RBA slashes Rates by a full 1%

[mr smith]

Will be interesting to watch house prices, low interest will encourage more buying.
BUT
The difference over the last couple of weeks has been the changing job security of thousands of Aussies. Every second person I talk to is worried about their future, once prices start to slide and confidence is eroding it wont take long for a crash.

[4Vman]

Originally Posted by Rodp

A scam a bank has come up with?

It's how I also do things and I'm on target for knocking off 10 years of repayments, 5 years into paying it off - as time goes by, that target will continue to drop.

If you can't keep control of your spending, that's a different issue entirely. I only put on credit what I would normally have paid cash for. I zero the credit card balance before the interest free period ends and my paycheck going straight into my homeloan is offsetting my interest.

Exactly how i do it, the credit card is a convenient way to spend, its also a good way to reconcile your month's spending, you just transfer a lump sum at the end of the month to avoid any interest payments..
Some cards like Amex give you a statement at the end of the financial year breaking your spending habits into segments, it can show trends, in any event the smart way to use credit is to only spend what available funds you will have to clear it before interest is payable..

[mr smith]

Originally Posted by mr smith

In my opinion this is one of the biggest scams the banks have come up with. Has never worked in the long term for anyone I know, all they end up with is a blown out credit card debt because they cant keep track of their spending. Cash will always be king.

OK I'm happy there are lots of disiplined people here. My argument is that the banks know most will over draw and not keep an eye on their spending for the life of the loan, some of the most responsible people I know have been trapped by this.
Do you really think the bank wants to help you save money?

If you do thats cool.
Me? no.

[balthazarr]

Slightly off-topic, but related nevertheless...

I've never understood the concept of a recession. Well, not the concept... but how they arise:

1. Some bean counter stands up and says that times are tough, future is bleak, etc.

2. Other bean counters take note and most will agree... yes, yes... times are tough, future is bleak, etc.

3. Gradually, this info trickles down towards the average Joes and Janes.

4. Like in Chinese Whispers, by the time average J & J get the info, the sky is falling.

5. Average J & J panic, clamp down on any non-essential spending.

6. Small businesses everywhere start to feel the drop in sales of average J & J not spending as much, so they readjust their forecasts, maybe ordering in less stock.

7. Wholesalers notice small business drop in sales, and readjust their forecasts, maybe ordering less stock and laying off a few workers.

8. Large multi-nationals notice reduction in orders from wholesalers, lay off hundreds, reduce production numbers and batten down the hatches.

9. Thousands out of work, with no disposable income to spend; Those that have disposable income won't spend it due to the 'recession'.

10. Some bean counter stands up and says that times are tough, future is bleak, etc.

The recession would never happen if, at step 5, average Joe and Jane continue spending as they normally would.

[BENT_8]

Originally Posted by 4Vman

You can't compare the US housing market to ours, we have a chronic short supply of housing here, people are itching to get into the market, either as investors, or upgraders, not just first home buyers, if loans become more affordable people will be more keen to get in, more people competing for the same property will have a natural tendency to drive prices upwards, as has been happening for the past 8 years... The last crop of rate rises just slowed things.. if rates drop watch the auctions go crazy.

You certainly can gauge our housing market on not only the US market, but world markets in general.
It has been forecast in certain circles that as much as 40% will be wiped from values as has been seen in the last 24-36mths in the US.
We always follow suit soon after.

As for the housing shortage, i'd suggest an era of government owned 'owner buyer' schemes as was offered here in SA during the 60's 70's whereby new immigrants were offered low payment loans to get out of hostels and into their own homes.
Our local government off loaded most of our government housing in the last 15yrs and in a lot of cases to people who needed little more than 1K in the bank for 3mths to get the loan with the government 1st owners grant to cover the legals.
There is now a plan in progress to put up multi floored units all over Adelaides north to house those after this all settles aswell as employ a large portion of the then out of work building trade, also a trait of the 60's 70's although that was more a product to aid the migration boom of 10 pound poms.

Time will tell.

[4Vman]

Originally Posted by BENT_8

You certainly can gauge our housing market on not only the US market, but world markets in general.
It has been forecast in certain circles that as much as 40% will be wiped from values as has been seen in the last 24-36mths in the US.
We always follow suit soon after.

As for the housing shortage, i'd suggest an era of government owned 'owner buyer' schemes as was offered here in SA during the 60's 70's whereby new immigrants were offered low payment loans to get out of hostels and into their own homes.
Our local government off loaded most of our government housing in the last 15yrs and in a lot of cases to people who needed little more than 1K in the bank for 3mths to get the loan with the government 1st owners grant to cover the legals.
There is now a plan in progress to put up multi floored units all over Adelaides north to house those after this all settles aswell as employ a large portion of the then out of work building trade, also a trait of the 60's 70's although that was more a product to aid the migration boom of 10 pound poms.

Time will tell.

HUH? how do you come up with that?? Unless someone builds a massive bridge and joins Australia to the US and share economies our housing market and environent is COMPLETELY different to the US's..
They're totally seperate and totally different.

[wulos]

I had prepared a pretty deep and for many meaningless reply about how official rates are never reflected in full by the lenders rates, and whether the RBA actually has any real relevance since deregulation, but it really doesn't matter.
More people flocking to major banks (with major banks aquiring any of the smaller competition) means that more people will be affected when things go bad. The joys of monopolies.

[Rodp]

Originally Posted by mr smith

OK I'm happy there are lots of disiplined people here. My argument is that the banks know most will over draw and not keep an eye on their spending for the life of the loan, some of the most responsible people I know have been trapped by this.
Do you really think the bank wants to help you save money?

If you do thats cool.
Me? no.

The bank has nothing to do with this scenario.. (?)

It's costing me an account keeping fee for my credit card which is sod all and all my cash goes straight into the home loan. I could redraw cash weekly as I needed it and leave the minimum payment over the month and still knock years off the home loan at no additional cost to myself.

I just choose to pay credit for everything I buy since it's a lot more convenient and doesn't require much forward planning and is reconciled within a minute at the end of the month.

I don't know how a responsible person can get caught out spending money they don't have - all my transactions and balances are quite easy to view. Suggests to me they're not that responsible.

[Romulus]

The whole economy is geared on credit growth. Without it, it will collapse, as is unfording now. The reserve bank is willing to forgo inflation targets of 2-3 percent (we will approach 5 percent by the end of this year) in favour of reducing the cash rate in an attempt to stimulate credit growth.

As much as many have stated their disappointment at the reserve bank lowering interest rates by 1 percent to a 6 percent cash rate, you can be almost gauranteed the reserve bank cash rate will end up at or slightly below 4 percent by the end of next year to stimulate the economy.

[Pinch]

For those with Wizard, from what I can gather they have not only not passed on any decrease, but their website today confirms their old, higher rates as at yesterday. No mention of a review of rates or pending reduction as they normally do. Now their standard variable is well above the banks so they either need to reduce their rates, or discontinue their advertising stating that their's is lower.

There is little that I can do as I am fixed at 6.8 for most of my loan anyway so this is almost all academic save for a few beers here and there on my variable portion. Its just the principle of the thing. My fixed contract does run out soon and if Wizard keeps this up, so will I also run out on them. Might be an issue for the advertising regulators too.

What's up with other people's banks, and be interested to see if there is any more up to date info on Wizard?

[Yellow_Festiva]

ING took about 10 days to pass on the last cut, their website hasn't been updated since 26 Sep.

Still variable of 8.74%.. would love see that get that down to 7.99%

[Scott]

I'm ANZ (dropping to ~8.57%) but I noticed CBA was heading to ~8.02%.

[BENT_8]

Originally Posted by 4Vman

our housing market and environent is COMPLETELY different to the US's..
They're totally seperate and totally different.

So you keep saying..

Time will tell.

[Rodp]

Originally Posted by TVS Super Pursuit

The whole economy is geared on credit growth. Without it, it will collapse, as is unfording now.

Unfording?

You should copywright that word, it's a beauty!

[Pinch]

Wizard now dropped by 0.80% too. SV now 8.49%. Effective 16/10 for existing customers.

[Stav]

Originally Posted by GTP006

I've had the long standing thought that we've been in recession for some time now. The mining boom doesn't reach very far south...

This country has been in reccession for about 2 years now. In this country the gst had seen record surplus funds held by the federal government as reported at budget time. The amount of vacant commercials properties I have seen in Sydney are amazing.So many empty places.At the post office in Merrylands...half the po boxes are up for lease as a result of the closure of many businessess. To survive in these times you have to be lucky,smart,rich,or have a good business.
The RBA monetary policy via interest rate drop is a move to protect this countries economy from collapse.

[Romulus]

Originally Posted by Rodp

Unfording?

You should copywright that word, it's a beauty!

: meant unfolding, but couldn't edit in time.

[HUNTER8]

Originally Posted by 4Vman

HUH? how do you come up with that?? Unless someone builds a massive bridge and joins Australia to the US and share economies our housing market and environent is COMPLETELY different to the US's..
They're totally seperate and totally different.

So how come we are affected by their credit crisis and property prices elsewhere in the world have dropped?

[Romulus]

Originally Posted by HUNTER8

So how come we are affected by their credit crisis and property prices elsewhere in the world have dropped?

Because of the sub-prime mortgage defaulters, and the lenders going broke. This is what happens when you lend money to people with no savings, no earnings, no jobs, no credit history and expect them to repay a mortgage for a home.

Suddenly all that cheap money becomes expensive, banks tighten their lending policies and go hand in cap to the government and customers to recoup their bad decision making.

Property prices fall as a result of half the number of people in your street defaulting or selling their property at firesale prices. This affects your property value.

It's something that should happen here in WA, to bring real estate prices back to a normal level, pre 47% p/a increase in property value in 04/05.

[DOC]

Originally Posted by TVS Super Pursuit

It's something that should happen here in WA, to bring real estate prices back to a normal level, pre 47% p/a increase in property value in 04/05.

In SA (news), they predict a 40% drop to bring things back into line across the board, ?

[charles_wif_xf]

We are screwed. Why, because when the US goes under (which it will), there goes China's biggest customer for all its two bit wares. Once the US money dries up, so does their demand for our ores and other mineral resources. Plus, Europe is also headed the same way as the US, so there goes our next biggest customer of things Australian...

[Romulus]

Originally Posted by charles_wif_xf

We are screwed. Why, because when the US goes under (which it will), there goes China's biggest customer for all its two bit wares. Once the US money dries up, so does their demand for our ores and other mineral resources. Plus, Europe is also headed the same way as the US, so there goes our next biggest customer of things Australian...

Really? Here's another perspective from Crikey.com

"I’m still waiting for someone to produce some reasoning as to why the Australian economy is going to shrink, let alone fall off a cliff, because there’s no evidence for it. And the collective amnesia about the fact that six months ago we were all worried the economy was running too hot is particularly annoying.

The IMF doesn’t think we’re too badly placed. And unemployment figures for September came out this morning. Employment is a lagging indicator, so it presumably won’t tell us much about what’s happening now, but unemployment skyrocketed to an alarming ... 4.3%, in seasonally adjusted terms.

In trend terms, employment rose slightly and unemployment fell slightly. Employers who are still struggling to get skilled staff might be able to breathe a sigh of relief sometime soon, but not right at the moment.

And then there’s commodities and China. Chinese growth is tipped to slow to a sluggardly 9%. It wasn’t too long ago that the main worry about the Chinese economy was overheating, as well. You’d have to tip that the long boom in commodities prices is over, but who seriously thinks that with Chinese demand still growing strongly, they’re going to fall back to the sort of levels we saw in the early part of the decade?

But China relies on exports, people will object, especially to Europe and America. Indeed. But it also has 1.2 plus billion people, in a region with another billion people in rapidly-developing economies (remember that enormous disaster, the Asian economic crisis?). So far this is whites-only crisis."

[Scott]

The trend in Asia to move from rural to urban landscapes is not something that can stop overnight. The same trend will really impact South Africa & South America in the not too distant future.

The drain on our resources is pretty safe for the moment which should, in the very least, keep kicking the tin for some time ahead.

At this stage, we are relatively insulated.

[SB076]

Originally Posted by TVS Super Pursuit

Really? Here's another perspective from Crikey.com

"I’m still waiting for someone to produce some reasoning as to why the Australian economy is going to shrink, let alone fall off a cliff, because there’s no evidence for it. And the collective amnesia about the fact that six months ago we were all worried the economy was running too hot is particularly annoying.

The IMF doesn’t think we’re too badly placed. And unemployment figures for September came out this morning. Employment is a lagging indicator, so it presumably won’t tell us much about what’s happening now, but unemployment skyrocketed to an alarming ... 4.3%, in seasonally adjusted terms.

In trend terms, employment rose slightly and unemployment fell slightly. Employers who are still struggling to get skilled staff might be able to breathe a sigh of relief sometime soon, but not right at the moment.

And then there’s commodities and China. Chinese growth is tipped to slow to a sluggardly 9%. It wasn’t too long ago that the main worry about the Chinese economy was overheating, as well. You’d have to tip that the long boom in commodities prices is over, but who seriously thinks that with Chinese demand still growing strongly, they’re going to fall back to the sort of levels we saw in the early part of the decade?

But China relies on exports, people will object, especially to Europe and America. Indeed. But it also has 1.2 plus billion people, in a region with another billion people in rapidly-developing economies (remember that enormous disaster, the Asian economic crisis?). So far this is whites-only crisis."

Australia has been riding a mining boom and suppling resources to not just China but also Europe as they undertook in large scale infrastructure development. With Europe and China slowing there is less demand for our resources which will end the boom in mining. Add to that the US economy which will effect China and further reduce there needs for our resources. Hence why BHP shares are dropping even more than our banks.

As usual though negative press etc doesnt help and will probably make the situation worse than what it needs to be. Dont get me wrong I think Australia's economy is about as best placed as it can be given the situation. However the current finacial situation ahs still got a way to go and who knows how it will unfold.

[charles_wif_xf]

Woops, looks like China is having second thoughts:

http://www.theage.com.au/national/al...1010-4xoe.html

[Scott]

Originally Posted by SB076

With Europe and China slowing there is less demand for our resources which will end the boom in mining.

The boom will not end any time soon, it may suffer a hiccup but it is really still in its infancy.

[4Vman]

Originally Posted by TVS Super Pursuit

Because of the sub-prime mortgage defaulters, and the lenders going broke. This is what happens when you lend money to people with no savings, no earnings, no jobs, no credit history and expect them to repay a mortgage for a home.

Suddenly all that cheap money becomes expensive, banks tighten their lending policies and go hand in cap to the government and customers to recoup their bad decision making.

Property prices fall as a result of half the number of people in your street defaulting or selling their property at firesale prices. This affects your property value.

It's something that should happen here in WA, to bring real estate prices back to a normal level, pre 47% p/a increase in property value in 04/05.

The US banks are far more exposed than we are to bad investment which is why IMO we wont follow their trend:

Originally Posted by fmc351

Make of it what you will.

[XWGT]

Originally Posted by HUNTER8

So how come we are affected by their credit crisis and property prices elsewhere in the world have dropped?

Ok here is a very important point.

In the US, the banks take ALL the risk from defaults on mortgages. In other words, if you cant pay for you house anymore, you just walk away and the bank has to pick up the loss on sale etc. You walk away scott free without a cent to pay, so the banks have real losses on their books, not just paper ones.

Here in Aus, YOU take the risk. If you cant pay for your house, the bank reposesses it. They then sell it for a song. The difference between what you owe and what they get for it is paid by the mortgage insurer. The mortgage insurer then comes after YOU for the difference. If not insured, the bank comes after you directly. i.e the banks never lose in Aus.

Thats the fundamental difference and reason why property prices have plummeted (over supply from banks selling and not enough deman to sustain prices) and banks have taken massive real $ hits ( remember mortgage insurers Fanny Mae and Freddy Mac? They were paying for all the losses, but then it got too big and they folded so the banks had to take all the losses, which got too big so they folded.............repeat until economy melts.......)

[*rayman*]

Bit of a flipside view for all us car enthusiasts.....

This is going to affect the over inflated prices of muscle cars (both here and in the U.S) as more people decide they dont need so much money tied up in a lifestyle asset. It may go further and affect prices on expensive vehicles period.

There will be people that have bought these types of cars that can and will afford to keep them, and then there is the group that have purchased them with equity from their houses, or from 'mining boom' related jobs. They will also have a lot of other lifestyle assets most likely try and move to free up some money if times get tougher....

There may be some bargains turn up in the coming months / years.... just make sure you have the money to snap them up when they appear.

It may not happen overnight, but it will happen.

[4Vman]

Originally Posted by *rayman*

Bit of a flipside view for all us car enthusiasts.....

This is going to affect the over inflated prices of muscle cars (both here and in the U.S) as more people decide they dont need so much money tied up in a lifestyle asset. It may go further and affect prices on expensive vehicles period.

There will be people that have bought these types of cars that can and will afford to keep them, and then there is the group that have purchased them with equity from their houses, or from 'mining boom' related jobs. They will also have a lot of other lifestyle assets most likely try and move to free up some money if times get tougher....

It may not happen overnight, but it will happen.

Hm.. i think that's already happened to some extent..
The 1% drop has created an instant wave of interest in property here in Vic, i've got 3 friends who are mortgage brokers, all work for separate firms, their phones went into melt down over the past few days, the lowering of interest rates and the forecast of another wave of falls has excited the market, watch auction results over the coming months.....

As a side note has anyone done the math on buying and selling recently? i did yesterday... to sell and buy (move homes) a property of similar value of around $800K will set you back close to $70K in costs and fees!!!!