It’s being widely reported and my friends in Sydney who “know the market” attest to a slide in Sydney’s astronomical property prices. People are getting the jitters. The smart money has already “left town” and has found a home in the stock market, gold and other hidey-holes.
I was chatting recently with a couple in their early thirties – we started a conversation at a local coffee shop. They were wondering what to make of rumours of interest rates about to go up.
They confided that they had a $400,000 “VIP” type loan through a Broking House on their principal place of residence. They had an electronic copy of their contract so I took a peek. Just as I thought – another “Interest rate holiday” that will be clawed back by the Lender in Years 4 and 5. Poor people had no clue. They hardly understood what I was telling them.
Their repayments NOW are $1,833.00 per calendar month, interest only. By the time Year 4 comes around, very conservatively, interest rates will be at least 1 percent higher than they are today. Years 4 and 5 come with an extra sting in the tail. Their repayments will revert to Principal and Interest at “1 percent above market rate”.
I got into a Mortgage Calculator. Their repayments will jump $642.00 per month or by 35 PERCENT. I thought the poor dears were going to faint. “But, but, but…..” they stammered.
They bought me a coffee, said “thanks” in a wheezy, incoherent sort of way, and walked, leaning on each other, toward the beach.