Interest rate predictions

Discussion in 'Property Market Economics' started by Peter Carter, 27th Apr, 2017.

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  1. Peter Carter

    Peter Carter Active Member

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    Good evening all.

    I am interested to see what people's interest rate predictions are over the next couple of years
     
  2. Barny

    Barny Well-Known Member

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    2% increase on all interest only loans.
    1% increase on P&I
     
  3. Anthony Brew

    Anthony Brew Well-Known Member

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    You think the gap will be so wide as to be a whole percent more for IO? Seems like a lot.
    Though I guess would shove rather than nudge investors to move to P&I, which is what APRA wants.
     
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  4. Anthony Brew

    Anthony Brew Well-Known Member

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    Shame there isn't a compromise that can take into account offset money.

    Right now on my smaller loan (just as an example):
    - IO = $750 (calculated with offset ignored)
    - P&I = $950 (payable with offset ignored)
    Difference of $200 going to pay off the principle for P&I


    - IO (actual) = $475 (interest only after offset taken into consideration)

    As it is, P&I means I end up paying more than half my P&I payment to the principle, which is about 250% of what it is calculated to do be paying back to the principle.

    Would be more than happy with a P&I actual that was $200 over the actual interest payable after offset considered, which would come to $675 and should suit both myself ($200 is not much) and the APRA initiatives to get people to be paying down debt.
     
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  5. sash

    sash Well-Known Member

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    I reckon that OO loans will hit 5.3% and I/O 5.9%

    If there is something with a 6 in front...people are stuffed.....
     
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  6. Beano

    Beano Well-Known Member

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    Especially if you need to pay principal too!
     
  7. sash

    sash Well-Known Member

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    Yes....from 3.85% to 5.3% is a 40% hike in rates...pay P/I and it is more like 60-70% hike!
     
  8. GetRIDof5CENTpiece

    GetRIDof5CENTpiece Well-Known Member

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    I can't see a 1.5% increase in the short term with the economic outlook as it stands and the whole global uncertainty.
     
  9. sash

    sash Well-Known Member

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    I/O loans have already moved about 60 basis points ...real issue will be when I/O loans are severely limited...that will be the trigger ....
     
  10. GetRIDof5CENTpiece

    GetRIDof5CENTpiece Well-Known Member

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    Yes there is a strong case to be made for further increases for investor loans and/or interest only loans.
    P&I for OO I don't see moving that much in the short term.
     
  11. sash

    sash Well-Known Member

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    They will also....but more like 50-60 basis points more...due to funding cost increases..they have already moved 30-40 basis points.
     
  12. dabbler

    dabbler Well-Known Member

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    So, here is what has been going on with some lenders.

    Liberty not that long ago were competitive, they were doing 80LVR IO loans for under 4.4 IIRC

    Well, Liberty now has, since around APRA period, whacked on 1% approx & some must be on higher than that at higher LVRs

    So 80LVR IO with 3 properties and you must be around the 5.5% mark TODAY it ain't gonna take long to get to 6% it would seem. (brokers, feel free to chime in to correct either way).

    But I was paying more on loans, you would have been too Sash, although I am sure many of us have topped up and added on, the national debt does not exclude us who use this forum :)

    But I am guessing that many, on the way down, re financed or re negotiated and also fixed, so overall not too bad a position. Actually, for some who held lot of property for long time it must have been a very sickly sweet last 4 years or so, rising equity & lower costs.

    I do not want to guess rates, but I can tell you this.

    If you fix and your paying say 1k a week, well, you know you will be paying 1k a week for however long you fix, so you just need to decide if this is better, or guessing what will happen in near future.
     
  13. Barny

    Barny Well-Known Member

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    Thinking the banks must continue making profits and the added pressure from apra will make it easy to increase interest only loans.
     
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  14. Arnoldus

    Arnoldus Well-Known Member

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    Horrible at predictions, and always seem to focus on the negative, but I expect the discount rate to drop back to around half a %, and the average SVR to be around 1.5% higher by *next* Xmas. I don't believe the cost of funding for the banks is sustainable, and it will rise quite sharply by the end of the year or early 2018.

    Not looking forward the silly-bugger games in Canberra if rates do start rising significantly for your everyday PPoR'er.
     
  15. Kangabanga

    Kangabanga Well-Known Member

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    IF we go into a recession and labor wins next election or MT gets ousted, then its really hard to call. Overseas funding costs for banks might skyrocket if we lose our AAA status, but RBA may cut to zero like other developed nations have done. So maybe rates will be about the same or higher by 1-2%

    I'd say by then IO loans may even be a thing of the past if that happens.

    At the moment US 10YR bond rates have fallen from 2.6% back to 2.3% but things are still pretty volatile.
     
    Last edited: 28th Apr, 2017
  16. highlighter

    highlighter Well-Known Member

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    Hard to say, right now I think the RBA are scared to fart in the wrong direction, let alone to raise or cut rates.
     
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  17. sash

    sash Well-Known Member

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    From where I sit if there is 50-70 basis point spread between P/I and I/O ..I will not bother to go I/O rather have that in my pocket and pay down the loan!

     
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  18. dabbler

    dabbler Well-Known Member

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    I am not sure how they are pricing P&I, maybe a broker or two can chime in, but I agree, but I had no real dislike for P&I anyway & been thinking of changing some before all the recent changes.
     
  19. paulF

    paulF Well-Known Member

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  20. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    P&I is definitely the flavor of the month and especially so with OO. Most lenders have a P&I PPOR special running atm.

    I think lenders will continue to tweak investor rates and ole mate RBA will sit on their hands and may even drop a few basis points over the rest of the year.

    What concerns me the most is equity grabs over 80% being restricted or abolished which would realy suck as thats how many of us keep are acquiring assets.
     

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