Borrowers Beware: Interest rate sensitivity buffers @7.75%

Yes, it seems they are now rolling the loans with assessments at a 20 yr P+I repayment schedule, where as in the past I've had them @ 27yr P+I. We have half a dozen due to roll at the end of this year. Its not looking good.

 

You're probalby going to need to refinance to another lender and reset the total loan term to 30 years to get around this one.

The problem with I/O renewals is the banks still want you to pay off the loan within 30 years (perhaps they don't, but the regulators want you to). Extending I/O periods essentially loads the repayment period to the back end of the loan term, resulting in higher repayments at that time.

 

Hi guys,

here is what I think about banks using the seemingly extreme buffers.

The banks set the rates so they are beset placed to know what are the rates likely to be in the future. It may seem a bit excessive from our point of view but we don't have access to information they do.

People make the argument that it is virtually impossible for the RBA to be in a position to be raising rates to that degree (3-4%) any time soon given the state of the economy and hence the mortgage rates are going to stay where they are and there is no need to test serviceability at high rates. This only true when the system is functioning under normal circumstances, that is when the cash rate is around 5% inflation is around 2.5-3% and economic growth is on trend.

If the economy does hit the skids the banks' cost-of-funding (the amount they have to pay for borrowing on the money market) will go up regardless where the cash rate is and even if the banks were sound on paper due to systemic risk.

Let me know what you think.
Cheers

 

Supply and demand - lenders still have to appease stakeholders and hot numbers. Some of the lenders are really hurting and will need to turn the proverbial tab back on.

I am expecting some major changes in the existing post APRA calculations and policies. Negative gearing, benchmark rates and living expenses can all be tweaked to increase servicing and they will to some extend. Won't return to Pre APRA levels but will ease up.

 

Yes, being done for right reasons, but being a hardass on someone already advanced money pre changes is not smart, or really warranted, I mean, if someone wants to be a total hardass in this situation, you could not blame people for throwing them everything and saying, ok, you can have it all (if they are near a wall).

I have been in this situation before, decades ago, when bank decided to become very like nazis, with only a few years to run, they wanted to take security rather than re finance, it was more than 2 decades before I decided to try them again. I mean if a person can pay, why chase new business if you can re secure what you already have and probably also get the extras...

 

Well, we have banks bleeding a bit at the moment, or last week, personally, I have seen a real cooling in Sydney SW, so, what are they to do ? Cut the cord completely in what must be an evident slow down, or start to find ways to balance things out and make more money ?

My bet is on the latter, but I also do not trust them to not just rip what they can, where they can.

So I sit each way at this point, but admit I do as I please anyway.......I can see reasons for buying in bull and bear, and also for not buying in bull ad bear markets.