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Member since 02 Nov 2007
Member from Levin
Yes Joybel, I certainly do remember the high interest rates in the 80s. I bought a house with a 7% interest rate on the mortgage and within 18 months my interest rate had jumped to 18%. Luckily I had not borrowed too much but there were a lot of enforced mortgagee sales in those times.
What I dont understand is that people are still able to get single figure interest rates on their mortgages today and yet on-line savings accounts are earning over 8.5% and term deposits are over 9% with most banks.
Also can anybody give me information about these `no deposit needed' house purchase deals. Someone I know is just entering in to one of these and is preparing to borrow 100% of the purchase price - sounds scary to me.
Member since 18 Mar 2007
Member from Papakura
Scares me too.
Has your friend considered this....the bank lends 100% on a property and your friend moves in.
In the meantime the economy is slowing, house prices are falling and will continue to fall yet for a while. Realisticly.
How secure is she with her job in a falling economy for repayment issues.
If she loses her job how is she going to repay the loan.
Consider this....she purchases a home for say $300,000.00 with no deposit.
House prices continue to fall, and she is unable, for a variety of reasons, to service the mortgage.
The bank forecloses and puts the property on the market to recoupe their money.
In the meantime property prices have slumped and the price for sale is $275,000.00 which the bank get.
So now we have a deficit of $25,000.00, plus fees which includes agents commision.
The deficit has now blown out to somewhere between $30 and $35,000.00, but the bank will want to recoupe this money thats owing and will force it if necessary....so....your friend has no home and owes the bank close to $35,000.00 dollars. They've got her by the short and curleys love. Hope it helps.
Is there an Agent out there that could advise.
Member since 09 Dec 2006
Member from Te Awamutu
Joybel, in answer to your post #28, no, I would not like to go back to that basic wage of the 50s, but that is noty what I was meaning.
Regardless of what the wages are, the banks should not be charging more than 5 %. The INTEREST take of 5 % on $300,000 is more than enough to cover their expenses and give them a respectable profit margin. Just as in the 50s 5 % was enough on a $30,000 mortgage.
At 30,000 the 5 % return was 1500. At 300,000, the 5 % return is 15000. And that is every year.
The point I make is that they will always make a profit. The bigger the loan, the bigger the returns, even at the same interest rate. And don't insult our intelligence by saying their overheads are higher. In proportion to those days, they are not. What they invest in computer systems, they save on manpower. There used to be many more staff in the banks ( and other businesses ) than there are now.
But they have become greedy, and the govt has let them, in fact encouraged them. It means more taxes.
Thanks for that Squirter,
She does not have a secure job so now I am really worried for her. The land agents and the mortgage-brokers just want to make their cut - they dont really care about the long term consequences for her. A good accountant or lawyer should caution against this madness but I dont know if she has either of these.
But she is a grown woman with a strong will and all I can do is be ready to pick up the pieces. I will put your scenario to her but the real problem is she does not want to hear about the pitfalls - she just wants to make money.
Print it out and leave it on her table without saying a word, she will read it and digest it at here liesure.
You can only help those that are prepared to help themselves.
Cheers to you love.... an ex Sussex St boy.
G'day back to you Squirter,
There was an item on TV the other night that made the exact same point as you did in your earlier post - now I just hope that the bank I have my money invested with is not one of the lenders of the 100% loans.
My friend had their application for a loan turned down which is lucky for her altho' she doesnt see it that way.
Any hints for me re buying and selling on a declining property market?
Member since 02 Nov 2006
Member from Linwood
Did you get a shock to see the very short clip on the TV1 news of the tent town in USA, where families who have lost their homes in mortgagee sales, are reduced to living? Is the writing on the wall for Kiwis in the same boat? If you can't pay the mortgage you won't be able to afford the rental prices either, as demand will push the rents higher.
Member since 27 Jan 2010
Member from Alicetown
Post deleted at 27 Jan 2010 11:46am by GrownUps Administrator
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