Mortgage stress if .5% rise - but not wher eyou may expect

Discussion in 'Loans & Mortgage Brokers' started by dabbler, 22nd Jan, 2017.

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  1. dabbler

    dabbler Well-Known Member

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    I posted on another thread about this, and some are asking about rate rises, rates have gone up here already on quite a few products. Below is not too alarm, we all have to deal with it if we have debt.

    Anyway the story they were running was on the ABC, but I found it on nines news site as soft copy.

    http://finance.nine.com.au/2017/01/18/09/54/aussie-homeowners-at-risk-of-losing-homes-if-rates-rise


    Regarding rates, some other stories below, but the gist is, rate cuts, or more precise, lowering mortgage repayments are over bar some odd event, bottom was 16.

    Prob in 15 a few people said to me .5% would wipe them out, problem is I know a group of these younger people who were all doing the same, but I do not think it is them alone, lot of older people pulling equity and buying places in Sydney with 2-3% returns, frankly, that could bite a lot of people betting on quick, large cap gains.

    http://www.theaustralian.com.au/bus...s/news-story/e1a1109cf73d68140511de7af5d87a8b

    ‘Disturbing signs of mortgage stress’ as rates rise

    Mortgage rates rise despite RBA holding the line

    Mortgage rate rises a wake-up call for property buyers
     
  2. House

    House Well-Known Member

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    Considering the MSM definition of 'mortgage stress' is 30% of income going towards repayments. Not exactly what I'd consider to be stressful if upto 70% of income is disposable! Back in 1991, 60% was going towards repayments.

    "It showed that around 20 per cent — that’s one in five homeowners — would find themselves in mortgage difficulty if interest rates rose by 0.5 per cent or less. An additional 4 per cent would be troubled by a rise between 0.5 per cent and one per cent."

    Sounds pretty subjective... Given .5% on a $1m mortgage at 4.09% is equivalent to ~$35/wk more each for a couple, pretty sure most could easily find it if they really needed to. Back in 1991, 60% was going towards repayments.

    "A large number of Aussie homeowners are at risk of losing their homes if interest rates rise by as little as 0.5 percent, a new report has found"
    No actual number given :rolleyes:

    In 2008 almost 33% of Aussie households were classified as being 'at risk' and 26% as 'extreme risk' so things are actually improving :)

    [​IMG] Evernote Camera Roll 20160829 142329.jpg

    "
    Interestingly, the report found wealthy homeowners in well-to-do suburbs, such as Bondi in Sydney's east, are among those at most risk of mortgage stress."

    Interestingly, according to this sexy graph, wealthy owners are actually the least likely to be at risk
    Evernote Camera Roll 20160829 142611.jpg

    [​IMG]
     
    Last edited: 22nd Jan, 2017
    mcarthur and James G like this.
  3. dabbler

    dabbler Well-Known Member

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    No, I would not take story as gospel, and a lot of people could cut non essentials, but will they ?

    Some of the people I know who said .5 would flatten them, all bought at 1200-1500 and + / sqm, then put McMansions on them, new large screens everywhere, new furniture and all mod cons & of course you need new cars to keep up appearances too.

    You never know though, I cant see people having 70% of income as disposable if they have children and all the mod cons etc
     
  4. sash

    sash Well-Known Member

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    The issue won't be the places like Bondi more like Blacktown, Liverpool, Northwest and Southwest....these areas have a very high concentration of people paying off mortgages....
     
  5. big max

    big max Well-Known Member

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    Also need to bear in mind that rates will rise as the economy improves. And when that happens average incomes rise also (both from renters and property owners). So provided it's done slowly it will balance out.
     
  6. dabbler

    dabbler Well-Known Member

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    Yeah Sash, you would think that, but people may have taken advantage of the rates to get into places they would not normally be able too.

    I was in Northern Beaches a week ago, was chatting to a guy about his house, anyway he said they were maxed out & he was mainly working in resi building, people like that who could be hit from both sides are also at risk if buying at peak and maxing out.

    Time will tell, as big max says, if it all happens slowly, no big drama, if it happens fast or a crisis unfolds, it will hurt many.

    I am not convinced that our wages may grow - my thinking has always been the exact opposite, but if there is a shift to be less globalised, that could mean we again have better prospects, the loss of job ad manufacturing is not a US only condition.
     
  7. mikey7

    mikey7 Well-Known Member

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    $96/wk more..?
    1mil x 0.5 / 100 / 52
     
  8. House

    House Well-Known Member

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    That's the figure that came up on the NAB repayment calc- 4.09% was $1,113 and 4.59% was $1,181. Still pretty manageable and if not, switch to IO to $883/wk.
     
    mikey7 likes this.

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