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

Dr-StrangeLove on 03/08/2022 - 22:45
Last edited 03/08/2022 - 22:45

I guess this question is mostly for home owners (investment/ppor/both)

I assume a lot of folks here own at least one home I’m hoping this resonates with some of you. We recently purchased our first home in the peak of high housing prices (not sure if that’s what it had been called from a long time now) but the raise in interest rates are really making me think of out decision to buy was wrong or should we have postponed it a little longer. We have been planning to buy a family home from quite sometime and it isn’t easy with the current craziness in the market. We purchased a $1.4 mil house with 88% lvr 4 months ago. Bank approved the loan and now we are feeling the heat. Monthly payments have gone up by $1500. It’s taking a toll on our mental health. Is anyone else in a similar boat? How are you handling yourself? Any suggestions how to cope considering more rate hikes?

Financial

Comments

  • voo123 on 09/08/2022 - 20:19
    +2

    Not feeling the pinch at all. Moved into newly built home this year and we only borrowed 3/4 of our max capacity. Already had 20% deposit + 5% stamp duty (VIC)+ 6months worth of expenses saved up, so we borrowed at 80% LVR. Been smashing down the mortgage at x3 minimum repayments prior to interest rate rise, now we're paying around x2.5 of repayments from the rises and young bub. Already planned for interest rate rises and I hate living from pay cheque to pay cheque so I was very conservative with my borrowings. Planning to pay off mortgage within 10 years.

  • furyou on 09/08/2022 - 21:58

    We also got a house with a huge loan. We couldn't afford it. Yet, the house over the years has earned more in appreciation than our jobs have. So we can afford now, less than back then. Affordability drops. So in the end it's probably better now than if you didn't buy for a few years.

  • happyhammer on 09/08/2022 - 23:31
    -1

    Just learn matched betting. Do it right and it's $20k+ tax free and relatively risk free over 6 months.

    Cutting down already tight expenses will only get you so far.

  • wandaria on 10/08/2022 - 07:16
    -1

    If you believe that you should own that house long term, then the easiest solution is to move out and rent the place to others. You can then rent yourself another house thats cheaper etc and after tax deductions etc you will save considerable money. There are varied solutions. The fear is greater than reality 99% of the time. Really it comes down to your perspective on reasons for purchasing that place at that time in terms of long term. One thing people need to be aware of is that the ONLY REAL LEVER the Government/Reserve Bank has to reduce pressure in times of economic shocks is to substantially reduce interest rates. The Reserve Bank and Government know that we are going to experience another GFC type event in the next few years and you cannot drop interest rates substantially if they are near zero as it has no beneficial impact. Interest rates below zero are a different matter and not for this post. So under the guise of supply induced inflation they are lifting rates.

  • seraphim2017 on 10/08/2022 - 09:19

    Having lived through higher rates, I would suggest that you may have taken on a debt you will struggle to service when rates return to a longer term average. We have had ridiculously cheap money for a long time, but that isnt' normal.

    I would personally judge my true borrowing capacity based on a rate of around 5%+ to determine if I could service repayments for security. (Yes, I'm risk averse, so will never be a millionaire!). If rates stay low = happy days and overpayment to bank against a rainy day in an offset home loan to reduce interest, but if rates go high, can keep head above water, have lived that before, don't wish to again.

    Only have 1 property/home, don'tpersonally consider it a fair way of building equity, although fair enough to those who do, nothing grand but it's ours and whilst not being within 5k of the CBD, it is liveable.

    $1.4m at 88% LTV seems to be a big loan for a first home purchase, I thought most people started with a 3 bedder in a less perfect location and trade up over the years? Or am I so out of touch that $1.4m is now a starter home, in which case yikes and I feel for you OP, rates may well remain higher so adding income potential might be the only available route to balance the books, and long term that is hard as well. Good luck however you manage those repayments.

  • love2buy on 10/08/2022 - 17:30

    $1500 sounds like a lot but if you break it down, its about an extra $50 a day which isn't entirely unmanageable.

  • scanuck on 11/08/2022 - 09:35

    What a community we have here

    OP is clearly hurting - have some compassion. Sure it’s of their own doing but they are looking for some genuine advice, strategies and probably some support!

    OP get some genuine financial advice - look to fix if you are worried of rates increasing, set a budget if you fix, know your expenses, trim the fat, sell what you don’t need, eat in etc

    You’ve stated selling isn’t an option - but don’t rule it out.

    Good luck

  • Rangerdave12 on 12/08/2022 - 13:00
    -2

    I don't feel sorry for OP.
    If you can't afford it ,sell it .
    Or tighten your belt and eat expired cat food.
    We should stop bailing out debt eaters and start rewarding savers.

  • Jikx on 14/08/2022 - 09:48
    +1

    Renting it out is actually a very good option - the interest, rates, etc will be tax deductible and give significant savings. Then move back when/if rates drop or you have saved enough that you are comfortable.

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