bristolman Posted November 6, 2015 Share Posted November 6, 2015 The problem is immigration to some extent. Cheap labour from the EU is keeping wages down, and keeping inflation down. Cheap dumping from China is also keeping inflation down. Interest rates should already be rising. The fact that they are not may lead to another asset bubble. We all know how that one ends. The govt needs some balls and needs to regulate. Without it, rinse and repeat the last ten years. The thing is wages are rising at the fastest rate in 6 years so that can't be a factor in keeping inflation low. Quote Link to comment Share on other sites More sharing options...
HappyHeart Posted November 6, 2015 Share Posted November 6, 2015 I feel better off than I've ever been, wage rises and low interest rates...low debt, savings...is it all an illusion? Will it all come crashing down? If it does we'll buy a kit home and be done with. Quote Link to comment Share on other sites More sharing options...
newjez Posted November 6, 2015 Share Posted November 6, 2015 It is interesting if you consider the following example. Imagine a pom in 2008 - he works in oil and gas in the UK - earns a good wage, owns a house outright worth £400,000 GFC strikes. This pom gets made redundant, his house drops in value to £300,000 This pom decides to migrate to Australia. He gets a job in Perth on 4x his UK salary. He leaves his house in the UK as - he may want to return, he doesn't want to sell it at a discount to what it was worth, and the exchange rate is 1.5 He could only afford a starter home in Australia for $450,000 He decides to rent a very nice house in Perth by the sea. Come 2015, and he may want to return to the UK, as he has lost his high paying contract. Or, he may take a lower paying maintenance job. He gets his house in the UK valued. It is now worth £600,000. At current exchange rates, that will give him around $1.3 million AUD With the added bonus that the 1.3 million perth house was probably still worth 1.3 million or more when he first moved to Perth. Whatever he decides, he's done pretty well out of it. Quote Link to comment Share on other sites More sharing options...
newjez Posted November 6, 2015 Share Posted November 6, 2015 The thing is wages are rising at the fastest rate in 6 years so that can't be a factor in keeping inflation low. Tell me when they are rising at the fastest rate in 20 years. We've just had a six year recession. Quote Link to comment Share on other sites More sharing options...
bristolman Posted November 6, 2015 Share Posted November 6, 2015 Tell me when they are rising at the fastest rate in 20 years. We've just had a six year recession. I'm just saying your example wasn't really accurate. Cheap EU labour only impacts certain sectors of the economy. Many companies now are implementing the living wage for example rather than the minimum wage. Quote Link to comment Share on other sites More sharing options...
newjez Posted November 6, 2015 Share Posted November 6, 2015 I'm just saying your example wasn't really accurate. Cheap EU labour only impacts certain sectors of the economy. Many companies now are implementing the living wage for example rather than the minimum wage. It has been a factor - cheap dumping has also been a factor. The stronger pound also has an effect. All these things have been combining to make inflation very low. Quote Link to comment Share on other sites More sharing options...
northernbird Posted November 6, 2015 Share Posted November 6, 2015 How would the average family cope if interest rates rose to 17%. That's how high they were at the end of the 80's. We ate toast for tea all the time and turned the heating off. It's the only way we could afford to keep up our mortgage payments. Quote Link to comment Share on other sites More sharing options...
VERYSTORMY Posted November 6, 2015 Share Posted November 6, 2015 We ate toast for tea all the time and turned the heating off. It's the only way we could afford to keep up our mortgage payments. I know most people though would simply lose their house at that interest rate. To put in perspective, a interest rate of just over 5%, which big banks offer now, on a $300k mortgage is $1700 a month (just over). But at 17% it is $4277 a month Quote Link to comment Share on other sites More sharing options...
ramot Posted November 6, 2015 Share Posted November 6, 2015 (edited) We ate toast for tea all the time and turned the heating off. It's the only way we could afford to keep up our mortgage payments. I know most people though would simply lose their house at that interest rate. To put in perspective, a interest rate of just over 5%, which big banks offer now, on a $300k mortgage is $1700 a month (just over). But at 17% it is $4277 a month Somehow as NB above we managed, the wages were much lower and trust me the extra was just as hard to find, just had to tough it out. Sorry should have said we were in UK, 1 wage plus 3 children, Edited November 6, 2015 by ramot Quote Link to comment Share on other sites More sharing options...
Parley Posted November 6, 2015 Share Posted November 6, 2015 They will never go up to that level again in our life times. They will stay at current levels for many years also. Quote Link to comment Share on other sites More sharing options...
milliem Posted November 6, 2015 Share Posted November 6, 2015 I didn't want to take any risks so I fixed our rate as soon as the first of the big four announced the rise. There is just too much uncertainty with the dollar at the moment. We ended up paying slightly less each month and I am glad to have the stability for the next few years. We can still make small extra payments on the principal but not as much as before. The plan is to just put any extra in the bank and take a lump sum off at the end of the fixed rate. Millie x Quote Link to comment Share on other sites More sharing options...
HappyHeart Posted November 6, 2015 Share Posted November 6, 2015 I know most people though would simply lose their house at that interest rate. To put in perspective, a interest rate of just over 5%, which big banks offer now, on a $300k mortgage is $1700 a month (just over). But at 17% it is $4277 a month That's staggering. I'd sell up and rent if it got to that (if I could) Quote Link to comment Share on other sites More sharing options...
WeegieDave Posted November 6, 2015 Share Posted November 6, 2015 The trouble I have seen in Perth is people living above their means. So many people want to 4x2 house and the Toyota Prado. People are debted up to their eye balls and it's no suprise that Australia now has the highest level of personal debt in the world. Double of America'e levels. Greece had a massive culture of people living above their means... Look what happened there. Perth's trouble don't look so bad when you look at what people are paying for (being ripped off for) property in Sydney and Melbourne. Quote Link to comment Share on other sites More sharing options...
HappyHeart Posted November 6, 2015 Share Posted November 6, 2015 The trouble I have seen in Perth is people living above their means. So many people want to 4x2 house and the Toyota Prado. People are debted up to their eye balls and it's no suprise that Australia now has the highest level of personal debt in the world. Double of America'e levels. Greece had a massive culture of people living above their means... Look what happened there. Perth's trouble don't look so bad when you look at what people are paying for (being ripped off for) property in Sydney and Melbourne. This is it isn't it....I know people who bought million dollar houses, just average houses really..in 'good' suburbs. Ridiculously overpriced. I doubt they are still worth that now. We've just about paid off our new car (6 years old) and were debating upgrading but decided to just keep it..its paid for and still goes and looks ok! Why saddle ourselves with more unnecessary debt? We paid what we thought our house was 'worth' 5 years ago and that's helped us feel less panicked at the thought of stagnating prices and rising rates.... Quote Link to comment Share on other sites More sharing options...
WeegieDave Posted November 6, 2015 Share Posted November 6, 2015 This is it isn't it....I know people who bought million dollar houses, just average houses really..in 'good' suburbs. Ridiculously overpriced. I doubt they are still worth that now. We've just about paid off our new car (6 years old) and were debating upgrading but decided to just keep it..its paid for and still goes and looks ok! Why saddle ourselves with more unnecessary debt? We paid what we thought our house was 'worth' 5 years ago and that's helped us feel less panicked at the thought of stagnating prices and rising rates.... The bank offered me a home loan of $1.1 million based on my salary when I was doing FIFO. The thought of tha amount of debt made me shudder and I knew FIFO wasn't going to last forever nor did I want to do it forever as I hated it so I bought a house that I could afford with just my base salary. Unfortuntely, all too many people bit the bankers hand off take the $1 million plus dollar mortgages and now have no FIFO. My house will no doubt have dropped in value also but I never bought it to make money and I'll just sit tight for a few years and see what happens. I was there when the crash happened in the UK but your average Aussie between 21 - 40 years old has no idea of what a recession or crash in the economy is. Australia has just been a big isolated bubble for a few years. Quote Link to comment Share on other sites More sharing options...
WeegieDave Posted November 7, 2015 Share Posted November 7, 2015 This is it isn't it....I know people who bought million dollar houses, just average houses really..in 'good' suburbs. Ridiculously overpriced. I doubt they are still worth that now. We've just about paid off our new car (6 years old) and were debating upgrading but decided to just keep it..its paid for and still goes and looks ok! Why saddle ourselves with more unnecessary debt? We paid what we thought our house was 'worth' 5 years ago and that's helped us feel less panicked at the thought of stagnating prices and rising rates.... I always think that the rule for a couple / family is that if there are 2 income earners, your level of debt would still be manageable for a few months should one of you lose your job. Quote Link to comment Share on other sites More sharing options...
JockinTas Posted November 7, 2015 Share Posted November 7, 2015 The bank offered me a home loan of $1.1 million based on my salary when I was doing FIFO. The thought of tha amount of debt made me shudder and I knew FIFO wasn't going to last forever nor did I want to do it forever as I hated it so I bought a house that I could afford with just my base salary. Unfortuntely, all too many people bit the bankers hand off take the $1 million plus dollar mortgages and now have no FIFO. My house will no doubt have dropped in value also but I never bought it to make money and I'll just sit tight for a few years and see what happens. I was there when the crash happened in the UK but your average Aussie between 21 - 40 years old has no idea of what a recession or crash in the economy is. Australia has just been a big isolated bubble for a few years. I do agree with a lot of whatyou say. However my OH was in building/construction most of his working life and that is a real boom or bust industry. Common sense (you would think) to always live within your means. We didn't have a new car until we retired. We never felt deprived and we never worried too much about debt because apart from a small mortgage we didn't have any. Quote Link to comment Share on other sites More sharing options...
HappyHeart Posted November 7, 2015 Share Posted November 7, 2015 The bank offered us nearly double what we actually borrowed. The repayments would have been unmanageable. We pay a bit less than what we paid in rent now. I can see the attraction though and it is harder to 'live within your means' with constant offers of credit. We learned valuable financial lessons in our 20s and early 30s and decided to be much more sensible here. Finally paying off. Quote Link to comment Share on other sites More sharing options...
AJ Posted November 7, 2015 Share Posted November 7, 2015 The trouble I have seen in Perth is people living above their means. So many people want to 4x2 house and the Toyota Prado. People are debted up to their eye balls and it's no suprise that Australia now has the highest level of personal debt in the world. Double of America'e levels. Greece had a massive culture of people living above their means... Look what happened there. Perth's trouble don't look so bad when you look at what people are paying for (being ripped off for) property in Sydney and Melbourne. Thats exactly it Weegie! How many people forget they have just come from a 3 bed semi and been driving a 6 year old Ford Focus, to wanting everything right away! A lot of it is to show people "how well we are doing in Australia" but dont mention they are ticked up to the eyeballs to do it! I have been here 7 years and only now have changed our 2nd hand golf that we bought when we arrived to a new car. But never been a show off! Quote Link to comment Share on other sites More sharing options...
HappyHeart Posted November 7, 2015 Share Posted November 7, 2015 We drove around in a pair of battered old heaps for ages when we arrived. It didn't matter, all we needed was something to get from a to b. Quote Link to comment Share on other sites More sharing options...
flag of convenience Posted November 7, 2015 Share Posted November 7, 2015 The problem is immigration to some extent. Cheap labour from the EU is keeping wages down, and keeping inflation down. Cheap dumping from China is also keeping inflation down. Interest rates should already be rising. The fact that they are not may lead to another asset bubble. We all know how that one ends. The govt needs some balls and needs to regulate. Without it, rinse and repeat the last ten years. The main factor of course being like in Australia cheap money. I wouldn't think the immigration Ponzi goes anywhere near as far as Australia, where every capital city is impacted. Outside of London does immigration really impact on house prices in UK? Even within London I would say it is the foreign buyers, far out weighing Sydney's numbers, that really impact. When I was searching for property in London during 2010, some 75% of sales were to overseas nationals. Insane. Although both London and Sydney now have in common the fact that ordinary people have in fact been priced out of the market. The world has not recovered from the GFC which resulted in cheap money. The effects of can now be seen. Perth is in a poor situation being a resource based city, no demand for resources and Perth somewhat losses its reason to be. Quote Link to comment Share on other sites More sharing options...
flag of convenience Posted November 7, 2015 Share Posted November 7, 2015 We drove around in a pair of battered old heaps for ages when we arrived. It didn't matter, all we needed was something to get from a to b. We drive a thirteen year old 'heap' around, to get from A to B. I don't have an issue at all with it as cars as the biggest waste of money. Sadly we are judged somewhat into our perceived prosperity by the wheels we drive. Quote Link to comment Share on other sites More sharing options...
flag of convenience Posted November 7, 2015 Share Posted November 7, 2015 The bank offered us nearly double what we actually borrowed. The repayments would have been unmanageable. We pay a bit less than what we paid in rent now. I can see the attraction though and it is harder to 'live within your means' with constant offers of credit. We learned valuable financial lessons in our 20s and early 30s and decided to be much more sensible here. Finally paying off. The banks are being forced to scale back their hyper 'generosity' after the Murray Financial System Inquiry. Quote Link to comment Share on other sites More sharing options...
HappyHeart Posted November 7, 2015 Share Posted November 7, 2015 We drive a thirteen year old 'heap' around, to get from A to B. I don't have an issue at all with it as cars as the biggest waste of money. Sadly we are judged somewhat into our perceived prosperity by the wheels we drive. Our main car (my car) is 6 years old now but still think of it as 'new' and OHs car is 20 years old! The newest BMW he could afford:) Quote Link to comment Share on other sites More sharing options...
HappyHeart Posted November 7, 2015 Share Posted November 7, 2015 The banks are being forced to scale back their hyper 'generosity' after the Murray Financial System Inquiry. We could still borrow a lot more than would be sensible. I'm looking at houses we could 'afford' by the banks reckoning and they'd be like 'dream home' but we don't earn dream home money. Debating staying on in this house for longer than originally planned now despite fact layout is less than ideal... Quote Link to comment Share on other sites More sharing options...
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