#MortgageRates #HomeOwnership #PersonalFinance
Hey fellow Aussies! 🏠💰 Have you ever wondered why we can’t lock in our mortgage rates for the life of the loan like they do in the USA? It can be frustrating to see our rates increase over time and not have that certainty of knowing exactly what we’ll be paying.
Here are some reasons why Australians can’t lock in mortgage rates for the life of the loan:
– In Australia, most mortgages have variable interest rates that are tied to the official cash rate set by the Reserve Bank.
– Fixed-rate mortgages do exist in Australia, but they typically only last for a few years before reverting to a variable rate.
– Locking in rates for the life of the loan could result in higher initial rates, as lenders would need to account for potential fluctuations in the market over a longer period.
So, what’s the solution? While we may not be able to lock in rates for the entire loan term like our friends in the US, there are still ways to manage your mortgage repayments:
– Consider fixing your rate for a shorter period to take advantage of lower rates in the short term.
– Make extra repayments when you can to pay off your loan faster and reduce the impact of rate increases.
– Regularly review your mortgage and explore refinancing options to find a more competitive rate.
Remember, everyone’s financial situation is unique, so it’s always a good idea to consult with a financial advisor before making any major decisions.👩💼💡 Let’s all work together to navigate the world of mortgage rates and homeownership! 🤝🏡 #FinancialAdvice #MortgageTips
because that’s not the right way to rip off aussies. it’s gotta be the other way. the one they’re doing right now.
Banks don’t want to take the risk, or it’s uneconomical for them to do
Banks also borrow money at variable rates to lend to to you. That’s why.
Ge money used to do one. Not advertised cause was not popular
Unfortunately, I can’t post a picture, but have a look at this graph: [https://x.com/LoganMohtashami/status/1808891615710490801](https://x.com/LoganMohtashami/status/1808891615710490801)
When judging how impactful interest rate increases will be at curtailing private sector activity, a big variable to consider is whether the country relies on fixed-rate or variable-rate debt for its housing sector. The United States has among the highest ratios of fixed-rate mortgages in the world. Germany, France, have access to long-term fixed rates as well.
Freddie Mac etc is **NO** reason why Australian Banks don’t even provide decent 10-15 year mortgages.
Aussie household finances are being put under so much pressure, its not even funny anymore. I am a migrant from Germany who has spent the last 15 years in Sydney and I feel truly sad for Australians and how they are being absolutely screwed over by the Gobv and financial sector.
Always find homeloans a funny type of loan, when you look at it simplistically.
Bank: I’ll lend you X, and you pay me Y but I can change Y at any point in time….
As unfortunate as it is in this economy to not have been fixed for an extended period when we were at all time lows, there’s definitely more stability in the market as well as buying and selling. Americans are often trapped in their own home because they don’t want to sell a 2% interest home to buy a new home at 7% on a new mortgage.
*A key reason why lenders don’t offer 30 year fixed mortgage rates in Australia is because* ***we don’t have a well-developed secondary mortgage market****. This is a space where lenders and investors buy and sell mortgages*
Govt here doesn’t issue 30 year bonds.
Take it up with the RBA.
Basically our markets for trading debt aren’t deep enough to sustain 10/15/20 year debt.
In the US lots of pension funds and foreign investors are willing to buy 10/20/30 year mortgage debt.
Another tricky part for banks has been explaining break costs on term loans. Gets very expensive when rates drop fast.
Banks haven’t always done well to explain how break cost operate. And customers go to authorities etc saying didn’t understand…
Would you trade that in for offset accounts being illegal?
I wonder whether there’s a way to get the loan from an American lender. Seems like a decent opportunity for both parties (not without some risk).
Simplest answer I can give is that it is not profitable for banks to do so.
Locking in a rate for so long increases risk on the banks significantly. To mitigate that risk and remain solvent they would have to increase the buffer on rates. This is why mortgage rates in the US are usually much higher than here.
Having said that, regulating for term of loan rates would likely bring some stability to housing and the higher rates lower prices. So not the worst idea.
Obviously it’s nice if you get in at the bottom, but the government offering these loans has pretty bad side effects. Supply is down heaps because people won’t give up their 30 year mortgage at 2 percent, severely restricting housing mobility.
But when interest rates fall after you lock it in for life of the loan, do you want to be locked in to a higher rate or refinance at a lower rate?
Australians don’t need a lot of coaxing to prop up the ponzi scheme (aka the Australian economy). Every Australian is born with anxiety, stingginess and an insatiable appetite to own a property. When they are about 2 years old, they begin to worry about living well when they reach the age of pissing buckets every 30 minutes.
A truly crazy place with even crazier people.
No one wants to lend you like that.
They make more money this way.
Less banks go bankrupt in this country.
Because USD is the world’s reserve currency and many countries are willing to buy their loans.
Why would anyone lend to Australian banks with a fixed rate over 30 years when our currency is so volatile.
Google Fannie Mae / Freddie Mac
Possible, but you will need to have at least $100,000 spare to cover margin costs.
It is possible to hedge your interest rate exposure via 10 yr bond futures, however hedge maintenance would be required regularly.
I know a few people who have done this with commercial properties in the past.