Superannuation Discussion + market volatility

[Brissy1]

Does your fund make you renew every 3 years?

2 types of Binding Nomination, lapsing and non-lapsing. To my mind a Lapsing Binding Nomination is like writing a will that has an expiration date of 2 or 3 years, just silly .
And yes some funds only allow Lapsing, was one of the considerations I made when transferring to a new fund.

 

[Quickstatus]

And yes some funds only allow Lapsing

Mine allows lapsing and non lapsing.

 

[Quickstatus]

the question is how much of a hit

Whatever the hit, I think rents are going up for existing properties to compensate.
Mine are just about cashflow positive now, so I would hold.

 

[JessicaTam]

[mod hat]
Please keep to the thread topic and avoid *any* political commentary.

Some posts have been removed.
[/mod hat]

 

[Brissy1]

If the housing market does take a real hit, it still might be worth buying into - the question is how much of a hit?

And when? Maybe 2 years.
In my experience, sharemarket is quick to react to changing circumstances, but housing slow. House sellers are simply unwilling to sell at the buyers quickly changed price. Forced sales hopefully remain very low.
And again (imo) it's the buyers who set the price; sellers can ask what they like, but to quote..."tell 'em their dreaming".

 

[Quickstatus]

Forced sales hopefully remain very low.

The ones at risk are probably the recent first time home buyers with 5% deposit. They are likely to see negative equity very quickly + high interest rates.

 

[Pushka]

The ones at risk are probably the recent first time home buyers with 5% deposit. They are likely to see negative equity very quickly + high interest rates.

I saw some stats on that last night. Frightening. And then there's grind of paying the mortgage every month.

 

[Quickstatus]

mortgage every month.

They should be paying it fortnightly but yes.
Now also add in an economic slowdown.

 

[tgh]

The ones at risk are probably the recent first time home buyers with 5% deposit.

..as well as the banks that provided the finance .. leads to….

 

[Quickstatus]

.as well as the banks that provided the finance .. leads to….

The banks will be Ok but they will be stricter with loan approvals, dragging down economic activity

 

[Mr_Tee]

The ones at risk are probably the recent first time home buyers with 5% deposit.

..as well as the banks that provided the finance .. leads to….

In general terms.....the banks should be OK if some of these 5% loans start to fall over as a part of the scheme was that the 5% deposit was provided by the borrower/home owner and the Lenders Mortgage insurance that would usually be required by the banks to be paid for by the borrower was replaced with a Federal Government Guarantee in lieu. So effectively, the government is guaranteeing the banks on this cohort of loans. The borrower/home owner will still lose the lot though.

 

[Quickstatus]

The borrower/home owner will still lose the lot

If property values fall, it would be interesting if the banks start a revaluation of the security held against mortgages where the equity is less than a certain % - maybe 5%?.

 

[Mr_Tee]

If property values fall, it would be interesting if the banks start a revaluation of the security held against mortgages where the equity is less than a certain % - maybe 5%?.

The banks can value and revalue as much as they like and as often as they like - but it is in no-ones best interests for the banks to start going hard core and start demanding repayment of a loan only because the value of the property has fallen to $X vs. a loan value of $Y when the borrower continues to service the loan and meet regular minimum monthly or fortnightly repayments. The banks have learnt this lesson before and they would be hesitant to repeat it.

The single biggest risk to the housing property market is unemployment, which leads to loan servicing difficulties which leaves the borrowers and the banks with little to no room to move - that's when the banks start to ask the hard questions.

I'm more concerned about unemployment levels, and long terms structural unemployment, rather than relatively short term blips in property prices in relation to the impacts on bank performance and property market activity and trends.

 

[CaptJCool]

In general terms.....the banks should be OK if some of these 5% loans start to fall over as a part of the scheme was that the 5% deposit was provided by the borrower/home owner and the Lenders Mortgage insurance that would usually be required by the banks to be paid for by the borrower was replaced with a Federal Government Guarantee in lieu. So effectively, the government is guaranteeing the banks on this cohort of loans. The borrower/home owner will still lose the lot though.

We don’t have a system in Australia that “underprices” distressed sales
And it’s set up so the bank recoups ALL its outstanding balance via (higher prices or LMI) with any residual carried by the INSUROR who seeks to get it back from the former owner (bankruptcy does wipe out the debt)

There’s a further safeguard in the capacity to repay calculation anyway (can they repay even with a x% increase in interest rates)
The amount for repayment is calculated on the net income less rent anyway so is a secondary buffer too. And people are asked to show how they currently spend money (eg on themselves or children)

Lack of deposit in and of itself is not a predictor of non-repayment. Losing a job or being a gambler or luxury spender (champagne tastes on coca-cola income) or future study while not working or switching from a job to a small business or getting sick and having no paid leave or taking on a property or business loan which gets called in (no consumer protections on these) or not achieving a future higher income are

Unless it’s really early years, often there’s balance leftover so no loss at all. Just a serious lack of cashflow problem that can’t be solved in time.

 

[Quickstatus]

The banks won't trigger a foreclosure on a mortgage if the security held is in negative equity. It would just be a risk factor and does not necessarily change the carrying value of the mortgage on the bank's balance sheet. The combination of negative equity and unemployment is definitely an issue as other comments

However, negative equity makes it extremely difficult to refinance the loan.

 

[hydrabyss]

However, negative equity makes it extremely difficult to refinance the loan.

Nothing like being in mortgage prison. I am hoping I have learnt my lesson but nothing like another once in a life time deal to over commit again.

 

[QF WP]

An interesting story in todays news media, doesn't surprise me at all. Wanting to retire and being able to financially afford to retire, aretwo very different situations:

Australians are putting off their retirement by up to four years as cost-of-living pressures bites hard. In its latest retirement report, Colonial First State flagged Australians want to leave the workforce at 62, but the financial realities...
https://www.news.com.au/finance/sup...s/news-story/27aa8b2445f7a754400ec0bb0eafb220

 

[mrsterryn]

An interesting story in todays news media, doesn't surprise me at all. Wanting to retire and being able to financially afford to retire, are two very different situations:

Do you think people perhaps a inflated view of how much is needed in retirement ? Not including those who currently rent due to inability to purchas , they have a horrendous time .

Notwithstanding I know a lot of people have aversions to Centrelink but it is there as a backup

 

[Quickstatus]

inflated view of how much is needed in retirement

You mean they overestimate their weekly budget?

 

[QF WP]

From first hand experience, very few unadvised clients have done the research to know how much capital they need in retirement - and by the time they do, it can be too late to either contribute, or to accept the level of risk needed (or even a combination of the two). The ASFA retirement standard numbers are generally sobering for most: Retirement Standard