How Many of You Are Really Feeling The Raise in The Interest Rates?

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        Syrex-13 on 08/08/2022 - 08:45

        You don’t think banks are smart enough to realise someone with a high LVR would have to pay LMI if they moved lenders, thus refused to offer them a deal to stay?

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  Pete10001 on 05/08/2022 - 22:41

  Please make an appointment with a financial counsellor as soon as possible. They will advise you of your options.

  Personally I would buy something I can afford, even if that means making a short term loss by selling your current home.

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  dufflover on 05/08/2022 - 23:51

  I find it a bit contradictory that people point out how the property market has gone up bonkers in price (which I agree completely agree to the point I think of it as a ponzi scheme for many years now, but I digress…) meaning they "have" to take out massive loans which take a lot longer to pay down - but then seem taken aback when rates go up, as if they expected low rates for 15 or 20 years. The rates now are still far lower than what I was paying just a few years ago.

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  greggyp on 06/08/2022 - 00:52

  +4

  You were given a loan, one you could afford factoring in rate rises etc, unless you cheated on your numbers or something.

  So what you do is cut your spending on rubbish, which most people do, waste a lot of money, tell the mrs stop wasting money, send kids to a normal school etc.

  Rates will be going up a lot more, if you cheated or really have a hard time now, you better sell and take a 200k or so loss and buy something cheap.

  Frankly, it is idiotic to do 88% on a 1.5m house even with 2 good jobs, I have no idea why so many people do this, start at the bottom, save on interest and pay your humble shitty unit off first, then step up slightly, and so on……

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    Cookiescream on 06/08/2022 - 22:09

    I totally agree. I bought a shitty apartment, which can be easily rented. But it is my first property. South east Melbourne, less than 300 k.

    I would like one day to live by the beach, but no way would take such a huge mortgage as my first.

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  umoddbro on 06/08/2022 - 00:55

  Getting more money in the bank for me….. after years of low interest this is a nice change.

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  AG_ACT on 06/08/2022 - 09:43

  Yeah, it sucks, wasn’t planning on the rises starting for another year or so, so definitely feel it.

  Advice to op, tighten your belt now, pay off/put as much in an offset account as possible because things are going to get significantly worse very quickly.

  Banks usually factor in 3% hikes from current rates, so they clearly think you can still comfortably afford the next 2 rate hikes. I’d advise you assume they have already happened and start reducing your mortgage.

  If you don’t think that will give you a comfortable buffer, then I’d seriously consider getting a housemate, or renting out your current house and moving into something smaller. Do some research into the 6 year ppor capital gains exemption.

  I’m in the ACT, so we have the mental consolation that the io component is still less than what you would pay for the equivalent rental property

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  serpserpserp on 06/08/2022 - 12:55

  I feel for you OP. You rolled the dice and it's not panning out. How do you even afford the extra $1500 a month? When I bought my house at the near top of the last peak, if interest rates had gone up by to cause my repayments to be an extra $100 a week I would have been screwed. But luckily I could see the most likely rates were headed the other way and they did. It was hard slog those first 4 years though.

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  Jaystea on 06/08/2022 - 13:41

  My partner and I are in a similar situation. Settled a month ago, borrowed 1.3mil on a 95% LVR. I don't know your income situation, but we kept to a strict ~30% mortgage repayment rule - ie. interest repayments would have to hit 7% for us to start feeling "mortgage stress" by definition. Although others have a much stricter buffer - this gave us a mildly conservative estimate of what was comfortable for us to borrow.

  We don't have any children/dependents though, and we are also fairly frugal in our day to day living as we're both at work most days of the week. We cook ~80% of our meals, go out for a nice meal once a fortnight or so. Certainly, I think if you're currently still paying under 30% of your pre-tax income, you'd be doing well and will be able to stay afloat quite comfortably, regardless if it's $1500 or $3000 more a month. You need to try and measure it as a percentage of your income situation to get a better idea of what is affordable.

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  DeeTrance on 06/08/2022 - 14:25

  +1

  Think about refinancing with another lender. I just refinanced about $2 Million at about 0.3% lower interest than with the current lender's best offer. That's a huge difference at $2M.

  It does not matter whether you are or aren't feeling the pinch, you should be constantly refinancing every 12-24 months to get the best deal because lenders are motivated to get new customers while punishing existing loyal customers.

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    duchy on 06/08/2022 - 22:30

    +1

    Not with 88% LVR, mate.

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  [Deactivated] on 06/08/2022 - 14:44

  -7

  Not me. I just rented out one of my investment property, and one of the potential candidate voluntarily offered to raise the rental rate to up their chances. I took the offer, and I'm actually earning more than pre-interest rate rises. So personally, I'm loving the rate rises, there's more competition for rentals now :) Just waiting for the annual anniversary to increase the rental rate for other properties i have.

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  bigbadboogieman on 06/08/2022 - 15:54

  We bought ~ 3 years ago with 89% LVR after saving every spare dollar for more than 10 years. We were lucky we got in just before Covid, although at the time I was sh!t scared because we were not sure if we could retain our jobs. The housing market was down. Had two+ years since then to pay off as much as we could and with the higher values we are at 60% LVR now however I am still feeling the tight pinch. Monthly payments have gone up by more than $600 and it's still going. I had switched jobs last year for a 15K jump. All of that minus tax plus some more goes to the increased interest payments. My life mantra nowadays is:

  "This too shall pass"

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    SeVeN11 on 10/08/2022 - 12:45

    if you want less stress you can simply borrow more
    i.e. borrow up to 80% of the current value and have that money just sit there and do nothing.

    its no different to selling your house and having that cash sitting there, except you have to pay for it if you use it, there's no associated tax with it since you're borrowing and it provides you with a lot of feel-good money and sleep very well at night money.

    this is what I do…

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      bigbadboogieman on 10/08/2022 - 12:47

      +1

      The intention is to do this exact thing when we refinance in a couple of months (after I get the promised $2K cashback) from my current lender. Planning to use this equity to get into an investment property.

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        SeVeN11 on 10/08/2022 - 12:59

        +1

        I would suggest you tell them a large chunk of this is for 'renovation' expenses so that you can get an OO rate on your loan, then the rest for investment etc.

        Some people think you cannot get an OO loan for investment, but you can… you just need to tell the bank its for personal use such as renovations, holidays etc. it's simply just a product to charge investors more.

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          bigbadboogieman on 10/08/2022 - 13:00

          @SeVeN11: Good to known will keep that in mind.

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  Kinko82 on 06/08/2022 - 18:50

  There is some positive news on the horizon in my opinion. CBA have reduced their fixed rates for their 4 year fix down to 4.99 last week and Macquarie bank reduced their fixed rates by up to 0.76%.

  It’s a good change to see the banks reducing fixed rates rather than increasing them every other week.

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    peekabooo on 07/08/2022 - 22:08

    I noticed that too. I was hoping for the interest rate hit high for the property prices to come down in Adelaide. I don't get this market.

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      Kinko82 on 09/08/2022 - 10:03

      I find it really depends which suburbs and type of property you’re looking at. Some properties in some suburbs are just not affected by the rate increases much. Especially areas that are popular with owner occupier families.

      There just seems to be endless amount of deposit from selling their other properties or gifts from parents or inheritance or their incomes are big enough to sustain any rate increases.

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  ALesha77 on 06/08/2022 - 19:32

  +1

  It’s taking a toll on our mental health. Is anyone else in a similar boat? How are you handling yourself?

  I used to get that a few times when started trading and was in a large position losing money.
  The ONLY way out is to reduce or close your position.

  If this post is not a joke (almost 90% LVR - seriously?), I would be selling down and regaining my mental balance first.
  You can't properly function (let alone live a full life) with a huge mental weight - you will feel better the moment you are out.

  Interest rates will go up until capital market break - central banks have no other choice now. There will be much more pain and risk of a full collapse ahead.

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  UFO on 06/08/2022 - 19:37

  +9

  OP, you're not going to want to hear this- but you know its the truth.

  You've overextended.

  Four months ago at 88% LVR, and your repayments now have already stretched your budget.
  Clearly interest rates will continue to rise in the short to medium term, in at least the same amount as they've done over the last 6 months… and likely more.

  The hard reality is now cutting your losses and making the right financial decision.
  The "selling is not an option" mentality you have now is admirable, but is a mistake. Interest rates WILL continue to go up, and this is almost certain.
  If you are already struggling with payments (and mental health), NOW is the time to make the adjustments required to weather the coming storm.

  Option A). Is to batten down and keep the house as rates go up. Keeping the house means of course being able to make the repayments- both now and into the future long term. The interest rates aren't coming back down to what they were at the start of the year. Not going to happen. So that means living "tight" for the medium to long term. You soldier on, but living like that for the foreseeable future will cost in other areas you can't measure on a bank statement. "Keeping the house" might mean "Losing the marriage"… and that's not a overestimation believe me.

  Option B). Sell… and sell now. You will lose two things… whatever drop in value your house has already lost, and your ability to lend in the short to medium term (banks have really tightened up, and whatever residual money you get from the sale will be less than your original deposit). Two bitter pills to swallow, but hear me out.

  The second option, as unappealing at it sounds, is your best course of action. You'll keep more of whatever money you have left now, instead of being forced to sell in 6-12 months time in a far more depressed market, will result in potentially losing ALL your initial deposit.

  Renting now, or better yet buying a smaller/cheaper property- will be less of a financial strain to the both of you, will take A LOT of pressure off of you. I don't think you fully comprehend what that pressure will do to you and your relationship… in trying to keep something you can't possibly afford.

  You've overstretched… but don't put your head in the sand thinking "everything will be ok". Make the tough decisions today, otherwise someone else will make the tough decision for you later… be it the bank, or the family law solicitor.

  If you or your partner have no realistic way of increasing your incomes in the short term, do what needs to be done now. Don't chase the market down and lose even more.
  Of course none of this matters if you can truly afford an additional $1500 per month (on top of the $1500 extra already required). But that doesn't sound like the case. And believe me, the recent increase in interest rates is just the start. Even conservative pundits are saying at least double the current increase by early next year.

  I wish you the best. But remember, its not the end of the world taking a relatively small financial loss… compared to what you could lose in the near future.
  Eyes wide open and make the right decisions on logic… not based on hope alone.

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    Viper8 on 08/08/2022 - 11:30

    +1

    "Even conservative pundits are saying at least double the current increase by early next year"
    That's false.
    Yes experts and the market are pricing in additional increases, but from here on smaller increases and not every month. The most bullish reliable source, which always over-estimates actuals is the ASX cash rate futures. Even that has come down to 3.3%, less than double today's rate.
    The heads of the big banks which in my opinion tend to be the most accurate at predicting cash rates are saying something in the 2.X%. I ignore economic journalists, or "experts" from property and investments companies, likewise from universities. They frequently get the predictions wrong (check out the Finder surveys).

    If rates really were to more than double in such a short time, it would destroy the housing market. And the government, the superfunds, the banks and the RBA will never, ever let that happen.
    Instead they will raise rates as high as they can without causing a crisis.

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      Viper8 on 08/08/2022 - 13:36

      +2

      Just to add to this: banks are now pricing in rate CUTS next year, hence slashing their fixed-term rates to be significantly lower than their variable rates.
      Why? Experts foresee an impending recession both in Aus and throughout the western world. Once the RBA has put the brakes on inflation, they're going to need to stimulate the economy through cheaper debt.

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  piglet1 on 06/08/2022 - 19:56

  +1

  Time for a plan B.

  Cut down streaming services, check your car insurance quotes and make sure you're not paying lazy tax, same for health insurance, stop eating out, watch out for weekly specials at coles/woolies and plan your meals around them, find your local market to get cheaper groceries, stop online shopping for unnecessary stuff. Meal prep. Use less heating and electricity.

  Other options are to get a second job driving uber or grab / food delivery services, odd jobs on airtasker or something. If your kids are old enough, ask them to get a part time job. Rent out a spare room or car?

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  Cookiescream on 06/08/2022 - 20:23

  No because

  1 - I bought something i can afford even on a 100% interest rate (undesirable area and small apartment - but mine [and the bank's] and easy to rent).

  2 - because i fixed my rate for 4 years.

  If you cannot cut spending, get a second job?

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  Mr Random on 06/08/2022 - 20:53

  +1

  We built in the past 12 months, but only got what we could afford even though it was tempting to go that little bit extra.

  Ultimately at the time of purchase you needed to think where the rate will be in 1-5years and whether you can still pay that off. The low rates could not last forever.

  With what you borrowed, I can only assume you are in NSW, somewhat near Sydney? Or Melbourne Eastern suburbs?
  Either way, as crap as it is, we need to live within our means, and not bite off more than we can chew. Which usually means locating yourself in an area a little further out from the city, or downsizing.

  The only two options are to live on 2 minute noodles for a long while as rates go up and up, and hope that you can still afford your home.
  Or alternatively sell and buy something within your means while accounting for rates of up to 8% to be on the safe side.

  Edit. Maybe another option is to go interest only payments while the going is tough? Unsure what implications this can have, which is why i did not place this in my initial options to begin with. But it still just bandaids the initial problem of owning something you may not be able to afford.
  Also talk to your bank to reduce your rates. I did this with ING and they gave me a 0.5% discount.

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  greatlamp on 06/08/2022 - 21:29

  OP you need to imagine that you will lose your home if you don't get serious about cutting back your lifestyle, and you need your partner to be on board as well.

  You aren't serious now, you are just wishing it wasn't happening. The bank didn't lend you more than you could afford to repay unless you lied about your income. Not if you bought in the last four months, they wouldn't offer a mortgage of more than 6x your income.

  You need to cut back on unnecessary expenses. Cancel all your streaming services. Cancel your internet. Cancel your home phone and rely on your mobile. Stop buying new clothes. Stop buying takeaway.

  Or you can keep pretending that rates will go down again, then lose your house and around 300k.

  It shouldn't need to be said but you cannot afford to have another child unless you have a parent willing to provide free childcare. You need two incomes to survive

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  GourmetFoodie on 06/08/2022 - 21:35

  Wow. This thread has been an education for me. I couldn’t sleep at night with some of these LVRs.

  All I can say to the OP is good luck. There’s been some great advice in this thread. You have some tough decisions ahead.

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  meoden1005 on 06/08/2022 - 21:58

  +2

  I think you made a mistake to buy first house at 1.4 mils. Sorry I dont know your income level to comment on your situation. My wife and me both combine income at 200k. The bank said they can lend us 800k and we have 200k deposit. We did not buy millions dollar house. We settle for something cheap at 500k postwar concrete house 3 beds and 1 bath. We can easily pay off the loan and recent interest rate does not hurt us at the moment. The reason that I choose something cheaper and less leverage because I dont want to be slave for the bank for 30 years. We would use extra cash to invest in REITs or other companies that pay stable dividend to further increase our income in future. Also, I see no point to get into big debt to buy big house that we cannot utilise everything in the house plus the cost to maintain big house will be much more with the raise of electricity.

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    TEER3X on 06/08/2022 - 22:08

    +1

    1.4m doesn't necessarily get you a big house, it's all about the area (eg schools). There are plenty of shit houses at that price point too.

    Obviously you're not talking Melbourne or Sydney here chief

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  dji1111111 on 06/08/2022 - 22:08

  I could never understand the queue of people at open homes earlier this year all trying to buy a house in an overheated market.
  I actually told my folks to not buy a house because they were feeling FOMO.
  and this is coming from someone who stands to gain if property price continues to rise.

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  duchy on 06/08/2022 - 22:28

  +1

  My advice:
  1, Switch to Interest Only for the next 3 years.
  2, Budget! There are some great tools out there to help with that.
  3, Save like crazy into offset account.

  Medium term:
  4, If/When the LVR reaches 80% refinance if better offer on the market (high probability there will be)

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    kev98 on 07/08/2022 - 10:32

    Why would you switch to I/O right now? Rates are still historically very low, if you can't afford mortgage now you won't be able to afford it in 3 years. I/O rates are also higher than P&I rates.

    Repayments will also increase once it goes back to P&I at end of I/O term

    Best advice is pay as much as possible in to mortgage now and be realistic about financial position. If OP can't afford repayments at 5% then OP should consider downsizing or rentvesting.

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  YOTG on 06/08/2022 - 22:56

  +5

  I have experience working with people who for one reason or another where financial pressure can get to be a bit much.
  Good news for you OP is that it sounds like you are not in a critical decision point yet but may get there at some point in the future.
  For anyone reading this who may be in a similar situation here are some things you can do:

  1) Contact the National Debt Helpline 1800 007 007 or visit their website https://ndh.org.au/ - Book an appointment so you can get free advice from a financial councillor. They will ask you questions to understand your situation and provide you with a list of options you can pursue

  2) If you cannot meet your repayments on your home loan then call your bank. They are required to assess your situation if you are in financial hardship. Banks will generally do everything they can to buy you a reasonable amount of time to improve your situation eg lost job, recovering from injury etc.

  OP for your specific situation here is some food for thought outside the generic 2 points above

  • Consider what will help your mental health - If you are on variable rated then maybe you want to consider going fixed to avoid the month to month stress of will my home loan payments go up next month.

  • LVR is at 88% - Keep a close eye on the changing valuation of your property. Refinancing could become impossible in the future if the loan is larger that value of the property. If you can afford the monthly payments then you can try and ride this out until things improve. No one knows where things are going with interest rates but further rises over the next 12 months appear likely

  Hopefully this helps :)

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  Powlie85 on 07/08/2022 - 00:55

  Pur monthly repayments went up by $200 a month. We bought 2 years ago in Parramatta - for $725,000. We were looking at homes further bout west and bigger for around a million - so glad we didn't do it 😂

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  AlanHB on 07/08/2022 - 04:40

  I'm not feeling the stress of it as I bought a house on the assumption at interest rates were to rise to 5% and budgeted around that. Obviously the house that we bought was a fair bit below out max pre-approval and that combined with a decent payrise has kept me pretty good.

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  Takeonme on 07/08/2022 - 05:45

  There will be interest rate cuts at the end of next year.

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  Decbaux on 07/08/2022 - 06:30

  +59

  Dr Strangelove apologies for the wall of text but I really hope this will help.

  We're in a very similar situation and have been dealing with our budget daily for about a month now so will list off the things we've tried to do.

  The mental health issues are extremely real - Take care of yourself and understand things will get better.

  Rates are currently expected to rise this year and start falling again (or levelling at least…) in 12 months, can you make it through this time realistically?

  For context we went for our preapprovals around January, rates were super low, recent advice from EVERYONE was rates werent changing for a couple of years based on those awful RBA statements 'save the money while you can' was a VERY COMMON advice from people around property and although it seems so obvious in hindsight and people love to look back now and tell you how stupid you were, they completely forget the mindset was completely reversed back then.
  We should have fixed the rates (no shit!) for anyone not actually in that situation its hard to understand how quickly everything changed. We also had a daugher born prematurely and were in and out of hospital every 3 hours for 2 months right as our purchase went through and loan was approved so focussing on that the way we should have was way out mind.

  Financially very similary situation too, mid-30s, - 1.44M loan (~80% though) and we intend to retire from this house, we have no regrets about the house, only about not fixing the interest rates. So our repayments have just gone up about the exact same as yours as well.

  The advice I can give is check EVERY SINGLE ITEM you pay for in your budget and think of how you can do it cheaper, making small cuts along the way. Try and investigate how many companies are hitting you with 'loyalty tax' by upping subscription/renewal prices.

  So things we reviewed:
  * Evaluate income, can you make more in any possible way?
  * My wife is looking at better paid jobs, I am looking at trying to pull in 10-20 hours a week of contract work on the side. No luck yet.
  * Talk to the Bank, see if they can do anything. We felt hard done by as they promote on their (Unibank) website about helping with payment pauses during mat leave, which we are dealing with - however they told us since the mortgage is less than 12 months old we dont qualify. This is not explained anywhere on their site promoting this as a feature, which I think is (profanity) to be honest. We sold a property with them to purchase this so have been a customer a lot longer than 12 months, they dont care.
  * We are starting to do surveys through Octopus surveys and together as a couple we're on track for $200/month from this.
  * Rent a room - we're very willing but in the same boat, young kids so no one wants to touch the room. I will just keep my post up on flatmate finders and reduce the price until it becomes not worth the while. (WOULD be fantastic to get 800-1000/month but even at a 200/week (well under market here) people dont want to live with kids which i totally get.)
  * Streaming - cancelled everything except Disney+ and YouTube (for YouTube Kids). Switched back to piracy and plex for watching anything else. Saved about $40/month (Stan, Netflix Dropout.tv, etc)
  * Cancelled Amazon video and music subs, just kept standard Prime. Saved about $10/month
  * Called Optus and checked out our bills, unfortuantely we're already on the 2nd cheapest rate and the cheapest wont cover our data usage at all, but as soon as our contracts finish up next year we'll go back to Amaysim prepaid and save about $140/month (70 each). As phone payments will be completed too.
  * Check insurances.
  * Check Life Insurance - I was able to increase my cover from $150,000 (essentially useless) to $1.5M for both death and TPD through my super fund. This would save my family if anything was to happen to me and my income. Also got income protection at 80% of my income which was about 15 years out of date with regards to my salary.
  We had estimates in place for our Home Insurance & Contents based on what we expected to have purchased for the house but reviewed this and reduced our total contents cover by $20,000 and took off some mobile insurance coverage on specific items like iPads that never leave the house anyway. Saved about $40/month.
  * Our Trauma Insurance was through AIA from an old financial adviser meeting and was WAY overpriced. Changed to TAL and saved about $170/month. Not typical but check all your insurances!
  * Revew energy usage, is there anything you can do to bring down monthly spend? Reduce heating, reduce dryer usage, etc.
  * Planned to cut takeaways from weekly to fornightly or monthly. Avoiding Uber Eats etc. to prefer going and doing a pick up instead. (Honestly this is an amazing saving, we can get meals for $30 takeaway that we used to pay $70 for with uber eats etc and had just gotten lazy about it). Predicting this will save us $200+/month if not more.
  * Cancelled my backblaze subscription. Copied my entire system to an external HDD instead and took it to my BILs house for an offsite backup. Saved $10/month.
  * Reduced broadband speed to save another $20/month
  * Cancelled XBOX Game Pass, PS Plus, Nintendo online subs. Saved about $25/month (and had credit banked up so still active for some of them).
  * Check all Insurance. Are you paying comprehensive on cars that arent worth the Excess? We have a 20 year old car but still pay for comprehensive because the used market is still bonkers. If the value of the used car market drops and we could get a beater for cheaper maybe we drop this.
  * Daycare is our 2nd biggest expense after the mortgage ($1700/month) we have to weigh up based on income if its even worth it, currently it is as we end up with more at the end of the month with daycare+work than without.
  * Can family help with childcare? Not an option for us unfortunately (all live too far away and although we'd love for them to come and stay with us, they dont want to).
  * Are you putting things into savings regularly? Might need to put these on hold and understand that once you get past the most painful 2-3 years here you can top things up more quickly with higher incomes, reduced day care when kids to go school, etc.
  * Wife stopped getting nails done, etc. $70/month saved.
  * We still budget for haircuts which is a lot more expensive for her but we'll suck that up.
  * Paid up kids sports in advance and will not renew next term, sucks but we'll spend more time at the park. About $75/month saved.
  * All up our strict new budget saves us about $975/month based on regular expenditure and cutting back. This has helped but is not enough for the rest of the year. We will need to find more income.

  I also went through and did very basic calculations on what our repayments might look like in coming months. Helped to put things into perspective and we can reassess based on "how many months will our savings cover at X rate".

  We intend to plan NOW around repayments at 3% RBA cash rate. We will be drawing down our savings pretty quickly until my wife gets back from mat leave and tries to find a better paying job but stops us having to have the horrible painful mental health experience every time the rates go up in between in the meantime as we're already dealing with the higher rate in our heads.

  Estimated repayments (projections):
  3.64% - $6,579 (RBA August cash rate 1.85%)
  4.14% - $6,992 (RBA September cash rate 2.35%)
  4.29% - $7,118 (RBA cash rate 2.50%) - Projected peak in RBA announcement 2nd August 2022
  4.64% - $7,417 (RBA October cash rate 2.85%)
  4.79% - $7,546 (RBA cash rate at 3%)
  5.14% - $7,854 (RBA November cash rate 3.35%)
  5.64% - $8,303 (RBA December cash rate 3.85%)
  6.00% - $8,634 (RBA cash rate of 4.21%)
  7.00% - $9,580 (RBA cash rate of 5.21%)
  8.00% - $10,566 (RBA cash rate of 6.21%)

  • 

    DeeTrance on 07/08/2022 - 08:22

    +18

    Your budgeting prowess is impressive. Rather than judging the OP without knowing his financial position, you've actually provided helpful information. Good post.

  • 

    peanut48 on 07/08/2022 - 12:47

    great post, thanks for sharing. You inspired me to make my own projections. Whilst my position is not like OP's, I too am stressed about the rates but these projections helped quantify those thoughts.

    I was planning on moving overseas for big life change reasons and renting out my PPOR but these rates rising means I will have to postpone those plans for now. Sitting at under 30% of my income now but beginning to sweat a little and bracing myself for the coming months. Fingers are crossed and all prayers that nothing jeopardises my income.

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    MarsTitan on 07/08/2022 - 16:23

    +1

    You can still do better on your mobile phone plans. 70/ month is quite high.

    Otherwise pretty good.

    • 

      Decbaux on 23/08/2022 - 11:56

      Oh definitely, to clarify the $70/month is the expected savings, i think ongoing costs would be about $40/month with amaysim plans with data to match our usage.

  • 

    junji82 on 07/08/2022 - 18:19

    Thank you for your great post.

  • 

    spk-chelsea on 07/08/2022 - 21:39

    Legendary comment. Thanks a lot mate.

  • 

    peekabooo on 07/08/2022 - 22:18

    I don't get and ads in Youtube kids. What beneft you get for the subscription?

    I only have third party car insurance and our cars around 15 years old. I don't think comprehensive insurance is worth it as it doesn't cover engine or related components. With the huge gap payment and our cars being old it's cheaper to buy a new car or replace the parts. Comprehensive insurance is not worth for a car that old.

    • 

      Decbaux on 23/08/2022 - 12:02

      Not sure but we use YouTube Kids on an iPad and its crazy filled with ads (like 3 per video) however we get zero when on youtube premium activated.

      I know you can prevent them on PC with an adblocker etc. however not as easy when using the iPad OS app, etc.

      • 

        peekabooo on 23/08/2022 - 20:09

        I use YouTube kids on android tv and very rarely there is an ad. That's mostly for some kids toy. I don't even remember seeing one in the last couple months.

  • 

    ALesha77 on 08/08/2022 - 21:44

    Wow, lots of text but I am sorry to say, not a single clear thought.
    And comments are surprising to be honest.

    Do you realize that you have overpaid for an overvalued asset and now are cutting on you life quality to pay a "margin call" to your bank on a losing position?
    I understand all the emotions and connection to the place but this is what agents and asset owners use against you to get you trapped for your whole life.

    What if inflation will not subside (which is my central case) and the RBA will need to lift rates to 10% which is entirely possible. And on top of it we will face a mother of all recessions in down under.
    De-globalization, move from JIT to to just in case, regional separation and massive immigration plans will be permanent drivers of inflation here.
    With the rest of the world heading for recession, ours will be twice as bad with nat resources going into the sh@t-hole, we are the nation to lose the most of what is coming.

    Are you sure, it will still be about crunching numbers when (not if) rates are 10% and recession made 20% of aussies jobless?

    • 

      MarsTitan on 08/08/2022 - 22:29

      +1

      What if all your scenarios don't play out and after a brief lull it starts to go back upwards. You can save money if you move back to parents but seldom will be a move to rental work out better in the long run.

      Going forward:

      Their childcare costs are going to be lower than previous years (around 3~10K difference). For second child even lower.

      Their taxes will be lower from June next year (at least 5~10 K again depending if both working or single income family).

      These changes are either legislated or will soon be legislated (childcare one). But your "scenarios" may or may not happen.

      • 

        ALesha77 on 08/08/2022 - 23:07

        +1

        "Going upwards" because of exactly what drivers?

        RE prices have just been at a generation top because of:
        - TFF's 400 billion of "free money" that went into under 2% mortgages
        - Idiotic grants of different kinds that took money away from productive investments and pumped it into the "pump and dump" scheme
        - rates near zero
        - another 200 billion of "free" money in different keepers schemes

        Do you think ALL of the above will ever repeat again comin in at once? And in order for the prices to go a bit higher, we need an extra kick on top of the above.
        We have been at the very top, the only way is down for years to come.

        • 

          MarsTitan on 08/08/2022 - 23:44

          @ALesha77: The base pays are increasing with inflation at 5%. Soon the age care sector may get a 10% increase.

          The interest rates even at 2.5% (rba nerutral) are near historic lows.

          The main problem was 30% rise because of relaxation of apra lending criteria. That is close to being fixed. House prices won't boom for a couple of years and likely go down to 2019/2020 level. Canceling the covid boom.

          Yes, stretching to max limit is never good, but always taking the most pessimistic outlook does not help either.

  • 

    billbro on 09/08/2022 - 00:09

    Don't typically read or comment on forum threads, but I thought similar to others this was worthy of applause. Fantastic practical examples of what you have done or could be potentially applied by the OP to help relieve some of the pressure.

    Insurance is an interesting one, which comes down to your risk tolerance and potentially occupational profile. Might want to check if there is coverage overlap between the trauma insurance and your TPD, given there can be exclusions to avoid double dipping.

    Separately, we are fortunate to not feel the pinch (yet) - interesting that some other comments have concluded the loan size and LVR by the OP was sheer lunacy. We had a higher loan size and 90% LVR, but we also projected repayments with a 500bp serviceability buffer (beyond the 300 by APRA) - however, higher LVR and without LMI allowed for better cashflow.

    I can also see why plenty of people may have been caught out by the rate hikes (we were) and we proactively manage our loan and super. We were running rolling 12 month fixed loans as we were expecting to place a longer term lock-in pending an uptick in coming years. People who entered into longer term fixed loans weren't necessarily better money managers (if the rate hiking cycle followed RBA commentary) as they would have fallen out of their fixed terms sooner.

    • 

      Decbaux on 23/08/2022 - 12:04

      Yes insurance changes can be massive. My wife ended up being able to pay about 50% of her existing insurance costs by moving over to UniSuper with me, for the same coverage level. I believe her old one was IOOF. It doesnt help cashflow now obviously but still good benefits gleaned through going through every expense with a fine toothed comb.

  • 

    msimpatient on 09/08/2022 - 09:50

    You can ask to speak with the complaints area and or customer advocate to reassess your hardship application.

    Seems unfair they won't assist given your history. Afca is the next step of course.

    Financial support options can also include requesting lower interest rates btw, not just putting payments on hold or reducing them.

    You sound like you have a great handle on things.

    Did you review mobiles as well? Jump on a yearly prepaid plan which can be less than $15 a month with calls/text and a reasonable amount of data.

    • 

      Decbaux on 23/08/2022 - 11:58

      We did discuss with the bank, when I say they wouldnt help I meant their advertised assistances for those on maternity leave. We could go through financial hardship applications with them which would open other options, but realistically we are not at a point yet where we need to do so.

  • 

    SeVeN11 on 10/08/2022 - 13:13

    Just so that you know, once things cool off
    if you continue to save 10k a year and put it into an ETF earning 8% total return and compounding the dividends you will have
    500k in 20 years while only contributing 200k
    1.2m in 30 years while only contributing 300k
    2.8m in 40 years while only contributing 400k

    something to think about when you do have the free cashflow to put into ETF

• 

  Chrp1 on 07/08/2022 - 07:29

  No because I chose not to follow the FOMO herd. You're part of the reason why prices have reached the levels they have. Just because a bank CAN lend you an amount of money doesn't mean you SHOULD borrow it. Many people along with yourself have treated the recent low interest rates as a license to borrow free money which is one of the causes of exploding property prices. You stepped over others and over-extended yourself to get what you wanted. You have no one but yourself to blame.

  Even the people that are so proud of themselves for choosing a fixed rate loan for 2-4 years, what's your plan when your repayments will quite probably double once your 2-4 years is over? Do you seriously think you'll get a 50% pay rise by then?

  The Government and banks are also to blame - they saw it happening and did nothing. They even flooded the market with first home buyer grants and made it worse. As always, the banks are the real winners here.

• 

  nik on 07/08/2022 - 08:12

  +8

  Sorry to hear your experience OP, without know too much about your situation. This is my personal opinions or solutions if I am in your position;

  • Talk to your bank or broker to seek lower interest rate
  • Personally I think Banks/Lenders will start bring in honeymoon home loan. (1 or 2 years really sharp interest rate then revert back to normal rate)
  • Banks/Lenders always give good offers/discount interest rate to acquired new business
    NOTE: Given that you loan is Mortgage Insured, this is not the best option, however you can internal refinance with same bank and your mortgage insurance premium from previous loan will be considered. At the end of the day, you can still say NO to the offer if you don't like it.
  • Switch repayment to interest Only and start looking for a higher pay job or start second job
  • Maybe rent the spare room (if available) in your property out for the time been?

  Hope this helps and good luck.

  • 

    DeeTrance on 07/08/2022 - 08:25

    +1

    No judging, no blaming. Just solid advice. Well done.

• 

  mousie on 07/08/2022 - 11:36

  Cancel Netflix and sail the high seas

• 

  hitworm on 07/08/2022 - 13:39

  +1

  Consider renting the house and covering repayment using rental income while living somewhere more affordable?

• 

  striker5950 on 07/08/2022 - 13:50

  the term "bite off more than you could chew" fits this quite well,. at which point in the last 4 months did this not cross your mind "can we afford to pay if interest rates go up"?

  a friend of mine just bought a 750k unit with 3 bedrooms, this is what you should have gotten too. if you cant afford living near the city, move out the the burbs. no other choice. you would have been perfectly fine if you would have bought a cheaper place.

• 

  cnrmlj on 07/08/2022 - 17:39

  How Many of You Are Really Feeling The Raise in The Interest Rates?

  We are not at the moment. We fixed just under 90% of our home and investment property loans at 1.89% for home and 2.44% for investment. Next year the home comes out of fixed and the following year investment property. Will probably start to feel it then.

  As fixed rates were so low last year and the RBA said they wouldn't raise rates until 2024 i assume alot of people fixed their rates.

  We may therefore have a GFC / Sub Prime style situation in Australia in 2023 / 2024 if my assumption is true and alot of people with fixed rates have them finish and they need to move to variable rate that is 2 or 3 times that they were previously enjoying.

  Obviously none of this helps OP, but it does answer the title question.

• 

  Worf on 07/08/2022 - 17:56

  Can you add a poll to this post?

• 

  Mintee on 07/08/2022 - 18:08

  -4

  Sooo I have alot of help from my parent…. Not in the fact that they hand me money, but they dont charge me rent etc…

  I was silly and obviously brought in the peak which sucks…. My home worth 700k, is likely to drop to 600k in about 2 years i can feel it…

  The good news is, when i built my lvr was 50%, and my tenants are in a 5 year lease…

  So theres not going anywhere, and im not selling. Hopefully in 5 years once shit settles my house is back worth 700k

  So has it impacted me? Yes and no… From positive gearing im going to be neagtive gearing…. Has it impacted my mental health, yes! Because I'm stuck living at home with my parents longer and i wanted move out and build something for.myself.

  But in saying this, and not to be rude i knew that i couldnt afford a 1.5m home, which is why i didnt build one at that price.. I did all my financial forecasting solo at an interest rate of 5%….

  I planned everything to a T prior to purchasing, now things didnt go to plan, i had contingencys if i lost my job… How long could i afford my repayments till i found another, etc etc, my house value has dropped and to those that are in situations where theyre struggling right now… I'm sorry you cant balme the bank. Your job. Your living style the government… Frankly you borrowed to much….

• 

  MarsTitan on 07/08/2022 - 18:55

  If you are with cba or westpac then they are providing a 4.99% 4 years fixed rate. You don't need to refinance and it can help a lot with your mental stress.

  Best of luck.

• 

  Bluto Mindpretzel on 07/08/2022 - 19:25

  Not feeling it at all, I have been living well within my means.

• 

  yjun355 on 07/08/2022 - 21:21

  So, whats the expectation in terms of further rate rises? Are we expecting another 2% from here in total?

• 

  imurgod on 07/08/2022 - 22:10

  -3

  This has interesting to watch unfold.

  I paid off my investment properties while rates were low (thank goodness) and I'm now looking to buy a big house this year or early 2023 with water and city views in my area which were going for around $4M - $10M before the election. I am now watching the prices drop steadily as people who over mortgaged get desperate.

  Anyway, if it's affecting your mental health, you should speak to the bank. There are measures they have to put into place to help and you could always look at renting something cheaper and rent your home out (rent is pretty good at the moment).

  Don't let this temporary adjustment kill you, look at all the options and speak to someone to get financial help.

  • 

    Littlevu on 07/08/2022 - 22:55

    If I had three guesses, it’d be Manly, Clontarf and Mosman. Was I close?

    • 

      imurgod on 08/08/2022 - 08:25

      -3

      Ha ha… no. I do love the northern beaches but my mrs doesn't so we're not on that side of the bridge.

  • 

    kalithreaver on 08/08/2022 - 09:25

    how many investment properties you got? im guessing they are worth a bit if you are looking to get into an expensive place.

    • 

      imurgod on 08/08/2022 - 09:47

      -2

      It's Sydney, there's no bargains in property here.

      I have 3 now.

      • 

        kalithreaver on 08/08/2022 - 10:46

        nice work getting 3 paid off. we expect to pay off our mortgage at the end of next year and looking at what to do after. we are in melbourne so maybe an investment property if prices drop a bit over the next few years.

        • 

          imurgod on 08/08/2022 - 10:48

          @kalithreaver: I bought them in the early and mid naughties so it isn't like I paid them off in just a few years. It took me almost 20 years.

          Melbourne is a good market too.

• 

  kalithreaver on 08/08/2022 - 09:24

  +2

  thankfully not. we got our mortgage 9 years ago and pumped lots of money into it, especially over the last few years where interest rates where cheap. we got about another year or so left and will have it paid off.

  unfortunately i think rates are gonna go up another 1% at least and then they will be back at normal levels. if i was you i would figure out how that looks for you and what options you have to mitigate it.

• 

  devnull73 on 08/08/2022 - 10:32

  My advice would be to sell now and take the hit.

  Interest rates will continue to rise for a while, and coupled with a shaky China, who knows what will happen. It could very likely be that Chinese investment in Australian property will be banned, which would cause a large oversupply.

  Kids and health are important. Money and things, not so much.

• 

  mavis30551 on 08/08/2022 - 10:58

  +1

  Interest rates going up sucks.
  SO far its costing me maybe 200 a month more and I can definetely notice it.

  interest rates themselves arent such an issue but the compounding effect of that, rising cost of living (i paid nearly $4 for 1 capsicum yesterday) , Fuel prices increasing and wages that have only increased by 1.9% per year and stagnated over the last 10 years is definetely noticable.

  Nothing that cant be offset by being more frugal , budgeting more and staying home more, but after 2 years of doing that anyway from covid it couldnt be worse timing.

  Hang in there OP, it will get easier.

• 

  tryingtohelp on 08/08/2022 - 10:59

  OP - Assess where you can cut, and put them against your loan. If needed, go for a second job that comes with flexibility like uber driver or eats. This is a short-term family time sacrifice for long-term gain.
  Selling should be your last option - exhaust all resources first, and explore the options to make a second income stream.
  A second child is totally your decision - Child care fees aren't getting any cheap.

  Things you can cut -
  -Unnecessary upgrades to your new home - I know that feeling and the urge of upgrading the couch/bed, etc
  - Costly mobile plans - hey, you can live with $120/annum if you want to. Same with NBN - downgrade or move to a cheaper alternative
  - Health Insurance - get off the extras and see the basic plans that suit your family
  - Dining out - Coffee/Dinners are the most where you can have maximum savings. With a very little compromise
  - If possible, Leave your child to your family/parents/Work from home for a few days in a week - will help you save heaps in childcare.

  One important thing you should have if you haven't, and this is only me as I tend to overthink a lot.
  - Life cover for both partners

  This is a little compromise to your lifestyle for the short-term, for a long-term benefit.

  I had exactly the same feeling when I purchased my home a few years ago, and had buyer's remorse, trust me, it was a stretch for me, and had a similar situation as you do.
  At some stage, I was thinking to sell it, but renting was turning out to be a bigger compromise as you are most likely going to find accommodation that will not suit your family's needs.
  For me, the interest rates were dropping, but then I paid off the loan I raised from my friends and family.

  The upside - The retals of your property is highly likely to be close to your interest rates. What you can do is rent your home out and move to a cheaper rental option - agian short term.
  DON'T LOSE IT, WE ALL ARE IN THERE :-)

• 

  Jaspa7 on 08/08/2022 - 11:44

  +2

  Bought a house for a bargain right at the start of the Covid panic that was well within our means (300 to 350k with combined salary of ~140k, bank was saying why not go for something like 600-700k) with the 20-25% deposit required to not pay LMI. Fixed half the loan at the end of last year when all the financial experts were warning rates were going to rise - so no, inflation and wage stagnation is hitting far harder than monthly mortgage repayments and personally hope they keep raising it 50 basis points every month for the next 12 months.

• 

  Brick Tamland on 08/08/2022 - 11:49

  Initially I wasnt so worried but my last statement shows my monthly mortgage interest charge going up from approx $500 ish to around $700. I know its not much compared to others but I was still a bit surprised and that definitely makes me reconsider some discretionary spending.

• 

  [Deactivated] on 08/08/2022 - 12:10

  +3

  If you’re going to panic, panic early.

  • 

    Brick Tamland on 08/08/2022 - 14:45

    +1

    Important learnings from the great toilet paper shortage era.

    • 

      Cluster on 09/08/2022 - 10:43

      Yes, because toilet paper hasn't been available since March 2020.

      • 

        Brick Tamland on 09/08/2022 - 12:46

        I think you maybe looking in the wrong aisle.

• 

  dracoknight92 on 08/08/2022 - 16:21

  +1

  My repayment only went up $9 weekly so far on the variable portion, financially we are in a better position than we were at the beginning of the morgage 1.5 years ago and we're still mostly fixed until early 2025. But mentally I'm made anxious by those news outlets pumping the same scarce tactic everyday, just close yourself off from them for a while will help imo.

• 

  CaptainSharpe on 08/08/2022 - 16:49

  +2

  Why did you buy a 1.4 million dollar house with a small loan, knowing that the interest rates were going to rise one day? You got a 1.2+ million dollar loan?

  This is why I chose to buy a much smaller house somewhere I could more easily afford if things got dicey. Some people thought I was an idiot for not going for the best and biggest I could afford, as it would be a better investment opportunity.

  But I'd prefer to not have to stress about being able to keep up with monthly repayments, or starting to sweat each time I see the RBA announce yet another increase.

  Either way, the RBA don't want you to have much money left over each month. They need savings to dwindle and for people to afford less stuff, so that money becomes more valuable again.

• 

  daft009 on 09/08/2022 - 01:41

  +1

  I bought pre GFC so seen it before.
  Even back then I borrowed less than the bank offered as I could see myself being stretched if I took the whole amount they approved me for

  I feel there will be more trouble in a year or 2 once a lot of these fixed mortgages start expiring.

  Which is why the futures markets is pricing in interest rate cuts next year

• 

  pipe on 09/08/2022 - 09:12

  -1

  There is another option which nobody has said.

  Wait for the government to buy you out.

  In the future there will be increased public outrage towards privileged rich people causing housing and climate crisis. Then the government will push communism as the solution.

• 

  jonagrah on 09/08/2022 - 09:41

  +2

  Not really, we live in a modest house with a small mortgage. Interest rate has been fixed at 1.89% for two years, but we've continued to make the same repayments as when it was 3.89%.

• 

  Willy Beamish on 09/08/2022 - 12:13

  +2

  $1.4 mil house
  It’s taking a toll on our mental health

  Why buy something that you couldn't comfortably afford?

  • 

    Cluster on 09/08/2022 - 12:53

    +1

    Australians' self worth and image is based on two things: What you do for a living, and where you live. People will crawl over broken glass while eating ghost peppers just to afford a super expensive house to impress other people.

    • 

      Willy Beamish on 09/08/2022 - 14:36

      Feelsbadman for those people

• 

  Cluster on 09/08/2022 - 12:51

  +1

  I'm not feeling the rate rises at all, as I locked in 1.75% for 3 years. 18 months to go.

  However, I am now saving more money as I assume I'll be paying around 4% on my mortgage in 2024. I expect the RBA will start cutting the cash rate in mid to late 2023 as they'll inevitably overshoot and help cause a recession.

  • 

    SeVeN11 on 10/08/2022 - 12:54

    if RBA starts cutting rates it means more of us would be unemployed and wouldn't be able to pay the mortgage at all.
    we're all just hoping its not us.

• 

  PaperplaneXXX on 09/08/2022 - 14:31

  not affected.
  2 fixed mortgages till October 2024 at 2.09%
  and 2.49%

  people shall stop listening to the goverment
  always think about a back up plan.

  I have time to save some money till maturity

  • 

    SeVeN11 on 10/08/2022 - 12:52

    I remember doing this a decade ago, except I fixed at 8.2% for 5 years at the peak when the news, friends and family were telling me its going to go to 10-15% !

    i.e. A good chunk of you fixing at the low rate is most probably associated with luck.

• 

  leesangyee on 09/08/2022 - 15:19

  +2

  A wise person once told me to always factor in 50% increase in repayment to avoid loan stress, regardless of the market. Sorry it is a bit backward to make such comment but it sounds like your options are limited. Either refinance to a lower rate (fixed, different bank, negotiate with current borrower), sell, convert to rental property (and downsize to a cheaper rental yourself), or change the lifestyle (cutting down a lot of stuff including holidays and private school fees - if that's what it takes to keep the house).
  Limited options might not be a terrible thing - it allows you to narrow down the most viable choice and focus on achieving that.
  All the best.

• 

  fitr on 09/08/2022 - 16:06

  -2

  its bad and not in fact help anything. Just robbery your money

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