Savings from record low interest rates gobbled up by rising house prices
Savings from record low interest rates gobbled up by rising house prices; Rates only have to rise two or three times to push mortgage repayments back above their eye-watering pre-GFC levels
Tweet Topic Started: 11 Aug 2014, 05:10 PM (383 Views)
INTEREST rates would only have to rise two or three times to push mortgage repayments back above their eye-watering pre-GFC levels, new modelling shows.
Despite record low interest rates, home borrowers in three state capitals — Sydney, Melbourne and Darwin — are already forking out more each month than they were six years ago.
Soaring house prices have offset the savings delivered by interest rate cuts — keeping housing affordability out of reach for many Australians, the modelling by the National Centre for Social and Economic Modelling for News Corp Australia shows.
“Really it comes down to how big a deposit you can put together,” the principal research fellow at NATSEM, Ben Phillips said.
“If you can easily pull together a decent deposit then low interest rates will help housing affordability. But if you don’t have much of a deposit then what you’re going to find is the low interest rates are pushing up the house prices so much that you’re going to struggle to get into the market.”
“And of course, low interest rates just make it that much harder to save that deposit.”
Despite the economic downturn, the median national house price has risen by almost a third, from $365,000 in mid 2008 — just before the GFC hit — to just shy of half a million dollars today.
Monthly repayments on the median priced Aussie home were $2,750 back then, assuming a 90 per cent loan to value ratio and a 30 year term.
Rising house prices have pushed repayment levels up to $2,565 a month on a median priced home.
That’s despite the headline standard variable interest rate almost halving from 9.45 per cent to 5.95 per cent during that time.
At today’s prices, it would only take another 66 basis points of rate rises to push repayment levels back to their pre-GFC highs, the modelling shows.
Monthly repayments on the median priced Aussie home were $2,750 back then, assuming a 90 per cent loan to value ratio and a 30 year term.
Rising house prices have pushed repayment levels up to $2,565 a month on a median priced home.
That’s despite the headline standard variable interest rate almost halving from 9.45 per cent to 5.95 per cent during that time.
At today’s prices, it would only take another 66 basis points of rate rises to push repayment levels back to their pre-GFC highs, the modelling shows.
Umm - doesn't this analysis ignore all the wages growth since 2008??? Average wages would have risen by at least 20% since then, meaning repayments would have to hit $3300/month before we were at the equivelant cost level to late 07/early 08? Meaning that interest rates would have to go up a fair bit more than 66 basis pointd before that level was hit again - more than +2.5% in fact based on the articles calculations.
(Calc - if +66 basis points ups payments from $2565 -> $2750 = +$185/month, then to rise to $3300 would need +$735/month, = 3.81 x $185/.66 basis points = +2.62%).
For Aussie property bears, "denial", is not just a long river in North Africa.....
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy