Chapter 1: What is the main topic discussed in this episode?
It's the Real Estate Podcast, brought to you by ANZ Home Loans for financial well-beings. And welcome to another episode of the Real Estate Podcast, available on iHeartRadio every morning at 6.30am. Also on Spotify and Apple and wherever you get your podcast from. Well, it's the morning after the cash rate rise. Wednesday is back with us, the 5th for October for 2022.
Well, yesterday afternoon was pretty interesting. Finally, a little bit of a break from that 50 basis points with the RBA choosing to go 20%. 25 which must mean it's got to mean that the next rate rise is going to be 25 as well surely you can't go from 25 and then back up to 50 but we'll wait and see celebrate the 25 is what i say this morning
It was the sixth consecutive increase in the cash rate, which has now been lifted by 2.5 percentage points since the start of May. Now, on that $750,000 mortgage, the quarter percentage point increase will lift monthly repayments by $110. And if you take in all of the rate rises since May, that figure for borrowers to find has increased by $1,030 a month. It is a lot to find that.
And one thing is for sure, and this is something we probably need to keep perspective on, and that is that the outlook for the global economy hasn't miraculously improved and can be argued... has actually gotten worse. It doesn't help when Putin is talking about tactical nukes, among other things. So we are still like every other country around the world.
We're still navigating ourselves out of this. It's your weekday real estate breakfast with news, interviews and predictions every morning on The Real Estate Podcast. Hey, also, if you have a $500,000 loan after yesterday's 25 basis points rise, you will be paying an extra 74 bucks. Hey, if you're celebrating your birthday for today, October 5, you are celebrating it with Rose from the Titanic.
Yes, Kate Winslet. She is turning 46 years young today.
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Chapter 2: What does the recent RBA rate rise mean for mortgage holders?
It was on this day back in 2011 Steve Jobs passed away. It's a while ago, eh? And also from the history books, James Bond makes his theatrical debut on this day back in 1962. And we've been seeing all of the destruction with these hurricanes in the US. So bear in mind on this day in 1864, most of Calcutta was destroyed by a cyclone and around 60,000 people died.
Coming up next, we are going to continue the extended interview with Simon Kustermarker from the Demographics Group. We spoke to Simon yesterday afternoon. You only got sort of half of that interview, so the full interview is coming up next. It's your real estate podcast for breakfast. It's the main centre forecast with PRD, selling smarter every day.
All right, let's have a look at your weather on this Wednesday morning around Australia. Grab the raincoat. You're going to need it in Sydney, expecting rain with 21 degrees. In Melbourne, the rain to increase also, expecting a high of 17 degrees. In Brisbane, expecting partly cloudy skies but it should be dry with 24 degrees. And in Perth today, showers to ease and a high of 21.
We talk with leading property commentators with analysis, predictions, forecasts, and what's trending every morning from 6.30. G'day there, Simon. Great to have you on the podcast. Great to be back. Well, they have made their call, the RBA. They have decided to go a little bit softer, which is interesting. It's what I was predicting for this month, 25 basis points instead of the 50.
Well, that's the result, I guess, that many economists were hoping for, a relatively low increase in order to slow the negative effects on the mortgage owners in particular. And the other problem, Simon, is that people are facing less opportunity to refinance their mortgage. In fact, some can't right now. They cannot refinance, which means that more people will follow suit.
And the main reason for this is the equity in their properties when it falls below 20%. They're just not able to refinance. And it's been described as being a prisoner to your own mortgage. Absolutely. And if this occurs at a high enough rate, the market needs to find a solution. This might be a financial product in terms of jumping on interest only repayments for a couple of years.
which of course is a very hard issue for the mortgage holders, or you might need to sell your house. And then you sell your house and you need to enter the rental market, you need to downsize, which of course is still very difficult because we are still operating in market conditions of very low housing stock.
So we have those super low vacancy rates, which makes this even harder because there is probably... nowhere to go in the near vicinity where you're living, which then completely uproots families and forces kids to leave school and so on. So there is a lot and lot that changes with this little number that we announce every month. Yes, indeed.
And the Australian house prices are among the highest in the world. In fact, a recent survey shows that Sydney ranked second after Hong Kong as the least affordable city globally. Melbourne not that far behind in fifth position.
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Chapter 3: How much will monthly repayments increase after the rate rise?
It's a nightmare for them. But how much should the box that you live in be worth? And it can't easily be answered. But international comparison suggests that we have we allowed our house prices to grow too high. And more Australians right now, they're in negative equity as, of course, house prices are falling. So that's kind of like a double whammy. It certainly is.
And we've seen this before, though, in the Western Australian market, where at the height of the mining booms, lots of people purchased very expensive homes and they went into negative equity for decades. probably four or five years, if not longer, which is psychologically an absolute nightmare.
But in the long run, if the market continues to recover and house prices continue to go up, then it was just an uncomfortable period of time and the property ultimately will still have turned out as a big win. But that's easy to say with the power of hindsight rather than when you're stuck in the moment.
Yeah, and just having a look at the interest rates, of course, this is where internationally, if you look at what is happening in the US and those fixed rates, the whole mindset is completely different in the US versus Australia. And if Australia had more of the fixed rate mentality rather than the variable rate, things would be much different.
exactly and that's the problem with the current mortgage holders that we are in a market where almost all rates are variable almost most rates are variable that means that you are essentially a victim to those rate changes that might come we're in a market where you already sign up for 30 years you sign a rate and it's valid for the next 30 years as in the us you're not as much of a victim
to the changing circumstances over those three decades. It might all play out to be the same over the period of a long loan of 30 years. But again, with a fixed term, you don't have those absolute strong pain points as we have at the moment. That said, at the moment, we are not on crazy high interest rates. The interest rates are still in the long term international comparison relatively low.
They're not outrageously high figures. It's just that we got used to very, very low interest rates over a very long period of time in Australia. Yes, and the dilemma, I guess, of being a mortgage holder in Australia. Simon, we'll leave it there. Thanks so much for coming on to The Real Estate Podcast. Really appreciate it. Anytime.
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