Banks, regulators in crisis talks about what happens in 6 months....

I think the highest risk is the highly leveraged self employed. More so those that got away with 1 years financials (can’t believe this is still a thing)...

 

Don't stress too much.

The Government will step in and pay for the repayments of loans under forbearance.

For example: https://www.securitisation.com.au/news-feed/asf-forbearance-spv-key-features-released

"Over the ensuing weeks, the [Australian Securitisation Forum] has worked closely with the [Australian Office of Financial Management] and the securitisation industry on a ‘forbearance SPV’ that will allow for the SFSF to support term and warehouse structures where COVID-19 hardship cases can be shown to be restricting cash flow into securitisation vehicles."​

 

I've heard this before...only for it to be broken.

 

Cash rate is at 0.25%
Fixed rates are approx 50bpts below variable rates
The only way banks can cut variable by 50bpts is to give away margin
Banks are already suffering biggest fall in profits in generations , with tens of billions of deferred loans also at risk of default in 4,5,6 months. The probability of them voluntarily taking further hits to their margin are minute .

Understanding all of the above - how likely is it variable rates can or will get cheaper than current fixed rates ?

it’s possible , sure - but it’s also extremely , extremely unlikely . That’s why I said it’s “unlikely “ we will ever see rates this low again .

 

The question is can Fixed IO Investment rates be cheaper than now? That's what most people here wants to know.

 

Rates are going negative for sure in the coming year. Banks will be dishing out no interest loans or even pay you to take out a loan with them. Already happening in Europe last year. Problem is you will have to be employed to get a loan.

Danish bank launches world’s first negative interest rate mortgage

 

No interest loans, really? I have heard this happening in other countries but this will be a major step here.

Over what period of time do you think we may reach zero interest loans?

 

0.25 is still higher than 0.00

 

Are you ...

 

Umm I think I already said over the coming year in the post you just replied to?? Even though RBA has mentioned they will not be doing negative rates, they probably wont have a choice but to do negative rates to keep the system afloat.

 

Which's bank ?

 

RBA has made it very very clear that they are at the bottom. Any further move would require QE. Like I said already ...not impossible, but certainly improbable. And even if the last 0.25% were to be cut by the RBA, the banks wouldn't pass any or all of it on in all likelihood.... as they have proven over and again.... which brings us full circle to;

Fixed rates are approx 50bpts below variable rates
The only way banks can cut variable by 50bpts is to give away margin
Banks are already suffering biggest fall in profits in generations , with tens of billions of deferred loans also at risk of default in 4,5,6 months. The probability of them voluntarily taking further hits to their margin are minute .

Understanding all of the above - how likely is it variable rates can or will get cheaper than current fixed rates ? They might get closer.... and even that is probably a stretch.... but actually cheaper? Unlikely . And even if it did happen, it might be 18-24 months away.... so youd be so far ahead by switching now, that over 3 years youd still come out in front.

All these things are best guess.... but right now 1-3 year fixed rates are substantially cheaper than variable rates - that's all I'm saying

 

Here you go, and here are the facts.

I wont scaremonger about this very important issue. Its not rocket science if you have too much debt and you can not service this you are going to feel the pain. Here is the link on Australia’s personal debt

Is Australia's household debt the second highest in the world?

My personal debt level is very low, around 20% is leveraged over my portfolio. I am retired and I live off rents and develop property

 

Why a gulf has formed between fixed and variable interest rates

 

I also think the low doc product has tightened, this wont help

Perhaps @euro73 can confirm if there have been changes

 

I won’t scaremonger about any issue, important or not.

But what I will do is suggest/recommend that people take a considered, intelligent, well-thought-out, cautious, ... approach to every thing we do.

It is bad that people fail the above at the individual level (eg QH nurse in Rockhampton) but far worse at a national level (USA, UK, Brazil, Russia, ...).

In my books, comments like:

and

is scaremongering.

Wouldn’t it be better to suggest that people doing it tough financially do some risk analysis, come up with a risk management plan (including their options), ...

That would be far better for everyone’s mental health than “game over”, “fire sales “, ...

If that isn’t scaremongering, I don’t know what it.

At the very least, It is not helpful, especially for any PC members who could be in this situation.

 

“Tis but a scratch!”

 

OK, I dont see it this way at all.

You are interested in playing the person but you should be playing the ball.

there may be no choice but To sell?

This will be last resort, and if investors dont know or understand this they probably should not be investing.

There are so many threads on this topic, its hardly rocket science

 

"Things are never as good or as bad as what they seem"

 

We hope but.....

It will come back to leverage and debt level Of the investor

why mitigating risk is very important, especially when markets turn.

Hopefully most will have a buffer to survive in bad times