So there's been a rate cut last week bringing the rate to a new historical low. The Insiders this morning suggested that many will simply throw the savings on the mortgage thus defeating the purpose of the rate cut.
, I was wondering just how bad is the economy, anecdotally and/or at ground level?
There have been regular stories on the ABC news website where various analysts provide graphs showing mortgage stress/delinquency, negative equity, etc etc
But I keep waiting for the news story on the family that's had to sell or started a gofundme page to help with the increased mortgage payments as the fixed term ended and the cough banks started charging at P&I rates. Wasn't there supposed to be a large number of mortgage holders in such a position?
In fact, I know three people that have bought properties since the election. Only one complained of being put the ringer by the lenders.
My facebook feed is constantly fed by friends on what must be expensive overseas holidays (no-one seems to holiday domestically anymore), checking into J lounges, and various other pursuits and activities that would generally indicate that belt-tightening is a long way off.
So where are the stories of austerity to support the dire situation that economy is supposed to be in?
I don't know anyone that's been laid off or forced to sell their house.
The short answer is the news reports are more beat-up than the economy.
The longer answer
So there's been a rate cut last week.
The Insiders this morning suggested that many will simply throw the savings on the mortgage
true - anyone paying off these ridiculously high loan values will do this. Better to pay the principal down and finish repayments in 15 years than 30-35years. Especially if you’re already 45 when you start !
I was wondering just how bad is the economy, anecdotally and/or at ground level?
It’s not. But the purists will say the sky is falling because they tout continual expansion when perpetual growth is disingenuous. Just how many whitegoods does one household need ? A bit like the election results, the opinion makers have an opinion which isn’t reality. As the baseline raises every year, you get a % reduction effect and yet in absolute volume the increase is often higher.
Eg which figure is higher. 18% of $100,000, average full time earnings $35,000 only one income in the household 4 kids (1990 housing prices and interest rates).
Or 4% of $450,000 (today’s median outer suburb prices and interest) average full time earnings $73,000 two income households 2 kids
Well. It depends on which one you use, and that’s the point, opinion makers ELEVATE whatever stat suits their argument. In any event, going by the losses Atlassian has made, why is their share price now $130 enough for the founders to now own the former Fairfax mansions at Point Piper sold for a aggregate $190 million. Income doesn’t much have any connection to wealth creation. Capital gains do
There have been regular stories on the ABC news website where various analysts provide graphs showing mortgage stress/delinquency, negative equity, etc etc
Delinquency rates top out around 3.3% in WA and NT
FOR Severe hardship, Genworth the Lenders mortgage insurer run a book of 1.3 million properties covered. Annual hardship around 9,670. Tooth and nail people fightto stay in their home and LMI is how it’s done. Extend the loan period blah blah. APRA required banks to model a 7% interest rate for loan approval affordability
In fact, I know three people that have bought properties since the election. Only one complained of being put the ringer by the lenders.
Election all over, no risk of changes to neg gearing, pretty decent slump in property prices. Interest rates still heading down too. Just think of property prices as if they were the prices of a share on ASX. price behaviour seems to operate somewhat similarly.
My facebook feed is constantly fed by friends on what must be expensive overseas holidays (no-one seems to holiday domestically anymore), checking into J lounges, and various other pursuits and activities that would generally indicate that belt-tightening is a long way off.
Ah no GST on offshore holidays, let’s blame our sagging economy on the Bali shoppers.
Most super arrangements are ample to do this as there’s the safety net of age pension and Medicare and aged care subsides should you run out of your own capital. Of course many will never run out of capital as they live on the tax-free earnings or have account based pensions or large SMSF haha or large pools of frequent flyer points with some on annually replenishing defined benefits .
As has been pointed out, folk on age pensions can travel overseas to visit family in the original home country, and Asian locations often so much cheaper than here ($60 a week?)
So where are the stories of austerity to support the dire situation that economy is supposed to be in?
When 1/3 of household income goes to taxes (income tax and GST) and 1/3 (or more) to rent or home loans. Plus another 10% to rates and taxes (or strata fees), utilities and superannuation and 5% more to food and 12-15% to children. Seriously stretched. People are already living austerity. And they voted for lower taxes as the tax burden on top of home loans is enormous.
I don't know anyone that's been laid off or forced to sell their house.
I do, but selling the house is mainly tied to business loans where the business collapses leaving a large outstanding loan balance. The checks and balances on business loans appear to be nothing like home loans. And the cashflow literally dries up overnight So the capacity to pay ends when the business shuts, and foreclosures then appear to be harsh. PS I’m told the Royal commission has had a chilling effect on property foreclosures.
AS FOR being laid off, unemployment is very low, and back to Genworth a lot of income opportunities are explored before any forced sales. They brag about it in their annual report. (Another govt asset that was flogged off and privatised) The lay off itself comes with redundancy payments and unused leave is fully guaranteed by the Australian Government under the FEG legislation. So as a consequence They appear generally not to cause residence foreclosure. The size of the layoff payments tides people over some months plus those near superannuation preservation age can always access that and tip the balance into paying out the mortgage.
PS Divorce had previously been a significant reason for selling a house and divorce rates have dived. People are staying together longer OR it may be as result of the superannuation splitting laws from 2001 where the house is just given to the custodial parent in lieu of share of super...
So that’s the longer answer
