Real estate, post COVID-19 level 4 (since 2020)

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#3150593 20-Oct-2023 17:56

Handle9:

You aren't "outwitting" the banks. The banks don't really care what the market does as they are selling debt on cost+margin.

but its not just cost + margin. costs are not fixed. there is also incentives to gain customers. so is going to 5 year actually cheaper? it may be one year the rates will go down even cheaper than the 5 year rate. do you take the one year and hope it goes down in one year or if you think it won't go down take the 5 year. place your bets roll the dice.

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#3150600 20-Oct-2023 19:08

tweake:

Handle9:

You aren't "outwitting" the banks. The banks don't really care what the market does as they are selling debt on cost+margin.

but its not just cost + margin. costs are not fixed. there is also incentives to gain customers. so is going to 5 year actually cheaper? it may be one year the rates will go down even cheaper than the 5 year rate. do you take the one year and hope it goes down in one year or if you think it won't go down take the 5 year. place your bets roll the dice.

By and large banks are lending money on the same term they borrow at - if you take a 2 year fixed mortgage they will borrow that money for 2 years at a fixed rate, either from term deposits or the wholesale market. There's a fair bit of financial engineering involved but the principle holds.

It's just cost+margin for them. They make their money regardless of the interest rate if you don't default.

tweake

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#3150607 20-Oct-2023 20:11

Handle9:

By and large banks are lending money on the same term they borrow at - if you take a 2 year fixed mortgage they will borrow that money for 2 years at a fixed rate, either from term deposits or the wholesale market. There's a fair bit of financial engineering involved but the principle holds.

It's just cost+margin for them. They make their money regardless of the interest rate if you don't default.

we are not taking one term at one rate. we are talking multiple different terms at different rates. if it was just cost+ all the terms would all be the same, or everyone would just take the cheapest making the rest pointless.

you take the more expensive short term rate on the gamble that rates are about to drop and you will be able to take advantage of the cheaper new rates. the banks know all that so they price that in, to what they predict will happen. hence your betting against what they predict will happen.

if someone is complaining about not taking the 5 year rate, they clearly took the shorter more expensive term betting that rates would drop, but they didn't and they lost out.

Handle9

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#3150609 20-Oct-2023 20:25

tweake:

Handle9:

By and large banks are lending money on the same term they borrow at - if you take a 2 year fixed mortgage they will borrow that money for 2 years at a fixed rate, either from term deposits or the wholesale market. There's a fair bit of financial engineering involved but the principle holds.

It's just cost+margin for them. They make their money regardless of the interest rate if you don't default.

we are not taking one term at one rate. we are talking multiple different terms at different rates. if it was just cost+ all the terms would all be the same, or everyone would just take the cheapest making the rest pointless.

you take the more expensive short term rate on the gamble that rates are about to drop and you will be able to take advantage of the cheaper new rates. the banks know all that so they price that in, to what they predict will happen. hence your betting against what they predict will happen.

if someone is complaining about not taking the 5 year rate, they clearly took the shorter more expensive term betting that rates would drop, but they didn't and they lost out.

You don't understand what I am talking about.

quickymart

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#3152273 26-Oct-2023 07:17

https://www.nzherald.co.nz/business/the-front-page-how-new-government-will-change-our-housing-market/MMZSLG4RGZEIDK5DJNVJD7RIXA/

Great. Another reason not to vote National - unless you're a property owner or investor, they're probably beside themselves with glee at the moment.

mudguard

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#3152284 26-Oct-2023 08:30

tweake:

its always a gamble. your trying to outwit the banks as to what the markets will do. i dare say most people will loose and always think they should have done something different.

Personally I'm not trying to outwit the banks. My loan is split into four, some floating (very small thankfully), then three fixed terms. I'm not trying to pick the market, I'm just to prevent any shocks. So as each chunk comes up for renewal, which in my case are largely going to higher rates, my monthly repayment is only going up by a smaller amount.

Say $100,000 going from 3% to 6%. Then in twelve months another $200,000 chunk comes up. The net result might not mean I pay the absolute lowest I could, but it gives me a much better idea of what my repayments will be over the next couple of years.

I have some friends with a much larger mortgage, in one lump at a low rate that is coming off it's fixed term shortly and the difference is horrendous.

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tweake

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#3152439 26-Oct-2023 17:13

mudguard:

tweake:

its always a gamble. your trying to outwit the banks as to what the markets will do. i dare say most people will loose and always think they should have done something different.

Personally I'm not trying to outwit the banks. My loan is split into four, some floating (very small thankfully), then three fixed terms. I'm not trying to pick the market, I'm just to prevent any shocks. So as each chunk comes up for renewal, which in my case are largely going to higher rates, my monthly repayment is only going up by a smaller amount.

Say $100,000 going from 3% to 6%. Then in twelve months another $200,000 chunk comes up. The net result might not mean I pay the absolute lowest I could, but it gives me a much better idea of what my repayments will be over the next couple of years.

I have some friends with a much larger mortgage, in one lump at a low rate that is coming off it's fixed term shortly and the difference is horrendous.

agreed. your also not complaining that you missed out on xyz rate even tho you know you could have done better. you win some you loose some, hence its a gamble.

with your friends mortgage they have had low rates for a long time and hopefully they made use of it before we went back to "normal". the problem is really that some people didn't take advantage of the low rates to get ahead of their mortgage.

for me i'm on variable so i've been on 8+% for a long time. but i'm not complaining as i took advantage of the low rates and got way ahead.

tweake

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#3152441 26-Oct-2023 17:17

quickymart:

https://www.nzherald.co.nz/business/the-front-page-how-new-government-will-change-our-housing-market/MMZSLG4RGZEIDK5DJNVJD7RIXA/

Great. Another reason not to vote National - unless you're a property owner or investor, they're probably beside themselves with glee at the moment.

well actually national campaigned on the promise of making the housing crisis worse, and people voted for them. most people WANT prices to go up because its their life savings. hence they want govt to exploit FHBers and immigrants as much as possible.

mattwnz

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#3152453 26-Oct-2023 18:35

tweake:

quickymart:

https://www.nzherald.co.nz/business/the-front-page-how-new-government-will-change-our-housing-market/MMZSLG4RGZEIDK5DJNVJD7RIXA/

Great. Another reason not to vote National - unless you're a property owner or investor, they're probably beside themselves with glee at the moment.

well actually national campaigned on the promise of making the housing crisis worse, and people voted for them. most people WANT prices to go up because its their life savings. hence they want govt to exploit FHBers and immigrants as much as possible.

Supposedly the housing crisis ended, but is going to occur again due to the record high immigration according to this article. https://www.interest.co.nz/property/124937/immigration-driven-population-growth-auckland-means-demand-housing-starting-exceed

It is obvious that when you create more demand, then supply will reduce, and that then can drive up prices. Guessing National will again deny there is a housing crisis like they did last time they were in power. But then said there was a housing crisis both before and after they last time in power. But Labour isn't really any better, except they did try and get investors to buy new, rather than existing homes with the interest deductibility removeable, so First Home buyers were on a level playing field. But that will now be reversed. Landlords seem to be in it for the tax free capital gains when they eventually sell in 20 +years time for retirement, when IMO it should be taxed.

tweake

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#3152463 26-Oct-2023 19:35

mattwnz:

Supposedly the housing crisis ended,

sadly it hasn't.

that BS was being pushed by the RE companies via the media for a short time. standard marketing smoke screen, say the opposite of the truth. house price are still triple, maybe quadruple, "affordable" house to income ratios. you could drop prices in half and still not end the housing crisis. people are sweating because of the drop in prices after covid, imagen the terror and panic if prices dropped to affordable levels.

tweake

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#3152468 26-Oct-2023 19:47

mattwnz:

It is obvious that when you create more demand, then supply will reduce, and that then can drive up prices. Guessing National will again deny there is a housing crisis like they did last time they were in power. But then said there was a housing crisis both before and after they last time in power. But Labour isn't really any better, except they did try and get investors to buy new, rather than existing homes with the interest deductibility removeable, so First Home buyers were on a level playing field. But that will now be reversed. Landlords seem to be in it for the tax free capital gains when they eventually sell in 20 +years time for retirement, when IMO it should be taxed.

more demand will increase prices, which is the whole point of the game. trouble is people need to have money to pay for it. so i fully expect there to be a big campaign (again) to push fhbers into working 24hr 7 days a week, 4 jobs (and i'm not kidding, its been promoted before), loose all their kiwisaver, just so they can hand over their paycheck to someone else. failing that the immigration tap, however thats a double edge sword for politicians.

no major political party mentioned anything about fixing the housing market. just think about why that is.

landlords will absolutely cream it big time and fly by night investors will dive in digging for gold. house prices will rocket and rents will follow.

hopefully this time they will bounce the house prices so high it crashes and burns nz economy to the ground.

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quickymart

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#3152481 26-Oct-2023 22:26

mattwnz:

It is obvious that when you create more demand, then supply will reduce, and that then can drive up prices. Guessing National will again deny there is a housing crisis like they did last time they were in power. But then said there was a housing crisis both before and after they last time in power.

I remember that - I think in 2014 Key said there was no housing crisis/shortage (prices were a lot better back then though, compared to today's sky-high nonsense). English said something similar in 2017. It wasn't until just before the election that year and they realised that they could potentially lose that suddenly National did a 180° and all of sudden there was a housing crisis. Didn't help them win the election then though.

mattwnz

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#3152486 27-Oct-2023 00:30

quickymart:

mattwnz:

It is obvious that when you create more demand, then supply will reduce, and that then can drive up prices. Guessing National will again deny there is a housing crisis like they did last time they were in power. But then said there was a housing crisis both before and after they last time in power.

I remember that - I think in 2014 Key said there was no housing crisis/shortage (prices were a lot better back then though, compared to today's sky-high nonsense). English said something similar in 2017. It wasn't until just before the election that year and they realised that they could potentially lose that suddenly National did a 180° and all of sudden there was a housing crisis. Didn't help them win the election then though.

Yes people and the mainstream media quickly forget, or it doesn't suit their narrative. Although National got a higher percentage back then, than they got in the most recent election, but Winston decided to go with Labour which was a bit of a shock at the time.

mattwnz

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#3152487 27-Oct-2023 00:37

tweake:

quickymart:

https://www.nzherald.co.nz/business/the-front-page-how-new-government-will-change-our-housing-market/MMZSLG4RGZEIDK5DJNVJD7RIXA/

Great. Another reason not to vote National - unless you're a property owner or investor, they're probably beside themselves with glee at the moment.

well actually national campaigned on the promise of making the housing crisis worse, and people voted for them. most people WANT prices to go up because its their life savings. hence they want govt to exploit FHBers and immigrants as much as possible.

New Zealand has had a Property price 'bubble' between 2020 and 2022, and then a 'crash'. Two words which the mainstream media in NZ don't seem to use. Although overseas, including in Oz, they call the NZ house price fall a 'crash' https://www.macrobusiness.com.au/2023/05/new-zealands-house-price-crash-is-one-for-the-ages/ . imo Rising interest rates are one of the main factors in prices rising or falling. So they are the main reason IMO that prices have crashed in many places as the rates increased. I don't know how some of these people who purchased at the peak can afford to service their mortgage. There was a story on the radio about a family who had borrowed a million dollars and are now really struggling. I can't really understand why banks were stress testing people at such a low interest rate at the time, when the emergency low interest rates were supposed to be just a temporary thing. Especially as unlike the US, we can't lock in the low rates for anymore than 5 years. Whereas in the US or Japan you can lock in the low rates for 30 years.

tweake

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#3152778 27-Oct-2023 16:05

mattwnz:

New Zealand has had a Property price 'bubble' between 2020 and 2022, and then a 'crash'. Two words which the mainstream media in NZ don't seem to use. Although overseas, including in Oz, they call the NZ house price fall a 'crash' https://www.macrobusiness.com.au/2023/05/new-zealands-house-price-crash-is-one-for-the-ages/ . imo Rising interest rates are one of the main factors in prices rising or falling. So they are the main reason IMO that prices have crashed in many places as the rates increased. I don't know how some of these people who purchased at the peak can afford to service their mortgage. There was a story on the radio about a family who had borrowed a million dollars and are now really struggling. I can't really understand why banks were stress testing people at such a low interest rate at the time, when the emergency low interest rates were supposed to be just a temporary thing. Especially as unlike the US, we can't lock in the low rates for anymore than 5 years. Whereas in the US or Japan you can lock in the low rates for 30 years.

absolutely.

its a bubble on top of a house crisis boom. prices have only rolled back a tiny amount. by mem i think its down to 2021 levels. trouble is the RE are trying to change the language by claiming the house crisis is over. trying to normalize a bad situation, standard gaslighting tactic.

the thing is million dollar mortgages are not uncommon now, it won't be long until it will be a requirement. you do not get much of a house for that money either. a low standard crap house with tons of lipstick. however its hard to feel sorry for many of them when i dare say most went into it with the idea they will make $$$ off the boom.

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