Not sure about the US but fixed-rate term in Australia is about 5 years. Nobody would give you a 30 year fixed rate.
You'd eventually have to pay 6% on the $1M.
You'd eventually have to pay 6% on the $1M.
I moved to the US from the UK, where mortgages look more like Australia’s, and I still find it amazing you can fix such a low rate for so long here.
Before the creation of the enormous state-owned insurance corporations and government programs to drive down those fixed rate mortgage costs, American mortgages were usually short-term, with giant balloon payments. Those short-term, balloon-payment mortgages went bust in huge numbers during the Great Depression, creating pressure on the government to "do something."
Say what you will about American housing policy, but those 15- and 30-year mortgage arrangements are very stable.
Adjustable-rate mortgages are not.
I look my cost of funds, tack on my spread and that is the price you pay.
In the US, where 30-year mortgages are standard, the LARGE majority of homeowners would not be able to afford payments on their home amortized over only 5 years.
But I can say that prices are rising rapidly here in Australia.
The already expensive Sydney market rose on average ~$1200 a day over the last quarter!
Melbourne isn't far behind!
We too have low interest rates!
Whats not clear is how people are paying for the houses. Where is the money for deposits coming from, and how are they servicing such huge loans?
Dual incomes and parents assisting would account for a lot of it. But what happens if/when the parents need the money back and the DINKies decide to have children and either lose the dual income or get slugged with child care fees!
https://www.theguardian.com/business/grogonomics/2021/sep/16...
That is, the interest rate is guaranteed for five years and then it periodically adjusts.
(Australian housing markets in major cities are some of the most expensive in the world.)
The median home price in Australia is about US$725k. So no.
Also, if this is accurate, Australia is more of a nation of homeowners than of renters.
https://www.abs.gov.au/statistics/people/housing/housing-occ...
"66% of Australian households owned their own home with or without a mortgage.
32% of households rented their home.
Average weekly housing costs were: $484 for owners with a mortgage; $53 for owners without a mortgage; and $366 for renters."
484 AUD/week = 1500 USD/month 366 AUD/week = 1150 USD/month
It also says housing costs for renters have increased 51% in 20 years (to 2018) which is an average of 2% annually.
"housing costs are defined as the sum of rent payments; rate payments (water and general); and mortgage or unsecured loan payments (if the initial purpose of the loan was primarily to buy, add, or alter the dwelling)"
Sydney and to a lesser extent Melbourne are both completely unaffordable (A$1m+) to new home owners on an average income unless you're prepared to live in a unit or commute 2 hours a day to the CBD. Brisbane, Adelaide and Perth on the other hand are significantly cheaper and one could still afford a nice family home.
Also worth noting is that the huge boom in prices only really started in the early 2000s. People who bought prior to that period make up a disproportionate number of owner occupiers.
> The nation's median property price lifted by 1.5 per cent last month (to $666,514)
https://www.abc.net.au/news/2021-09-01/property-housing-core...
That's a >50% increase over ~3 years and from the article 20% over the last year.
This appears to be a data provider oriented towards entities with large real estate portfolios, and they specifically say on their website that their "hedonic" index is not meant for affordability calculations, for what that's worth.
It's difficult for me to tell which index is in the article, but the note about the missing data under the chart implies to me that the article is (inappropriately) using the hedonic index. I wonder how much difference it makes.
'this month's figures from CoreLogic did not include Perth or regional Western Australia "pending the resolution of a divergence from other housing market measures in WA" '
"Rather than relying solely on transacted sale prices to provide a measure of housing market conditions, the CoreLogic Daily Home Value Index is based on a ‘hedonic’ methodology which includes the attributes of properties that are transacting as part of the analysis."
https://www.corelogic.com.au/research/monthly-indices
"The fact that median or other percentile based series cannot be used to track changes in value of a market portfolio does not make them wrong: it is simply that they have different applications than hedonic indices. For example, median price series are useful in answering economic policy questions relating to housing affordability."
A more up to date government source has the following;
> Weighted average (mean) of the eight capital cities Residential Property Price Index... rose 16.8% over the last twelve months.
We could go on forever trying to work out the exact numbers. The main thing I want to do is show non-australians how quickly our prices have risen and are rising!
https://www.abs.gov.au/statistics/economy/price-indexes-and-...
See https://www.google.com/amp/s/amp.abc.net.au/article/10042389...
AUD$955,927 national median and AUD$1.4m Sydney median.
The difference every time I bought a house was about 1%
Ya, my dad in Canada keeps encouraging me to buy property given the mortgages. Has its downsides, but over all its brilliant.