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What if mortgage rates went to 7%?
Topic Started: 25 Oct 2016, 11:39 AM (5,648 Views)
Simon_S
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b_b
26 Oct 2016, 02:03 PM

- People waiting for "market forces" to increase interest rates will be waiting a long long time
Of Course what could possibly go wrong............LOL
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Foxy
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Zero is coming...

Terry
25 Oct 2016, 11:39 AM
Seems a bit far fetched to me, but the good people at APRA think it's a pretty good benchmark to "stress test" the suburbanites and recommend that the banks develop their risk profiles for borrowers accordingly.

http://apra.gov.au/adi/PrudentialFramework/Documents/Final%20draft%20APG%20223%20-%20Marked%20Up.pdf
Hi Terry,

I like your ideas, they are not unlike mine.

But, the ends of the bell curve are just that, the exceptions, the rump or as you call them the Suburbanites are a group of average people that make up the majority.

If the intelligencia set the rules for the rump of humanity it would have little meaning.

So Terry other than for sport there is really no point speaking with the "Suburbanites" just avoid them???

The bulk of humanity are what i term minus 10%ers.

They add little to the outcome.

Then there are the plus 10%ers.

So to be a plus 10%er you got to create 10% more than you consume.

Most people can not do that.
So there you have suburbanites.



http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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Terry
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foxbat
26 Oct 2016, 02:35 PM
Hi Terry,

I like your ideas, they are not unlike mine.

But, the ends of the bell curve are just that, the exceptions, the rump or as you call them the Suburbanites are a group of average people that make up the majority.

If the intelligencia set the rules for the rump of humanity it would have little meaning.

So Terry other than for sport there is really no point speaking with the "Suburbanites" just avoid them???

The bulk of humanity are what i term minus 10%ers.

They add little to the outcome.

Then there are the plus 10%ers.

So to be a plus 10%er you got to create 10% more than you consume.

Most people can not do that.
So there you have suburbanites.



The ruling class cannot exist without the suburbanites Foxy. That's where they draw their power. Whenever you draw a representative sample of the population, you're talking about the suburbanites. There are sub-groups within the suburbanites based on demographics (for example, millennials) or SEC (for example, income groups). So when you say the suburbanite is "average", it all depends. But yes, I agree with you. As a metaphor, the suburbanite is a composite of average. However, it's also important to remember that the mainstream media is honed in on the suburbanite. If you're trying to build an high-cost economy, you need the suburbanites on your side (win hearts and minds) for it to work. As we've seen with the U.S., Japan, and parts of Europe, if it all goes to seed, the suburbanites go into their shells; give up; or revolt (mainly at a superficial level).
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Foxy
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Zero is coming...

Terry
26 Oct 2016, 02:55 PM
The ruling class cannot exist without the suburbanites Foxy. That's where they draw their power. Whenever you draw a representative sample of the population, you're talking about the suburbanites. There are sub-groups within the suburbanites based on demographics (for example, millennials) or SEC (for example, income groups). So when you say the suburbanite is "average", it all depends. But yes, I agree with you. As a metaphor, the suburbanite is a composite of average. However, it's also important to remember that the mainstream media is honed in on the suburbanite. If you're trying to build an high-cost economy, you need the suburbanites on your side (win hearts and minds) for it to work. As we've seen with the U.S., Japan, and parts of Europe, if it all goes to seed, the suburbanites go into their shells; give up; or revolt (mainly at a superficial level).
I am not so sure,

What power do you get from this?

http://www.worldstarhiphop.com/videos/video.php?v=wshhBinh110FoxRJpf9O


foxbat
26 Oct 2016, 02:57 PM
I am not so sure,

What power do you get from this?

http://www.worldstarhiphop.com/videos/video.php?v=wshhBinh110FoxRJpf9O
I just see the suburbanites continually losing any value, so any investment in them is going to decline. In real terms.

Peter

So investing into a house to rent to them gets you ??$500 p.w. average?

But what in the real economy can that buy?

You see real and nominal are a step away from the here and now of the average person.

I know you know.

What value are these people to the "real" economy??

http://www.worldstarhiphop.com/videos/video.php?v=wshhBinh110FoxRJpf9O
Edited by Foxy, 26 Oct 2016, 03:26 PM.
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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Jon Snow
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Rufus
26 Oct 2016, 12:26 AM
It would be less, but the normal flow of interbank transactions is enormous.
The flow is enourmous, but the nett flow is surprisingly small.

b_b
26 Oct 2016, 10:17 AM
Now if bank balance sheets shrink, the commercial banks require less ESA’s to support their balance sheets. So the RBA reduces to aggregate ESA balances so as to maintain their target rate (if not the rate will fall to the lower bound - 0.25% below the target). This is entirely consistent with the link I posted earlier. Here is what the RBA has to say about it.

So in summary;
- The RBA controls the interbank rate.
- They do this by manipulating the ESA balances the banks hold with the RBA via open market operations (allowing the banks to borrow and repay ESA’s).
- Therefore people like Simon will get very frustrated waiting for official cash rates to increase from “market forces"
It really doesn't matter. The Central Bank doesn't control credit spreads, which are a function of risk estimation.

Edited by Jon Snow, 26 Oct 2016, 08:39 PM.
Speak when you are angry and you will make the best speech you will ever regret.
Ambrose Bierce
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Rufus
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Jon Snow
26 Oct 2016, 08:26 PM
The flow is enourmous, but the nett flow is surprisingly small.
it's not at all surprising.
Take risks - if you win you will become wealthy, if you lose you will become wise
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Matthew
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Simon_S
26 Oct 2016, 01:46 PM
If you had a clue you would have provided something substantial to support your claims but as usual..........
Right back at ya.

Quote:
 
NOTHING...........
Right back at ya.
My only hope for my three boys is that they turn out nothing at all like Chris.
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Simon_S
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Matthew
27 Oct 2016, 01:40 AM
Right back at ya.


Right back at ya.
Since you missed it here it is again:

Quote:
 
Matthew
25 Oct 2016, 11:23 PM
Really? Explain how?

I don't think anybody including yourself knows what point you are trying to make is other than references to 1929.
So you're expecting wage growth in the next crises?

RBA: 2 Depressions 1 Banking Collapse

Quote:

Over the past 150 years, Australia has experienced two macroeconomic
depressions, both of which coincided with worldwide depressions.1 The first of
these was in the 1890s and the second in the 1930s. These were also times of
financial distress both domestically and in the rest of the world. For Australia
there were many similarities across both depressions. Indeed Sinclair (1965, p. 85)
suggests: ‘There is such an obvious similarity between the economic depressions
which occurred in Australia in the 1890s and the 1930s that it is tempting to
suggest that history was repeating itself in the latter case’.


Quote:

The central argument of this paper is that variation in the performance of the
financial system across the two depressions was primarily due to variation in the
condition of the financial system prior to each depression. We show this by
examining the behaviour of a range of indicators of financial stability over the
decade prior to each depression.4 These indicators are:
(i) the level and nature of investment;
(ii) property market speculation;
(iii) credit growth;
(iv) capital inflows;
(v) degree of risk management within the financial system; and
(vi) competitive pressures in the financial sector.


1890's 75% Private Debt to GDP
1930's 45% Private Debt to GDP
2016 125% Private Debt to GDP.........And climbing

What could possibly go wrong.....................
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chunty
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Khaderbhai
25 Oct 2016, 11:47 AM
The banks are already doing it Roddy. Have been for a while now.
I am a long time property bear who has just recently given up hoping for a housing crash and bit the bullet with the purchase of my first home.

I ran my own model assuming 8% long-term interest rates from FY20 onwards to get the amount of debt I was comfortable taking on (assuming kids in a few years, can pay it down in 10-15 years). Whilst the bank said they were stress testing me at 7-8%, they offered about 50% more debt than I felt comfortable taking on, so I don't put a lot of weight on the 7% stress testing by banks. If I took all the debt they were offering at 7% interest rates, I would still be repaying debt well into my 50's.

My view is the RBA will never allow rates to go back up to 7% because of the problems so many people would face. We will be stuck in a period of low rates for a long time yet - just like the rest of the developed world. This is the reason I decided to stop hoping for a crash. There are too many vested interests for it to ever happen.
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herbie
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chunty
28 Oct 2016, 03:36 PM
I am a long time property bear who has just recently given up hoping for a housing crash and bit the bullet with the purchase of my first home.

I ran my own model assuming 8% long-term interest rates from FY20 onwards to get the amount of debt I was comfortable taking on (assuming kids in a few years, can pay it down in 10-15 years). Whilst the bank said they were stress testing me at 7-8%, they offered about 50% more debt than I felt comfortable taking on, so I don't put a lot of weight on the 7% stress testing by banks. If I took all the debt they were offering at 7% interest rates, I would still be repaying debt well into my 50's.

My view is the RBA will never allow rates to go back up to 7% because of the problems so many people would face. We will be stuck in a period of low rates for a long time yet - just like the rest of the developed world. This is the reason I decided to stop hoping for a crash. There are too many vested interests for it to ever happen.
I recall your avatar (tho you had a different name back then [as I recall] - not that I give a rat's wif name changes bein' legit) - But just out of interest, in what general locale did you buy?

Oh 'n PS: Welcome ta tha capitulated bear camp regardless ... :)
Edited by herbie, 28 Oct 2016, 04:31 PM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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