Thread: Mortgage Repayments

Originally Posted by Captain_Rightfoot

I know what BigJon is saying. And in part I agree.

Thing is I think we're heading for a big one too, and largely because of the housing boom. It's caused all sorts of trouble. Some people have done well, but those with little financial responsibility have used the opportunity to spend equity largely on stuff that doesn't matter (Plasma Tv, SS Ute anyone?).

I did the sums with a mate on buying a house with a mate and it worked out that on a modest house in my area it would cost him about 20k a year in repayments so someone else could live in his house.

But, he pointed out that if he doesn't get in the market then he might never be able to. So, it is unspoken but he like everyone else thinks that houses will just keep going up 30% a year and you'll make money on the capital growth. Taking the big picture view if you extrapolate 30% over even a small timeframe it's clear it's unsustainable. It's never ever happened that we have had a housing boom without some kind of a bust.

Anyway, I'm sitting back hoping to pick up a bargain in the next little while.

The signs are mounting... IMHO it's starting.

First signs

During my working life I went through at least four boom-bust cycles. The collapse of the building business in 1982-83 saw my gross income reduced to almost half what it was in the boom years of 79-82. I believe another bust is about due. House and land prices are getting beyond reach, and when no new investors are coming into the market buying the properties of the last crop of investors, then the bust happens.

Nothing like a good bust and a year or two on Newstart Allowance to knock the arrogance out of building tradesmen. They sure do keep appointments when there is little work about.

Originally Posted by Reads90

...
Interest rates going up is all our fault and has nothing to do with the government . The government are trying to stop everyone spending money , and the only way to do that is to take money out of the economy (so that people can't over spend). The way to do that is tax or interest rates. Both unpopular and both the government gets blamed for. ....

The big problem with monetary policy where it manages interest rates alone is that it is indiscreet and then becomes a double edged sword.

Yes putting a hold on an overexcited economy by raising interest rates will encourage some people to invest but will also hurt those with current flexible rate loans. More importantly it will slow the building and construction industries, in turn those other industries who support building and construction. This can easily lead to large scale reduction in employment and further stress in those sectors. It also makes the Aussie$ more attractive to the market. A high comparative vale Aussie$ makes it harder to sell Aussie products on the world markets.

What is really needed is a method of slowing growth without reducing employment in Australia, but still reducing the volume of imported goods coming in from overseas (which benefit the Australian economy and "balance of trade" very little).

Interest rates can slow the value of imports, but if we quarantine mortgage interests from those rises it will reinforce employment in Australia by maintaining the building and construction support industries.

Just my opinion.

Diana

A few years ago the local paper was running sob stories of people who had gone into another morgage to buy a second house which was then rented out to Defence Housing. Their rent was based on the current market figures and when it dropped these people were complaining that rent should not go down, they were not able to meet the repayments, its the government fault, etc but they never factored in any price flucuations. Their excuse was "we were told it would be safe" without reading all the Defence Housing blurb which stated how the current rate was obtained. Same as those people who get hooked by the Nigerian and other scams...they see the "money" that they can get without really looking at it, why give your bank details to someone you do not know?
House prices have gone up a lot but that is due to many factors, the house my parents bought in 1956 was a basic 3BR and came without furnishings, whitegoods except a stove, no landscaping, no sewerage as it had not reached the suburbs yet, no sealed roads. These items came slowly over the years when the money was available, we also did not have a car. Since then the councils expect the roads to be sealed, sewerage in, the homebuyers expect a larger house, all modern cons. 2 car garage, home entertainment units, dishwashers etc then the gov has thrown in GST which adds to the cost and councils have a multitude of fees for everything and rules Timber is getting scarcer and therefore dearer, all of which add to the basic cost of a house.
Also as others have pointed out, years ago you had to save for a deposit at least 10% to show that you could save, now the banks don't care so people with poor financial management skills can get a loan which they cannot really pay once anything changes. Interest rates have never remained fixed at a low rate for a long time.
When I moved here I lived in a tent for the first period then moved up and was careful always with my money so now my second home is payed off and I am debt free. To do it I had to make sacrifices and go without holidays, study at uni part time and budget carefully. It is probably a characteristic of those who grew up in the 40 and 50s as from an early age we knew money was tight and had to be earned. This comment has been made by a few. Now I look at those working with me in their 20s and it is a gotta have now mentality. One just bought a unit but had to get a full home entertainment system then 6 months later had to buy a new DVD player because it had a bigger hard disc so he can now watch 4 hours of Star Wars without getting up. Instead of paying a little extra in his repayments and getting the interest charged down he prefers to buy the latest gadget.
You also need to look around at what is offered and not to rush in because the salesman claims it will go quick. A friend has just moved into her new home (about 4 streets away from your friends BigJon) and she did her homework as to the builder. Cost $350,000 which included your choice of finishes, whitegoods, blinds, 2 car garage, landscaping and fencing. The house is well made. Just a few doors away another person was forced to sell their new house within a few months because their builder for $500,000 only gave them an empty house, no fences, landscaping etc and they had to take out an extra loan to buy the necessities so they could move in. The repayments were too much but they did not check what they really got for their money, they just liked the house but its quality was no better than the other house and offered nothing extra.
It has stopped raining now so I will stop my rant and go out and do some work.

quarantining home loans won't give the desired effect.

increasing interest rates works because it forces home owners to review their budgets and curb their spending..

Originally Posted by procrastination inc

quarantining home loans won't give the desired effect.

increasing interest rates works because it forces home owners to review their budgets and curb their spending..

the spending is not just done by home owners.......what about those that don't own a home like the 20 somethings that still live at home.

Originally Posted by isuzurover

You and your mate are at odds with most businesses in OZ. The Australian business council or whatever they are called, recently said the federal government should halt spending for 2 years, to keep inflation (and interest rates) low(er) in a bid to overcome the problems related to the excessive spending in the last part of howard's reign.

And wouldn't that be a lovely disaster. No govt. spending means for some businesses NO customers, and for many many others such a reduction in govt. spending would almost send them to the wall, followed by mass sackings, mass unemployment, redundancies, bankruptcies. The various levels of government are the biggest spenders of all. Even if you are not dealing directly with government, many of your customers are and the cash flows on to you.

Originally Posted by Numpty's Missus

Consultancy Diana...that's where its at Yep...us old girls are propping the system up by staying in a crap job

yes NM alot are doing exactly that but, they should stop whinging and go to uni that way they can pay off there morgage. Oh wait don't nurses go to uni. silly me

Originally Posted by procrastination inc

quarantining home loans won't give the desired effect.

increasing interest rates works because it forces home owners to review their budgets and curb their spending..

Sure it will provided that they can't tack all the gizmos onto their mortgage and have to pay credid card or personal loan interest rates for the the excessive lifestyle.

If you can't quarantine mortgage interest then give some tax incentives for home ownership, like being able to claim a portion of the mortgage interest as a tax deduction. Home owners are less of a burdon on the social security system in their old age.

Originally Posted by Numpty's Missus

Consultancy Diana...that's where its at Yep...us old girls are propping the system up by staying in a crap job

NM

I tried that, the money is O.K. when you have a contract but then there can be lots of down time between contracts.

Worst of all if you are doing research consultancy, you have to do lots of work to submit the proposals before the 30 June end of financial year, but may not get notified whether it was successful till December or the New Year and then have less than 6 months to complete a project. Often you can be unsuccessful and there goes a whole year without a contract.

Sometimes you want to hedge your bets and submit proposals for different projects to different funding bodies. You may end up getting more than one and not have the resources to complete them or again get none.

There is something to be said about regular work and regular pay. More than that, in health consultancy, you are also taking risks but the rewards are no where the possibilities of those in business.

I'm too old to start out that way now!

Diana