More mortgage rate cuts expected ...

Discussion in 'Property Market Economics' started by paulF, 6th Mar, 2018.

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  1. paulF

    paulF Well-Known Member

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  2. Tenex

    Tenex Well-Known Member

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    There is no doubt that banks went crazy with APRA's silly way of dealing with debt by mandating to increase the investment IO loans and right now the investment IO loans are vacuuming the cash from the economy.

    Now we need RBA to put in a rate cut at some point this year.

    With all the tarrifs going in the US we are going to be in for a very interesting ride in terms of exports and trade wars moving forward,
     
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  3. mickyyyy

    mickyyyy Well-Known Member

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    Investment has dropped and so has building and I also expect a rate cut and tightening of service calculators.

    We could pay more for all goods so less money for property investment from this Tarrif war
     
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  4. DaveM

    DaveM Well-Known Member

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    Its OK I am sure Liberty will just keep increasing regardless :rolleyes:
     
  5. euro73

    euro73 Well-Known Member Business Member

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    As called some time ago, you'll increasingly see the spread between P&I and IO reduced, and you'll also see "specials" where lenders with some capacity will seek volume for a while until they reach their quota. Taps will go on, then taps will go off. Thats just how its going to be now.

    But its the sideshow, not the main game. And while it may provide modest improvements to affordability for many by reducing holding costs by a modest amount for a while, it wont assist serviceability at all... and that means it wont assist with either extending or refinancing IO loan terms when they expire.

    It's also important to note that the 30% quota will remain.

    These two things ( servicing calc and quota ) mean that a P&I cliff still awaits many IO borrowers ..... that remains the main game that the regulators and the RBA will be watching closely...

    This is why I still believe there's a strong chance this will deter the RBA from increasing the cash rate for a good while, and we may even see cash rate reductions if delinquencies start trending upwards. Keeping Australia's securitisation reliant mortgage default rates low will become a big priority for the regulators and RBA.
     
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  6. mickyyyy

    mickyyyy Well-Known Member

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    @euro73 It's amazing how many people have no idea what is coming from conversations with mates and showing the repayment calculator. My agent mate said he has not seen reposed properties in years and two have come up, and he believes more to come...
     
  7. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    coz they can

    having said that, when was the last rate rise for the base variable rate at Liberty ?

    ta
    rolf
     
  8. DaveM

    DaveM Well-Known Member

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    Have to check my letters pile.. couple of months ago...
     
  9. euro73

    euro73 Well-Known Member Business Member

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    2018 is @ 5 years from when IO lending started really ramping up ( circa 2013) so obviously this year is when the first generation of P&I payment shock , P&I cliff, P&I re-setting ( whatever people want to name it ) will start showing up.....

    We already know that 2014 and 2015 were when IO volumes peaked, so assuming most of that IO volume was written at 5 year IO terms, 2019 and 2020 is where peak payment shock will roll through the system...

    Some of the IO debt will have been written at 10 year terms of course, maybe even at 15 years.... so it wont all be rolling out in 2019 and 2020.... but most of it will. And some IO borrowers who do roll over will be able to extend or refinance , although most wont.... so not everyone's going to be imploding simultaneously. BUT, however you cut it, most of the IO borrowers from 2013,14 and 15 do have a P&I "event" coming their way, and I expect 2019 and into 2020 is still where the mortgage distress will start showing up if its going to happen.

    This is why I would expect the RBA to probably leave rates alone until then, and why I can also see the potential for RBA cash rate reductions in mid - late 2019 if it starts looking like a bigger problem than the RBA currently says they believe it is... .... it will all depend on whether delinquencies start increasing quite a lot. And none of us own that particular crystal ball.
     
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  10. eletronic_exp0430

    eletronic_exp0430 Well-Known Member

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    LOL thats true. Anyone still with Liberty these days? I managed to get a 0.25% discount with Pepper recently. Still high though - probably going to refinance soon.
     
  11. euro73

    euro73 Well-Known Member Business Member

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    NAB's turn

    Screen Shot 2018-03-09 at 9.29.39 am.png
     
  12. L3ha7

    L3ha7 Well-Known Member

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    @mickyyyy -my sister told me in canada people can buy reposed propertise (people unable to pay and bank sells it) from banks.

    Have you seen anything like this here?
     
  13. Toilandtrouble

    Toilandtrouble Well-Known Member

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    The next move is still expected to be up in the cash rate (first half of 2019), but as people note a lot of risk factors at present that could change this and likely will. We are fortunate that there is still capacity to reduce our cash rate.
     
  14. hobartchic

    hobartchic Well-Known Member

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    Yes, but they tend to be sold quietly, only know about it if actively looking at property and honest agents. Seen a few bank sales for the last two years in Southern Tas. A few northern Tasmania. Quite a few West Coast Tasmania. This motel was about $120k two years ago, now $85k: 15 Karlson Street, Rosebery TAS 7470 - House For Sale | Domain
     
  15. hobartchic

    hobartchic Well-Known Member

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    If you know where to look, you can find mortgagee sales. Queensland and SA seem to be seeing quite a few at the moment.