Anyone else feeling rate rise pain?

We had $600 per week spare cash prior to rate rises, now we have $100… with more rate rises in sight…

Paying off three mortgages principal and interest right now…is a bit rough. We have a $45000 cash war chest. But the idea of falling short weekly and having to use those savings is very anxiety provoking. We also have $100000 in shares that we can sell if we have to, but really don’t want to sell at a loss.

I’ve been able to increase my income $200 per week after tax picking up extra short overnight shifts. Not fun but it’s got to be done.

Cutting it very tight these days. Anyone else feeling the pinch?

Got over a million in equity, but have less spare cash each week than I did when I got my first job 18 years ago.

I feel we are very well off, but if we are feeling the pinch I can only imagine what some people must be feeling with these increases to the cash rate.

 

I’m ok because of low LVR. But will be selling an IP early next year so I can borrow close to max for a PPOR next year.

Am genuinely perplexed that people are still purchasing houses at 2% gross rent yield in Sydney.

Cafes and shopping centres are still full. Know plenty of people going on holidays etc, it doesn’t feel like people are feeling the pinch…. Maybe some don’t realise

 

Yeah I really think people haven’t worked out the impact on their budget, or are still enjoying low fixed rates, or interest only periods. Or don’t have multiple investment properties lol.

It’s just a bit of a rough time to be an investor. We are paying thousands a month in principal payments for our 3 loans. Technically it’s not lost money, just forced savings, but it’s creating a day to day cash poor situation when interest rate rises are sucking up all the spare cash. Plus you don’t want to buy anything with savings because you need a war chest with what’s coming.

We will be fine. We have a plan A, B, C… But damn it’s a lot to get your head around and adjust to.

 

Rents should be rising sharply in the inner south though @Tim86

 

Yeah increasing one property $70pw rent to match current market prices. Meanwhile costs for that property are up $200pw already and set to go up another $100pw on top.

So rents aren’t blunting the effects of rate rises much…

 

Is there an option to refinance at least part of the loans and go interest only? Putting any additional cash in an offset and increasing your buffer?

 

Alas don’t have the serviceability to refinance.

 

The challenge will also be inflation. Insurance and maintenance is going to sharply increase

 

Yep, it’s all sucking up spare cash very quickly.

 

Yeah, we're definitely feeling the pinch a bit. Also all P&I with buffers that we don't want to use. Our incomes have lagged behind inflation over the past year.

On top of the economic environment, we're about to start a new business and settle on another IP. So our pain will get worse before it gets better. Made the decision to continue on our plan despite the changing factors because even though it might not make sense 'in this market' it makes sense for us. Time marches on...

 

Toughing out loans also on P&I as a retiree. Fixed a couple, let a couple ride the rate roller coaster.

Hope I don’t have to go back to work am pretty institutionalised now!

Some good thoughts:
1. Remember any reduction in debt improves net worth at the end of the day.
2. In my unqualified opinion SEQ rents are going to soar over the next 2 years, before no doubt flatlining again for the next 10.
3. This too shall pass. Take a long term view.

 

Paying 3 loans all P+I. Two of them are fixed so I've been spared for the most part. I've stopped salary sacrificing into super and changed jobs for a 15k per annum pay rise to alleviate the financial pressure. I loved my old job and would've stayed for years longer if inflation and rate rises were not what they are in this current environment.

 

Luckily most of ours are on fixed till late 2023. Hopefully by then rates will be on the decline again and some chunky rental increases in between

Got lucky for now. Working on getting a buffer ready for 2024 just incase.

 

I will feel the pain, not much yet because 2 of my loans are fixed until later 2023. I also pay P&I so takes more cash out. I am not looking forward to seeing those cash flows later 2023!!

However do you think it’s also more psychological that you don’t see those savings? You have enough buffers - even with those 600pw, that’s 30k per year before tax. You will get some tax back next year, plus rental increases to get some back. So your 45k saving should last you a couple of years and in the long term scheme, those net 20k negative per year is not massive compared to your equity / growth and most of them are your principal payments.

Plus your share is still liquid if you really need it in extreme unknown situations.

So I would think it’s not as bad as it seems, beside psychological impact of cutting cashflow close every week / month.

But it also shows that eventually these rate rises will flow through economy for lower spending and will slow down economy and inflation. Just a matter of time.

 

yeah it’s all psychological at the end of the day. Just a big adjustment that is going to cause some pain

 

Repayments have gone up at lot but had a large buffer so I just see it as it will now take longer to pay everything off. Have not changed spending habits… Rents have increased which helps but the mortgage (and rates, and insurance and now land tax) is increasing more than rents.

 

I'm feeling the pain already with a baby on the way

$5.5k to almost $8k per month on the mortgage with no end in site. Had fixed my previous PPOR at 1.85% for 4 years with Westpac and kicking myself at the timing of the upgrade only 1 year in to that. I should have known better given the industry I work in however I had a bit of FOMO and had an emotional attachment to a house

Managed to negotiate a 10% salary increase a couple of weeks ago but that's only a temporary fix

We'll be ok for another 1% rise in rates but unsure what the plan is when my wife's maternity leave payments end 5 months post birth and/or if the rates end up much higher than that. Unlikely our servicing would allow us to revert to interest only however may lean on the bank to revert for 6 months so my wife can have 11/12 months off

Heres hoping the 24/25 tax cuts remain in place

 

We've got two loans still on IO which will revert to P&I in two years time. Been IO for over 20 years, but since one is $46k and the other $70k, I'm not worried about them. Most of our loans are fully offset, and just sold another. Filling up the offsets, and no pain at all here.

 

Haha, funny you should say that. We're retired as well, and Hubby is sometimes prone to spend without thinking. He's asked a few times "should I be looking for a job?" My reply is "Only if you want to", but in saying that, he's actively looking for people for a band or duo....or something like that, so I guess he'll be bringing in some money anyway. Although as a musician, I'm really glad that we'd never have to live off the earnings.

 

At this stage, once banks pass through all raises and all fixed loans expire our interest bill will have increased by about $70k/yr. That does not take into account further increases from here.

I’m not worried, I’ve read the Barefoot Investor - should be able to offset this by cancelling Netflix and taking my own lunch to work.