If we look at the disparity in today's australian economy you could easily believe that we were dealing with different countries and different economies and that each could have their own currency. If we consider West Australia, frankly the powerhouse of the National economy, people there would be paying 1-2% more on their mortgages and the currency we may suggest would be termed the 'ore' and would be worth approximately 2 US dollars and be running close on parity with the british pound.
Over in Victoria the interest rates would be on the way down to aid the manufacturing and education sectors. The big V currency doesn't have strong mineral reserves to use as it's underlying strength so has to rely on more mundane financial stimulus which is sadly lacking in the Vics economy where their exports are too few and they can't compete on the open market when it comes to other commodities.
Across the ditch in Tasmania, mortgage interest are rock bottom, the cash rates being 3%, with barely a heart beat from the tassie economy and their currency, the Tiger, bumping along on par with Thailands Baht.
Up in Sydney, the financial hub would be taking advantage of all the currency and interest rate differentials and their currency, the Ranger, would try to 'piggy back' it's way on the back of the Ore, by way of association, and 'stand over' tactics!
This situation seems crazy doesn't it, but this sort of arrangement would be the naturla progression if the reserve bank tried to be everything to everyone. Fiscal policy would have to be radically different between the States to accomdate the economic differences foisted on Governments because of the different monetary policy settings.
Fortunatley that's not the world we live in, however it means the reserve bank has only one weapon at its disposal in the fight against inflation and when that weapon is fired, everyone feels it.
It seems Australia is suffering from an accute case of Dutch Disease. The term coined by the Economist magazine in the 1970's refers to a country that enjoys a mining boom. But when that boom ends (in the case of the Netherlands, because a fall in natural gas and oil prices) the country finds that many of its manufacturing and services industries have moved on.
The symptoms that accompany Dutch Disease - hihg interest rates and currency, can be accoomodated by Mining companies but they are financial poison to everyone else in the economy. These major issues need to be quickly addressed, as the boom can be all encompassing and stymie any push for reform that may draw us from the shirt tails of Mother China.
Mortgage holders missed an interest rate bullet this month largely because the reserve bank is unsure how the global economy will play out. In the reserve bank mind and most others, high commodity prices means higher inflation whihc means higher interest rates. With an Australian dollar over parity and likely to push higher, it means more pain across the non-mining sectors of the economy.
The Country cannot afford to ride on the back of the State-miners and must look at how we are going to continue to become a strong financial nation without the gleam of the mining boom.
Tuesday, September 6, 2011
Thursday, June 23, 2011
Are you dancing with the IBIZA set??
This is a exert from my up and coming Beer Coaster Guide to Finance. The guide is all about finance in the 21st century, lot of good stuff in there to get people thinking about saving and investing.
There’s a coastal town in Spain called Ibiza where the English go to get ‘smashed’, tan up on the beach and spend pounds to put on pounds. It’s a place with no inhibitions no rules, where money runs down the drain in a swirling party atmosphere. Parallels can be drawn between this Ibiza and a condition here also termed Ibiza – I have a Big Income but Zero Assets. If you are dancing with the IBIZA set, your prospects of building wealth will be severely affected. Party goers in this subset don’t place any emphasis on investing. Stereotypically they earn a good income, commonly from the huge fly in/fly out mining industry currently fuelling our economy. They’re locked up for weeks in ‘dongas’ in hot, harsh conditions and when they fly home they ‘HIT IT’ - living an excessive lifestyle, eating out most nights, buying new cars and going on exotic holidays.
Well you might say, “It doesn’t sound all that bad”, they’re having a hell of a time within the game of Tick Tock, but the one thing they are missing , if they don’t wake up and save and invest for the future, when the party is over, the IBIZA set will suffer the inevitable ‘hang over’.
Their Superannuation will fall well short of their requirements when they retire and in our world there are only two ways to generate income – exchanging your labour and skills for dollars and saving and creating wealth that in turn provides passive income. Once you stop working, you can no longer exchange your labour for income and if you haven’t invested, there will be no income from passive alternatives.
If you are dancing with the IBIZA set, all your income at the moment is generated by selling your skills on the labour market. But that is only the first stage of your financial journey through life. The next stage in this personal financial journey is about transitioning the source of your income, so that you use less of your own fading work hours to generate income as you age. Drive along the roads and have a look at the numbers of grey haired men, bent over repairing the road or rail line. They must be in their 50’s and some 60’s but they’re still toiling away, why is that? They never began their journey to growth their wealth tree.
We all like a party but what keeps the IBIZA set dancing into oblivion? The root cause seems to be the mental attitude we have mentioned in the 5 barriers to financial success. There’s fear, lethargy, ignorance, procrastination to name a few – the ‘live in the moment’ mentality perpetuates the continuing failure of any semblance of saving and investing.. That leads to a feeling of resignation and this is compensated by lifestyle spending.
There is always hope for the IBIZA set. With a good income, their situation can quickly turn around but they must acknowledge their predicament and make efforts to change the situation. Everyone has a chance to have a goose that lays a golden egg. If that goose is eaten or neglected, these golden eggs disappear fore ever.
Is it time to put down your glasses…?
There’s a coastal town in Spain called Ibiza where the English go to get ‘smashed’, tan up on the beach and spend pounds to put on pounds. It’s a place with no inhibitions no rules, where money runs down the drain in a swirling party atmosphere. Parallels can be drawn between this Ibiza and a condition here also termed Ibiza – I have a Big Income but Zero Assets. If you are dancing with the IBIZA set, your prospects of building wealth will be severely affected. Party goers in this subset don’t place any emphasis on investing. Stereotypically they earn a good income, commonly from the huge fly in/fly out mining industry currently fuelling our economy. They’re locked up for weeks in ‘dongas’ in hot, harsh conditions and when they fly home they ‘HIT IT’ - living an excessive lifestyle, eating out most nights, buying new cars and going on exotic holidays.
Well you might say, “It doesn’t sound all that bad”, they’re having a hell of a time within the game of Tick Tock, but the one thing they are missing , if they don’t wake up and save and invest for the future, when the party is over, the IBIZA set will suffer the inevitable ‘hang over’.
Their Superannuation will fall well short of their requirements when they retire and in our world there are only two ways to generate income – exchanging your labour and skills for dollars and saving and creating wealth that in turn provides passive income. Once you stop working, you can no longer exchange your labour for income and if you haven’t invested, there will be no income from passive alternatives.
If you are dancing with the IBIZA set, all your income at the moment is generated by selling your skills on the labour market. But that is only the first stage of your financial journey through life. The next stage in this personal financial journey is about transitioning the source of your income, so that you use less of your own fading work hours to generate income as you age. Drive along the roads and have a look at the numbers of grey haired men, bent over repairing the road or rail line. They must be in their 50’s and some 60’s but they’re still toiling away, why is that? They never began their journey to growth their wealth tree.
We all like a party but what keeps the IBIZA set dancing into oblivion? The root cause seems to be the mental attitude we have mentioned in the 5 barriers to financial success. There’s fear, lethargy, ignorance, procrastination to name a few – the ‘live in the moment’ mentality perpetuates the continuing failure of any semblance of saving and investing.. That leads to a feeling of resignation and this is compensated by lifestyle spending.
There is always hope for the IBIZA set. With a good income, their situation can quickly turn around but they must acknowledge their predicament and make efforts to change the situation. Everyone has a chance to have a goose that lays a golden egg. If that goose is eaten or neglected, these golden eggs disappear fore ever.
Is it time to put down your glasses…?
Monday, May 30, 2011
Greece debt crisis
More economics lessons. This is a good article about greece's debt crisis and how it came about. Good to understand how these financial systems work and fail becuase we are all ultimately affected.
regards,
Craig
Echoes of Greece's Debt Crisis
By Justin Fox Monday, Feb. 22, 2010
TIME contributor Justin Fox is the editorial director of the Harvard Business Review Group
In 1973, 100 Greek Drachmas would get you $3.33. By May 2000, that was down to 27¢. That's the way the currency crumbles in a smallish, less than rich nation beset by government budget deficits, inflation and a spotty record of economic policymaking. Convincing foreign investors to buy your debt is a struggle. Financial life is difficult in ways scarcely imagined by inhabitants of the lucky (and not large) club of nations with solid currencies.
In June 2000, though, Greece was lucky enough to join that club. By the skin of its teeth, it met the criteria for admission to Europe's new currency union. First, the drachma's value was fixed to that of hard-money countries such as Germany and the Netherlands, and its long decline against the dollar slowed. Then in 2002, the drachma exited the currency stage, giving way to the euro.
Greece suddenly found itself with a solid, reliable currency. Its government and businesses could borrow at lower interest rates than before. The country boomed, with real GDP growth topping 3.8% for eight straight years. (During the same 2000-07 run, U.S. GDP growth never hit 3.7%; Germany didn't make it past 3.2%.) It seemed as though Greece had landed a one-way ticket to economic good times.
The reality was more complicated. Greece now had a solid currency--but it wasn't Greece's currency. The euro was managed by monetary wonks at the European Central Bank in Frankfurt for whom the Greek economy was but a blip. And the decision makers in Athens with responsibility for fiscal policy continued to blunder. The country kept running big deficits in the boom years. Then came the Great Recession. Last fall, a new government revealed that the 2009 budget deficit was much higher than previously disclosed--nearly 13% of GDP. Ever since, the world's financial markets have been going through another of their periodic losses of faith in Greece. Only this time, it isn't just Greece's problem.
Three other nations on the fringe of the euro zone--Portugal, Ireland and Spain--are caught in the undertow of Greece's crisis. All three have displayed better fiscal behavior than Greece, but they suffer from the same disconnect between their dire local economic conditions and the monetary policymakers in Frankfurt with other things on their minds. Meanwhile, a core euro-zone country, Italy, has also fallen out of favor with investors because of its high government debt. In a sure sign that these troubles are serious, market analysts have assigned them a catchy acronym: PIGS, for Portugal, Ireland, Greece and Spain (or PIIGS if you include Italy). In early February, the panic began to spread beyond their borders, with markets flailing in Europe and then around the world.
What is the endgame here? Greece has big debts relative to the size of its $357 billion economy (about 120% of GDP). It no longer has the option of eating into those debts by inflating its currency. In fact, it has no power to use monetary policy to ease its pain, as the Federal Reserve has been doing in a big way in the U.S. The only options for Greece are to 1) scrimp and save to convince creditors that it can keep paying them off, 2) convince its fellow euro-zone countries--or maybe the International Monetary Fund--to bail it out, 3) default on its debts or 4) pull out of the euro.
Option No. 1 is domestic political suicide, and it might not be smart economics either; slashing government spending and raising taxes during a downturn could worsen that downturn. Option No. 2 seems the best of the lot but has high international political hurdles to surmount. No. 3 would be a disaster for Greece and for the global financial system. As for No. 4, given that there are no procedures for leaving the euro, it might risk unraveling the entire project. In the euro's prelaunch period, a few skeptics predicted that the mismatch between a single European currency and differing national economic conditions would eventually lead to tension and an ugly breakup. The euro, heretofore one of the great political and economic successes of the past decade, is now undergoing a stress test of that hypothesis.
But there is another, even simpler warning for the U.S. economy as we face our own deficit issues. "It's only when the tide goes out that you learn who's been swimming naked," investor Warren Buffett has said. The U.S. has none of the currency difficulties of the PIGS. We do have a government deficit expected to hit 10.6% of GDP this year and a total federal debt that will cross 100% of GDP in 2012, according to White House projections. The rolling crisis of the past three years has been an embarrassing exercise in exposing the financially underclothed. It doesn't appear to be over--and the U.S. isn't what you would call well dressed.
regards,
Craig
Echoes of Greece's Debt Crisis
By Justin Fox Monday, Feb. 22, 2010
TIME contributor Justin Fox is the editorial director of the Harvard Business Review Group
In 1973, 100 Greek Drachmas would get you $3.33. By May 2000, that was down to 27¢. That's the way the currency crumbles in a smallish, less than rich nation beset by government budget deficits, inflation and a spotty record of economic policymaking. Convincing foreign investors to buy your debt is a struggle. Financial life is difficult in ways scarcely imagined by inhabitants of the lucky (and not large) club of nations with solid currencies.
In June 2000, though, Greece was lucky enough to join that club. By the skin of its teeth, it met the criteria for admission to Europe's new currency union. First, the drachma's value was fixed to that of hard-money countries such as Germany and the Netherlands, and its long decline against the dollar slowed. Then in 2002, the drachma exited the currency stage, giving way to the euro.
Greece suddenly found itself with a solid, reliable currency. Its government and businesses could borrow at lower interest rates than before. The country boomed, with real GDP growth topping 3.8% for eight straight years. (During the same 2000-07 run, U.S. GDP growth never hit 3.7%; Germany didn't make it past 3.2%.) It seemed as though Greece had landed a one-way ticket to economic good times.
The reality was more complicated. Greece now had a solid currency--but it wasn't Greece's currency. The euro was managed by monetary wonks at the European Central Bank in Frankfurt for whom the Greek economy was but a blip. And the decision makers in Athens with responsibility for fiscal policy continued to blunder. The country kept running big deficits in the boom years. Then came the Great Recession. Last fall, a new government revealed that the 2009 budget deficit was much higher than previously disclosed--nearly 13% of GDP. Ever since, the world's financial markets have been going through another of their periodic losses of faith in Greece. Only this time, it isn't just Greece's problem.
Three other nations on the fringe of the euro zone--Portugal, Ireland and Spain--are caught in the undertow of Greece's crisis. All three have displayed better fiscal behavior than Greece, but they suffer from the same disconnect between their dire local economic conditions and the monetary policymakers in Frankfurt with other things on their minds. Meanwhile, a core euro-zone country, Italy, has also fallen out of favor with investors because of its high government debt. In a sure sign that these troubles are serious, market analysts have assigned them a catchy acronym: PIGS, for Portugal, Ireland, Greece and Spain (or PIIGS if you include Italy). In early February, the panic began to spread beyond their borders, with markets flailing in Europe and then around the world.
What is the endgame here? Greece has big debts relative to the size of its $357 billion economy (about 120% of GDP). It no longer has the option of eating into those debts by inflating its currency. In fact, it has no power to use monetary policy to ease its pain, as the Federal Reserve has been doing in a big way in the U.S. The only options for Greece are to 1) scrimp and save to convince creditors that it can keep paying them off, 2) convince its fellow euro-zone countries--or maybe the International Monetary Fund--to bail it out, 3) default on its debts or 4) pull out of the euro.
Option No. 1 is domestic political suicide, and it might not be smart economics either; slashing government spending and raising taxes during a downturn could worsen that downturn. Option No. 2 seems the best of the lot but has high international political hurdles to surmount. No. 3 would be a disaster for Greece and for the global financial system. As for No. 4, given that there are no procedures for leaving the euro, it might risk unraveling the entire project. In the euro's prelaunch period, a few skeptics predicted that the mismatch between a single European currency and differing national economic conditions would eventually lead to tension and an ugly breakup. The euro, heretofore one of the great political and economic successes of the past decade, is now undergoing a stress test of that hypothesis.
But there is another, even simpler warning for the U.S. economy as we face our own deficit issues. "It's only when the tide goes out that you learn who's been swimming naked," investor Warren Buffett has said. The U.S. has none of the currency difficulties of the PIGS. We do have a government deficit expected to hit 10.6% of GDP this year and a total federal debt that will cross 100% of GDP in 2012, according to White House projections. The rolling crisis of the past three years has been an embarrassing exercise in exposing the financially underclothed. It doesn't appear to be over--and the U.S. isn't what you would call well dressed.
Tuesday, May 17, 2011
U.S. Hits the Debt Ceiling: What Does It All Mean?
What does this really mean anyway?
Well, first…let's define debt ceiling: "It is the level of government borrowing allowed by Congress." Think of the debt ceiling like the government's credit card limit... and it's maxed out. The current debt ceiling sits at $14.294 Trillion. This is the amount of money the government is legally allowed to borrow to fund all its functions - from defense to education to entitlement programs. But don't worry just yet. Treasury Secretary Timothy Geithner says the government can continue to pay its debts until August 2nd thanks to higher-than-expected tax revenue and "extraordinary measures" such as stopping the issuance of State and Local Government Series bonds, which fund infrastructure and other projects. In addition, Geithner says he is going to stop making contributions to the pension plans of certain federal employees.
To put the debt ceiling in historical perspective: Congress has voted 10 times in past decade to raise the debt ceiling, typically without much fuss. But this year is different. Many House Republicans say they won't vote to raise the debt ceiling unless the Obama administration agrees to big spending cuts, or at least tough restrictions on future spending. The White House says the debt ceiling vote should be separate from the budget debate, so an All-American standoff is occurring.
Failure to raise the debt ceiling could cause the government to default on its debt payments, something unprecedented in U.S. history. In a statement released Monday, Treasury Secretary Tim Geithner warned such an outcome will result in "catastrophic economic consequences for citizens." Government officials Ben Bernanke, Austan Goolsbee and Defense Secretary Bill Gates agree, as do Wall Street heavyweights like Bill Gross, Warren Buffett and Jamie Dimon.
But many in the GOP say that's a bluff and the government can continue to make its debt payments by selling assets such as its gold holdings or real estate, or by cutting spending on other things, like Social Security and Medicare.
Hopefully we won't find out who's bluffing and who's right.
Well, first…let's define debt ceiling: "It is the level of government borrowing allowed by Congress." Think of the debt ceiling like the government's credit card limit... and it's maxed out. The current debt ceiling sits at $14.294 Trillion. This is the amount of money the government is legally allowed to borrow to fund all its functions - from defense to education to entitlement programs. But don't worry just yet. Treasury Secretary Timothy Geithner says the government can continue to pay its debts until August 2nd thanks to higher-than-expected tax revenue and "extraordinary measures" such as stopping the issuance of State and Local Government Series bonds, which fund infrastructure and other projects. In addition, Geithner says he is going to stop making contributions to the pension plans of certain federal employees.
To put the debt ceiling in historical perspective: Congress has voted 10 times in past decade to raise the debt ceiling, typically without much fuss. But this year is different. Many House Republicans say they won't vote to raise the debt ceiling unless the Obama administration agrees to big spending cuts, or at least tough restrictions on future spending. The White House says the debt ceiling vote should be separate from the budget debate, so an All-American standoff is occurring.
Failure to raise the debt ceiling could cause the government to default on its debt payments, something unprecedented in U.S. history. In a statement released Monday, Treasury Secretary Tim Geithner warned such an outcome will result in "catastrophic economic consequences for citizens." Government officials Ben Bernanke, Austan Goolsbee and Defense Secretary Bill Gates agree, as do Wall Street heavyweights like Bill Gross, Warren Buffett and Jamie Dimon.
But many in the GOP say that's a bluff and the government can continue to make its debt payments by selling assets such as its gold holdings or real estate, or by cutting spending on other things, like Social Security and Medicare.
Hopefully we won't find out who's bluffing and who's right.
Wednesday, May 11, 2011
Has Perth property turned the corner?
Perth has defied the National trend with the Australian Bureau of Statistics recording an increase in the Perth median house price for the quarter ending March 2011; http://au.news.yahoo.com/thewest/a/-/newshome/9294234/perth-house-prices-defynational-fall/. This coincides with our recent increase in investor and sales activity.
This may be the first sign of a needed upward swing in the Perth residential market. With investment yields increasing and rent becoming a larger slice of the household pay packet, property investment is becoming a more attractive proposition. If we see an easing in the Federal Immigration Policy, to relieve the skill shortage crisis, this will result in increased pressure on the housing market.
This may be the first sign of a needed upward swing in the Perth residential market. With investment yields increasing and rent becoming a larger slice of the household pay packet, property investment is becoming a more attractive proposition. If we see an easing in the Federal Immigration Policy, to relieve the skill shortage crisis, this will result in increased pressure on the housing market.
Sunday, April 17, 2011
6 Tips for Choosing a new Home Loan... Once you’ve found your dream home, the one that ticks all the boxes on your list, the next thing you’ve got to sort out is the financing. However, actually choosing a home loan that meets your needs and doesn’t cost the world is much easier said than done. And without a road map, the process of choosing a home loan can become a long and drawn out affair. So if you’re looking for a home loan and don’t know what to look out for, here are some tips to help simplify the process. You are in Charge Since you want a home, and you need a lender to give you the money in order to buy one, it is tempting to feel as though you need to please the lender in order to get the money that you need. This mindset is dangerous. It is not difficult to turn this mindset on its head and remember that lenders need borrowers in order to earn interest and stay in business. There are plenty of lenders to choose from, we currently have 10 big banks and non-major bank lenders to compare, and if you ever walk away from a bank they will not hesitate to let you walk back in. When you approach home loans and creditors from this perspective, you are much more likely to pursue the interest rate that you truly deserve, and find it. Fixed or Variable Rate? A variable rate will typically have the smallest interest rate up front, but it can grow out of proportion at a later date, depending on how the rate is determined. In most cases, a variable rate home loan will have a fixed rate for a given amount of time. Once this period is over, the rate will then be adjusted according the the state of the economy on a periodic basis. A variable rate is idea for an individual who plans on moving out of the home within the fixed rate period. It is also the best choice if the interest rates are especially high, and can be expected to drop down within the next several years. Lock in the Rate Home loan rates change all the time, typically after when the Reserve Bank changes the base rate of interest. Basically you’re riding up and down with the market. But if you are happy with the rate as it is, and you think that rates are going to go up then you might want to lock it in. When you choose to lock in the rate, be sure to get the information in writing so that there is no confusion about the rate in the future. This will give you secure that for “X” number of years your repayments are going to be stable. Deposit It is a good idea to invest as large a deposit as possible. The smaller the deposit, the larger the size of the loan, which ultimately means spending more in interest. It is surprising how much longer a loan can take to pay off, or how much more interest payments are wasted, when a small deposit is paid. Ideally, a buyer would only purchase a home that they could save up a 2% deposit for which will mean that you need to borrow 80% of the property value. This means that the homeowner will not, in most cases, be required to pay for private mortgage insurance (PMI) and also significantly reduces the amount of interest and time required to pay off the mortgage. SometimesOnce you’ve found your dream home, the one that ticks all the boxes on your list, the next thing you’ve got to sort out is the financing. However, actually choosing a home loan that meets your needs and doesn’t cost the world is much easier said than done. And without a road map, the process of choosing a home loan can become a long and drawn out affair. So if you’re looking for a home loan and don’t know what to look out for, here are some tips to help simplify the process. You are in Charge Since you want a home, and you need a lender to give you the money in order to buy one, it is tempting to feel as though you need to please the lender in order to get the money that you need. This mindset is dangerous. It is not difficult to turn this mindset on its head and remember that lenders need borrowers in order to earn interest and stay in business. There are plenty of lenders to choose from, we currently have 10 big banks and non-major bank lenders to compare, and if you ever walk away from a bank they will not hesitate to let you walk back in. When you approach home loans and creditors from this perspective, you are much more likely to pursue the interest rate that you truly deserve, and find it. Fixed or Variable Rate? A variable rate will typically have the smallest interest rate up front, but it can grow out of proportion at a later date, depending on how the rate is determined. In most cases, a variable rate home loan will have a fixed rate for a given amount of time. Once this period is over, the rate will then be adjusted according the the state of the economy on a periodic basis. A variable rate is idea for an individual who plans on moving out of the home within the fixed rate period. It is also the best choice if the interest rates are especially high, and can be expected to drop down within the next several years. Lock in the Rate Home loan rates change all the time, typically after when the Reserve Bank changes the base rate of interest. Basically you’re riding up and down with the market. But if you are happy with the rate as it is, and you think that rates are going to go up then you might want to lock it in. When you choose to lock in the rate, be sure to get the information in writing so that there is no confusion about the rate in the future. This will give you secure that for “X” number of years your repayments are going to be stable. Deposit It is a good idea to invest as large a deposit as possible. The smaller the deposit, the larger the size of the loan, which ultimately means spending more in interest. It is surprising how much longer a loan can take to pay off, or how much more interest payments are wasted, when a small deposit is paid. . Ideally, a buyer would only purchase a home that they could save up a 2% deposit for which will mean that you need to borrow 80% of the property value. This means that the homeowner will not, in most cases, be required to pay for private mortgage insurance (PMI) and also significantly reduces the amount of interest and time required to pay off the mortgage. Sometimes the interest rate itself can be reduced by paying a larger deposit. Fees Always make sure that you understand the associated fees before agreeing to anything. There can be setup fees, monthly fees, annual fees, controversial exit fees and penalty fees for paying it off sooner than your agreed loan term. Get a good estimate in order to get an idea of what the involved costs will be. Wiggle Room Like most people, you’ll probably choose a variable rate home loan. That being the case, it is very wise to calculate the repayments if the interest rate were to go up 2% higher than the rate you can start off with. This will give you wiggle room. If you can’t afford the home loan repayments at the higher interest rate than you need to reduce your loan amount. the interest rate itself can be reduced by paying a larger deposit. Fees Always make sure that you understand the associated fees before agreeing to anything. There can be setup fees, monthly fees, annual fees, controversial exit fees and penalty fees for paying it off sooner than your agreed loan term. Get a good estimate in order to get an idea of what the involved costs will be. Wiggle Room Like most people, you’ll probably choose a variable rate home loan. That being the case, it is very wise to calculate the repayments if the interest rate were to go up 2% higher than the rate you can start off with. This will give you wiggle room. If you can’t afford the home loan repayments at the higher interest rate than you need to reduce your loan amount.
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