Market Crash? A different perspective on IO

Discussion in 'Property Market Economics' started by Ghoti, 2nd Nov, 2018.

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  1. Perthguy

    Perthguy Well-Known Member

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    No. The loan term remains. Possibly 27 years left to run
     
  2. Perthguy

    Perthguy Well-Known Member

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    ING
     
  3. Jimmylt

    Jimmylt Well-Known Member

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    So you're having a go at him for crystal balling, yet you confidently asserted earlier that "there is a lot of angst about unsustainable population increase amongst the voting majority, you would be silly to think that immigration levels won't be curtailed to win votes and keep the public happy."??
    Can you please provide evidence of this ridiculous statement?
     
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  4. berten

    berten Well-Known Member

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    Read the news.

    Per polls, Public by and large think there is too much immigration. Pollies have responded with promises of reduction.
     
  5. Befuddled

    Befuddled Well-Known Member

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    Politicians and their promises...
     
  6. sash

    sash Well-Known Member

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  7. Rex

    Rex Well-Known Member

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    If that expenses model is strictly enforced industry wide, Australia would be kicking a massive own goal and needlessly throw property markets into a proper crash. It's also paternalistic and would preclude lower income households from buying property.
    Could happen though.
     
  8. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    the report is ancient, and the lenders have been working on various methods to more accurately portray a borrowers true capacity - some more succesfully than others.

    Its more so higher income earners that have had the relative to previous capacity cut, since quote a few lenders are linking min deemed expenses to total income

    Its not uncommon to see a borrower earn say 3 k more , and have lower borrowing cap, because their deemed expenses have gone up by 10 k, because some lenders arent using a linear model but stepped HEMS as income goes up.

    Obviously if a clients reported and documented expenses is higher than the HEMS, this is where some will no longer qualify.

    We turn away quite a few loans a month, because under our assessment model they simply cant be shown to service the loan.

    The get shown some appropriate modelling and can usually obtain finance elsewhere.

    ta
    rolf
     
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  9. Triton

    Triton Well-Known Member

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    Population growth becomes the big issue
    You can go back to your cave now
     
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  10. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    Line by line scrutiny of actual expense is turning out to be no less scary for many. The extent of understating real expense is just coming to front.
     
    Last edited: 6th Nov, 2018
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  11. willair

    willair Well-Known Member Premium Member

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    I know you can find this quote in :Hansard: a quote in fine Australianism by Paul Keating about his political opponents"" were to dumb to raffle a duck in a pub"",and the recession we had to have..
     
  12. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    yes but when you are running double digit wages growth, leading to double digit inflation, leading to early 20 % commercial interest rates the and obvious outcome is a major slow down.

    I remember those times well.


    ta

    rolf
     
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  13. willair

    willair Well-Known Member Premium Member

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    Rolf ,They were different times within that recession..I know a few investors that were wiped out during those years,all the Banks would do is bring in a new manager for 3-5 months and give them three months to fix up the payments or sell them up -Then do the same at another problem area,compare that with history or a portent of the future..
     
  14. Perthguy

    Perthguy Well-Known Member

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  15. berten

    berten Well-Known Member

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    After stamp duty, buying, selling and holding costs, it's probably a similar yield to a HISA?
     
    Last edited: 6th Nov, 2018
  16. Perthguy

    Perthguy Well-Known Member

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    No need to guess. It's easy to prove or disprove. What rate are you assuming for your HISA? Mine is paying 1.5% at the moment. Let's say they borrowed at an 80% LVR. That's a deposit of $87k. We'll be generous and assume they started with $100k. So interest in year 1 would have been $1,500. I'm not going to bother compounding that over 7 years. I am going take a wild guess and say you are way off. Feel free to post some numbers if you want.
     
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  17. berten

    berten Well-Known Member

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    Mine is paying 3.1%. or $13.6k p.a on 439, more when compounded.

    You oughta shop around
     
  18. Perthguy

    Perthguy Well-Known Member

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    So you are saying they bought the house for cash? Highly unlikely. The highest probability is an 80% or 90% LVR.

    Try calculating the return on the initial deposit which would likely not be more than $100k.

    They could have done a 105% lend which is what I did the last time I bought in Melbourne. It means I put zero dollars down.

    So, in this case if they put in zero dollars and walk away with the $151k before taxes and fees, what is the ROI? I have always wondered that.
     
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  19. berten

    berten Well-Known Member

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    Haaaaa!
     
  20. Perthguy

    Perthguy Well-Known Member

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    Your point?

    Starting with a deposit of $100,000 at your claimed 3.1% and compounding monthly, they would have ended up with $124,200. A $24,200 profit before taxes and fees.

    I would like you to show me how $151k before taxes and fees is less than $24.2k before taxes and fees.

    What you are saying makes zero sense to me.