Five reasons for the RBA to keep rates on hold
Five reasons for the RBA to keep rates on hold
With the economy slowing, inflation pressures easing and household expenditure diving, starting the new financial year with hike number 13 could well prove to be an ominous sign, writes Ian Verrender.
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On cue, there's been a sudden spike in homes, owned for two years or less, being sold for a loss.
During the pandemic first-home-buyers splurge, just 3 per cent of properties held for less than two years were sold at a loss. That's suddenly now leapt to 12.3 per cent.
Will be an interesting number to watch going forward.
Unpopular opinion, but if future generations are going to be able to own a home in the lands of their parents, grandparents, and great grandparents, rates need to continue to rise and debt costs need to come way up so people start using money instead of debt.
Does Australia have long long term mortgages like America's 30 year? In canuckistan over 90% of mortgages are 5 years or less because a 10 year has a couple percent premium and by the time you hit 20 years you were looking at like an 8% rate when you could get 5 years for like 2%.
If Australia is similar to canada in that regard, the real scary part will be when the fixed rate mortgages taken out during the pandemic reset in about 2 years.
Australian mortgages are usually over a 30 year term.
So the interest rate is fixed for 30 years, or it takes 30 years to pay it off?
Variable rate, calculated daily, over a 30 year term
2 years seems to be the standard here for fixed terms. We're expecting that cliff edge any day now.
Boomers and inflation
I hate to say it, but, it's the boomers I'm sure. Again.
I'm travelling Australia and working. I'm Gen X. It's a slog, but enjoyable and a chance of a lifetime.
Our house at home has a massive mortgage and we're renting it out. We run at a loss on our house, as we can't socially justify renting it at the rate it would take to break even. So we take the loss.
But, interest rates are rising. They keep going up. People are still spending. Who are these people?
It's the boomers.
On this trip I see boomer after boomer in $120K + tow vehicle, with $150k + caravan. Kitted out with everything you can imagine. Spending like crazy, and I mean like crazy, on whatever they want. Fishing rods, fishing gear, the BEST tyres for their vehicles, suspension upgrades that I can't imagine the cost of. Meals and cafe's every bloody day. I see them sipping their latte's and eating carrot cake, spending $60 to $80 a night on van parks and in a discussion with one, he told me he thought even $90 a night was good value. Unbelievable. They eat at restaurants all the time and have the best of everything.
It's.. the.. BOOMERS. I hate to say it, it's like some haunting htat never stops, but it's true.
They have NO mortgage. The rates don't impact them one bit. Their extra rental properties are bringing them in more than they could have dreamed and the rest of us are getting these bogus interest rate rises, as if that will fix the problem.
None of us, or very few of us, can spend like the boomers can, and are.
Now, I have had them say to me "oh, we worked hard, we didn't complain like your generation" and "we drove clapped out cars, and we finally made it", etc. Now that is fine, good on them, but it doesn't change the fact of what is driving this inflation.
I read that about 25,000 new caravans a year are being sold in Australia. Add that many dodge rams and other large tow vehicles, then all the gear that goes with them. It's insane.
/rant over