More good news ...

Do you need to submit a new application or a simple phone call ? Might fix one of my loans with NAB. Currently its variable I/O Due to expire in 2.5 years.

 

I think you can simply call them and get it done. If I/O expires in 2.5 years then you might be able to fix it for max of 2.5 years.

 

Thanks @devank If that's the case probably not worth it for me as my current rate is 4.14% with $50k in offset. Will call and find out.

 

IMHO, anyone who doesn't stress test their loan portfolio at 8% to 9%, they are not a "professional" investor at best or an "idiot" at worst.

Years ago, when rates were 7% to 8%, I stress tested my loan portfolio to 15%. To my (and everyone's) surprise, they went to 17%. It was tough (no surprise there) but I survived.

Rising interest rates is one of the risks of the property investment game. Do your risk analysis, develop a risk management plan and be prepared to execute it if you have to.

Rising interest rates is not all bad news - higher rates on deposits, rents will go up, bigger tax refunds, ...

 

I think stress testing to 7% is sufficient. A LOT needs to happen before they go above that. We'd also see incomes and rents rise.

In 2008 rates increased to 9%+ and it was seriously bad for the economy. Today we're a lot more sensitive and vulnerable. There would be significant intervention before rates increased beyond 7%.

I do agree that people need to stress test their debt and I also agree that rates need to increase. It feels good if you're taking on debt, but it's doing nothing the help reduce debt. I'd be much happier if rates were around 6%.

 

I would normally agree but I have been caught out once before. I am now a little more conservative, no harm in that .

 

Opportunity cost.

 

I would rather call it SANF.

 

Long term average of rates is around 7%. If rates rise usually that's a sign that the economy is improving. The days of double digit interest rates are over though. The RBA has clearly favoured low inflation over full employment.

 

wise words

 

Do you stress test entire portfolio at interest only or P&I?

What about others, interest only or P&I?

 

I think 9-10% @ P&I would be a solid start towards being impervious.

 

I stress test at Interest Only (as that is all I have) but I do four scenarios, namely:

1. Rates and Offsets as they are.

2. Rates as they are and Offset are empty.

3. Rates at 8% or 9% (depending how conservative I want to be) and Offsets as they are.

4. Rates at 8% or 9% and Offset are empty.

I only focus on next 3 years and 5 years. I don't see much value looking at timeframes greater than that.

I bought PIA years ago and still use it for all my What Ifs.

 

so do you come up Trump.. I mean Trumps?

 

Getting there.

 

You're not serious? Never suggest responsible debt management or contingency planning on these forums. It's only the number of properties that matter around here. Anything resembling common sense or sensible planning is just crazy talk! Obviously you have started to fall off the wagon....you need to drink some more Kool Aid - immediately!

Unfortunately, while that's super safe, it's also a really inefficient use of available income and borrowing capacity. If you are only borrowing enough so that you can cover worse case scenarios 8 and 9% P&I repayment scenario's like this, you aren't maximising what you can do with your available income. You're leaving a lot of portfolio building income on the table as "safety net" money.

Much as you all hate me to use these 4 letters - this is yet another redundancy that NRAS affords me. The cash flow surpluses allow me to maximise available income and invest aggressively , yet still be covered for high rates and P&I in the event that's the way things evolved... and there's those other minor and inconvenient things like also being able to reduce debt and improve borrowing capacity along the way.

 

Oh hell no! This is not my scenario at all. Someone asked what they thought was safe. 9-10% P&I is well safe. I'm spread thinner than my current income allows. But I have my partners whole income as yet untouched in reserve, until next year.

 

Yes.. more good news.. cut cut and cut

Rate cut predicted as GDP worse than gloomiest forecast

 

I am not an economist and failed at maths, but can someone tell me how or if rise of bond rates in USA could impact on Australia?

 

Only a portion of the money lent in Australia comes from the RBA. Most of it comes from other sources including overseas. If the cost of money is rising overseas, it has an effect on the cost of money here. I don't understand the direct like to US bond rates, but I am aware that it's a strong indicator of where our rates are headed.