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Thread: Interest Rates

  1. #1261
    Join Date
    Oct 2006
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    Auckland
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    We have had a closer look at both of our IP's accounts again, and to our surprise both properties are doing well and are both cashflow +ve. One by $5900 pa, and the other by $1400. Time has increased both the
    rents by about $50 each over about a 5 year period and this has really helped our cashflow. Add to that the new rate on one of them and our cashflow is really healthy now.

    As we are building a new home with increased mortgage, we are now going to stay IO on both properties and going P&I on our PPOR, we will use the extra cashflow from our IP's and pay done our home loan quicker,we will stick a portion of the loan on a revolving credit so that we can put lump sums on it once a year.

    The good thing is now that the IP's are paying for themselves, we can just sit on them and wait for them to increase in value, while working hard on our home loan which we cannot depreciate the interest.

    Time in the market really helps your cashflow, and getting through a slump has a positive effect on you portfolio.

    FH

  2. #1262
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    Vienna, Austria
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    Thanks Drelly. And I thought Austrian Banks were sharks. Since seeing how low Austrian Mortgages are in comparison to NZ mortgages( in relation to OCR) I wonder if NZ banks are following a UK model. The other possibility is may reflect on a low savings rate. Austria with its history has a population who have far higher savings levels than the UK and NZ.
    Last edited by Austrokiwi; 26-01-2012 at 06:57 PM.
    The mission of any business enterprise should include the aim to develop economic conditions rather than simply react to them.

  3. #1263
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    3,691

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    Quote Originally Posted by freezinhot View Post
    The good thing is now that the IP's are paying for themselves, we can just sit on them and wait for them to increase in value, while working hard on our home loan which we cannot depreciate the interest.

    Time in the market really helps your cashflow, and getting through a slump has a positive effect on you portfolio.

    FH
    That is a happy ending!
    Well done, FH.
    Now you are set up for life.
    And to think Bernard Hickey and his nutter friends paint you as an evil bastard who deserves to be taxed, tarred and feathered.
    Last edited by Perry; 27-01-2012 at 12:00 PM. Reason: fixed typo

  4. #1264
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    Jan 2008
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    Wellington
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    Quote Originally Posted by Austrokiwi View Post
    Since seeing how low Austrian Mortgages are in comparison to NZ mortgages( in relation to OCR) I wonder if NZ banks are following a UK model. The other possibility is may reflect on a low savings rate. Austria with its history has a population who have far higher savings levels than the UK and NZ.
    Austrokiwi: I am surprised to hear Austrian bank housing loan interest rates are that low i.e. 2.75%. I have long believed that NZers have been "conditioned" to accept higher "prices" for everything--money not excluded.

    Is that Austrian rate floating or fixed ? If fixed, for what duration can that be got for ? Can you find out definitively why it is so low ?

    My theories: Austrians are well educated in Mises "Austrian Economics" theories

    Possibly Austrian people, because of their attitude to savings, have created heaps of equity/money to lend out using their own surplus funds generated within the country rather than using expensive overseas funds. The other thing may be that they are simply smart enough not to take loans when ridiculous interest rate figures such as those quoted in NZ (i.e. be price sensitive and reduce demand ). Maybe they save up a lot more money before they buy a house making them low risk debtors.

    Does the government control of the margin banks are allowed to make? In NZ the government is ofcourse hands-off and lets our brother bankers from across the ditch screw us royally (apart from recent ineffective mumblings by RB Governor Bollard about "bank efficiencies"

    On the flip side--one assumes the poor Austrian savers are not getting much interest income either? So what does a retiree's safe bank savings deposit pay as interest ?
    Last edited by Perry; 28-01-2012 at 08:43 PM. Reason: fixed typo

  5. #1265
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    Ours is a floating rate mortgage. Its flexible but we can't redraw on it. In 2002 we applied for the mortgage and signed the mortgage agreements at 5.6%. By the time we actually finalized the purchase contract( takes a long time in Austria) the interest rates ( by the way the interest rate I am quoting in our case is APR) had dropped to under 4%. In Austria Fixed rate mortgages are more expensive than floating. Long ago I gained the impression that Nzers were just conditioned to high interest rates. I don't think the average Austrian is cognizant of the Austrian school. Rather they have in, in at least, familial memory the loss of empire, the 1920s Inflationary period, the depression, then the complete ending of Austria as a nation state, and then the rebuilding after WWII. With that history (and physical reminders still exist) Austrians seem to abhor debt. I think there is another key to saving ( this will seem slightly weird hypothesis) Salaries and wages are paid once a month*. Not the NZ standard fortnightly. I know from my experience that shifting to a once a month salary enforces budgetting, You find very quickly you save more in each pay. It seems to me fortnightly salaries allows one to be that little more lazy with money matters.....and it makes reaching for the credit card just a little less
    worrying.

    Here s a link to a web site confirming the interest Rate(many banks don't advertise the mortgage rates as generally they tailor the mortgage rates and conditions to each persons assessed risk.
    http://www.investinaustrianproperty....ge_advice.html

    If you were looking at borrowing from Austria for an NZ propertyyou could do it( I think you would have to go to one of the private banks. but then you are exposed to the exchange rate risk. you can reduce the risk by using currency options as hedges but the cost of that would have to be counted as part of the expenses of your mortgage. NOw This leads, I realize to supporting the idea a low national savings rate supports a high interest rate... NZ banks to fund their lending have to borrow and must hedge for currency fluctuations.

    Some other comments: A lot of people ( mainly expats ) have complicated mortgage types. A common one is a endowment Life insurance policy linked mortgage. In effect its an interest only mortgage with compulsory payments into a Insurance policy that is expected to payout the value of the mortgage at the other end. Great for the banks...as they get higher interest over the mortgage term and a commission on every policy sold!! The other one is a foreign borrowings. I am not sure how it operates ( thats why we don't have one) In this one The mortgage is denominated in a low interest currency like Yen and you pay back in a strong currency usually Swiss franks. Recently both these last two types of mortgages have seen borrowers out of pocket.

    * IN austria for wage and salary purposes there are either 13 or 14 "pay months" in a year( depends on employment contract) the extra one or two payments are usually paid out in December and January ( may help keep people out of debt)
    The mission of any business enterprise should include the aim to develop economic conditions rather than simply react to them.

  6. #1266
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    Jul 2010
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    Auckland City, why invest else where?
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    My mortage broker told me I can get 5.5% fixed for 2 years from Westpac...

    Should I fix now?

    Very tempted... since i'm not moving those properties to another bank now...

  7. #1267
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    Jul 2010
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    Quote Originally Posted by NovInvestor View Post
    My mortage broker told me I can get 5.5% fixed for 2 years from Westpac...

    Should I fix now?

    Very tempted... since i'm not moving those properties to another bank now...


    Correction... Westpac 2 year fix at 5.29%!

  8. #1268
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    Jun 2004
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    5.29% - their advertised rate is 5.79% so that is a huge discount!

  9. #1269
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    Jul 2011
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    What are the conditions on that?

  10. #1270
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    Jan 2008
    Location
    Wellington
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    Thanks AustroK


 

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