Interest Rates

[eri]

the problem for japan

is the population has peaked

they already have more than enough houses, cities, towns, villages

so no more growth

just more and more and young people moving to mega-cities and hollowing out the countryside

and a population that gets older and older every year

paying less tax, taking more pension, racking up bigger medical bills

................

but that is looking like europe's future too

sometime after that

china's

[Austrokiwi]

Europe is sick! We just got a letter from the bank.I had to read it twice before I believed it. From April our mortgage interest rate will be 0.625 %(Austria). NZ Won't be raising rates for a long time

[Wayne]

Europe is sick! We just got a letter from the bank.I had to read it twice before I believed it. From April our mortgage interest rate will be 0.625 %(Austria). NZ Won't be raising rates for a long time

At 0.625% how do they measure serviceability? Basically you don't pay anything so could afford to borrow moon beams.
Are these IO or P&I?
If P&I I suppose that would define your ability to repay?

[Austrokiwi]

At 0.625% how do they measure serviceability? Basically you don't pay anything so could afford to borrow moon beams.
Are these IO or P&I?
If P&I I suppose that would define your ability to repay?

it's owner occupied. Austria has seen huge house/apartment appreciation.Serviceability is the old nz 1980s type. 20% deposit. Payments not to exceed 33% of income. Average house price is about €500,000 _ €700,000. Average apartment €250k-€350k prices are my best guess based on our district

[Wayne]

Austria has seen huge house/apartment appreciation.

Not surprised - servicing the loan doesn't cost anything!

[Bluekiwi]

At 0.625% how do they measure serviceability? Basically you don't pay anything so could afford to borrow moon beams.
Are these IO or P&I?
If P&I I suppose that would define your ability to repay?

The world is certainly changing faster now, in many many regards, than what it used to.
Its exponential.

The news in terms of major global events, economic, terrorist, political, wars, and disasters.
Seems to constantly deliver 10 times the kind of stuff we used to get (yeah I know we see and hear things a lot more as well)

This new world order of low interest rates could creat a global land grab.
Especially in the countries where population growth is strong.

Could we be on the cusp of (courtesy of Ron Hoy Fong) - THE BOOM OF ALL BOOMS !!

[eri]

Economists have long assumed that, in practice, it would be impossible to send nominal rates below the “zero lower bound”.

Cash is the sticking point. It earns interest of 0%.

As soon as the rates banks offer fall below that, savers have an incentive to withdraw their money and stash it under a mattress (or in a safe-deposit box).

But such is the seriousness of the situation that some central bankers are now willing to give negative rates a shot.

...

the biggest effect of negative interest rates may be on currencies.

Low interest rates help to pull down yields on all manner of local investments, encouraging both natives and foreigners to put their money elsewhere.

As capital takes flight, the currency should fall.

Since the ECB introduced negative deposit rates the euro has fallen against the dollar by nearly 20%.

After Sweden adopted negative rates, the krona fell to a six-year low against the dollar.

It is no coincidence that the central bank with the greatest enthusiasm for negative rates is Denmark’s: its sole objective is maintaining a fixed exchange rate with the euro.

http://www.economist.com/news/financ...t-they-do-hurt

[Wayne]

BK - possible.
At 0.625% interest rate I don't see what stops people buying heaps?
Imagine, 6% in NZ causes a flurry (a stampede really), just what would happen at 0.625%?
The mind boggles.

[elguapo]

At 0.625% interest rate I don't see what stops people buying heaps?

Japan has had lower interest rates than this for 20 odd years. They in effect now have debts that can never be re payed and a zomibe banking system that can't extend more loans even if you could service it. The whole world is heading down this path and it's not good news for property investors at all.

[Damap]

Deflation is a killer yes. I had my money on stagflation but the last 12 months have just been so weird.

[Bluekiwi]

Japan has had lower interest rates than this for 20 odd years. They in effect now have debts that can never be re payed and a zomibe banking system that can't extend more loans even if you could service it. The whole world is heading down this path and it's not good news for property investors at all.

Thats the world Winston would have us live in.
But 50k per year Immigration, high birth rates, it aint happening here for quite some time.

You can see how it would work, once the tables eventually were turned, you only have to look at some of the rural towns of NZ.
You need to use your brains to buy in the right locations, and sell up and buy somewhere else when the writing is on the wall.

The writing has been on the wall in Japan for decades so you cant use that as an example.
Give me something better.

[Damap]

Japan is a good example of what we could all face if we live long enough though BK.
Shrinking and aging labor force.
Rising costs from a growing pool of retirees.
No fiscal fix to boost economy because everybody else is in same boat.
Could be tough for our kids.

[eri]

as the japanese gov. already know

the answer to many of their problems is

to import huge numbers of people

but the xenophobe's won't let them

tinkering with a few immigrants won't work because their population is so large

which is why nz is smart to have a continual stream of a few now

while our ageing population issue is still small

but gov. + councils

need to think ahead of their nimbie + greedy voters

and provide the infrastructure needed for future growth

not presents for the present population

[Bluekiwi]

Japan is a good example of what we could all face if we live long enough though BK.
Shrinking and aging labor force.
Rising costs from a growing pool of retirees.
No fiscal fix to boost economy because everybody else is in same boat.
Could be tough for our kids.

Yep its on the cards.

My thinking, is same as the example Mat Gilligan used a long time ago.

Buy 10 houses and wait x years till they double in value.
Sell 5, and live off the rental of the 5 that are now freehold.
Spend more time with my chidren and then ass on to my children.

Once that Nirvana is achieved then ti doesnt matter what type of flation you have

[Damap]

What sort of ass??