The Property Crash Is Just Getting Started…

Following the Reserve Bank’s double rate hike, big banks have lifted all their variable mortgage rates by 0.5 percentage points.

As a result, the average variable borrower will have seen their rate rise by 1.25 percentage points since the start of May.

That means someone with a $500,000 mortgage, with 25 years remaining, will see their repayments increase by an estimated $333 in total across the three hikes, said.

While variable rate borrowers with loans with CBA, NAB, and ANZ will be charged a higher interest rate starting today, it will take weeks for their monthly repayments to rise. In fact, the increase in monthly repayments many of these customers are currently seeing resulted from the May hike.
This is because banks typically give 20 to 32 days’ notice before lifting their monthly repayments, despite charging their customers the higher rate from the effective date.

Even then, the increase to their monthly repayment might not take effect for another few weeks, depending on when they are due.

UBS has predicted interest rates will peak at around 3.5 per cent in March next year, but said this will still hit the housing market hard.

“We still think market pricing of about 3.5 per cent – if delivered – would likely crash housing, and see the economy nearing a recession,” George Tharenou, chief economist at UBS, told The Australian.

If interest rates were to rise to 3.5 per cent it would likely see the average variable mortgage rate hit a whopping 6 per cent and could plunge the economy into recession, according to the investment bank.

“Interest payments across the economy next year for the household sector will close to double from now,” Mr Tharenou said.

“We have never seen such a sharp increase in repayments. That really crushes household cashflow next year when you have cost-of-living issues.”

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  1. I live in Hobart. There is no way prices went up in the last two months and there are lots of decent houses on the market too! I would estimate that prices have gone down 10% at a minimum.

  2. Inbetween a Rock and a hard place, US can't get inflation under control without raising IR but there will be sectors going bust if they do given the replayments

  3. Hi Martin thanks for your prompt and clear explanation/information. Can you please allow me to give you a little suggestion? If you need to do a video just to read an article (or some notes you may have written down) it's OK but not always as the content becomes boring. So can I please ask to have just a quick 10min speech where you resume/explain/expone the most important points as you wish without reading a document? This will help us to watch the video with more interest and also read the articles you think are worth. Thank you so much!

  4. these minuscule price % drops are insignificant, we need price drops of 40 to 50% to bring home prices back to normal. Banks won't allow it, so in we go into the financial see saw, the ones that should not have borrowed so much will lose their homes, the wealthy will buy them up, then prices up they go again.

  5. Martin. Just to be pedantic it is grammatically correct to say first, followed by secondly (not firstly). Just a jarring note on an otherwise excellent series of short videos

  6. This type of inflation isn't going to be contained by monetary policy. Consider the classical explanation for inflation: too much money chasing too few goods. Today's 'too few goods' has been created by supply-chain disruptions due to the pandemic, exacerbated by the war in the Ukraine. The 'too much money' has been due to central banks driving rates to depths not seen since Sumerians were carving notes on clay tablets. The inevitable rate increases will start shaping the historic low unemployment rate. What we're seeing are economies incapable of normalising.

  7. the abysmal rate of financial literacy in Australia (and beyond) is a national disgrace, not least because it is not accidental nor is it one of the infamous "unintended consequences" (of policy) frequently claimed to be at play by govts/central bankers/ economists in their attempts to disguise the actual economic agendas dictated by 'neo-liberalism' , which their policies seemingly adhere to come what may.

  8. Thanks Martin, the lag is important news (esp coupled with the lagging CPI figure, which is currently c14 wks old).
    Yet my savings are getting less than the cash rate. Does this mean banks would rather borrow at a higher (RBA cash) rate from each other, than from me? There must be an incentive, not just their boundless contempt for depositors.
    (Bank licences should come with mutual obligations to the public, given they amount to 'a licence to print money' granted by the people.)

  9. Order out of chaos. And out of this catastrophic mess the evil central bankers will ride in like white knights and save us all with universal basic income, and the chains and shackles that come with it

  10. Lowe and the RBA, bullied by Scum-oh and Friedenberg to keep rates ridiculously low to make the LNP look competent, are only now allowed to raise rates to try to deal with everything bubbles and money printing inflation. It won't be pretty.

  11. “Be greedy when others are fearful, and fearful when others are greedy”.

    Great Warren Buffett quote describing the last 12 months. So many FOMO buyers who are about to get a reality slap.

  12. It’s what happens when interest rates change, portfolios adjust and the imprudent purged. It’s going to be a crash and not a crisis until unemployment starts rising. Think of it as a slow motion margin call on Australian households who signed themselves into debt over a horizon they were never going to be able to repay.

    Anyways, it starts at the top as Reality shapes unrealistic expectations that were only ever fantasises. “6% per cent” whopping? Must be a millennial living in a virtual reality that never examines History. Balance sheets will force decisions Mr. North, yes rates of changes in the asset prices is lagged but even an accountant could calculate the acceleration of these prices is negative. Sober presentation. “When they start dropping them again”? Deary me, looking over your shoulder into your wish world, as usual. See you in September Mr. North.

  13. 18months ago every home owner I knew thought they were so clever, going out and buying boats and caravans. I was the fool who said covid was going to crash everything since people wouldn't be able to work. It's about time that every person that has used their home as a ATM shouldered some of the pain. The sensible people will be ok and get by but to hell with the smug overleveraged, maybe the debt binge party might finally be over…

  14. Prices still increasing in Central Queensland. Sales listings almost dried up. New construction going flat out. Majour labour shortages. Rental vacancies close to zero.

  15. Ha ha ha I'm in zero debt maybe you all should be too you are all the reason it's collapsing you and your greasy loans you take Millonair you and you thought you were a real somebody. Huh the banks coming for your ass

  16. The only ones that may be affected are those whom purchased in the last few years. Investors are still getting good returns and will ride this part of the cycle out, especially those whom purchased properties in regional areas and growth corridors under 1 million. Plenty of ppor that have large equity and have paid of a significant portion of their loan or have a tidy sum in a offset account. Most of the doomsayers are the could have should have would have type. My shack down the mountains is returning 600 pw.If you look at the mortgage stress indicators there are only small pockets in each state that are affected, mostly working class areas which has always been the case.

  17. Seems funny 2019 it was said the same thing , but covit brought this market up 100 percent. But hey get it clear there will be an other crisis coming that the government will blame for your lose of valve in the false wealth .
    Wake up it’s a false economy .

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