happily lend you more than you can afford, as long as THEY can make their money back (by selling when you default). They don't mind if your stress is through the roof for years. They don't care if you have to cut every other expense out of your life.

      To cope with the hard times; get out of the house, go for a walk by the beach, work out, hang out with friends, have a drink, you need to do something within the domains that keep you sane in order to escape the demons or the thoughts will crush you

      Great advice. But unhelpful to phrase it like this is some unforeseeable or inevitable hardship, and not a direct result of OP's choices. As someone who has made dumb mistakes myself, I think it's more helpful to assist OP in seeing where they went wrong so they can learn from it, and never be in the same situation again.

      Let OP stress about it a little bit now, enough to work out the possible scenarios and best course of action (while OP still can).

    • Fobsessive on 05/08/2022 - 01:04
      +3

      Not sure about "life is worth all the suffering"

  • yogihogi on 04/08/2022 - 06:27
    +1

    Personally we are in a strong financial position ( only due to recent inheritance) as are most of my immediate family. However most of our close friends are struggling, especially those whose purchased recently and have $1million mortgages. Gone are the days of refinancing to access equity for a new Mercedes’ or $140k Cruiser

    • [Deactivated] on 04/08/2022 - 08:16
      +7

      All those people driving their Mercedes … they were not earned. They were the result of a bigger sucker borrowing even more money for a sold home.

      All these fancy cars - are the result of an incredible bubble of debt. The people driving the Mercedes aren't in debt. They just passed the can down - and the cars are a symbol of the reckless debt of others.

      This is not a sign of a wealthy society. It is a sign of a society in deep, deep trouble.

      • muzzamo on 09/08/2022 - 10:13
        +2

        Couldn't agree more.

        So much of the "wealth" we have seen in the few years has really just been a transfer of wealth - from someone's future (the next 30 years of mortgage repayments) to someone's present.

      • SeVeN11 on 10/08/2022 - 11:52

        I think the root cause of this is simply the government's reckless printing of money over the last 2 years…
        that money is now well circulated in the economy and obviously pumped the price of everything.
        The actual way to do this is actually to reduce government spending, i.e. for the government to spend less than it collects in tax revenues.
        The alternative is raising interest rates to reduce the spending of the masses to get some short term effect while they get their act together.

        I wouldn't call it the reckless debt of others, the OP was probably not reckless when he purchased… maybe a bit of FOMO.
        I think its more to do with propaganda, the RBA did say they won't raise rates until 2024, but we're just 1/2 way through 2022 and still have a good 0.5% to 1% rate rise to go!

        the news is just incredibly good at manipulating the masses.

        • pogichinoy on 11/08/2022 - 09:48
          +1

          The RBA quote is:

          "The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. For this to occur, wages growth will have to be materially higher than it is currently. This will require significant gains in employment and a return to a tight labour market. The Board does not expect these conditions to be met until 2024 at the earliest."

          People tend to forget the entire quote and only focus on "not raising rates till 2024". Obviously inflation figures aren't in the targeted 2-3% range, which is why the RBA acted earlier than 2024 and increased rates.

          The media are also to blame for poorly reporting the actual quote.

  • ihbh on 04/08/2022 - 07:03
    +5

    but the raise in interest rates are really making me think of out decision to buy was wrong or should we have postponed it a little longer

    Yes, interest rates drove the rise in prices, and were at rock bottom so the only way was up. The biggest problem for novices is not the absolute increase but the percentage increase because rates were so low.

    Two possible generic solutions (I don't know your specific situation and can't legally offer that advice):

    1. Move out and rent out the place and rent yourself a cheaper place. You might have to do this for a number of years.
    2. Sell now and take a small loss vs later and take a bigger loss (financial and mental). Depending on your situation, 1. might only be a short term solution.

    Some people are feeling it in a good way. Not to rub it in or anything, but the interest rate rise is a God send for many self funded retirees who've had to eat into their capital when interest rates were rock bottom.

    Investors who bought a long time ago and have paid off their loans are seeing rising rents.

    • peekabooo on 08/08/2022 - 17:26
      +1

      I love these interest rate hikes. Cost of living is too high and property prices have gone up too much. I was hoping for the hikes since last year. I think it was a bit late and so many people got into bad deals and paid a premium like OP did. I'm not a retiree I'm in my early thirties looking to buy a home for a while. But the property prices grew so fast and I anticipated a downturn. The hard part was to convince my partner to jump into this market.

      • TEER3X on 09/08/2022 - 19:04

        Prices aren't predicted to fall below pre pandemic levels, it's not "timing" but "time in" the market, always has been. I'll be entering the property market within the next 12 months, I don't care what happens after that.

        • peekabooo on 09/08/2022 - 19:40

          I expect a lot more properties freeing up once the world returns to normal. So many new properties are built without much population growth. Unless net migration to Adelaide was higher in that case capital cities will suffer. Because the immigration was not great during the pandemic. And a lot of older folks haven't moved to retirement villages or nursing homes due to fear once that happens I expect a lot more properties hitting the market.

          • TEER3X on 09/08/2022 - 20:32

            @peekabooo: only until investors remain on the sidelines.

            • peekabooo on 09/08/2022 - 21:22

              @TEER3X: With interest rates being high, there won't be many.Hopefully

  • Overclocked91 on 04/08/2022 - 07:10

    What's your interest rate? It may be time to look at refinancing to reduce your interest rate even by 0.5%

    • avoidfullprice on 04/08/2022 - 07:29
      +1

      I wonder if they have to pay LMi again and how much, and is it worth it. The total interest over 30 years might be lower but OP might sell sooner than that

      • Overclocked91 on 04/08/2022 - 08:25
        +2

        True. An LVR like that they probably couldn't refinance.

        • jjjaar on 04/08/2022 - 09:30

          It would still be worth talking to a broker to get a better understanding of what, if anything, could be done. Though noting it would probably cost at least $40k just in fees to sell, and then fees+stamp duty on the new property.

  • netjock on 04/08/2022 - 08:08
    +15

    We recently purchased our first home

    Otherwise what would you have been paying in rent?

    You could always try to rent your place out and rent cheaper to try to make up the difference

    • SeVeN11 on 10/08/2022 - 11:53

      most probably the best advice so far!

  • [Deactivated] on 04/08/2022 - 08:12
    +12

    We purchased a $1.4 mil house with 88% lvr 4 months ago.

    I've been looking for a home for the last several years, and I set a New Year's resolution to buy a house no matter what on 1 Jan 2021.

    But the queues, the buying frenzy, the disdain from agents who weren't interested… I decided it was incredibly dangerous and abandoned looking altogether.

    You bought a highly leveraged asset at the peak of the market at nearly 0% interest. What did you think was going to happen?

    Look around Melbourne (where I'm looking). Every home ended up around $900,000 to $1,000,000 - even the scruffiest roughest home in the dodgy neighbourhoods. Why do you think that was? The answer was obvious. People weren't valuing property. People were borrowing the absolute max they could borrow… which explains why prices went up 20%.

    So you bought your home competing with other people borrowing the absolute maximum at near-zero interest.

    Now the frenzy has abated, that deflates home prices. Interest rates are going up, that deflates home prices a substantial amount.

    If I were in your shoes I'd be seriously considering cutting your losses before the market deflates so far you're in negative equity. Because if you hit negative equity you're in far bigger trouble than you realise.

    • DarkOz on 04/08/2022 - 08:50
      +6

      I am certain that his house is already in negative equity. He bought at the peak so it had already fallen somewhat and it will keep falling. Not to mentioned what he had paid for stamp duty(5.5%?) and all the legal fees and interests.

      It would be fair to say that he had lost 10% of the house already and counting. The only ones that are not losing(winning) are the banks and the government. Especially the government pocketing 5.5% already and potentially another 5.5% soon.

    • capslock on 04/08/2022 - 09:01
      +5

      OP is working to pump money into a house that is losing value as each day passes.

      • brendanm on 04/08/2022 - 18:16
        +1

        In the short term.

    • Windows98 on 04/08/2022 - 18:14

      So much this.

    • May4th on 06/08/2022 - 15:33
      +4

      All the ones advocating for selling - all you are doing is crystallizing paper losses, they will lose 200-300k likely aftter stamp duty and fees, have little to no savings and likely psychologically scarred to get back into the market any time soon and miss the upswing. Not to mention the stress of selling, finding a rental and moving.

      Negative equity is temporary, selling makes it permanent. If you can tighten your belt, budget well and get through the next 2 years you will come out much better off if this house is in a capital city. If your cash flow/savings cannot get you through, then we seriously miscalculated. See if banks can help with pausing repayments, cut expenses and ask for help from family/friends. Good luck

      • muzzamo on 09/08/2022 - 10:17

        Negative equity is temporary, selling makes it permanent.

        Some people, myself included, and i'm a home owner, believe that the run up in debt and prices was a 30 year bubble that is now over. Prices might not recover, in nominal terms, for 50 years.

    • TEER3X on 06/08/2022 - 20:33

      So when is a good time to buy?

  • klonky on 04/08/2022 - 08:24
    +9

    If your home is big enough you could consider renting out a room to cover some of your costs. But you really need to calculate your repayments on an additional 1.5%, can you afford that? If not, you might need to get out while you can.

    Unfortunately alot of people are going to be making very tough financial decisions over the next 6 to 12 months.

    • drprox on 07/08/2022 - 17:16

      Actually a good idea this. If it's the difference between keeping home or losing home.

  • djones145 on 04/08/2022 - 09:05
    +19

    you think its bad now
    come back the first Tuesday of the month for the next 4 months and report back

  • singlemalt72 on 04/08/2022 - 09:07

    When I got my current mortgage I made sure I could comfortably pay it off if interest rates were north of 8% and paid it off fast - Should be paid off by this time next year.

  • donbot on 04/08/2022 - 09:07
    +9

    Yikes, a $1.2m first home loan. That gives me chills just thinking about it.

    Reduce spending and increase income and hunker down to ride it out. A safety buffer of savings would allow you to ride it out with less of an impact.. but I think a decision as to which way is better is where you're at:

    1. Cut and run by selling now (probably do your deposit, but walk away without the mental stress and/or continued problem), or
    2. Strap in and ride it out with hard work and scrimping/saving/earning.

    Neither are going to be easy.

  • try2bhelpful on 04/08/2022 - 09:19
    +9

    I have no idea how anyone gets the cahones to drop a million on a house. Not a criticism just an observation.

    In ‘87 we bought a one of a pair in Glen Huntley for $90,000. We had combined wages of $40,000. However, we also had an interest rate of, roughly, 16%. Back then it was a no brainer to pour all available income into the loan to chew into the principal ASAP. My wage went, directly, into the loan and we lived off the man’s. This allowed us to get well ahead of the interest rate curve.

    My suggestion is sit down and do some hard budgeting for the next few years. What are essentials and what are things you can jettison. Ideally you need to be not only meeting the interest payments you need to be eating into the principle. The more you can do of that the less money you pay overall.

    • jjjaar on 04/08/2022 - 09:45
      +11

      I have no idea how anyone gets the cahones to drop a million on a house.

      Because we've conditioned everyone to think they must buy a house, so everyone wants to. This increased the prices, got other people seeing that they could make profit out of them, and now with supply and demand, that's just what they cost.

      It's absolutely devastating, but it is what it is.

      IMO, I don't think anyone should be allowed to own property they don't intend to live in, or holiday in (and them actually using it, none of this put it on airbnb shit). We need to stop people from buying properties with the sole intention of renting them out for profit. It's the only way prices will balance out, and we'll go back to people being able to afford a property twice (and a bit) the price of their combined wages, as opposed to 7 times.

      • try2bhelpful on 04/08/2022 - 09:50
        +16

        Don’t disagree on that one. I’m one of those dreadful entitled Boomers but the only property I own is my home. I put my extra money into Superannuation and shares. I prefer my money is providing jobs rather than locked up in bricks and mortar. There is a frightening number of houses where they stand empty most of the time. Housing should be a nest, not a nest egg. Frankly people should get a home, maybe one investment property, and after that you get hit with a levy for public housing.

        • jjjaar on 04/08/2022 - 09:53
          +12

          A public housing levy. I like that!

        • Windows7forever on 05/08/2022 - 20:05
          +2

          Brilliant idea

        • the4thzodiac on 07/08/2022 - 15:47

          +1000

          yes - 1 PPOR, 1-2 IP max. great idea.

          remember, IPs provide rental to those who can afford to rent.

    • qvinto on 05/08/2022 - 11:46
      +12

      A key problem is that your 90K Glen Huntley house is probably now worth $1.5-2M and a younger family looking to buy a similar home would need to service that on combined average wages of probably around $150k. That is 10x combined wages not 2.2X. The rates are lower now but (in crude terms) 17% of 2.2X is still much less than 6% of 10X. Also the rates were 17% for a relatively brief time. However they will probably be ~6% for a long time now. The insane housing bubble has change the reality of buying a house for the younger generation, and made it much harder. The new generation will also not see a 10X gain in the value of their house while they own it unlike the older generation. Basically there was a single-generation wealth growth for home owners which the new generation now has to pay for (unless they inherit the older generations wealth, which you won't if you have a low-socio economic or a migrant background)

      Saying that, a young family on average wages should obviously not buy a 1.5-2M house but get something cheaper instead. However even a cheap house is at least 800k+ now in Melbourne.

      (not suggesting you are to blame for any of this)

    • JimB on 07/08/2022 - 11:55

      Lucky you.

      Unfortunately if you wish to live in a good area of Melbourne that’s the price you have to pay.

      With rate increases, people will borrow less and therefore pay less.

      Good areas to live have never been cheap and will never be cheap

    • netjock on 10/08/2022 - 12:53
      +1

      In ‘87 we bought a one of a pair in Glen Huntley for $90,000. We had combined wages of $40,000

      Little bit over 2x salary.

      I hope OP is making $500k combined. Being on OzB the average salary is $250k so not out of the question.

      Like I said many times this time it is the same but different. It isn't the interest that is going to kill you, just the principal. How so? During your time when rates did ease off you had breathing room. OR you could reduce the principal which interest is calculated from quickly. Now people have massive principal to pay off so OP is stuffed unless rates go back to 2% which is unlikely.

      Maybe OP should start praying that there is enough people breaking financially before them that it will force the RBA to not raise rates high enough to put them behind and into default.

  • bitesized on 04/08/2022 - 09:21
    +10

    Keep thinking of ways to reduce your outgoing or increase your incoming.

    Reduce outgoing:
    - Check all home/car insurances for cheaper options
    - Same with utility/internet providers
    - Cut down on streaming services - youtube/netflix/spotify
    - DIY car wash, hair cuts, exercise

    Increase incoming:
    - Amazon flex delivery/uber eats
    - Can you or spouse provide tuition or musical instrument lessons
    - Job switch to higher paying role
    - Insert other creative idea to make money that isn't crypto related

    • mboy on 04/08/2022 - 11:18
      +2

      Great list!

      OP start by reducing all your outgoings, it's quicker to action, easier to do and can make a big impact.
      If that's not enough, then you can consider a side-hustle or changing roles.

      Crucially, the success of either of these is going to come down to your pride/hubris:

      • The creature comforts you think you and your family "deserve" are irrelevant right now
      • Working a side-hustle (like a delivery driver) is not beneath you

      Like I said earlier, it's not going to be easy. Make the right moves now.

    • DemocracyManifest on 07/08/2022 - 10:55

      I disagree on hair cuts haha unless you are really good at it. Even the cheapest barber shop should do a better job than you

  • ardie-chengz on 04/08/2022 - 09:34
    +4

    Perhaps talking to a broker or financial adviser about what other options are available that we may not be aware of may be worth it?

    For us personally, we signed to build in South Brisbane in December 2021 but delays in the land registration mean we haven't started paying the mortgage until the land gets settled (ETA in a month or 2). But watching these rate hikes has me anxious what it'll be by the time the build is complete and we start paying P+I in about a year's time. Using this extra time to basically get as big of a savings buffer as possible in case things get considerably worse and/or this recession talk eventuates.

  • Shazam82 on 04/08/2022 - 09:35
    +2

    To be fair to OP, no one expected interest rates to rise so quickly. Everyone is an expert in hindsight.

    A house is a long term investment and the first few years is always the hardest. Just to take the pressure off short term you can go interest only for five years on your principal place of residence. This will reduce your monthly payments considerably. The bank will tell you the danger is your term will decrease from 30 to 25 years once your interest only term expires. Don't stress about this you can reset the 30 years and refinance. You will need to eventually pay back your loan but this might help because your mental health is really important.

    Reach out if you want to chat.

    • Drakesy on 04/08/2022 - 09:44
      +2

      Only those that actually believed the RBA didn't.
      If you put 2 and 2 together you just needed to look at new Zealand to see what we're in for.

      • pao2x on 04/08/2022 - 10:19
        +1

        This, RBNZ started rising interest rates October 2021. And a few months later the RBA Gov was still saying interest rates was going up on 2024 until Ukraine blew up…..

  • Fergy1987 on 04/08/2022 - 09:37
    +5

    Must be nice to be able to afford a 1.4 million dollar home

    • Drakesy on 04/08/2022 - 09:45
      +31

      'Afford'

    • digitalbath on 08/08/2022 - 19:14

      They can’t though. That’s the problem haha

  • Danstar on 04/08/2022 - 09:51
    +1

    Nope. First house almost paid off and bought in before the boom.

    • try2bhelpful on 04/08/2022 - 10:02
      +1

      Just how old are you? We were scandalised when my man’s brother bought a property in Richmond in the early 80s for $54,000. Frankly property was booming then.

      • Danstar on 05/08/2022 - 23:52

        I’m under 40

  • johndowy on 04/08/2022 - 09:54
    +2

    How much was your income to get approved for that loan?

    • [Deactivated] on 04/08/2022 - 10:47
      +4

      It may have been a combined income.

      Either way, how do people sleep at night knowing all their spare income must go onto the mortgage? If anything goes even slightly wrong, one person loses their job… it is game over.

      Also the leverage was insane. It was borrowing $1.23 million dollars on a sub-$200,000 deposit. That blows my mind. At least it wasn't a 5% loan but… in this market… not having a 20% deposit is a big red warning sign.

      We're not in Covid days any more where banks are being told they must give payment holidays.

      • johndowy on 04/08/2022 - 10:52

        They might have plenty of spare money.

        For a large loan and 88% LVR, either they originally had a 20% deposit and values have dropped or they paid LMI or they work have high paying jobs in good industries (like medicine) where they can get special loans at higher LVR.

        Either way, that would mean that they would have plenty of money to drop on higher interest rates.

        Also, banks assess loans at ~5.5% so they should be fine, no?

  • Porker on 04/08/2022 - 10:10
    +3

    Even though the bank gave you the loan, did you do any forecasting or future preparations for rate changes? The low-low-low interest rate was never going to last, or indeed would not last for the 30 years of the loan.

    If you did build in a buffer, start enacting it now to reduce that $1500. If not, then seek financial assistance unless you're prepared to provide your financial position here (which you shouldn't do).

    At the very least, if not already, create an offset account and put every spare dollar you have in that and use that as your daily driver instead of (say) a savings account.

  • cupcake on 04/08/2022 - 10:39

    I'm not feeling the stress of it yet but anything can happen.

  • Choc0 on 04/08/2022 - 10:47
    +3

    Was looking at 1.4M houses six months ago and thinking the ship has sailed. Now similar properties are listing at 1.2M

    There's some hope here.

    • techno2000 on 05/08/2022 - 12:41
      -2

      I see people banging on about this quite a bit.However due to higher interest rates your monthly repayment will be the same as before or even more.So how is it more affordable?

      $1.4 million monthly loan repayment over 30 years at 2.5%= $5,531.69 monthly

      $1.2 million monthly loan repayment over 30 years at 4.25%= $5,903.28 monthly

      • schwinn on 05/08/2022 - 14:10
        +6

        The deal is that the guy who paid 1.4M will also have to pay mortgage at 4.25%…

        • techno2000 on 05/08/2022 - 14:29
          +4

          Yes but apart from would be home buyers feeling gleeful at others misfortune,how is the interest rate going up considerably going to help new home buyers get it any easier than before?

          • schwinn on 05/08/2022 - 14:33
            +3

            @techno2000: Ah I see your point, you’re saying that the higher interest rate reduces their mortgage capacity. Sorry I was approaching it from the serviceability perspective.

            In that way I would agree and say this is when the rich will get richer

          • tomleonhart on 05/08/2022 - 18:03

            @techno2000: interest rate rises, house price falls. Your deposit has more value. I think that's how it goes ? In your example, I would say 1.2m is still too expensive for the interest rate of 4.25%.

      • jeeg on 05/08/2022 - 19:05

        Is this before the $1500 increase as mentioned by the Op or after the increase?

        If it is before, i could not fathom the financial pressure to pay $7500 for a house mortgage on a monthly basis. I think i might crack anytime.

      • TEER3X on 06/08/2022 - 20:38
        +1

        It's more 'affordable' as less of a deposit is required to get to 20% to avoid lmi

        Plus those buying believe interest rates will fall again at some point during the life of the loan.

    • santaclaus on 05/08/2022 - 17:54

      could you share where is this? Is it in Victoria? From what I see, that's not the case in glen waverley. vendors simply withdraw if they don't get the price that they want. And people still bid like crazy a couple weeks ago.
      I would want to believe that price has dropped but it seems that's not the case. price goes up very easily but it is very hard to go down. Those 2.5M-3M houses don't drop to 2M.

      • daclaw on 06/08/2022 - 23:29

        Glen Waverley is only ridiculous in the secondary college zone, the school is not even that good

      • greatlamp on 07/08/2022 - 07:18
        -1

        Location makes a huge difference. No surprise 'Chinese' suburbs won't drop in price. At least until China's mortgage bubble cracks.

        I wouldn't expect big price drops anywhere in metropolitan Melbourne, it has a fast growing population, infrastructure can't keep up, and a diversified job market.

        If you can't afford it someone else will gladly take your place. It isn't a one trick pony like Perth

  • caramellokoala on 04/08/2022 - 11:12
    +4

    A man who bought his house well over RRP posting in a bargain forum.

    The irony is delicious.

    • ItsMeAgro on 05/08/2022 - 09:40
      +5

      I'm always amazed how many OzBargainers seem to be spending hours chasing a few dollars in cashbacks, then purchase luxury cars and million-dollar homes at the highest prices in history.

      Like, you could waste money like an idiot every day and still be better off than that, if you get a modest car and home.

  • GandalfTheCheap on 04/08/2022 - 11:28
    +3

    Buy stocks in these "Interest rates don't stay at record lows forever?!?!?! WTF!!?! What do I do?!?!!!?" OzBargain forum posts, boys. This is just the beginning…

  • Lunarboogie on 04/08/2022 - 11:55

    There is a bit of hyperbole here. Yes, repayments may have gone up by $1500 per month but half of that is principle too. So the increase in actual interest is $750 which when looked through this lens isn’t as onerous. Between two adults, it should simply require some belt tightening. Just gotta get through the next stretch and come through the other side. Like plenty of people have done before you.

    If you need more cash, rent a room out. There’s a rental crisis so won’t be vacant for long if you advertised. For a 1.2m property, this should net you at least $250 per week, more than meeting the interest hikes.

    • mboy on 04/08/2022 - 12:10
      +7

      Yes, repayments may have gone up by $1500 per month but half of that is principle too. So the increase in actual interest is $750 which when looked through this lens isn’t as onerous.

      Uhhh, no it's definitely not half. OP is right at the beginning of the mortgage (bought 4 months ago).
      Given that they've just started, their monthly repayments (including the increase of $1500) are weighted toward interest.

      That's how a Principal + Interest home loans works. At the beginning of the term, repayments are weighted towards interest, and with each subsequent repayment the percentage that goes toward interest diminishes and the percentage that goes toward principal increases.

      This amortization schedule chart should illustrate what I mean:
      https://assets.themortgagereports.com/wp-content/uploads/201…

      I can't be bothered doing the maths with the OP's loan LVR but it's far from 50/50. At a guess, it's much more like 70/30.

    • MS Paint on 04/08/2022 - 12:14
      +1

      this should net you at least $250 per week

      This has income tax implications. The last thing OP needs is a tax debt as well.

      • Lunarboogie on 04/08/2022 - 12:33

        Yeah nah. No OzBer worth their salt would declare this income. OP is fighting for survival. The ATO can cool their jets.

        As for the 70/30 comment, yes I stand corrected. Either way though the idea to get a student in in one of the spare rooms will almost offset they entire rise (for now). For the rest, economise lah.

        • MS Paint on 04/08/2022 - 12:46
          +5

          So real ozbargainers defraud the federal government?

          I better amend my last tax return.

      • Donaldhump on 04/08/2022 - 22:49

        just say its a border think that's tax exempt. cook their meals

        guess after tax and rates proportioned might be a loss anyway

  • slowmo on 04/08/2022 - 12:55

    stop having smashed avo toasts! j/k.

    i'd be lying if i said i don't feel the pressure from the % increase, since I'm a tight arse, every $ taken away is painful.

    that said, when i made my house purchase, i factored in 14% interest rate. so i'd probably not feel as much pain for now.

    new/recent buyers are going to bear the brunt of this increase in rates.

    as said before to people cheering for the drop in property prices… be careful what you wish for.

    • try2bhelpful on 04/08/2022 - 13:06
      +2

      It depends on why you want the drop. The value of my own home is immaterial because I hope the way I leave it is in a wooden box. Australian housing is ludicrously high and tax breaks seem to be geared towards investment properties rather than homes. I want the drop do families can afford homes.

      It is long past avocado on toast.

      • slowmo on 04/08/2022 - 13:16

        for sure, i would love to have more families being able to afford their own home. just lurking in lots of forums (and social circles), there are some who just want house prices to tank so they can buy a big house with an average income and no savings. it's a consistent theme of "yay house prices drop!" but oblivious to the fact that lenders may further tighten up their lending because of exposure.

        fwiw, my comment on avo was more nuanced and tongue in cheek, since avos are essentially being dumped to keep prices up at the moment.

        • try2bhelpful on 04/08/2022 - 13:19

          No probs. Frankly I realise I was the golden era. I just wish the current people got the same privileges.

          You are right, Avos are cheap at the moment.

          • slowmo on 04/08/2022 - 13:27

            @try2bhelpful: imo, managing the property economy is tough. there are always going to be more cashed up people/companies/trusts than there are first home buyers.

            no matter which way the general economy swings, the cashed-up ones wins. Economy good, they will buy maybe 4 leveraged, economy not so good, they will buy 3 instead of 4. Just pulling on the price/rate lever is not going to help, it's like you pointed out the problem is systemic, the tax breaks and gearing. We won't start solving the affordability issue w/o fixing the systemic issue.

            • try2bhelpful on 04/08/2022 - 15:45

              @slowmo: Yeah, then you’ll get the cashed up screaming “socialism”. This is why I proposed a levy to be used for social housing if you own a property portfolio. Cools the market and puts money into social housing. It is ludicrous that people can’t afford one and some people have ten.

              • slowmo on 04/08/2022 - 15:55
                +1

                @try2bhelpful: i think we are in agreement, looking at the previous decades, some ministers have over 100s of investment properties… i am not surprised you need to drag them all kicking and screaming to get the reforms in place. not to mention a lot of mom/dad investors that bought into this pyramid scheme.

  • ass3ts on 04/08/2022 - 17:19

    Yes I'm feeling it, I'm feeling good.

  • DoUKnowTheMuffinMan on 04/08/2022 - 17:28
    +6

    I'm in a similar boat although due to slightly different circumstances..

    My wife and I bought a house only 3months ago (just before first rba rise). The repayments were only 40% of our combined income at the time, which left us plenty of room for a rate rise except until…. we got the news a month later of a new addition to our family.
    Now I'm thinking that we will only have one wage for X-amount of time and not sure how we will manage the repayments + cost of living.

    Although I'm over the moon and can't wait, I'm a little nervous too…

    • MarsTitan on 04/08/2022 - 18:11
      +1

      Congrats.

    • try2bhelpful on 04/08/2022 - 18:19
      +2

      Congrats on the news. I would be looking for maternity leave, for as long as possible, and adding whatever paternity leave you can get. Also start looking into part time work and working from home options available. Do as much homework as you can upfront.

      All the best for the bub.

    • dvsbastard on 04/08/2022 - 19:44

      We all have different risk appetites, but 40% of a combined income at record low rates seems huge to me.

    • TEER3X on 06/08/2022 - 20:40
      +1

      The repayments were only 40% of our combined income at the time

      Is that not on the brink of mortgage stress???

      • DoUKnowTheMuffinMan on 07/08/2022 - 01:03
        +1

        You consider 40% mortgage stress???
        Bills and food accounts for 20% and we put the other 40% in savings…

        I'm really curious what you spend all your money on? Or how high your bills are…

        • greatlamp on 07/08/2022 - 07:32

          It's mortgage stress according to newscorp, who expect these struggling "Aussie battlers" buy a new car every 5 years, take a yearly $5k holiday, spend $20 on lunch and $5 on coffee every day, and $100 on uber eats on Friday night.

          After work drinks, $12 on 1 beer without blinking - if everyone else in the room is doing it, it must be ok.

          I went for a loan recently and the bank refused to lend me more than 40% of my income. I had to lie and increase my declared living expenses just to get the loan. I was literally told "COVID lockdowns are over so your entertainment and eating out budget must to be higher".

    • Antikythera on 09/08/2022 - 19:35

      a new addition to our family.

      wooo! a third wage earner to split the mortgage with!!!!

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