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Readers response: What’s the most interesting cultural experience you've had while travelling?

When travelling abroad, we are often exposed to new and fascinating cultures that can open our eyes to different ways of life. We asked our readers to share the most interesting cultural experience they've had while travelling, and the response was overwhelming. Here's what they said. Sandra Beckett - Staying overnight in a Ger in Mongolia miles from anywhere, listening to Throat singing accompanied by two traditionally dressed musicians playing Horsehead fiddles. Also, travelling across Russia by train, visiting the Galapagos islands, Skara Brae in the Orkneys, the Hagia Sophia in Istanbul. Denise Ryan - Listening to glorious classical music played in Havana’s Plaza de la Catedral and attending a stunning performance of Swan Lake in the Grand Theatre of Havana. Deedee Cullum - Visiting Ypres in Belgium and staying the night so we could see the evening ceremony at the Menin gate. Alison Davenport - 50 years ago visiting a Fijian village made me realise everyone didn't live like I did. Have been amazed at all travel experiences since. Glenn Turton - Staying in a farmhouse in Normandy for a week. Visiting D-Day beaches and Mont St Michel from there and local villages and markets on the days between. Back to the farmhouse each night to cook local produce and sit by an open fire. Karen Psaila - Sitting in a small ally sipping black sweet tea in Egypt looking at the pyramids and sphinx whilst camels are strolling by. Amazing. Patricia Watson - Darwin. Spending a day with First Nation Women and Children in the bush and learning about food that grows and is edible in that area. James Langabeer - This are my three top three most interesting cultural experiences. 1. Japan's Tea Ceremony: Attending a traditional tea ceremony in Kyoto, Japan, where I learned about the intricate rituals and Zen Buddhism's influence. 2. Indian Holi Festival: Celebrating Holi, the Festival of Colors, in Mumbai, India, surrounded by vibrant colors, music, and joyful locals. 3. Moroccan Hammam: Experiencing a traditional Moroccan bathhouse (hammam) in Marrakech, where I discovered local customs and relaxation techniques. Margaret Mason - Staying for a couple of days in a small, traditional village in China. Image credits: Shutterstock

International Travel

Readers response: Who’s the most interesting person you’ve met while travelling?

One of the best parts of travelling is the people you met along the way. Whether it's as part of a tour group or an interesting character you meet by chance, interacting with interesting people in interesting places can bring a lot to your travel experience. We asked our readers to tell us about the most interesting person they've encountered on their travels and the response was overwhelming. Here's what they said. Diana Jason - Cargo Holly Harrison. He walked 15000 miles from the bottom of South America to the top of Alaska. A truly fascinating man. Margie Buckingham - While caravanning around Oz, every night we would meet interesting ppl enjoying pre-dinner drinks & nibbles around the campfire. We all had personal stories to tell or the best places to camp. Ann Smith - Myself. Travelled to the UK and found my independence and confidence, two and a bit years after I lost love of my life to cancer. Pamela Cari - We met the lady who played the mother of Apollonia Vitelli in The Godfather when we were in Savoca. Rosalie Busch - A couple who grew up behind the wall in East Berlin. Sue Velvin - Shaquille O'Neal when my daughter and I had a holiday in the states a few years ago! Awesome man. Wendy Farnham - A Buddhist Nun in Cambodia who lost her husband and 6 of her 7 children to starvation under Pol Pot’s regime. Lyn Schuemaker - Everybody. They all have stories to tell. Image credits: Shutterstock

International Travel

Five ways to take advantage of rising interest rates to boost your savings

<a href="https://theconversation.com/profiles/fredrick-kibon-changwony-234363">Fredrick Kibon Changwony</a>, <a href="https://theconversation.com/institutions/university-of-stirling-1697">University of Stirling</a> With the Bank of England base rate <a href="https://theconversation.com/how-the-bank-of-englands-interest-rate-hikes-are-filtering-through-to-your-finances-210344">currently the highest</a> it has been since early 2008, you may have a valuable opportunity to increase your earnings on pensions, investments and savings accounts. After all, when the central bank raises its main rate – the base rate, which is typically used as a benchmark for loans as well as savings accounts – it is trying to encourage people to spend less and save more. But UK banks and building societies have <a href="https://www.independent.co.uk/money/martin-lewis-savings-rates-mortgage-crisis-b2362955.html">recently been accused</a> of letting their savings rates lag the recent rapid rise in the base rate. UK regulator the Financial Conduct Authority has urged these financial firms to offer “<a href="https://www.fca.org.uk/news/press-releases/action-plan-cash-savings">fair and competitive</a>” savings rates in response to the increasing interest rates. Many financial institutions do offer accounts with <a href="https://www.theguardian.com/money/2023/jul/15/uk-savings-accounts-interest-nsi-building-societies-banks-deals">rates of 6% or more</a>. This is good news for avid savers – but only if you keep an eye on the market so you can switch from less competitive products. This is why it’s important to establish a regular savings habit, but many people are unsure about what that should involve. My colleagues and I have studied the <a href="https://dspace.stir.ac.uk/handle/1893/32240">correlation between people’s savings goals</a> (if they have any) and how they invest their money. We also looked at how seeking financial information advice, and being “good with numbers”, both influence this correlation. We analysed data from more than 40,000 individuals in 21,000 UK households from five waves of the Office for National Statistics Wealth and Assets Survey (WAS), conducted between 2006 and 2016. This data captures comprehensive economic wellbeing information and attitudes to financial planning. Our research shows the importance to your finances of setting multiple savings goals, keeping up with financial news, and seeking professional advice. Based on this, here are five research-based ways to make the most of your money. <h2>1. Set specific savings goals</h2> Establishing personal savings goals is one of the first steps most financial institutions and advisers will recommend to their customers, because it’s a good idea to <a href="https://www.investopedia.com/terms/c/compoundinterest.asp">save regularly</a>. Plus, our study shows that total financial assets increase in line with the number of savings goals you have, and that setting specific, rather than vague, goals leads to higher performance. Specific savings goals should have an end date, target figure, and even a meaningful name – for example, “£1,000 for 2024 trip to Asia” or “£250 for 2023 Christmas present fund”. This will create tangible reference points that encourage self-control and increase the pain you feel if you fail to meet your goal. <h2>2. Seek professional financial advice</h2> Rather than relying on friends, family and social media for financial advice, speak to an expert. Our research shows households that access professional financial advice were more likely to allocate a higher share of their wealth to stock portfolios than those that rely on friends, family and social media for financial advice. This result was consistent even across different wealth and income levels, with lower earners possibly using products like ISAs to make investments in stocks and shares. Other <a href="https://academic.oup.com/qje/article/134/3/1225/5435538">research shows</a> stock portfolios outperform most other types of investment in the long term. We also found that access to professional financial advice can substitute for setting goals, because your adviser should help you to determine the kinds of products to invest in (which is called asset allocation) for specific timelines and aims. <h2>3. Brush up on your maths</h2> <a href="https://doi.org/10.1111/j.1475-5890.2007.00052.x">Several studies</a> show numerical skills affect how households gather and process information, <a href="https://psycnet.apa.org/doi/10.1037/a0013114">set goals</a>, perceive risks, and <a href="https://heinonline.org/HOL/P?h=hein.journals/fedred89&i=791">decide to invest</a> in various financial assets. So, by brushing up on your basic numeracy and financial literacy skills – even with free online videos – you could boost your savings for the long term. Our study shows that individuals with high confidence in their numerical skills tend to have better financial planning habits – such as investing more in stocks and bonds than cash, which carries more risk but also the potential for greater returns. This trend is particularly evident among households with no savings goals, suggesting that numerical ability could compensate for failing to set such goals. <h2>4. Adopt appropriate savings strategies</h2> Diversified stock market portfolios generally outperform bonds and cash savings <a href="https://doi.org/10.1093/qje/qjz012">over longer periods</a>. However, stock markets can be volatile, so putting savings into less risky assets like bonds and cash is wise for savings goals of less than five years. In the longer term, investing across different global stock markets for more than five years can help counteract inflation. And you can access low-cost, diversified investment portfolios via financial products based on indices of stocks or other assets, such as exchange traded funds. <h2>5. Set, monitor and adjust your plan</h2> Free financial planning and budgeting apps can help you save money by tracking your spending and savings goals, and encouraging you to adhere to a budget. Most importantly, once you set savings goals and create a budget, don’t forget about them. Check regularly to see how your savings are building up and to monitor for any spending changes. A growing array of fintech tools can prompt and encourage this kind of long-term planning. Keeping an eye on savings rates is also important. As banks change rates or create new accounts, consider switching to get a better deal if you can do so without falling foul of account closure fees. It’s important to make sure your savings are working for you at any time, but its crucial in the current economy, when finances are tight but interest rates are rising.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/208853/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a href="https://theconversation.com/profiles/fredrick-kibon-changwony-234363">Fredrick Kibon Changwony</a>, Lecturer in Accounting & Finance, <a href="https://theconversation.com/institutions/university-of-stirling-1697">University of Stirling</a> Image credits: Shutterstock This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/five-ways-to-take-advantage-of-rising-interest-rates-to-boost-your-savings-208853">original article</a>.

Money & Banking

Why you’re probably paying more interest on your mortgage than you think

<a href="https://theconversation.com/profiles/sander-de-groote-1472267">Sander De Groote</a>, <a href="https://theconversation.com/institutions/unsw-sydney-1414">UNSW Sydney</a> and <a href="https://theconversation.com/profiles/kevin-li-892606">Kevin Li</a>, <a href="https://theconversation.com/institutions/unsw-sydney-1414">UNSW Sydney</a> For most things we buy, the price we are quoted is the price we pay. That’s supposed to be the case even where taxes and fees are involved. Australian law requires anyone selling anything to display a <a href="https://www.accc.gov.au/business/pricing/price-displays">total price</a> that includes all “taxes, duties and all unavoidable or pre-selected extra fees”. But our investigations, which compare the interest rate quoted on our mortgages with the fine print in our own mortgage documents, shows this is hardly ever the case for home loans. Even though we are both trained as accountants, until recently we hadn’t bothered to check – even as interest rates climbed. We assumed the rates we were being told we were being charged (say 5% per year) were the rates we were actually paying. This would be easy enough, and in our view the right thing, for banks to do. <h2>The price quoted usually isn’t the price paid</h2> Mortgage interest is usually charged monthly, but the rates are yearly. This means that each time interest is charged, the outstanding amount <a href="https://www.investopedia.com/terms/c/compoundinterest.asp">compounds</a> as interest is applied to interest. That sounds bad enough. But this isn’t our main complaint. It’s that there are two possible ways to calculate the amount of interest. Banks calcualte interest on a daily basis. The most reasonable would be to calculate the daily amount in a way that adds up to an annual amount that matches what was quoted. That way, a 5% rate would really be 5%. Although there’s a bit of <a href="https://cdn.theconversation.com/static_files/files/2814/compound_example.pdf">calculation</a> involved, it’s easy enough for banks to do. <h2>How banks calculate mortgage interest</h2> The other, arguably less reasonable, way is what’s called the “<a href="https://www.investopedia.com/articles/investing/020614/learn-simple-and-compound-interest.asp">simple</a>” method. Our investigations show that this technique is used by all the big four banks, and probably many others too. It’s called the simple method because it involves simply dividing the annual rate (say 5%) by 365 to determine the daily rate. This seems to not be important, but because of compounding it means the amount charged over a year is more than the rate quoted. Say you borrow $100,000 for one year at an annual rate of 5%, repaying the whole amount at the end of the year. You might expect to pay back $105,000. Instead, the banks’ method of calculating interest results in a total repayment of $105,116. This is because the daily interest rate (5% divided by 365) is applied to the outstanding balance each day and added to your balance once a month. These regular increases mean your interest compounds costing you more. <h2>Over decades, the difference matters</h2> In July 2023, the average size of a new mortgage in New South Wales was about A$750,000, with an average interest rate of about 5.95%. The method of calculation used by the banks and in the fine print of their mortgage contracts requires a monthly payment of $4,473 including the repayment of the amount originally borrowed over the life of a 30-year loan. But if 5.95% were actually charged each year, the monthly payment would be $4,398 – a difference of $900 per year. In this typical example, the difference over the life of the loan amounts to about $27,000. It means these borrowers will end up paying an effective interest rate of 6.11%. <h2>We had to read the fine print</h2> We checked the terms and conditions of each of the big four banks – Westpac, the Commonwealth, the National Australia Bank and the ANZ – as well as their biggest subsidiaries which include St George, The Bank of Melbourne, Bank SA and Bankwest. They all charge interest using the “simple” method. Mutual banks – the old credit unions and building societies owned by their members – have different reporting requirements, and we were unable to check the terms and conditions used by each one. But where we could, we found they used the same method as the big four. You can find this small print yourself, usually in the middle of your mortgage document. It’s a formula, accompanied by a paragraph of explanation. But you have to look carefully. Or you could call customer service, as we did, and ask the bank to explain the calculation. You shouldn’t have to. <h2>The price quoted ought to be the price paid</h2> We think the price quoted for a product should be the price that’s actually charged, as the law <a href="https://www.accc.gov.au/business/pricing/price-displays">generally requires</a> for products other than mortgages. This means if you are told you’ll be charged 5.95% interest per year, you should pay 5.95% per year – not 6.11% because of a quirk in the formula. Mortgages are a larger financial commitment than most purchases. This means that honesty and clear communication are even more important. It’s worth knowing what you are letting yourself in for when signing up for a mortgage. That way, when the bank or broker explains it to you and it’s not what was advertised, you can ask for a discount.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/213862/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a href="https://theconversation.com/profiles/sander-de-groote-1472267">Sander De Groote</a>, Lecturer, School of Accounting, Auditing and Taxation, <a href="https://theconversation.com/institutions/unsw-sydney-1414">UNSW Sydney</a> and <a href="https://theconversation.com/profiles/kevin-li-892606">Kevin Li</a>, Senior Lecturer, School of Accounting, Auditing and Taxation, <a href="https://theconversation.com/institutions/unsw-sydney-1414">UNSW Sydney</a> Image credits: Getty Images This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/why-youre-probably-paying-more-interest-on-your-mortgage-than-you-think-213862">original article</a>.

Money & Banking

“Breaking Aussies’ spirits”: Karl rips into Reserve Bank

Karl Stefanovic has ripped into the Reserve Bank for their decision to pause interest rates at an all time high. The Today host blasted their decision to freeze the cash rate at an 11-year high of 4.1 percent, as Aussies continue to struggle through the cost of living crisis. Karl Stefanovic has accused the Reserve Bank of “not giving a toss” about the millions of Australians struggling to keep their homes amid seemingly endless interest rate rises. On Thursday, Karl let loose on the RBA, slamming their decision to put Aussies under further financial strain. <blockquote class="instagram-media" style="background: #FFF; border: 0; border-radius: 3px; box-shadow: 0 0 1px 0 rgba(0,0,0,0.5),0 1px 10px 0 rgba(0,0,0,0.15); margin: 1px; max-width: 540px; min-width: 326px; padding: 0; width: calc(100% - 2px);" data-instgrm-permalink="https://www.instagram.com/reel/CuQTWInBqdU/?utm_source=ig_embed&utm_campaign=loading" data-instgrm-version="14"> <div style="padding: 16px;"> <div style="display: flex; flex-direction: row; align-items: center;"> <div style="background-color: #f4f4f4; border-radius: 50%; flex-grow: 0; height: 40px; margin-right: 14px; width: 40px;"> </div> <div style="display: flex; flex-direction: column; flex-grow: 1; justify-content: center;"> <div style="background-color: #f4f4f4; border-radius: 4px; flex-grow: 0; height: 14px; margin-bottom: 6px; width: 100px;"> </div> <div style="background-color: #f4f4f4; border-radius: 4px; flex-grow: 0; height: 14px; width: 60px;"> </div> </div> </div> <div style="padding: 19% 0;"> </div> <div style="display: block; height: 50px; margin: 0 auto 12px; width: 50px;"> </div> <div style="padding-top: 8px;"> <div style="color: #3897f0; font-family: Arial,sans-serif; font-size: 14px; font-style: normal; font-weight: 550; line-height: 18px;">View this post on Instagram</div> </div> <div style="padding: 12.5% 0;"> </div> <div style="display: flex; flex-direction: row; margin-bottom: 14px; align-items: center;"> <div> <div style="background-color: #f4f4f4; border-radius: 50%; height: 12.5px; width: 12.5px; transform: translateX(0px) translateY(7px);"> </div> <div style="background-color: #f4f4f4; height: 12.5px; transform: rotate(-45deg) translateX(3px) translateY(1px); width: 12.5px; flex-grow: 0; margin-right: 14px; margin-left: 2px;"> </div> <div style="background-color: #f4f4f4; border-radius: 50%; height: 12.5px; width: 12.5px; transform: translateX(9px) translateY(-18px);"> </div> </div> <div style="margin-left: 8px;"> <div style="background-color: #f4f4f4; border-radius: 50%; flex-grow: 0; height: 20px; width: 20px;"> </div> <div style="width: 0; height: 0; border-top: 2px solid transparent; border-left: 6px solid #f4f4f4; border-bottom: 2px solid transparent; transform: translateX(16px) translateY(-4px) rotate(30deg);"> </div> </div> <div style="margin-left: auto;"> <div style="width: 0px; border-top: 8px solid #F4F4F4; border-right: 8px solid transparent; transform: translateY(16px);"> </div> <div style="background-color: #f4f4f4; flex-grow: 0; height: 12px; width: 16px; transform: translateY(-4px);"> </div> <div style="width: 0; height: 0; border-top: 8px solid #F4F4F4; border-left: 8px solid transparent; transform: translateY(-4px) translateX(8px);"> </div> </div> </div> <div style="display: flex; flex-direction: column; flex-grow: 1; justify-content: center; margin-bottom: 24px;"> <div style="background-color: #f4f4f4; border-radius: 4px; flex-grow: 0; height: 14px; margin-bottom: 6px; width: 224px;"> </div> <div style="background-color: #f4f4f4; border-radius: 4px; flex-grow: 0; height: 14px; width: 144px;"> </div> </div> <p style="color: #c9c8cd; font-family: Arial,sans-serif; font-size: 14px; line-height: 17px; margin-bottom: 0; margin-top: 8px; overflow: hidden; padding: 8px 0 7px; text-align: center; text-overflow: ellipsis; white-space: nowrap;"><a style="color: #c9c8cd; font-family: Arial,sans-serif; font-size: 14px; font-style: normal; font-weight: normal; line-height: 17px; text-decoration: none;" href="https://www.instagram.com/reel/CuQTWInBqdU/?utm_source=ig_embed&utm_campaign=loading" target="_blank" rel="noopener">A post shared by thetodayshow (@thetodayshow)</a> </div> </blockquote> “They have single-handedly crushed, strangled Australian households,” he said. “Aussies who go to work, pay their bills, and just made the mistake of wanting to own their own home. Now you are being held to ransom.” “Everything you have built is now on the line because our central bank missed the inflation tidal wave. This is what's worse though.” “It's not over-spending respective governments carrying the can. It's you at home.” “It's you trying to put food on the table, pay your power bills and keep a roof over your family's head. It's no wonder it's breaking Aussies' spirits right now.” On Tuesday, the RBA moved to pause interest rates at an 11-year high of 4.1 per cent for the next month. Governor Philip Lowe hinted at more monetary policy tightening because inflation is still too high, even after the most aggressive rate rises since 1989. Even if interest rates don't rise again, mortgage repayments could still be hiked. Image credits: Today

RBA announces major interest rate rise

The Reserve Bank of Australia has lifted its official interest rate to 4.1 per cent, an increase not seen since early 2012. The bank’s board chose to lift the cash rate target by 0.25 of a percentage point for the second month in a row amid concerns that inflation is taking too long to decrease. The latest monthly consumer price index from the Australian Bureau of Statistics saw prices rise 6.8 per cent from 2022 to April 2023, up from the March reading due to statistical uncertainties caused by last year’s temporary fuel excise cut. Reserve Bank governor Phillip Lowe warned the public about rising costs of services including hospitality which are labour intensive and vulnerable to increased wages. "Recent data indicate that the upside risks to the inflation outlook have increased and the board has responded to this," he highlighted in his post-meeting statement. "While goods price inflation is slowing, services price inflation is still very high and is proving to be very persistent overseas. Unit labour costs are also rising briskly, with productivity growth remaining subdued.” Lowe noted the most recent and bigger than expected rise in minimum and award wages, which was the highest increase in decades. "Wages growth has picked up in response to the tight labour market and high inflation," he explained. "At the aggregate level, wages growth is still consistent with the inflation target, provided that productivity growth picks up.” The interest rate spike will add around $76 a month to the repayments on a $500,000 loan, and double that on a million-dollar 25-year mortgage. Someone with $500,000 owing on their home loan will see their monthly repayment increase by around $1,134 a month since the RBA started lifting rates from a record low of 0.1 per cent in May 2022. However, there is still the risk of another rate rise. "Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable time frame, but that will depend upon how the economy and inflation evolve," Lowe warned. Image credit: Twitter

Money & Banking

"We’re all f***ed if that happens": 60 Minutes' stunning f-bombshell

60 Minutes reporter Tom Steinfort spoke for Australians all across the nation when he swore at Treasurer Jim Chalmers in an interview on interest rates. The exchange transpired as homeowners brace for a 10th consecutive rate rise, with the move expected to produce the highest interest rates Australians have seen in the past decade. “Do you see similarities between now and what happened in the early ‘90s?” Steinfort asked the treasurer, referencing a difficult period of recession for Australia. “There’s absolutely no chance that interest rates will get to the level that they were at in the early 1990s. I wanna make that clear,” Chalmers responded. And while the treasurer had wasted no time in giving his answer, it wasn’t enough to stop Steinfort from scoffing, “yeah, well, we’re all f***ed if that happens.” In January 1990, interest rates peaked - or hit rock bottom - at a record high of 17.5 per cent. And now, the RBA is set to deliver more bad news - passing on another 0.25 per cent interest rate rise - with homeowners already feeling their wallet strings tightening when faced with the disparity between house prices and annual wages. Australia’s inflation rate of 7.8 per cent marks the highest level since the early 1990s and is over twice that of the RBA’s 2-3 per cent inflation target - one they adopted in 1993. - the RBA took on its inflation target in 1993. Experts fear that further interest rate hikes will see Australia face its first recession since 1991, a concern that Steinfort clearly shares. Elsewhere in the interview, Steinfort wanted to know if Chalmers believed Australians had seen the worst of the inflation crisis, asking, “do you think we’ve hit the inflation peak?” “That’s our expectation, yeah,” Chalmers said. “We think that’s most likely, uh, that inflation peaked at Christmas time and has started to moderate. But we won’t know until we get that next set of data.” “You think we might be through the worst of it?” Steinfort pressed. “Well, I think inflation is starting to come off,” Chalmers responded, before adding that despite his optimism, Australians shouldn’t expect for things to get easier overnight, “but even as it moderates we can’t be complacent about it, because it’s still going to be a challenge in ‘23, just like it was in ‘22.” “You paint a picture that we’ve turned a bit of a corner and that there are better times ahead, but the people we’re speaking to - I mean, even when I look at my home mortgage bill - we’re not feeling it,” a sceptical Steinfort pointed out. To which a smiling Chalmers answered, “yeah, I understand, and I think that certainly the prime minister understands, and that the government understands, that people are under real pressure now. “We’re doing what we can to deal with it within the constraints of a responsible budget.” <blockquote class="twitter-tweet"> Federal treasurer Jim Chalmers believes we’ve already seen the worst of Australia’s inflation problem. However he says 2023 will still be a challenging time for many families. Watch <a href="https://twitter.com/hashtag/60Mins?src=hash&ref_src=twsrc%5Etfw">#60Mins</a> on <a href="https://twitter.com/9Now?ref_src=twsrc%5Etfw">@9Now</a> <a href="https://t.co/4G5tZZO3fU">pic.twitter.com/4G5tZZO3fU</a> — 60 Minutes Australia (@60Mins) <a href="https://twitter.com/60Mins/status/1632322412959215617?ref_src=twsrc%5Etfw">March 5, 2023</a></blockquote> Images: 60 Minutes

Money & Banking

Millennials clash with Boomers in the battle of the housing market

A 27-year-old home loan document has reignited debate over which generation had the biggest mountain to climb in their quest to buy a place to call their own. Read more: The document, uploaded to the Facebook group Perth Reflect, outlines ANZ bank’s various interest rates offered on “owner occupied” homes, as well as those available for “investment property loans”, both respectively effective as of February and March 1996. The poster encouraged the group to discuss the find, and to share their experience with their own first home loans, with the caption “found this in our filing cabinet (1996) and was wondering what interest rates others were paying on their first home loan.” In 1996, the East Start loan for a home was 7.95 per cent per annum, and a variable at 10.50 per cent. Fixed rates began at 8.69 per cent for one year term, and went up to 9.69 per cent for five years. Loan terms for homes were offered up to 25 years, and 20 for investment properties. Meanwhile, in 2023, ANZ boasts a variable interest rate of 5.09 per cent per annum. Fixed index rates now begin at 5.69 per cent, 6.59 per cent for five years, and peak at 7.69 per cent for 10 years. This comes after Australia’s Reverse Bank passed down nine consecutive rises, with the cash rate reaching a 10-year high. The reveal came as a surprise to some, with the numbers of paper appearing much worse for those trying to buy a property in the ‘90s. And in the Facebook comment section, some recalled how their actual rates were even higher than the document suggested. “Paid 17.5 per cent initially, but was on variable,” wrote one of a purchase in the late ‘80s. Another noted how those with a fixed term loan believed they had it “much better” at the time. The younger members of the group, however, were quick to point out that while the numbers looked to be in favour of the older generation, the rates for 2023 did not accurately compare with those from 1996. “Houses were a 5th of the price,” one wrote, referencing an old and recurring argument about the disparity in house prices over the years. It was mentioned that while interest rates were high, prices were low, and “everything was affordable”. The discussion over the impact of the cost of living on wages has been covered from all sides on many occasions, but it didn’t stop it from coming up in this debate too, with one commenter writing, “regardless [of] if wages have increased, everything else has increased twice as much.” It led to the older members of the group circling back to a tired argument, too. One was determined to stop that line of argument in its tracks, suggesting that they’d been able to afford their home with the higher rates because they didn’t purchase takeaway coffee and “only ate out occasionally”. This wasn’t to be taken lying down, with the younger generation refusing to allow that buying the occasional little treat was the reason they couldn’t get a foot in the door of their own home. One member, perhaps realising that bickering wasn’t going to get them anywhere, decided to whip out a calculator and get to the bottom of it all. Someone wrote that they paid $44k for a 3 bedroom home in 1986, with a yearly income of $31k behind them, before allowing that “maybe things weren't so tough”. “If adjusted for inflation,” one said in response, before sharing their maths, “your income today would be $92k pa and the price you paid for your house would have been $131k.” While both generations faced struggles with the property market, the challenges faced in 2023 are an entirely new beast, and one member of Perth Reflects shared their sympathy over the situation. After explaining that they struggled through a 17.5 per cent interest rate themselves, they outlined the difference in their situation and their kids’, writing “my home loan was way less than what my kids are paying today”. They bought land and built a house in High Wycombe on a loan of around $130k, and noted that it can be difficult - if not impossible - find a deal like that in even a country town, where prices tend to err on the ‘cheaper’ side of the scale. “Wages are different,” they surmised, “but housing affordability has gone stupid and wages [have] not [been] increased accordingly.” Images: Getty, Facebook

Money & Banking

“I know you will recover”: Mark Bouris' candid confession

Mark Bouris has revealed he was forced to sell his house due to soaring interest rates. The Australian entrepreneur and mortgage expert made the frank admission on TikTok, admitting he had no other option that to sell his own home after being crippled by skyrocketing interest rates in the 1990s, and that it was “heartbreaking” to see “history repeating itself”. The former Celebrity Apprentice host began the candid video by saying he had only ever witnessed one other period of brutal economic conditions similar to today’s, in 1990, when the official cash rate hit a staggering 17.5 per cent: just 12 months before Australia was plunged into a devastating recession. “It was 1990. I had a wife, I had four kids, and I had to sell my house,” he said. “Telling my wife that I had to sell the house was the worst thing that I had to confront. Packing my family up was additionally really bad." <div class="embed" style="font-size: 16px; box-sizing: inherit; margin: 0px; padding: 0px; border: 0px; vertical-align: baseline; outline: none !important;"><iframe class="embedly-embed" style="box-sizing: inherit; margin: 0px; padding: 0px; border-width: 0px; vertical-align: baseline; width: 610px; max-width: 100%; outline: none !important;" title="tiktok embed" src="https://cdn.embedly.com/widgets/media.html?src=https%3A%2F%2Fwww.tiktok.com%2Fembed%2Fv2%2F7199376964300328194&display_name=tiktok&url=https%3A%2F%2Fwww.tiktok.com%2F%40markbouris%2Fvideo%2F7199376964300328194&image=https%3A%2F%2Fp16-sign-sg.tiktokcdn.com%2Ftos-alisg-p-0037%2Fd7eb67746f7e4a39bb2fbba6748cf211_1676235593%7Etplv-dmt-logom%3Atos-alisg-i-0068%2F2c16bbc3a49f42e8873431f16ac1ccd4.image%3Fx-expires%3D1676527200%26x-signature%3DJZG4wrBd%252Btt35jmBfpDi1wW%252FmjY%253D&key=5b465a7e134d4f09b4e6901220de11f0&type=text%2Fhtml&schema=tiktok" width="340" height="700" frameborder="0" scrolling="no" allowfullscreen="allowfullscreen"></iframe></div> “My friends could see that I had to sell my house, and I felt embarrassed. And I have to tell you, I was really angry." “I was angry at the time with the government, because the government jacked up rates, therefore the banks jacked up rates as well, and I was forced to sell.” He continued by adding that, “This stuff happens, and it happens in cycles, but the last time it happened was in 1990, and it happened to someone like me”. “I know you will recover. If you have to sell, you have to sell." “Don’t worry about it, your family, your partners, your friends, they’ll understand, don’t feel embarrassed.” He finished the video by encouraging anyone who was “confronting this position right now” to reach out, and provided his own email. Just days later, he followed it up with an Instagram video, revealing he had been inundated with responses that “actually breaks my heart to be frank”. <blockquote class="instagram-media" style="background: #FFF; border: 0; border-radius: 3px; box-shadow: 0 0 1px 0 rgba(0,0,0,0.5),0 1px 10px 0 rgba(0,0,0,0.15); margin: 1px; max-width: 540px; min-width: 326px; padding: 0; width: calc(100% - 2px);" data-instgrm-permalink="https://www.instagram.com/reel/ConjlBWBsuN/?utm_source=ig_embed&utm_campaign=loading" data-instgrm-version="14"> <div style="padding: 16px;"> <div style="display: flex; flex-direction: row; align-items: center;"> <div style="background-color: #f4f4f4; border-radius: 50%; flex-grow: 0; height: 40px; margin-right: 14px; width: 40px;"> </div> <div style="display: flex; flex-direction: column; flex-grow: 1; justify-content: center;"> <div style="background-color: #f4f4f4; border-radius: 4px; flex-grow: 0; height: 14px; margin-bottom: 6px; width: 100px;"> </div> <div style="background-color: #f4f4f4; border-radius: 4px; flex-grow: 0; height: 14px; width: 60px;"> </div> </div> </div> <div style="padding: 19% 0;"> </div> <div style="display: block; height: 50px; margin: 0 auto 12px; width: 50px;"> </div> <div style="padding-top: 8px;"> <div style="color: #3897f0; font-family: Arial,sans-serif; font-size: 14px; font-style: normal; font-weight: 550; line-height: 18px;">View this post on Instagram</div> </div> <div style="padding: 12.5% 0;"> </div> <div style="display: flex; flex-direction: row; margin-bottom: 14px; align-items: center;"> <div> <div style="background-color: #f4f4f4; border-radius: 50%; height: 12.5px; width: 12.5px; transform: translateX(0px) translateY(7px);"> </div> <div style="background-color: #f4f4f4; height: 12.5px; transform: rotate(-45deg) translateX(3px) translateY(1px); width: 12.5px; flex-grow: 0; margin-right: 14px; margin-left: 2px;"> </div> <div style="background-color: #f4f4f4; border-radius: 50%; height: 12.5px; width: 12.5px; transform: translateX(9px) translateY(-18px);"> </div> </div> <div style="margin-left: 8px;"> <div style="background-color: #f4f4f4; border-radius: 50%; flex-grow: 0; height: 20px; width: 20px;"> </div> <div style="width: 0; height: 0; border-top: 2px solid transparent; border-left: 6px solid #f4f4f4; border-bottom: 2px solid transparent; transform: translateX(16px) translateY(-4px) rotate(30deg);"> </div> </div> <div style="margin-left: auto;"> <div style="width: 0px; border-top: 8px solid #F4F4F4; border-right: 8px solid transparent; transform: translateY(16px);"> </div> <div style="background-color: #f4f4f4; flex-grow: 0; height: 12px; width: 16px; transform: translateY(-4px);"> </div> <div style="width: 0; height: 0; border-top: 8px solid #F4F4F4; border-left: 8px solid transparent; transform: translateY(-4px) translateX(8px);"> </div> </div> </div> <div style="display: flex; flex-direction: column; flex-grow: 1; justify-content: center; margin-bottom: 24px;"> <div style="background-color: #f4f4f4; border-radius: 4px; flex-grow: 0; height: 14px; margin-bottom: 6px; width: 224px;"> </div> <div style="background-color: #f4f4f4; border-radius: 4px; flex-grow: 0; height: 14px; width: 144px;"> </div> </div> <p style="color: #c9c8cd; font-family: Arial,sans-serif; font-size: 14px; line-height: 17px; margin-bottom: 0; margin-top: 8px; overflow: hidden; padding: 8px 0 7px; text-align: center; text-overflow: ellipsis; white-space: nowrap;"><a style="color: #c9c8cd; font-family: Arial,sans-serif; font-size: 14px; font-style: normal; font-weight: normal; line-height: 17px; text-decoration: none;" href="https://www.instagram.com/reel/ConjlBWBsuN/?utm_source=ig_embed&utm_campaign=loading" target="_blank" rel="noopener">A post shared by Mark Bouris (@mark_bouris)</a> </div> </blockquote> “I’ve got to be honest with you I didn’t anticipate the response,” he wrote in the caption. “I knew it’d be big but woah. All these messages just highlight the failure of the government and RBA.” He revealed he was struggling to keep up with the emails, but promised he did “give a damn” and that he would do what he could to help out those in difficult positions. Image credits: Getty Images

Money & Banking

Baby boomers outraged by satirical post about buying a home

A group of older Australians have fallen for a satirical news article about rising interest rates and home ownership, with baby boomers everywhere expressing their disapproval. A post from Australian satire news site The Shovel has gone viral, after they riled up the older demographic who likely bought their homes for a very reasonable price, while still urging millennials to try harder to get into the impossible property market. The headline of the joke post reads, “'But interest rates were 17 per cent in my day!' complains man who bought house for $67,000". The satirical article goes on to state John Bradly, a fictional 63-year-old man from Melbourne who bought his house in the 1980s, thinks young people concerned about interest rate rises “don’t know how good they have it”. Bradley is quoted as saying he had to save up “for weeks” for a house deposit and that he only had his salary to rely on which was “only about one-fifth of the value of the average home back then”. “It took me more than seven years to pay off my first house. Seven years! I was practically in my thirties by the time I was debt free. Can you imagine? Being beholden to a bank for your entire twenties! I’m pretty sure no-one in their twenties these days has to go through that,” the joke article stated. The article finishes with another jab at older Australians who are making it even harder for first home buyers by owning multiple properties. “Try managing tenants across 11 investment properties scattered around Melbourne and Sydney during a global pandemic. That’s what hard work is,” Bradley was quoted as saying. Despite the almost palpable satirical tone, dozens of Aussies were convinced the article was legitimate, flocking to comment that the article made them feel personally attacked. Even general manager of the Canterbury-Bankstown Bulldogs, Phil Gould, got caught up in discourse, urging the "news" site to do more research before publishing their articles. “Average full-time wage in 1990 was $566.80. Try to do just a little research,” he wrote, sharing a link to the satire article on Twitter. His followers were quick to point out that he had been duped by a fake news post, while others chose to highlight how he was only proving the point the article was making. Gould was not the only one who took the post seriously, with angry baby boomers sharing their stories of hardship when it came to buying their first home. “When my wife and I bought a 2 bed duplex in 90/91?, it cost us $108,000. Interest rates were 17 per cent. $108,000 was a LOT of $$ back then,” one person wrote. “We sacrificed a LOT. We started modestly as well.” Another person claimed that, while they bought their first house in the late 1980s for just over $71,000, but added they didn’t get things like paid parental leave and subsidised child care. “And yes interest rates at 17-18 per cent scared us,” the commenter said. Despite the outrage over the post, many people pointed out that despite the article being of a satirical nature, there could be an element of truth behind the sarcasm. One person said, "It’s getting harder and harder to tell the actual “news” content now", while another wrote, "I thought this was supposed to be a satirical publication". Image credits: The Shovel / Getty Images

Real Estate

5 interesting facts about how we hear

The cochlea is the most complex part of the ear, responsible for turning sounds waves into what we perceive as “hearing”. Here are five more facts about this amazing organ. 1. The cochlea turns sounds into “hearing” The cochlea receives sounds in the form of vibrations and converts them into nerve impulses. These impulses are sent to the brain to be translated into sounds that we recognise and understand. 2. The cochlea is the size of a pea Located in the inner ear, the cochlea looks like a snail shell (cochlea is Greek for snail) and is only the size of a pea. Yet within the small pea is everything needed to turn sound vibrations into hearing. 3. There are over 20,000 nerve cells in the cochlea There are approximately 24,000 hair fibres in the cochlea, which are essential to hearing. If these hair cells become damaged, hearing impairment occurs. 4. Cochlear implants directly stimulate auditory nerve A cochlear implant bypasses damaged hair cells in the cochlear to provide direct stimulation to the auditory nerve. 5. The cochlea can’t heal The cochlea cannot heal so damage done to your ear when younger can affect you later in life. It can be damaged by immune reactions, disease, drugs, chemicals, toxins, loud sounds, physical impact and ageing. Image credits: Getty Images

Body

Cash is not king when it comes to super

Record low interest rates are shrinking financial returns for conservative fund members. Regardless of whether your nest egg is self-managed or in a retail or industry super fund, if it’s mainly been sitting in cash you’ve missed out on healthy returns delivered by diversification. Five years ago, seven per cent term deposits were offered. But this is no longer the case. Many experts expect slim cash returns for a long time. Recently, deposits pay only two-and-a-half per cent. The fast-growing self-managed superannuation sector seems to be hit the hardest by the cash crash as members usually make their own investment decisions. Those who don’t use SMSFs should also check that cash does not dominate their savings. Most will already have a diverse range on investments through their fund’s default investment options. In Australia, we have almost 550 million SMSFs with more than one million members. According to official figures, they hold about 28 per cent of their money in cash. Typical retail and industry super funds hold 14 per cent of their money in cash. International shares, which is a top-performing asset class over the last five years, represents less than one per cent of SMSF assets compared with 22 per cent for other funds. Barbara Smith, CEO of Oasis Wealth and author of new book Keep it Super Simple, says that cash returns were nice for those who locked money in term deposits five years ago. But record low interest rates today mean now is not the time to do it again. “Our experience is sometimes people get scared and just leave it sitting in cash,” she says. “Now that rates have fallen, people are being a little proactive.” She says that people need to do their research and “always keep yourself close to your money.” Online share trading websites such as CommSec have more information than they’ve had before, Smith says. “The worst thing people do is invest in things they don’t understand. Once they do that you can start to see the money drizzle away. Take it slowly and gradually invest.” Andrea Slattery, CEO of the SMSE Association, says that the claim that SMSFs invest mainly in cash is incorrect. She says they get a lot of international exposure via investing in Aussie companies with big offshore earnings, like BHP Billiton, Rio Tinto and Westfield. “SMSFs are more flexible and leading the market in moving into new investments,” she says. “In the main, people are more engaged, they trust their specialist adviser and are more comfortable with the decisions that have been made. “You can’t actually do everything yourself – there are a couple of compulsory advisers you need – one’s an auditor and one’s an actuary. You manage it through professional advice directly to you,” Slattery says. Image: Getty Images

Retirement Income

I’m considering an interest-only home loan. What do I need to know?

An <a href="https://moneysmart.gov.au/home-loans/interest-only-home-loans" target="_blank" rel="noopener">interest-only home loan</a>, as the name suggests, is where you only pay the interest on a loan and not the principal (the original amount you borrowed). While authorities such as the Reserve Bank often <a href="https://www.rba.gov.au/speeches/2018/sp-ag-2018-04-24.html" target="_blank" rel="noopener">see</a> them as risky, interest-only loans can be helpful in some circumstances. If you’re considering an interest-only loan, here’s what you need to know. How long do they go for? These loans are typically last for five years at most, before reverting back to principal and interest (where you have to pay back, through regular payments, both interest and the initial sum you borrowed). You could potentially apply for another interest-only loan after your first one winds up, perhaps by refinancing (where you take a new mortgage to repay an existing loan). But you might not get it – and you’d still have to pay off the principal eventually. <figure class="align-center zoomable"><a href="https://images.theconversation.com/files/480309/original/file-20220822-18038-nyikjs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img src="https://images.theconversation.com/files/480309/original/file-20220822-18038-nyikjs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" srcset="https://images.theconversation.com/files/480309/original/file-20220822-18038-nyikjs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/480309/original/file-20220822-18038-nyikjs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/480309/original/file-20220822-18038-nyikjs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/480309/original/file-20220822-18038-nyikjs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/480309/original/file-20220822-18038-nyikjs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/480309/original/file-20220822-18038-nyikjs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" alt="" /></a><figcaption>Interest-only loans can cost you a lot more in interest over time than a regular principal and interest loan. Photo by Andrew Mead on Unsplash, <a class="license" href="http://creativecommons.org/licenses/by/4.0/" target="_blank" rel="noopener">CC BY</a></figcaption></figure> What are the upsides of an interest-only loan? An interest-only loan means you’ll have more cash available to cover other costs, or invest elsewhere. You can use a <a href="https://moneysmart.gov.au/home-loans/mortgage-calculator" target="_blank" rel="noopener">mortgage calculator</a> to work out how much extra cash you’d have if you switched from a principal and interest loan to an interest-only loan. It’s typically hundreds of dollars per week. This may get you a bit more wriggle room for daily expenses. Or, some people use the extra cash to invest in other things – such as shares – in the hope they can make more money overall and pick up some tax benefits along the way. That’s why interest-only loans are often popular among <a href="https://moneysmart.gov.au/home-loans/interest-only-home-loans" target="_blank" rel="noopener">investors</a>. Of course, this strategy comes with risk. An interest-only loan may also have a redraw facility, allowing you to add extra payments into the loan (above and beyond the interest) if you want, and withdraw money later when you need cash. This can allow people to avoid a personal loan, which usually has a much higher interest rate. Regular principal and interest loans may also have a redraw facility but the regular payments of principal are unavailable for redraw. That means less flexibility for the borrower. <figure class="align-center zoomable"><a href="https://images.theconversation.com/files/480311/original/file-20220822-64666-y67vz3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img src="https://images.theconversation.com/files/480311/original/file-20220822-64666-y67vz3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" srcset="https://images.theconversation.com/files/480311/original/file-20220822-64666-y67vz3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=408&fit=crop&dpr=1 600w, https://images.theconversation.com/files/480311/original/file-20220822-64666-y67vz3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=408&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/480311/original/file-20220822-64666-y67vz3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=408&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/480311/original/file-20220822-64666-y67vz3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=512&fit=crop&dpr=1 754w, https://images.theconversation.com/files/480311/original/file-20220822-64666-y67vz3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=512&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/480311/original/file-20220822-64666-y67vz3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=512&fit=crop&dpr=3 2262w" alt="" /></a><figcaption>What’s right for one borrower won’t be for the next. Image by Pfüderi from Pixabay, <a class="license" href="http://creativecommons.org/licenses/by/4.0/" target="_blank" rel="noopener">CC BY</a></figcaption></figure> What are the downsides? The interest rates on interest-only loans are generally higher than principal and interest loans. For example, the RBA July 2022 <a href="https://www.rba.gov.au/statistics/tables/xls/f05hist.xls" target="_blank" rel="noopener">indicator rate</a> for owner-occupier interest-only rates is 6.31%. But the equivalent variable rate for principal and interest loans is 5.77% (the indicator rate is just a guide; the actual difference varies from bank to bank). Interest-only loans can cost you a lot more over time than a regular principal and interest loan. This means a borrower needs to manage their finances well to ensure they can cover the interest payments now and still have enough to pay down the principal eventually. So you’ll need a plan for how you’re going to do that when the interest-only loan ends. There is also a risk of a shock – such as job loss, personal crisis or housing crash – causing the borrower to default on the loan altogether. If the borrower defaults on an interest-only loan, they may lose the house and the bank is left with a debt that was not substantially repaid (because the borrower had not yet made a dent in the principal). It’s a lose-lose situation. Are interest-only loans common? Interest-only loans represent <a href="https://www.apra.gov.au/news-and-publications/apra-releases-quarterly-authorised-deposit-taking-institution-statistics-11" target="_blank" rel="noopener">11.3% of all home loans</a> in Australia. This figure has been <a href="https://www.rba.gov.au/publications/fsr/2017/apr/box-b.html" target="_blank" rel="noopener">trending down</a> over the past five years, due in part to tighter <a href="https://www.apra.gov.au/news-and-publications/apra-to-remove-interest-only-benchmark-for-residential-mortgage-lending" target="_blank" rel="noopener">lending restrictions</a> and the fact low interest rates have made principal and interest loans relatively cheap recently. <figure class="align-center zoomable"><a href="https://images.theconversation.com/files/480312/original/file-20220822-65738-za6ht2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img src="https://images.theconversation.com/files/480312/original/file-20220822-65738-za6ht2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" srcset="https://images.theconversation.com/files/480312/original/file-20220822-65738-za6ht2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/480312/original/file-20220822-65738-za6ht2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/480312/original/file-20220822-65738-za6ht2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/480312/original/file-20220822-65738-za6ht2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/480312/original/file-20220822-65738-za6ht2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/480312/original/file-20220822-65738-za6ht2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" alt="" /></a><figcaption>Interest-only loans represent 11.3% of all home loans in Australia. Image by sandid from Pixabay, <a class="license" href="http://creativecommons.org/licenses/by/4.0/" target="_blank" rel="noopener">CC BY</a></figcaption></figure> What does the research say? One Dutch <a href="https://link.springer.com/article/10.1007/s11146-013-9453-9" target="_blank" rel="noopener">study</a> found “households that are more risk-averse and less literate are significantly less likely to choose an interest-only mortgage”. This partly due to lower initial repayments and wealthy households preferring the financial flexibility. Interest-only borrowing has also been found to <a href="https://www.sciencedirect.com/journal/journal-of-housing-economics" target="_blank" rel="noopener">fuel</a> <a href="https://doi.org/10.1016/j.regsciurbeco.2018.06.004" target="_blank" rel="noopener">housing</a> <a href="https://www.sciencedirect.com/science/article/pii/S1094202520300776?via%3Dihub" target="_blank" rel="noopener">speculation</a> and reduce housing affordability. A US study found borrowers also tend to <a href="https://doi.org/10.1093/rof/rfy016" target="_blank" rel="noopener">default</a> more. A Danish <a href="https://doi.org/10.1162/rest_a_01146" target="_blank" rel="noopener">study</a> found that once the interest-only lower repayment period is over and the loan reverts to principal and interest, those who didn’t make principal repayments suffered a large drop in disposable income. Financial flexibility comes with a catch With rates rising, interest-only loans may sound like an appealing way to have more cash available to cover other costs in life. But just remember financial flexibility comes with a catch. An interest-only loan could be more expensive in the long run. For some people, that cost will be worth it if it allows them to hold onto the house during a brief tough period or make more money investing elsewhere. But it’s a risk. And when the interest-only loan ends, you’re still stuck with the task of paying off the money you borrowed from the bank in the first place (with interest).<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/188817/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a href="https://theconversation.com/profiles/adrian-lee-94688" target="_blank" rel="noopener">Adrian Lee</a>, Associate Professor in Property and Real Estate, <a href="https://theconversation.com/institutions/deakin-university-757" target="_blank" rel="noopener">Deakin University</a> This article is republished from <a href="https://theconversation.com" target="_blank" rel="noopener">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/im-considering-an-interest-only-home-loan-what-do-i-need-to-know-188817" target="_blank" rel="noopener">original article</a>. Image: Getty Images

Money & Banking

RBA increases interest rates again

The Reserve Bank of Australia has increased interest rates by 0.5 per cent for the third month in a row. Interest rates are now 1.35 per cent with treasurer Jim Chalmers saying that inflation will only “get worse before it gets better”. "That's the brutal reality, unfortunately," he said. "A lot of people that I talk to around Australia are facing that same diabolical set of circumstances, where prices for everything are going up, people's wages aren't keeping up, it's harder and harder for small businesses to operate. "The government is doing what it can but really the only solution to this in the medium term is to try and build a budget and an economy which is as resilient as the Australian people themselves, and that's what we're working on." Mr Chalmers said it's expected that the interest rate will continue to go up and this will put a lot of pressure on people with mortgages. “Mortgage repayments are now eating up a bigger part of already stretched budgets,” he said. “Average homeowners owing $330,000 will now have to find another $90 a month at the same time as they try to keep up with the costs of petrol, electricity, groceries and other essentials.” RBA Governor Philip Lowe says Australians should expect further hikes to help with inflation. “Global inflation is high. It is being boosted by COVID-related disruptions to supply chains, the war in Ukraine and strong demand which is putting pressure on productive capacity,” he said. “Monetary policy globally is responding to this higher inflation, although it will be some time yet before inflation returns to target in most countries.” Images: Shutterstock

Money & Banking

Massive house price slowdown as interest rate climbs

After experiencing near-record high prices during the pandemic, the cost of a house in Australia’s capital cities is experiencing its biggest slowdown since 1989, according to new data. The slowdown in price growth over the past six months is worse than the stagnation and turbulence the housing market experienced in 2004 and 2008’s Global Financial Crisis. According to new analysis from PropTrack, the annual rate of home price growth in capital cities has dropped from January’s rate of 24 percent, to 14 percent. PropTrack has reported that Sydney prices have slowed at the fastest rate since 1989, Melbourne’s is the slowest since 2010 and Brisbane’s since 2008. Economist Paul Ryan told <a href="https://www.9news.com.au/national/australia-capital-city-home-prices-slow-down-slow-at-most-rapid-pace-in-more-than-30-years/e7d7b5cc-965d-480c-9b7f-20a6a9ef862d" target="_blank" rel="noopener">9News</a> the slowdown was “not surprising”, blaming recent interest rate rises and predicting it would continue due to additional rises expected over the rest of the year. “Looking ahead, the rapid slowdown in price growth signals the housing market is likely to continue to see slow growth over the rest of 2022,” he said. He added that buyers may be hesitant with the high level of uncertainty around the cost of mortgage repayments. “Resolving this uncertainty about the path of interest rates will be the key element buyers look for over the rest of the year,” he continued. Though it is normal for prices to decline after a period of growth, Ryan said this sudden six-month deceleration was of potential concern. “It’s not necessarily the case that growth falls rapidly after a run-up,” he said. “In general, the market moves more gradually, indicating there are other factors involved.” It comes after the Reserve Bank lifted the nation’s interest rates by 0.5 percent on Tuesday, making it the second month in a row with an increase. Image: Getty Images

Real Estate

"No interest in justice!" Andrew O'Keefe's courtroom explosion

Disgraced TV host Andrew O'Keefe has screamed at a magistrate in his latest court appearance, claiming he had “no interest in justice” and was threatened with contempt of court after he was again denied bail. As O'Keefe fronted Sydney’s Central Local Court on Wednesday afternoon, he appeared visibly distressed and frustrated. The 50-year-old was hit with six charges in January after police alleged that he grabbed a woman by the throat, punched her and pushed her to the ground, to which he pled not guilty to all charges. Mr O’Keefe has been remanded in custody since his arrest and lost his last bid for bail in the NSW Supreme Court in March. Defence lawyer Sharon Ramsden presented a fresh application for bail on Wednesday, in which she argued that more evidence had been served on Mr O’Keefe that outlined the “lack of injury” on the complainant. Over the bail hearing that lasted almost two-hours, Mr O’Keefe was audibly frustrated over what was being said in court. A prosecutor opposed the bail application and said there was “no new information” to warrant the request, “There’s not fresh circumstances in what has been put before the court … he has been in rehab nine times,” he said. Mr O’Keefe spoke over the prosecutor to deny the allegations as magistrate Daniel Reiss warned him he would be “going backwards by speaking up”. “That’s simply not true Your Honour,” Mr O’Keefe said, raising his voice. “I’m just getting the truth out there.” Mr O’Keefe continued to interrupt and shake his head in frustration as magistrate Daniel Reiss told the court of the 50-year-old’s mental health and drug issues. The magistrate warned that Mr O’Keefe was bordering on being in contempt of court. “I’ve dealt with many defendants, some are psychotic and are not as hard to deal with as you. Someone with legal qualifications and 10 warnings should know how to deal with it,” Mr Reiss said. Mr Reiss denied bail, saying he was not willing to allow the “unacceptable risk” of letting Mr O’Keefe leave custody. Mr O’Keefe gathered his papers and stood up before saying, “The transcript will say I was not arguing, I was trying to help you Your Honour.” “You have no interest in justice,” Mr O’Keefe continued before storming out. Mr O’Keefe will return to court for a hearing in June. Image credits: A Current Affair

News

Bank's worrying forecast for when housing prices will plummet

According to the lastest NAB forecast, property prices in Australia are expected to take a turn for the worst this year, before plunging by 11 percent by 2023. After the Reserve Bank flagged that interest rates could be on the rise at some point this year, NAB drastically revised their initial outlook on property prices over the next two years.In NAB's <a href="https://business.nab.com.au/nab-quarterly-australian-residential-property-survey-q4-2021-51029/" target="_blank" rel="noopener">Residential Property Survey</a> for the latest quarter, they have warned, “With our view on rate hikes coming forward, we now expect the turning point in property prices to occur in the second half of 2022.”As a result, property is set to rise in value by just three percent this year, compared to a 22 percent boom in 2021 which had not been seen since the mid-1980s. While 11 percent seems like a huge drop, the author of the report has reassured that it is a controlled drop. “We see this as a relatively orderly decline,” the report noted. “It is important to remember this correction comes after a very sharp run up in prices over the last year.”As a result of the rising interest rate expectations, NAB brought forward its predictions of a correction. “In terms of forecasts, we have brought forward the timing of the correction we expect in house prices to late-2022 as affordability constraints begin to bite and rising mortgage rates place downward pressure on prices,” the bank said. “This would offset gains seen in early-2022, so that overall, prices end the year roughly flat. We see this trend continuing through 2023, ending the year around 10 per cent lower.”Sydney and Melbourne will be hit hardest, dropping by nearly 12 percent each next year.Hobart will face the lowest drop for 2023 at only 4 percent. The combined capital city average was forecast to be a 9.4 percent decrease next year.NAB have warned that interest rates could be on the rise as early as November this year.Image credits: Getty Images<div class="media image" style="color: #000000;font-style: normal;font-weight: normal;letter-spacing: normal;text-align: start;text-indent: 0px;text-transform: none;text-decoration: none;flex-direction: column;align-items: center;width: 705.3308715820312px;margin-bottom: 32px"> </div>

Money & Banking

Australia’s Reserve Bank signals the end of ultra-cheap money. Here’s what it will mean

The Reserve Bank of Australia had a Cup Day surprise in store for the country, announcing it was abandoning its policy of “<a href="https://www.rba.gov.au/media-releases/2021/mr-21-24.html">yield curve control</a>”, meaning it was no longer going to defend any particular interest rate for borrowing over any particular duration. Until today it had a formal target for the three-year bond yield of 0.10%, enabling banks to provide three-year fixed mortgages very cheaply, and indicating the cash rate wouldn’t climb above 0.10% until the most recent three-year bond expires in <a href="https://www.rba.gov.au/media-releases/2021/mr-21-22.html">April 2024</a>. But it has now abandoned the target, a full two years early. <h2>Why control the yield curve in the first place?</h2> When COVID hit last year, the bank announced it would buy enough government bonds to keep the yield on the three-year bond at <a href="https://theconversation.com/more-than-a-rate-cut-behind-the-reserve-banks-three-point-plan-134140">0.25%</a>, as good as guaranteeing money would be cheap for years to come. Later, it cut the target for three-year bond yields (and the target for its cash rate) to a near-zero <a href="https://theconversation.com/5-ways-the-reserve-bank-is-going-to-bat-for-australia-like-never-before-149311">0.10%</a>, further lowering the cost of borrowing. Responding to an improving economy, the bank decided at its July 2021 meeting not to extend the program bond target beyond <a href="https://www.rba.gov.au/media-releases/2021/mr-21-13.html">April 2024</a>. The decision created a reasonable expectation the cash rate would remain close to zero until 2024. <h2>What did yield curve control achieve?</h2> Yield curve control achieved a lot. It took the bank just 11 days and A$27 billion dollars of bond purchases to achieve its first target, establishing ultra-low interest rates for years into the future. After that, it didn’t need to spend much. The new three-year rate became the new norm. Markets believed it would do whatever was needed to defend it. Over the next 18 months it intervened in the market only occasionally, and only in small amounts. That all changed last week. On October 15, the three-year bond rate started to climb above the bank’s target of 0.10%. It initially bought enough bonds to defend the rate and then, without warning, <a href="https://www.rba.gov.au/media-releases/2021/mr-21-24.html">capitulated</a> last Thursday, as good as withdrawing from the market and allowing the rate to climb to a high of 0.70%. By Monday the rate had climbed to more than 1.00% — more than ten times the Reserve Bank’s target. <img src="https://images.theconversation.com/files/429689/original/file-20211102-23-1wn4prr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" alt="" /> <a href="https://tradingeconomics.com/gacgb3y:ind" class="source">Trading Economics</a> Today’s announcement merely <a href="https://www.rba.gov.au/media-releases/2021/mr-21-24.html">made formal</a> what was apparent on Thursday: the bank is no longer going to spend public funds defending a line that might eventually be crossed. Bond traders thought the improving economic outlook meant the bank would have to lift its record low cash rate sooner that it had said it would. It lost the will to disagree. In a <a href="https://www.rba.gov.au/speeches/2021/sp-gov-2021-11-02.html">4pm</a> press conference Governor Philip Lowe said that to maintain the target would have been <a href="https://www.rba.gov.au/speeches/2021/mp3/sp-gov-2021-11-02.mp3">untenable</a>. Eventually the bank would have owned all the three-year bonds on offer. <h2>What will this do to the housing market?</h2> Today’s decision is a sure sign interest rates are going to start to rise. Not today, or even for the rest of this year, but sooner was previously expected. For what it is worth, Lowe said the latest data and forecasts did “not warrant an increase in interest rates in 2022”. For now, sub-2% fixed-rate mortgages are a thing of the past. The last were withdrawn this week. The decision means the booming housing market will start to crest. Low interest rates sparked the boom as renters flocked to become first-homebuyers and investors jumped in to catch rising prices. The prospect of higher mortgage payments is going to dent this enthusiasm, perhaps quickly. Prices are set to stabilise, before edging, <a href="https://www.afr.com/wealth/personal-finance/house-prices-could-fall-as-much-as-20pc-after-rate-increases-20211027-p593mw">or sliding</a> down . We don’t yet know how quickly variable interest rates will start to rise, but given the Reserve Bank has walked away from a battle to defend yield curve control, we do know it’ll be a long time before it even considers doing it again.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;" src="https://counter.theconversation.com/content/170928/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a href="https://theconversation.com/profiles/isaac-gross-737430">Isaac Gross</a>, Lecturer in Economics, <a href="https://theconversation.com/institutions/monash-university-1065">Monash University</a> This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/australias-reserve-bank-signals-the-end-of-ultra-cheap-money-heres-what-it-will-mean-170928">original article</a>. Image: Shutterstock

Retirement Income

No alibi: Fresh twist in William Tyrrell case

A key person of interest in the high-profile William Tyrrell case has been unable to give investigating police an alibi for the day of the boy's disappearance. A <a rel="noopener" href="https://7plus.com.au/7news-disappearance-of-william-tyrrell" target="_blank">7News investigation</a> revealed that convicted pedophile Frank Abbott was living approximately 12 kilometres from the town William went missing from in September 2014. The elderly man is now serving time in jail for the sexual assault of three young children, to which he maintains his innocence over. Police repeatedly questioned Abbott about his movements on the day William disappeared, and has been unable to provide a suitable alibi or someone to vouch for his movements. Despite the mounting suspicions, Abbott maintains he has nothing to do with the disappearance. A witness in the case named Steve, whose true identity is suppressed by a court order, claims a lot of the key evidence points to Abbott. “I believe that he, Frank, dropped (friend Ray Porter) off at hospital and had access to Ray’s car,” Steve told 7NEWS. When asked whether the car claim supports evidence supplied by William’s foster mother, Steve replied, “100 per cent.” Child protection advocate Adam Washbourne claims police had relented to disclosing the number of pedophiles living near the town of Kendall at the time of William's disappearance. “There were 20 sex offenders in the Kendall area,” he said. “Do you think there’s a street where there isn’t a registered sex offender? I’ve got news for you if you do." “They are in every town, every suburb, the safest places. They are monsters, predators, stalkers, and they live among us.” It’s hoped that the findings of a coronial inquest into William's disappearance will shed more light on the case, after out concluded in October last year due to the pandemic. In September, police returned to where William was last seen on the seven year anniversary of his disappearance, saying, "<a rel="noopener" href="https://www.oversixty.com.au/finance/legal/shock-twist-in-seven-year-search-for-william-tyrrell" target="_blank">Further information has come to light</a>." William was only three years old when he disappeared from his grandmother's home in Kendall, NSW, on Friday September 12th 2014. Despite hundred of volunteers, emergency services workers and locals scouring the town, no one could find a trace of the missing boy. Image credits: NSW Police/PR Image

Legal

5 ways you can use your home to overcome low interest rates

While record low interest rates may be great news for home buyers, they are generally horrible news for Australian retirees who rely on their savings income. The good news is that the family home - whether it is owned or rented - does provide a number of significant opportunities to generate income for retirees in a low interest rate environment. We’ve outlined five ways this could be the case: 1. Downsizing from the home Just over half of the 40 people who responded to a <a href="https://www.facebook.com/downsizing.com.au/">poll on our Facebook page</a>, stated they were considering downsizing from the family home, so they can release home equity to boost their retirement savings, because of low interest rates. Fortunately, it is these very same low interest rates that are also making it easier for downsizers to sell the home, because they are <a href="https://www.smh.com.au/business/the-economy/bubble-fears-are-back-property-prices-threatening-to-get-out-of-control-20191001-p52wia.html">breathing life into the property market.</a> As we have reported previously, the Australian Government has a downsizing superannuation incentive. Australians aged over 65 are using this incentive to boost their super by, on average, around $200,000. Using the incentive, a 65-year-old adding $220,000 to their super would be able to draw an additional tax-free income of $15,000 per year until age 88 - a pretty handy amount when interest rates are as rubbish as they currently are. <a href="https://www.downsizing.com.au/news/602/How-much-money-you-can-make-from-downsizing">Find out more about the government’s incentive here</a>. Downsizing has a number of benefits, including allowing people to move into alternative, age-appropriate accommodation, often located within a supportive community. Downsizing from the family home however may come with costs, in particular stamp duty on the new home and agent’s costs when selling the old home. The stamp duty impost can usually be avoided however by moving into a lease or licence retirement village unit or a land lease community. In addition, downsizers need to consider the fact that the released equity does count towards the pension assets and income tests, which could impact on eligibility for a part or full pension. 2. Unlocking the equity in the home There are both commercial and government ‘reverse mortgage’ schemes in place to help retirees to unlock the equity in their home, while still living in the home. The government’s expanded <a href="https://www.humanservices.gov.au/individuals/services/centrelink/pension-loans-scheme/who-can-get-it">Pensions Loans Scheme</a>, came into effect on 1 July 2019 and allows retirees to access a fortnightly amount representing 150 per cent of the maximum pension payment, via a government loan secured against their home. A 5.25 per cent interest rate will apply to the loan, which will need to be paid back to the government when the home is eventually sold. However, <a href="https://www.downsizing.com.au/news/573/Why-seniors-need-to-think-carefully-before-leaping-into-the-Pension-Loans-Scheme">as outlined in this story</a>, there are downsides to this scheme. One of the biggest downsides is that it encourages elderly people to stay in their existing home, when this home may not have the necessary ageing-in-place safety features that a newer home may have. It could also lead to loneliness, as older people are left isolated in their home. 3. Working from home OK - this is a bit of a controversial one... but stay with us. There is clear evidence that an increasing percentage of older Australians are staying in, or re-entering the workforce, because they either need the money or the mental stimulation. In August 2019, around 15 per cent of Australians over 65 were still working part-time or full-time, up from 10 per cent in August 2009 and just 5.4 per cent in August 1999. Part-time work is the most popular option for Australians aged over 65 (compared to the 1990s when there were more elderly Australians in full-time work). In July 2019, there were 345,000 Australians aged over 65 undertaking part-time work, compared to 256,300 in full-time work. <div><img src="https://img.seniorshousingonline.com.au/50b860f80fa8f41d56d22b98bba15a203a26c5f8" alt="" width="800" height="475" />Chart showing increasing number of Australians over 65 still working</div> These seniors are no doubt taking advantage of a number of tax incentives to supplement their retirement or pension income. For instance, the Australian Government’s Age Pension <a href="https://www.dss.gov.au/seniors/programmes-services/work-bonus">Work Bonus</a> increases the amount an eligible pensioner can earn from work before it affects their pension rate. From 1 July 2019, the amount fortnightly income from work that is not assessed and is not counted under the pension income test, increased from $250 to $300. Meanwhile, the <a href="https://www.superguide.com.au/smsfs/no-tax-retirement-sapto">Seniors and Pensioners Tax Offset</a> (SAPTO) allows Australians over 65 to take advantage of a $2,230 tax offset for annual incomes up to $32,279 (in 2017/18) and then a lower offset amount which extinguishes at an income level of $50,119. These helpful tax breaks mean that seniors may be able to undertake part-time work at home, to overcome the low interest rates, but at the same time minimise their tax burden and keep access to the pension. 4. Move to a rental community There are potential benefits in moving to a rental community, including the possibility that you can claim <a href="https://www.humanservices.gov.au/individuals/services/centrelink/rent-assistance">Commonwealth Rental Assistance</a> and also don't have to pay stamp duty to move in. For instance, an increasing number of Australians are deciding to move to senior-specific rental communities in regional areas, where the living costs are lower. Often, the rents in these villages are low enough to allow pensioners to be able to pay for both their accommodation and other living expenses. This means you may no longer be need to be reliant on savings income, in a low interest rate environment. The downside, of course, is that senior Australians may not want to have to move some distance to get into a village. This story explains more about the <a href="https://www.downsizing.com.au/news/543/Are-rental-villages-a-solution-for-Australias-pension-problem">increasing popularity of rental villages</a>. Other forms of seniors rental housing includes land lease communities (where you own the dwelling and rent the land underneath it) and leasehold retirement villages. 5. Use your garage for a profitable hobby A number of land lease communities are now offering <a href="https://www.downsizing.com.au/news/530/Homes-with-a-dream-garage-how-grey-nomads-are-transforming-retirement-communities">super-sized garages</a>, which can be used for any number of potentially profitable hobbies, including arts and crafts, collectables or your unique brand of home-made food. Of course, the danger is that you'll end up spending more money on your hobby, than you ever get back at the markets or online! Written by Mark Skelsey. Republished with permission of <a rel="noopener" href="https://www.downsizing.com.au/news/606/Five-ways-you-can-use-your-home-to-overcome-low-interest-rates" target="_blank">Downsizing.com.au</a>.

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