Interest-only resets turn “credit critical events”

Monday, 26 February 2018

Via the AFR:

…Big monthly repayment hikes are forcing many investors to extend their interest-free terms, or find other ways of boosting cash flow, such as increase rent, or selling.

For example, an investor with a $1 million property with a 20 per cent loan to value ratio servicing an $800,000 loan is paying $3333 a month on an average interest-only rate of 5 per cent, according to Finder.com.au, which monitors rates and fees. That’s a weekly payment of about $833.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.