Are you ready for 2007? Variable Rate Mortgage Impact

[trev]

Looking at things from an Australian perspective, where home mortgages are lent almost entirely on variable rate mortgages which rise and fall with each variation in official interest rates by the Reserve Bank, the USA system of mostly fixed rates seems inefficient economically. Fixed mortgages place banks under great stress during times of changing interest rates which has led to a need for government bailouts of massive proportions in the past, also it insulates consumers from most of the impact of official interest changes, resulting in much larger changes required to alter the course of the economy. Our central bank makes small changes to the interest rates and presto, the economy slows or grows because its impact on mortgage repayments is immediate. The result is an economy of 15 years of consecutive growth which looks like continuing into the future. A move by the USA banking system to true variable loans, not the hybrid fixed loans with occasional changes would be a huge benefit to your economy and its management.
Also I find it hard to believe that any government would give tax deductions on home interest payments, this just encourages the debt spiral and excessive spending and living beyond your means. The removal of those tax deductions would remove most if not all of your govenment deficit and go along way to fixing your trade deficit problems as well as reduce the overheating of your housing market.

[Bosh]

Originally posted by DanS
Do you have to refinance these mortgages? Is there a penalty if the payment goes to greater than 40% of your income?

40%??? That's insane. My rent (not including utilities) is around 6% of me and my wife's after tax income. And we have a two bedroom apartment which is not half-bad for a childless couple in Korea...

I did have to pay a $5k desposit (standard over here), but that's an insane portion of your income to spend on housing.

The removal of those tax deductions would remove most if not all of your govenment deficit and go along way to fixing your trade deficit problems as well as reduce the overheating of your housing market.

But it would piss a lot of people off, it's probably the most popular single tax-break. Not gunna happen.

[Spiffor]

Originally posted by Bosh
I did have to pay a $5k desposit (standard over here), but that's an insane portion of your income to spend on housing.

In Paris, many poor people spend as much as 2/3 of their income on rent.

[-Jrabbit]

We did a re-fi a few years back when rates were low, set ourselves up with a 20-yr fixed rate. It's pretty sweet.

It will be interesting to watch all the folks who took gimmick loans to acquire their McMansions struggling to find a reasonable re-fi. My guess is that the mortgage industry will come up with a couple new vehicles to meet that need.

Interest-only loans

[:) Smiley]

Originally posted by Bosh

40%??? That's insane. My rent (not including utilities) is around 6% of me and my wife's after tax income. And we have a two bedroom apartment which is not half-bad for a childless couple in Korea...

I did have to pay a $5k desposit (standard over here), but that's an insane portion of your income to spend on housing.

6%!

what kind of place do you live where rent is that cheap?

[Arrian]

Korea, clearly.

-Arrian

[Japher]

besides, he's a squirrel

probably lives in a tree

[Bosh]

Originally posted by Smiley


6%!

what kind of place do you live where rent is that cheap?

Within walking distance of here (yum yum yum), Seongnam, one of cheaper of Seoul's suburbs:

[Bosh]

Used to live near here, paid about twice as much for about half the space:

[Lorizael]

I'm not predicting the end of the world. I'm predicting a recession.

So was Japher spookily prescient or was the eventual recession coincidental?

[Bugs ****ing Bunny]

Recessions always come around. What few predicted was how big it was.

[pchang]

The reasoning behind Japher's prediction did match up with one of the underlying causes. When speaking of bearish predictors, we can often say they have correctly predicted 9 out of the last 2 recessions.

[PLATO]

How did I miss this thread? Pure gold.