Plonk

Got Interest Rate thread

872 posts in this topic

Do you see the Australian, SMH, Tabloid Newscorp rags, Kochie, Grimshaw throwing it out there?

Do the politicians acknowledge these issues?

Take a 100 people in the street and see if maybe 5 acknowledge they are pressing issues that can unravel the gossamer.

To 90%+ of the population they will be unexpected events.

The main furore is another 100 people at Ashmore reef going to take your house and imprison your loved ones.

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By identifying as many of the 'unexpected' events and assessing their likelihood can one mitigate and be prepared. When I was young Tinnie under training proud of my progress in the live environment an instructor would say..."what if he loses an engine now, what are your actions?" "what if the ILS failed now?" "what if your Radar failed? (ashen faced me then)" etc etc.

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A couple more for the "raise the variable rate above the the OCR rises" files:

Big provider- ING raise by .3%

http://www.theadviser.com.au/breaking-news/3526-ing-direct-lifts-rate-03pc

Small provider:

http://www.ratecity.com.au/home-loans/ (bottom right corner):

Qld Credit Union raises variable mortgages by .85%.

Wow. The above rates might still be lower than the Big 4, but rises like these sure show how providers have "decoupled" from the OCR.

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A couple more for the "raise the variable rate above the the OCR rises" files:

Big provider- ING raise by .3%

http://www.theadvise...lifts-rate-03pc

Small provider:

http://www.ratecity.com.au/home-loans/ (bottom right corner):

Qld Credit Union raises variable mortgages by .85%.

Wow. The above rates might still be lower than the Big 4, but rises like these sure show how providers have "decoupled" from the OCR.

this is kind of why i'm cautious to borrow from a smaller lender. it barely makes the news, if at all. if one of the big four lift too much it get's the attention of the media, the governement and the odd green grocer.

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Had to go to a acteba (ACT eight ball association) meeting tonite at the serbian club in mawson. (Lovely venue) Got to watch TT/ACA (not sure which) about the lowest mortgage rate. Reduced mortgage loans had 5.89%. (the lowest) Trouble with the small mortgage lenders I've heard is that some who signed up to various small lenders had their mortgages sold during the GFC and have gone from low to very high rates with no recourse but to refinance which is expensive. In the words of Kylie, better the devil you know.

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If you have a small loan (or a larger one that has high break fees), the refinancing fees alone might mean the equivalent of several YEARS of higher interest rates with the old lender. Its not really worth the effort, and they all know it.

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It is a shame tracker mortgages never hit the market here.

At least then you know what you are signing up for.

These were pretty good value pre GFC too. I know some people from the UK here whos home loan back home is 1.5% due to it being a tracker when the premium over OCR was only 1%.

Clearly pretty easy to keep things positively geared if your loan is only 1.5%.

No wonder the UK banks were hit particularly hard by the GFC!

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The futures just lifted today from around 30% chance of an IR rise in May, to 40%:

http://www.bloomberg.com/apps/quote?ticker=CSMEETAU%3AIND

... so I think "something's happened" to make it so. Here's what happened:

http://www.businessweek.com/news/2010-04-20/australia-s-february-westpac-leading-economic-index-gains-0-5-.html

Westpac/MI index- includes this:

April 21 (Bloomberg) -- An Australian index of leading economic indicators rose in February to the highest level in 1 1/2 years, adding to evidence the nation’s economy will accelerate this year.

The index, a gauge of future economic growth, increased 0.5 percent from January to 257.8, the highest since July 2008, Westpac Banking Corp. and the Melbourne Institute said in Sydney today. The index expanded at an annualized rate of 7.2 percent.

“This represents the fastest annualized growth rate in the leading index since 1997,” said Bill Evans, chief economist at Westpac Banking Corp. in Sydney. “It is signaling that growth in the Australian economy will accelerate through 2010 to well above trend by year end.”
Westpac’s leading index tracks eight gauges of activity, such as company profits and productivity, to give an indication of how the economy will perform over the next three to nine months.

And meanwhile:

Westpac’s Evans said the so-called normal level for the central bank’s benchmark overnight cash rate target is about 25 basis points higher than the current rate of 4.25 percent. A basis point is 0.01 percentage point.

Still, close to two weeks left before the decision.

Abroad, India raised their cash rate by .25% for the second time. Now, it's Malaysia, Norway, Vietnam, Israel, India and Australia who have raised rates. Canada looks to be raising soon- by about June.

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ME bank has no ATM's of their opwn but you can use bankSA and westpac atms at no fees/ for a few transactions. also the use at stupor markets for eftpos withdrawals and u get 12 transactions, so use as an ATM while shopping

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Glenn speaking @ 1pm on economic conditions and prospects. "Prospects" sounds like it might give a clue about the direction of future IR's. I am going to presume he'll be bullish.

http://www.rba.gov.au/

23 April 2010, 1.00 pm AEST

Speech by Glenn Stevens, Governor – Economic Conditions and Prospects – to the University of Southern Queensland and Toowoomba Chamber of Commerce and Industry Economic Conditions Forum, Toowoomba, Queensland

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The IR futures have done nothing short of a plummet after Stevens' speech. 26% of a .25% rise in May now:

http://www.bloomberg.com/apps/quote?ticker=CSMEETAU%3AIND

Whilst the import and export price indices were both in positive territory (for the quarter- over the year, they were shockers) and signalling recovery (and potential price inflation), all it took was for Stevens to say IR's are close to normal, to have the futures dealers going bananas. In reading the speech:

http://www.rba.gov.au/speeches/2010/sp-gov-230410.html

it's really quite bullish. He is saying the economy is doing well- a little bit ahead of speed- and IR's are not yet normal. so, back to normal, I would think (with great haste, I would hope!) On a bearish speech, I would expect the futures to fall significantly, but on this speech... I just can't see the difference between raise and then wait, or wait and then raise. An economy can do extraordinary things over a month - or two months. Waiting is imprudent :P

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Although it probably doesn't have a lot of relevance to most people on here, Homestart in South Australia (some sort of pseudo-government home finance co theoretically aimed at low income earners and which also offers a shared equity product) upped their standard variable from 6.82% to 7.22% last week (a 0.4% rise following the April official OCR rise of 0.25%).

As per Plonk's earlier comments on a few other smaller providers, seems they must be having some problems obtaining funding again... time for the govt to buy some more instruments to fund the NBLs?

I think the importance of this move by Homestart is that its totally cutting the legs off the low end of the market - people who don't earn a hefty wage are basically being squeezed out of joining the market no matter how much the mania has taken them over - higher interest rates, higher deposits required and prices so high that even shared equity won't let them buy entry level stuff (on below average wages).

Interesting in light of the apparently conflicting messages about future OCR rises - looks like funding costs are on the up.

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homestart also offer ninja loans, where the repayments are based on your ability to pay, not the interest you accrue.

yup you can have loans with them that the capital you owe increases over the term of the loan.

the plan being you will get a job later in life, win lotto , die . or at least something. maybe even with a little prayer house prices will go up and you can sell to pay off the loan.

when i went in quite a few years ago i could get a $75k ninja loan with a %10 deposit, but houses where $150k in the burbs.

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Although it probably doesn't have a lot of relevance to most people on here, Homestart in South Australia (some sort of pseudo-government home finance co theoretically aimed at low income earners and which also offers a shared equity product) upped their standard variable from 6.82% to 7.22% last week (a 0.4% rise following the April official OCR rise of 0.25%).

I think the importance of this move by Homestart is that its totally cutting the legs off the low end of the market - people who don't earn a hefty wage are basically being squeezed out of joining the market no matter how much the mania has taken them over - higher interest rates, higher deposits required and prices so high that even shared equity won't let them buy entry level stuff (on below average wages).

I'm a bit fond of govt shared equity schemes- not private for-profit ones. If people can only afford 80% of a home or whatever it is that Homestar offers, then that's all they can afford. Who knows- later on, they might be able to afford the rest. I looked at their home loan rates. Initially, rates looks high, but at a comparison rate (IR minus shared equity rate?) rates looks low.

http://homestart.com.au/getattachment/calculators-and-tools/rates-and-fees/CombinedSchedules.pdf

Also, this:

http://www.homestart.com.au/getattachment/about-homestart/media-centre/news/test-1/EquityStart-Release-Feb-10.pdf.aspx

Who cares about public housing tenants these days? Not many. As long as the government commits to rebuilding or repurchasing a house to replace the house going into private hands, it gives public housing tenants an opportunity they might not otherwise have. Of course, there's always this danger- my fave Youtube videowub.gif The new owners can't afford it, and at some stage, need public housing again, and there's none to be had:

I thinkj I've read that the govt shared equity schemes in SA and WA have very low default rates. good on people if they can actually get their own home by some alternative method. All the state governments should bring it in, I reckon. Beats having to compete against the mob in a rising market (soon to be collapsing?) Tas also has some homes reserved for public housing tenants to buy. Schemes for the poor are always good- unless they have unintended consequences of making the poor poorer.

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Non-profit schemes, I should add (editor is still wonky for me). For-profit schemes will always make the poor poorer at some point.

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Non-profit schemes, I should add (editor is still wonky for me). For-profit schemes will always make the poor poorer at some point.

i think that the shared equity thing *could* work if it weren't abused. which it almost invariably would be, but one can hope.

one could have the gov't essentially reclaim the land after each sale, buying it off the seller for the purchase price adjusted for inflation and reselling it to the new purchaser for the same price (sans some sort of handling fee). that would essentially eliminate the speculative/investment element of housing, making it a consumer good. the only way to make money would be to improve the house itself, and even that would depreciate.

mind you, i don't expect anything like to ever happen in australia, but imagine how much money would be freed up for other more productive activities if it were...

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mind you, i don't expect anything like to ever happen in australia, but imagine how much money would be freed up for other more productive activities if it were...

I wonder if somebody has tried to model the time it will take for every un-invested/un-spent post-tax dollar to be allocated to real-estate? ie a 100% mortgage vs wage ratio.

Given that mortgages are growing faster than incomes, a 100% usage is inevitable.

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There are too many variables and they change constantly due to government/central bank interference to bother with a projection.

Edited by sydney3000

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i think that the shared equity thing *could* work if it weren't abused. which it almost invariably would be, but one can hope.

one could have the gov't essentially reclaim the land after each sale, buying it off the seller for the purchase price adjusted for inflation and reselling it to the new purchaser for the same price (sans some sort of handling fee). that would essentially eliminate the speculative/investment element of housing, making it a consumer good. the only way to make money would be to improve the house itself, and even that would depreciate.

mind you, i don't expect anything like to ever happen in australia, but imagine how much money would be freed up for other more productive activities if it were...

Have you heard of Community Land Trusts? www.communitylandtrust.org.uk They operate in the US and UK, not sure where else, not yet in Australia. The CLT buys the land and effectively rents it out, retaining ownership.

If the bubble does burst, I hope that CLTs will be established in Australia to buy back land for communities and prevent the craziness recurring.

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