[zaph]

and the sunday telegraph version is slightly different with this highlight...

Quote

Modelling by Fujitsu Australia, which runs a "mortgage stress" index, suggests 1.1 million households will struggle with repayments if mortgage rates hit 10 per cent.

But it says house prices would be supported by almost-full employment and a continuing shortage of properties. "Prices would only suffer a small fall, they wouldn't crash," said Martin North, director of Fujitsu Australia.However, others warn the flood of first-home buyers - lured in by generous government incentives - will struggle so badly, they will be forced to sell, leading to a rapidly deflating property market.

AMP chief economist Shane Oliver said such high rates would lead to a big rise in delinquencies, and prices would fall by around 10 per cent.

[zaph]

ummester, on 10 April 2010 - 10:57 PM, said:

Meanwhile, all the buyers from 2009 are probably only on average incomes, 40-50 K PA, perhaps co-signing with a 30-40 K PA earner, leveraged with their FHBB and a bit of help from Mum & Dad. They might have to look for $2700 PM, when they are only grossing $6250, or clearing around $4300, in a better case scenario. Not hilarious for them.

or 370 per week left. that's do-able. but they better like dog food, because cat food is gonna break the budget.

[sydney3000]

Plonk, on 10 April 2010 - 10:53 PM, said:

I said Big 4 profiteers -> sydney3000 saying Big 4 useful for ATM's. I think sydney and I may have been speaking at cross-purposes.

There is no direct link between an institutions home loan offer and ATM access. The point is people are hesitant to strike up any relationship with an institution which offers no ATM network.

The non-banks can scream bloody murder about their lower fees, lower mortgage rates and better face-to-face service. No ATM network means no 21st century participation means no business. Considering that all non-banks are in the same boat you would figure they have the clue to build their own ATM network. If the government does turn Australia Post into a financial services branch and ATM network then you can kiss your other non-banks good-bye. They are asleep at the wheel.

[RumpledElf]

Why exactly do you need an ATM with a home loan? Its not like home loans are ordinary transaction accounts or anything ... I had a loan with the ANZ for years and it was only the loan, no transaction account, no cards, no nothing.

[Charles Bukowski]

Quote

Interest rates heading for 10 per cent, experts warn

• By Nick Gardner
• From: The Sunday Telegraph
• April 11, 2010 12:21AM

A million households will struggle with repayments if mortgage rates hit 10 per cent, index show / AAP Source: AAP

• Experts see rates hitting 10 per cent by 2010
• 'Strong prices, labour market fuelling inflation'
• Millions of homeowners at risk from rises

MORTGAGE rates are predicted to hit a horror 10 per cent within the next two years as the Reserve Bank hikes rates to prevent runaway inflation.

Leading economists say soaring commodity prices and rapidly rising employment are stoking dangerous inflationary pressures that the RBA is determined to stamp out.

As a result, economists at Macquarie Bank and Commsec, the Commonwealth Bank's investment arm, have both forecast the cash rate will hit "pre-crisis highs" of 7.25 per cent by 2012 if the economy continues to perform so strongly.

Since banks have expanded their profit margins during the financial crisis, that translates to variable mortgage rates of 10.1 per cent - the highest since 1996.

"The banks' margin above the cash rate has crept up to almost 2.90 per cent," said Josh Williamson, chief economist at Citibank. "So the cash rate doesn't even need to rise as high as last time (for mortgage rates) to hit double figures."





Rory Robertson, Macquarie's interest rate strategist, says a booming labour market could force the RBA's hand. "If the economy keeps on growing like this, we will hit the previous highs in the cash rate," Mr Robertson said.

"We already have a template of what happens when the economy grows strongly - we saw it before the Lehman Brothers collapse in 2008 - so we know how the Reserve Bank responds to the threat of inflation. It hiked aggressively back then, and it is doing the same again now."

Savanth Sebastian, senior economist at Commsec, says if iron-ore and coal prices continue to rise, we can expect the cash rate to revert to its pre-crisis level.

"The makings are there for a repeat of the commodities boom that we saw between 2003 and 2008, and rates will likely hit, or exceed, previous highs in this cycle."

The news will strike terror in many homes, especially owners who stretched to afford a property when rates were at record lows last year.

If rates do hit 10 per cent, a borrower who took a $300,000 mortgage when rates bottomed at 5.75 per cent last year will see monthly repayments rise by $839 a month, from $1887 to $2726.

Even if rates hit 9.50 per cent, the same borrowers will see repayments rise by $734 a month.

Mortgage brokers have urged potential buyers to factor in at least another two percentage points of rate hikes into their calculations before deciding how much to borrow.

Modelling by Fujitsu Australia, which runs a "mortgage stress" index, suggests 1.1 million households will struggle with repayments if mortgage rates hit 10 per cent.

But it says house prices would be supported by almost-full employment and a continuing shortage of properties.

"Prices would only suffer a small fall, they wouldn't crash," said Martin North, director of Fujitsu Australia.

However, others warn the flood of first-home buyers - lured in by generous government incentives - will struggle so badly, they will be forced to sell, leading to a rapidly deflating property market.

AMP chief economist Shane Oliver said such high rates would lead to a big rise in delinquencies, and prices would fall by around 10 per cent.

http://www.news.com....i-1225852259386

[tor]

RumpledElf, on 11 April 2010 - 01:55 AM, said:

Why exactly do you need an ATM with a home loan? Its not like home loans are ordinary transaction accounts or anything ... I had a loan with the ANZ for years and it was only the loan, no transaction account, no cards, no nothing.

I have my eftpos card linked to my offset account. Is that what they are talking about?

Good to hear that lots of people will be in trouble at 10%, I figured I would aim for 20% being my crawl up and die point on the basis that by then everyone else would have failed and the bank would let me pay 19% rather than take yet another home and sell it for nothing.

[tux]

Quote

Experts see rates hitting 10 per cent by 2010

Aren't most variable mortgage rates around 7.25% at the moment? I'd doubt we'll see 10% variable mortgage rates by the end of 2010. Happy to be proven wrong on this though.

[Max Carnage]

I think the journalist meant to write "by 2012" not 2010.

Even then, ten bucks says it won't happen.

[Bernard L. Madoff]

Max Carnage, on 11 April 2010 - 09:56 AM, said:

I think the journalist meant to write "by 2012" not 2010.

Even then, ten bucks says it won't happen.

If any of the growing Black Swans with 10ft wingspans* take flight we could be 2% in 2012. There will be property crashes, equity crashes, bond market collapses and as close to zirp as we can get being heavy overseas funders. Steve Keen might moonwalk to Kozzy. Maybe Rudd will get us into a 15% deficit to GDP ratio to save it but the country will be f*cked for two generations.

*Euro collapse via piigs and the German, French, UK debt exposure to the massively overleveraged and underwater old Eastern Europe; China bubble bursting; AltA/OptionArm/CRE Refi destroying the US banking system; War in the middle east and a closure of the Straits of Hormuz and $200 oil. etc etc

[tor]

These things are hardly black swans anymore are they?

Is it just my hatred of that catchphrase or is the very definition of Black Swan "something no one expected".

[Bernard L. Madoff]

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.

[Bernard L. Madoff]

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.

[Plonk]

A credit union "does a Westpac":

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


Macarthur Credit Union lifts variable mortgages by .45%

[Plonk]

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.

[zaph]

Plonk, on 12 April 2010 - 06:51 AM, said:

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.

[staringclown]

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.

[RumpledElf]

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.

[tom]

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!

[Plonk]

Laiki lifts variable mortgages by .50%;

http://www.ratecity.com.au/home-loans/

[Plonk]

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

http://www.bloomberg...=CSMEETAU%3AIND

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

http://www.businessw...gains-0-5-.html

Westpac/MI index- includes this:

Quote

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.

Quote

“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.”

Quote

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:

Quote

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.