No, were talking about a reduction in house prices and in increaee in borrowing rates. The current market conditions. Lol, you're misrepresenting my point and then saying it doesn't make sense.
House prices have dropped. Mortgated rates are up. A house that was 1 million early in the year costs 950k now. The mortgage for the person who paid a million is higher than the person buying at 950 now. Both will have the same rates (assuming variable).
No, they are not constant, and go up and down with rates. However, they are based on a factor of the purchase price, not the current market, like rent or a new purchase.
However, rates do go down often. We're at 15 year highs now, so the highest for most mortgages, and probably the most any have paid. However they are expected to drop next year again. Rents won't. Those paying the highest they have ever paid 10+ years into their loan are still paying less than the equivalent rent they would be paying if they didn't own.
If you bought a house for 1 million at lower rates and the price goes up
Only if you chose a fixed rate and only for the term of that fixed rate.
you pay more than the next person who buys an equivalent house for 950k, at the higher rate.
Did you mean to say less? This depends entirely on the rate and timeframe.
It’s still costly, but you pay less.
Again that depends entirely on fixed vs variable, fees, rate and timeframe.
This is not as straightforward as you’re making out, and even then you butchered your own argument.
The biggest issue is people ending up with negative equity and rising unemployment, it will end up with people losing their house and being in debt.
Beatings will continue until morale improves
Sure that's fine but mortgages are not constant as you originally claimed
I have a loan from 2013. It’s cheaper than rent, even with the higher interest rate rise. That’s the point. Rent rises with inflation and the market. Mortgages rise (and fall) with rates. Mortgages start off more expensive than rent, but end up less than rent after a number of years. And you have an asset at the end.
Rates rising cause drops in price as the people extending themselves to their max repayment have lowered borrowing capacity. However, the people who buy a cheaper house with higher rates end up the same in the short term and better off in the long run, compared to those that bought at lower rates recently and then had multiple rises.
You’re comparing the cost of a mortgage from 20 years ago, with 20 years ago prices. Do you know what rents were at both points in time? The homeowner that paid 1540 in 2006 is likely still paying that now, the equivalent renter pays closer to the mortgage holder paying 4540 and has nothing more to show for it.
It’s a failing in the system. Those that can afford to get on the ladder are set for life. The earlier, the better. Those that rent have a constant battle to keep up with rising costs. I have seen some financial articles that argue the opposite. It requires putting the difference between rent and mortgage and deposit into investments instead to take advantage of compounding interest. I don’t know anyone who does that. The people with investments seem to be the people with houses.
There's a few issues here, but I'll target the most obvious first
Over 2006 to 2026, the monthly repayment on an average new Australian home loan roughly tripled, from about $1,540 to about $4,540
It kinda does, relatively speaking, in the long run. If you bought a house for 1 million at lower rates and the price goes up, you pay more than the next person who buys an equivalent house for 950k, at the higher rate. It’s still costly, but you pay less. When rates eventually come down again, which is likely, the person who paid less will still be better off then.
Rates are high and rising (compared to recent history), and prices are high and dropping. I’d prefer to pay the lower house price, than the higher. The rates end up the same for everyone over time.
Rents go up over time. Mortgages stay the same. So many renters end up paying more over time. The problem is the initial cost, both the deposit and the higher payment, compared to rent, for the first 10 years.
House prices coming down with rising interest rates doesn't make them any more affordable unless you're sitting on a mound of cash worth a house
Just do 5th, 6th and 7th now and save everyone the hope.
Also that single lever doesn't do anything to slow those without mortgage or rent bills.
Hmmmm why is it that a single lever isn't curbing inflation??
It's almost like consumer spending isn't the cause of this inflation 🫠
Our massive productivity gains have been eaten up by the billionaire/owner class.
i completely agree with that and it's not that we have a productivity problem, we also long ago lost interest in needs vs wants and most of what we do as a society is based around the latter letting the former fall beside the wayside.
The really really weird shit is this is all encouraged by voters, LNP, ONP and ALP.
Does no one seem to remember that you used to be able to support a family of 5 on one modest income?
while that's true, it was of a different time and has rose tinted glasses. As my mother said, the reason she became a teacher was so she didn't have to give up work when she became pregnant and the two photos my mother has of her with her family shows they (8 kids and her parents) lived in a tin shack. All my grandparents died in their late 60's or early 70s not needing endless medical care and decades of pension.
Twisting the avocado toast meme, anecdotally, my 20 something nieces have spent more time overseas travelling then I have and I'm 59. One is off to Canada again for months as we speak and the other just got back from Japan, again, for the 4th time and she's 23, and that's just one of the many countries she's been to.
There's also any number of grumpy 60+yr olds (the ones apparently employed and raising a family of 5) who say they cant afford Australia anymore, so what happened to their so called wealth? YT is full of single, aged pensioners retired to Laos, Thailand and more recently Cambodia (because they can't afford Thailand)
on YT; Fiasco Dagama, Brett Voyage and read the comments section. The comme td unironically blaming migrants while their plan is to migrate and geo arbitrage :)
I retired at 40 (am now 60) and lived off grid in a little cottage in the bush because i never fitted in anywhere in Australia anyway.
New car sales are at an all time high (what a joke that is) discretionary spending (trinkets and gee jaws) also keeps rising.
Compare that with the have massive savings in Super and we're the second richest country per person on earth after Luxembourg,
Theb we're the biggest users of diesel (and have no oil) on the planet per capita because we're too incompetent to build electrified rail, in a country that's massive... the one token build recently, Inland Rail, has been scrapped from incompetence.
I'd suggest folks re read the Lucky Country, from the 1960s, the ironically titled book that pointed out we're a bunch of fools, electing idiots. The title was about we were lucky we had access to tremendous primary capital we expended (back then more farming, now mining) and it dulled our minds so we didn't have to think too much. Not much has changed
The last sane Prime Minster we had was Gough Whitlam and it's mostly been a shit show ever since, enabled by voters.
Capital which is invested in a non productive asset (housing, land) is also capital that doesn’t go into productive business investment. Those costs are forced on to people or businesses that don’t have an option to switch anywhere. I think a flow on effect is that disposable incomes and margins are eaten up and get recycled into choking the supply even harder. If everyone’s skimming then there’s nothing left for improving productivity. In my mind this is like a motor that only has a certain amount of torque and each middle man is piling on a tiny amount of weight. Eventually it seizes up
Seen a while ago on the Fediverse:
Oh, are they sharing it with me, with all their workers, with the rest of us? Yeah that's what I expected. So tell me again why should I give a shit about “shareholder value”?
This is so true. And just to further the point, productivity has gone up. Many jobs are faster & easier & take less time and fewer people to do. So more stuff is getting done per work hour. And yet, as you say, its somehow harder to afford cost of living on the pay of those work hours. So where is all that extra productivity going?
A lot of it goes to waste, possibly 'undervalued' by market distortions. (For example, tech like phones and laptops and TVs, take huge amounts of work to create - but are somehow relatively cheap. A low-cost wireless mouse costs about as much as buying lunch. That's pretty weird considering what's involved. The churn of using and replacing that stuff is sucking up a lot of productivity behind the scenes.) But yeah, the bigger effect is growing inequality. Ultra wealthy people and company sucking up all the profits from our productivity; and spending it on... well, a lot of stuff. One example that comes to mind is the enormous amount of resources going into building and running data centres at the moment. Land, water, raw materials, basic labour, skilled labour... and some promise that it is all going to be worth it, but right now its essentially just our collective wealth getting poured into machines that are currently doing more harm than good. It's a level of resource tradeoff that no normal person would make. But at the ultra-wealthy top, the cost doesn't matter so much to them, and the benefits including locking people into a cycle of dependency - so that the owners can say at the top unchallenged. It's not hard to see how that's a good deal for them, but not for anyone else.
Well, when there are productivity gains, there's no pay rises and the bulk goes to the corporation profits.
So, where is the incentive to be more productive?
Yeah media will skirt around the real problem for ever if they can. Now the new term is "money circulation"
We don't have a productivity problem when viewed through a human lens, rather than the absurd idea there must always be "growth".
We have a problem that that excess productivity has been captured by those who already have amassed wealth, to grow it even further.
Our massive productivity gains have been eaten up by the billionaire/owner class.
Does no one seem to remember that you used to be able to support a family of 5 on one modest income?
Now people can barely support a couple of 2 with two fairly good incomes.
The problem is inequality and ever increasing wealth of the rich, who then use that outsized influence over legislation and regulation so that they can amass even more.
We have a capitalism problem where our excess value is being stolen.
This idea that we need to fix our productivity is a strawman in my opinion.
inflation only comes down when discretionary spending slows
exactly and we're still not seeing cuts to discretionary spending ... yet, just lots of complaining though :) It was expected to and hence the stock prices of discretionary spending business like JB HiFi etal took a hit but new car sales are up, travel is up etc
I'm not one to lecture though... we just spent 7 months travelling Asia and we have zero debt (own a very modest cottage in a small rural village) , an ecar charged from solar for free, electricity itself is free (FIT from solar and away for months lets the credit build) as much free beef as we can eat, (farmer agists his cows on my back paddock and pays me with beef and some $) a gf who is a part time chef and loves to veg garden and cook superb meals, fruit trees out the ying yang and my interests and activities when back in Aus. are mostly free (hiking, MTB riding, kayaking, fishing, veg. gardening, the library I can walk to is free etc). Currently life is very good.
Yes the RBA
and the fed
the what now ? The RBA or Reserve Bank is all I've ever heard them called, never heard them called "the Fed", that's a concatenation normally reserved for the "Federal Reserve" in the US.
End of an era. I've heard good things about his recent book on the housing crisis too: https://www.blackincbooks.com.au/books/great-divide-0 which I'm planning to sit down and read soon.
Oh yeah, well we did atart looking at Macquarie a bit more as well after this post. But yeah, kinda got distracted and never made a decision. I'll have to start the convo with my partner up about it again. Macquarie looks acceptable.
And, yeah, not really doing it for moral reasons, they're just a bonus if I can furneggle some kind of moral purpose in the periphery of a banking convenience change.
