Latest / The Curve / RTC65: Vic spills the ☕ on the size of her mortgage and what's going on in the property market

Transcript

RTC65: Vic spills the ☕ on the size of her mortgage and what's going on in the property market · The Curve

• 0:00
  Welcome to Raising the Curth, a podcast designed to teach you everything you need to know
• 0:05
  to be better with your money.
• 0:07
  And the wise words of A new showmer were slipping carrots into the brownie recipe.
• 0:12
  I don't really get the saying.
• 0:14
  It's kind of like eating vegetables that actually taste good.
• 0:17
  You know, I'm like still not wearing it.
• 0:19
  Are you on the script?
• 0:20
  It's basically like saying, investing in finance can be boring but it totally doesn't
• 0:26
  need to be.
• 0:27
  OK, OK, so we're making it fun by putting the carrot.
• 0:31
  OK, the vegetables are just good for you.
• 0:33
  It's the brownie recipe.
• 0:35
  OK, we got there, we got there.
• 0:36
  OK, OK, well, you've really got a finance mate.
• 0:39
  Yeah, one of us has to.
• 0:40
  This is a show.
• 0:41
  OK, come and learn alongside me from Vick Harris, ex-fun manager.
• 0:45
  Well, I'm going to ask all the questions that you wish you could.
• 0:48
  And I'm going to be eating all the brownie you wish you could.
• 0:51
  It's so not the joke, Vick.
• 0:53
  Oh, OK, just come and talk and learn and laugh with us.
• 0:56
  Because together, we really can raise the curve.
• 1:01
  What are we talking about today, Littorian?
• 1:04
  Well, you...
• 1:05
  Oh, sorry.
• 1:07
  Still, my thunder.
• 1:08
  That's fine.
• 1:10
  Do you know?
• 1:11
  I hope you know, because I put it in the diary and I put the title name in the diary.
• 1:13
  I was going to say, is this one I asked for?
• 1:15
  Are we going to talk about the property market?
• 1:17
  We are.
• 1:18
  Yes.
• 1:19
  Because I feel like there's so much happening in the property market.
• 1:22
  And everyone's like, oh, it's down, it's up, it's...
• 1:24
  What if there's an opinion, yeah, definitely.
• 1:27
  But I don't really know how that relates to wider economics,
• 1:32
  or is it a good time to buy or sell?
• 1:34
  What are the interest rates blah, blah, blah?
• 1:36
  Oh, have I got it?
• 1:37
  It's a show for you.
• 1:40
  It's so nice having a personal assistant that just textures me all the shit that I need to know.
• 1:45
  I'm like, I've got an idea for you.
• 1:48
  Someone mentioned we should talk about.
• 1:51
  I think she's off-researching, love it.
• 1:53
  Anyway, so we'll start from the top.
• 1:56
  So there are four asset classes.
• 1:58
  So stocks, bonds, cash, property.
• 2:03
  You're going to do me out of a job, honestly.
• 2:05
  I was paying attention.
• 2:06
  Yeah, no, it's great.
• 2:07
  And so, yes, we have shares, which is the stock market.
• 2:10
  It consists of anything from investing in ETFs,
• 2:13
  which is an exchange-traded fund,
• 2:16
  investing directly in stocks, investing in funds that invest in stock.
• 2:20
  There's so many.
• 2:21
  That's what we talk about when we talk about shares.
• 2:22
  Then we've got property.
• 2:23
  Yes, it's investing in residential property.
• 2:26
  So property that you and I would live in, commercial property,
• 2:30
  which businesses operate out of, you've got industrial,
• 2:33
  which is like distribution centers, logistics, DHL,
• 2:37
  all that kind of stuff.
• 2:38
  And then we've got bonds, which is when you lend a company money or government.
• 2:44
  And then we've got cash, which is term deposits and all that.
• 2:47
  So those are the four asset classes.
• 2:48
  Oh, this feels vintage and I love it.
• 2:51
  If you haven't listened to this podcast before,
• 2:53
  we have got heaps of really good investing basics
• 2:57
  at the very beginning of this podcast.
• 2:59
  So if you're new to it and you're like,
• 3:01
  oh, some of the things you just see to kind of confusing
• 3:03
  don't really follow, zoom back to the beginning.
• 3:06
  Yeah.
• 3:07
  So the typical returns, and I'm talking about the long term,
• 3:11
  I sat down with my mom the other day and she was like,
• 3:13
  oh, this is down, down 1%.
• 3:16
  I was like, you but look at the long term,
• 3:17
  that's what you're going to get over the long term.
• 3:18
  But I haven't got that.
• 3:19
  I was like, because you haven't invested for the long term.
• 3:22
  Like she was investing in shares anyway.
• 3:24
  Long term also is a phrase that I'm pretty keen to recoin,
• 3:28
  because I think a lot of people in the hair long term,
• 3:30
  they're like, but long term is basically
• 3:34
  you're investing for the next 5, 10, 15, 20 years, right?
• 3:38
  Usually 10 or more.
• 3:39
  We try to say yeah.
• 3:41
  So it's not, you're not investing for tomorrow or next week or next year.
• 3:45
  Yeah.
• 3:46
  Long term is like, I think a decade away.
• 3:49
  Yes.
• 3:50
  Yeah.
• 3:51
  Yeah, a decade.
• 3:52
  So if you've fed your dog, she keeps looking me.
• 3:54
  A decade or more would be long term.
• 3:55
  Yes.
• 3:56
  So invest for the future.
• 3:59
  We could call it.
• 4:00
  Yeah, future investing.
• 4:01
  Yeah.
• 4:02
  So typical returns over the future, that doesn't really.
• 4:05
  No, we'll have to work.
• 4:06
  Not that if anyone's got a good idea, could you please let us know?
• 4:08
  But anyway, so shares have delivered about 8 to 9% over the long term.
• 4:13
  And property slightly less than that, depending on which country,
• 4:18
  bonds about 3 to 4 and cash is about 2%.
• 4:21
  Now I'm talking over the long term because right now all those returns are kind of
• 4:25
  all over the show.
• 4:25
  Yeah.
• 4:26
  Because we're in unprecedented times, which I hate that word.
• 4:30
  When you say 2% in cash, are we talking a lot like term deposits
• 4:34
  or actually physically holding cash?
• 4:36
  Term deposits, yeah.
• 4:37
  So in the bank.
• 4:38
  So savings accounts, term deposits, I'm not talking about
• 4:42
  if you holding cash is actually less than that, zero.
• 4:45
  Yeah.
• 4:46
  Because I reckon when you say cash, a lot of people would think
• 4:49
  holding cash, but actually you don't mean that it's putting things in the bank.
• 4:52
  Yeah.
• 4:53
  Yeah, putting it in the bank and getting at least a little bit of return on it.
• 4:56
  But term deposits these days are like 3 to 4%.
• 4:59
  Anyway, but today, we're going to focus on property in the MP.
• 5:05
  I can't, the dog's like me.
• 5:06
  Dogs like me.
• 5:07
  Well, is that, you know, it's because the dog's sitting on my lap.
• 5:09
  I can't really move my arms.
• 5:10
  Yeah.
• 5:11
  Property.
• 5:12
  Okay.
• 5:13
  Yeah, because we even talk about property in ages.
• 5:15
  I know.
• 5:16
  And there's a lot that has changed and gone on.
• 5:18
  And yeah, I really want to just put things in perspective with this episode.
• 5:22
  Because you do hear a lot of headlines.
• 5:24
  You do a freak out.
• 5:25
  If you're a property owner, if you're not, like there's, you know,
• 5:28
  there's a lot of headlines going around at the moment that would make you freak out.
• 5:31
  If you either side, if you're an owner or not.
• 5:33
  So I guess when you invest in multiple different AC classes,
• 5:39
  that's actually really good.
• 5:40
  So you're investing, you're diversifying.
• 5:42
  So if you can afford to invest in property and stocks or shares,
• 5:46
  that's really great.
• 5:48
  If you can invest some in bonds, some in shares, that's really great.
• 5:51
  So, but it is pretty tough in today's environment to, you know,
• 5:54
  have a really good share portfolio and a really good property portfolio.
• 5:57
  Because it's really expensive to get into property market at the moment,
• 6:01
  particularly in New Zealand.
• 6:02
  In New Zealand, has a weird fascination with investing in property.
• 6:06
  But I was actually doing the research on home ownership across New Zealand, Australia,
• 6:11
  the UK and US.
• 6:12
  And it's all around 65 to 70% home ownership, which is quite interesting.
• 6:17
  So 65 to 70% of people on your own home.
• 6:21
  I know.
• 6:22
  So I'm in the minority right now.
• 6:23
  You're, you're special.
• 6:26
  Oh, that's sad.
• 6:27
  Yeah.
• 6:28
  That makes you feel even worse about the fact I don't own property.
• 6:31
  No, I think that's like, can you find some better stats?
• 6:34
  Okay, okay.
• 6:36
  How about...
• 6:36
  Well, good, so many people are listening.
• 6:38
  We're like, well, shit, so am I, I'm 30%.
• 6:41
  But I just thought like New Zealand does have this, this gets so consumed with everyone,
• 6:46
  you know, saving to buy their own house.
• 6:49
  And while that's really good because it does, you know, having your own home,
• 6:52
  you have this tangible asset, this asset that you can feel and touch and you can live in,
• 6:57
  and you can create a home and create memories and all that.
• 7:00
  I always thought that it was just a weird New Zealand thing
• 7:04
  that we really wanted to have our own homes.
• 7:07
  But looking around the world, it's all over the different countries as well
• 7:10
  that they have the same kind of home ownership, which is quite interesting.
• 7:13
  But so it's not just New Zealand that's not seized with property.
• 7:16
  Well, we are obsessed in terms of like, that seems to be the only way that you can grow your wealth
• 7:21
  and it's not.
• 7:21
  There is, you can invest in other things.
• 7:23
  But I think the fact that we have that 70% home ownership
• 7:28
  and our house prices, so the average house price in New Zealand is a million dollars.
• 7:35
  I know.
• 7:36
  So I've just swore.
• 7:38
  I just resigned.
• 7:39
  I'm resigning from the property market.
• 7:41
  I'm not, I can't be asked.
• 7:43
  Like, that's so annoying.
• 7:45
  Yeah.
• 7:45
  So it's a million dollars in New Zealand.
• 7:48
  The equivalent is 700,000 in Australia.
• 7:51
  It's 680,000 in the US and it's 560,000 in the UK.
• 7:58
  That's all in New Zealand dollars.
• 7:59
  So let's buy a house in the UK.
• 8:02
  I knew.
• 8:03
  It's sort of like, well, it's a no-brainer.
• 8:06
  Well, obviously we buy a property in the UK.
• 8:08
  It's the cheapest it makes sense.
• 8:10
  I'm sure there's other countries with much cheaper property prices.
• 8:13
  So we have the highest house prices out of those four countries.
• 8:18
  Yeah, we've got very, we've got pretty much the same percentage of home ownership.
• 8:23
  So that's why it's, people say it's so hard to get on the property at New Zealand.
• 8:27
  Because our house prices are so much more expensive than even our house.
• 8:31
  Because it's, it's a attractive place to live, little old New Zealand.
• 8:34
  So the average house price is way more expensive in New Zealand?
• 8:38
  Yes.
• 8:38
  Yeah.
• 8:39
  However, there's the same amount of people trying to buy houses as Australia and the UK.
• 8:43
  Is that what you mean?
• 8:44
  They own houses.
• 8:45
  Yes.
• 8:46
  Yeah.
• 8:46
  Yeah.
• 8:47
  And little old New Zealand.
• 8:48
  And little old New Zealand.
• 8:49
  No wonder we're battling away.
• 8:52
  Yes.
• 8:53
  So that's why there's, there's this weird fascination of the only property is because
• 8:57
  it's so hard to get on that property ladder.
• 9:00
  But yeah, so you're going to have to save like $200,000 deposit if you want 20% as a deposit.
• 9:07
  Well, you need 20% deposit to put down in New Zealand.
• 9:10
  Whereas 20% of a $500,000 house in the UK is much more, much easier to do that for me.
• 9:18
  What is it?
• 9:21
  But it would be more like just over 100,000.
• 9:23
  It's still a lot.
• 9:25
  Yeah, but it's better than $200,000.
• 9:28
  Yeah.
• 9:28
  There can't be that many people that alone in a relationship with no help from their parents
• 9:34
  have saved that much money.
• 9:36
  Oh, totally.
• 9:36
  It's, if you have, could you please get in touch with saving tips and trails?
• 9:41
  Yeah, and that's why we kind of educate around investing in the stock market and shares
• 9:45
  because you don't need $200,000 to invest.
• 9:49
  You know, you can start with the little dollar and you can even grow your wealth to a point
• 9:54
  that you've build up enough for a house deposit and then buy a property.
• 9:57
  But there's a lot of benefits of investing in property as well.
• 9:59
  And this is why people pay rent.
• 10:03
  Yes, that rent.
• 10:04
  But one of the big ones is the leverage that you can use.
• 10:08
  So this means that the debt that you can borrow from the bank to buy the property.
• 10:12
  Oh my god, I understand this concept.
• 10:14
  And I'm really excited to get a, you know, resummented in my brain.
• 10:17
  Yes, okay, let's resumente.
• 10:20
  So if I see two years, I was like, so if can I borrow $1,000?
• 10:22
  I want to invest.
• 10:23
  Hold on, I need to decide if I want to give it to you.
• 10:25
  Well, please say yes.
• 10:27
  Hold on for the purpose of this example.
• 10:28
  Yes, thank you.
• 10:31
  So I take that and I invest it and it grows it by 20%.
• 10:34
  And I go, cool, thanks, so if, and you're like, I want my money back.
• 10:38
  I go, yep, cool, here's your $1,000 back.
• 10:40
  Thank you very much.
• 10:41
  And I've made, I've made $200 on that.
• 10:44
  So I've made $1200.
• 10:47
  So it's gone from $1,200, you want your $1,000 back?
• 10:51
  I keep the $200.
• 10:53
  The same works in property.
• 10:55
  I'm going to the bank.
• 10:56
  I'm saying, can I have a million dollars?
• 10:59
  And no, I'm like, damn it.
• 11:04
  I'm going to the bank saying, can I have a million dollars?
• 11:05
  They're going, yep, sure.
• 11:07
  Yes, there's an interest rate associated with that.
• 11:09
  But it's pretty, well, we'll get into that in a minute.
• 11:11
  It's not pretty minor anymore.
• 11:14
  They go, yep, cool.
• 11:15
  He's a million dollars.
• 11:16
  I mean, thank you so much.
• 11:17
  I invest that and say that grows by 20%.
• 11:21
  I've now got $1,200,000.
• 11:25
  Then the bank goes, I want my money back.
• 11:28
  I go,
• 11:30
  fucking out.
• 11:38
  Well, till I shut off.
• 11:40
  Okay, I go to the bank and I say, can I please borrow a million dollars?
• 11:45
  I want to invest it.
• 11:46
  I want to invest it in property.
• 11:48
  And they go, yep, sure, he's a million dollars.
• 11:50
  I go, thank you very much and it grows by 20%.
• 11:54
  I invest it and it grows by 20%.
• 11:56
  So you have $1,200,000?
• 11:58
  Yes, correct.
• 12:00
  Then the bank goes, we want our money back.
• 12:02
  And I go, yeah, cool.
• 12:03
  There's your million dollars and I've pocketed $200,000.
• 12:07
  If I didn't have that amount to borrow,
• 12:11
  I wouldn't be making that $200,000,
• 12:12
  because I don't have anything to invest.
• 12:15
  So this is like the rich yet richer kind of situation.
• 12:18
  It is because it's kind of like if you can afford to have a house deposit,
• 12:22
  then you can afford to go to the bank and ask for more.
• 12:24
  Whereas you can't go to the bank and ask for a million dollars.
• 12:27
  You said it was a very simplistic example,
• 12:29
  but you can't go with no savings yourself and go and ask the bank to borrow money.
• 12:34
  Because they want to see that you've actually made an effort to save some money.
• 12:39
  What I'm trying to say here is like the percentage increases the same,
• 12:43
  but because you have more examples.
• 12:45
  Yeah, more of a base because you've borrowed that from the bank.
• 12:49
  Yeah, the amount you can make,
• 12:51
  like the potential you can make is so much greater when you've borrowed money.
• 12:54
  Yes, and dollar terms, the amount is bigger,
• 12:58
  but percentage is effectively the same.
• 13:01
  You can effectively amplify your returns.
• 13:04
  But also it works in reverse.
• 13:07
  So if I said to you, hey, so I've kind of borrowed $1,000,
• 13:11
  you're like, yeah, sure here.
• 13:12
  And I'm like, cool, I want to invest it.
• 13:14
  I take it and I invest it and it's down 20%.
• 13:17
  And I'm like, hello, I want my money back.
• 13:19
  Then I'm like, I have to fork out an extra $200 because I've lost money.
• 13:25
  So this is kind of what we're seeing happen at the moment,
• 13:29
  which is really, really sad is that property prices are falling.
• 13:34
  So if you think about that money that you've borrowed,
• 13:37
  to buy that house, now that house prices fall in,
• 13:42
  and you've now got banks asking for their debt or their,
• 13:46
  what they lent you, they're asking for it back, and you're going shit.
• 13:51
  If I sell my house now, I'm going to make a loss.
• 13:55
  Or, you know, so it's kind of, it's quite tricky in that sense,
• 13:58
  is that when house prices are going out, people get really excited.
• 14:02
  They borrow lots of money, they invest it in the property market,
• 14:07
  and in that kind of fuels this growth and this continued increase in prices.
• 14:10
  But when that reverses, it really reverses.
• 14:13
  So that's kind of what we're seeing unfold at the moment.
• 14:15
  But why would the banks be randomly asking for the money back?
• 14:19
  Because people can't make their repayments.
• 14:21
  So I guess the biggest impact, so sorry, just a back trick.
• 14:26
  So the bank couldn't say, hey, the market's down.
• 14:29
  I want my money back.
• 14:30
  They only want their money back if people aren't paying it.
• 14:33
  Is that what you mean?
• 14:34
  Yes, yeah.
• 14:35
  And this is why they ask for that 20% deposit, for example,
• 14:40
  is because that,
• 14:43
  this is that, I feel like, so it's like,
• 14:47
  this is why they have that 20% deposit,
• 14:50
  because it's almost like that 20% buffer.
• 14:52
  So if house prices fall 20%, then your value of your house,
• 14:57
  it's like a huge loss.
• 14:59
  Shrada.
• 15:01
  I'm so sorry.
• 15:02
  Oh, I guess she's going.
• 15:08
  Where's her?
• 15:11
  She's like, he at the window.
• 15:13
  I think so.
• 15:15
  So one of the biggest impacts on house prices is interest rates.
• 15:18
  So maybe we'll talk about that and then it might all kind of come together.
• 15:22
  I hope the bank drops a bit.
• 15:25
  Getting a lot of confused options, they can't face it.
• 15:29
  Yeah, I'm like, okay, come on.
• 15:31
  Get to the point where the penny drops.
• 15:33
  Get to the point where the penny drops.
• 15:34
  Maybe I need another sip of coffee.
• 15:36
  Oh, yeah.
• 15:38
  Thank you.
• 15:38
  Yeah, is it sweet vanilla?
• 15:40
  I like this one.
• 15:41
  Yeah.
• 15:42
  Thank you, Nespresso, for sponsoring this podcast,
• 15:44
  because we genuinely need it.
• 15:47
  We're recording, you do it in the mornings,
• 15:49
  and this is the afternoon, so we're...
• 15:51
  Coffee and the afternoons, potentially.
• 15:52
  A big no-no?
• 15:53
  A big no-no from the sleep front to me, but...
• 15:55
  Oh, no.
• 15:56
  Anyway, okay, so the biggest impact on house prices is interest rates.
• 16:00
  And because this impacts people's ability to borrow.
• 16:04
  So when you're going to the bank and you're asking for that a million dollars,
• 16:07
  or I'm going to you and saying, can I borrow a thousand dollars?
• 16:10
  You're going to say, yeah, sure, Vic, but I am going to charge you for that.
• 16:15
  I'm going to charge you five percent.
• 16:18
  So the biggest impact on house prices is interest rates,
• 16:21
  because interest rates impacts people's ability to borrow.
• 16:25
  Now, I'm going to focus on New Zealand,
• 16:27
  but it's pretty much the same everywhere with interest rates at the moment, going up.
• 16:30
  So interest rates in house prices have an inverse relationship.
• 16:34
  That means when interest rates go up, house prices go down,
• 16:38
  when interest rates go down.
• 16:39
  So they're magnets.
• 16:42
  Oh, no, that's the opposite.
• 16:43
  Sorry, it's like the same side of the magnet where they bounce away.
• 16:46
  It's a seesaw.
• 16:47
  It's a seesaw, okay, great.
• 16:49
  They don't attract each other.
• 16:51
  They're not like hooking up or anything.
• 16:53
  Oh, yeah.
• 16:54
  They're repelling.
• 16:55
  They're not like, don't move together.
• 16:57
  They're separately.
• 16:58
  They've got it.
• 16:58
  Yeah, in opposite directions.
• 17:00
  So yes, so they have an inverse relationship.
• 17:02
  So interest rates are at the top of the seesaw.
• 17:06
  Yes.
• 17:06
  House prices are at the bottom.
• 17:08
  Yeah.
• 17:08
  And then when someone sits on it,
• 17:10
  it sits on it and then house prices are at the top.
• 17:13
  Interest rates are low.
• 17:14
  Yes, you got it.
• 17:16
  Yeah.
• 17:16
  Okay, I can work with that.
• 17:18
  Yeah.
• 17:19
  So when one goes out, the other goes down and vice versa.
• 17:22
  Why is that?
• 17:22
  Wouldn't you think that if you're buying an expensive house,
• 17:25
  there would be higher interest rates?
• 17:27
  Yeah.
• 17:28
  Well, let me explain.
• 17:30
  We didn't plan that.
• 17:31
  Ladies and gentlemen, we did not plan.
• 17:33
  Yes.
• 17:34
  So I'm going to use my situation as an example.
• 17:37
  Oh, okay.
• 17:38
  Yeah.
• 17:40
  You're literally getting up your repayment.
• 17:41
  I'm literally just going to expose the size of my mortgage.
• 17:44
  Love this.
• 17:46
  So I have a $900,000 mortgage.
• 17:49
  Okay.
• 17:49
  I mean, it doesn't mean a lot to me.
• 17:50
  Oh, my God.
• 17:51
  I know.
• 17:52
  I'm like waiting for that.
• 17:52
  I don't know what that means.
• 17:54
  So I have a $900,000.
• 17:55
  Is that a high one?
• 17:56
  It's pretty high, yeah.
• 17:58
  Anyway, I was paying three percent interest.
• 18:00
  To borrow that $900,000,
• 18:01
  I had to pay three percent.
• 18:03
  Sorry.
• 18:04
  So you have, so when you say even $900,000 mortgage,
• 18:07
  you have borrowed $900,000 from the bank.
• 18:11
  Yes.
• 18:11
  A mortgage is just a fence term for
• 18:14
  borrowing from the bank.
• 18:15
  Yeah.
• 18:15
  I had no idea.
• 18:16
  But using it for property.
• 18:17
  So yeah, I was paying about three percent on that
• 18:19
  when I first bought my house six years ago.
• 18:22
  So I was paying about 27.
• 18:28
  Fucking hell.
• 18:29
  Me, so please, I need to finish this record.
• 18:32
  Okay.
• 18:33
  Darling.
• 18:34
  Thank you.
• 18:34
  Wish you spoke sometimes.
• 18:37
  So I was paying $27,000 a year.
• 18:40
  Just on interest rate.
• 18:43
  On interest on the mortgage.
• 18:44
  $27,000.
• 18:47
  I'm now paying so interest rates have gone up.
• 18:50
  And this is all around inflation,
• 18:51
  which we spoke about.
• 18:53
  The way to curb inflation is to increase interest rates.
• 18:56
  So at the moment, the seesaw,
• 18:58
  at the top of the seesaw, we have interest rates
• 19:00
  and housing prices are on the ground.
• 19:03
  Yes.
• 19:03
  Yeah.
• 19:04
  So I was paying three percent on my mortgage
• 19:07
  when I first bought my house six years ago,
• 19:09
  which is $27,000 a year.
• 19:13
  Per year.
• 19:13
  So I was paying that.
• 19:14
  That's just on interest rates.
• 19:16
  Just on interest of my mortgage.
• 19:17
  Not including paying back some of my mortgage.
• 19:19
  This is just an interest.
• 19:21
  So this is why the smaller your mortgage,
• 19:24
  the smaller your interest dollar amount that you're paying.
• 19:28
  The interest rate might be the same
• 19:29
  that you're paying on that mortgage.
• 19:31
  But that percentage of what you have to pay back is less
• 19:32
  because the amount total out and you have to pay back is actually.
• 19:35
  Yeah.
• 19:36
  Yeah.
• 19:36
  So three percent on $500,000 mortgage
• 19:40
  is way less than three percent on a $900 or a million mortgage.
• 19:43
  Yes.
• 19:44
  So this is why the more you can save
• 19:46
  and put down as a deposit,
• 19:48
  the less your mortgage will be,
• 19:50
  which means the less you have to pay,
• 19:53
  dollar value of mortgage repayments.
• 19:56
  Got it.
• 19:59
  Kind of.
• 19:59
  I don't know.
• 20:00
  Do you?
• 20:02
  Okay.
• 20:03
  So I'm going to send some just out that to you
• 20:04
  because I think there might be some people falling asleep
• 20:06
  or rewinding.
• 20:07
  So essentially,
• 20:09
  if you have the bigger your mortgage,
• 20:13
  which is what you loan from the bank to buy your house,
• 20:15
  the higher that is for the more money you have to borrow,
• 20:18
  the higher amount of interest you're going to have to pay back.
• 20:21
  Because whatever the percentage is at that time,
• 20:23
  whether it's three, four, five, six, seven, eight,
• 20:24
  nine percent in interest,
• 20:26
  if you have more money,
• 20:28
  the percentage of interest is always going to be more.
• 20:31
  If you've got more that you've borrowed from the bank.
• 20:33
  Yes.
• 20:34
  So that's the,
• 20:35
  so the fundamental is the higher your mortgage,
• 20:37
  the more you have to pay back.
• 20:38
  Also the higher interest.
• 20:40
  Yes.
• 20:40
  Yeah.
• 20:41
  Because even though you,
• 20:42
  you might,
• 20:43
  you and me might be paying the same three percent.
• 20:47
  If I have a five hundred dollar mortgage and you have a thousand,
• 20:50
  a hundred thousand dollar.
• 20:51
  Sorry.
• 20:52
  So if I have a five hundred thousand dollar mortgage
• 20:55
  and I have a million dollar mortgage,
• 20:56
  I'll be paying more.
• 20:58
  And even though we're both on three percent.
• 20:59
  Yes.
• 21:00
  Yeah.
• 21:00
  Yeah.
• 21:00
  So that's why the more you can save and put down
• 21:04
  as a deposit,
• 21:05
  which is the non mortgage amount of the house price,
• 21:09
  the better.
• 21:10
  But that's really rare.
• 21:11
  There's no one that would be able to do that.
• 21:12
  Well, this is why you over time,
• 21:16
  you try and pay off your mortgage.
• 21:17
  Ah, because that brings your interest rates down.
• 21:19
  Yes.
• 21:19
  Yeah.
• 21:20
  So then if,
• 21:20
  say that was a penny drop moment.
• 21:22
  Yeah.
• 21:22
  Because otherwise I'm like,
• 21:23
  why would you bother paying the mortgage?
• 21:25
  Say my nine hundred thousand dollar mortgage
• 21:27
  and I was super saver
• 21:29
  and I managed to pay that down to
• 21:31
  five hundred thousand dollars in six years,
• 21:33
  which I have not.
• 21:35
  Then my interest payments would be a lot less.
• 21:38
  So I was paying twenty seven thousand dollars six years ago.
• 21:43
  Three percent mortgage rate.
• 21:45
  And now,
• 21:48
  I'm paying six and a half percent.
• 21:51
  So it's basically double.
• 21:52
  It's more than double.
• 21:53
  Yeah.
• 21:53
  I'm paying now paying about sixty thousand dollars a year.
• 21:58
  So I was I'm paying now more than double what I was paying.
• 22:02
  Even though you've paid some back.
• 22:04
  Yeah.
• 22:04
  So it's like
• 22:06
  that's absolutely crazy.
• 22:08
  Like, and doing these numbers, I was like,
• 22:10
  Oh gosh.
• 22:11
  But like, and if you think about that for a lot of people,
• 22:14
  that is
• 22:16
  unobtainable.
• 22:17
  Like just finding an extra thirty thousand dollars a year.
• 22:22
  And this has happened so quickly.
• 22:23
  These interest rates have moved so quickly
• 22:26
  that the average New Zealander is paying
• 22:29
  thirteen thousand dollars more interest payments
• 22:32
  versus this time last year.
• 22:34
  So that's an extra thirteen thousand dollars
• 22:36
  that people have to find.
• 22:37
  Households have to find
• 22:39
  to pay back just their mortgage.
• 22:41
  Let alone the price of grocery is going up.
• 22:43
  All that other stuff.
• 22:44
  This is just for
• 22:46
  their mortgage repayments.
• 22:47
  So out that really puts things in perspective.
• 22:50
  Yeah.
• 22:51
  And some other stats is 40% of all jobs have had
• 22:55
  a five percent or more pay rise.
• 22:56
  And 30% have had no pay rise this year.
• 22:59
  So if you think
• 23:01
  that's not even,
• 23:02
  so you've got a five percent pay rise.
• 23:03
  Cool.
• 23:04
  It's like
• 23:05
  interest rates have gone up on my mortgage
• 23:08
  astronomically.
• 23:09
  Like, you know, it's like you're,
• 23:11
  if you're not asking for a pay rise,
• 23:12
  you're going backwards.
• 23:14
  So it's a really, really important that you need to ask for
• 23:17
  a pay rise in this current environment.
• 23:20
  Especially for women,
• 23:22
  but that's a whole lot of the canoes.
• 23:24
  Well, that she's done a really amazing podcast with Miggy Palmer,
• 23:28
  who is from HEPTALKER,
• 23:30
  which is essentially an entire platform design
• 23:33
  to help women get more money
• 23:36
  out of their pay rises,
• 23:37
  have the confidence to ask for more.
• 23:39
  And in this particular episode,
• 23:40
  she gives us like so many tips and tricks on
• 23:44
  what you can do and how you can successfully ask for a pay rise.
• 23:48
  So if you haven't,
• 23:51
  definitely go back to listen.
• 23:53
  What episode was that?
• 23:54
  So that is episode
• 23:56
  60, episode 60.
• 24:00
  Yes.
• 24:01
  So go back and have a listen.
• 24:02
  It's really, really good.
• 24:03
  Yeah, but ask for a pay rise.
• 24:04
  It's interesting, though.
• 24:05
  When you actually apply for a mortgage,
• 24:07
  the banks often stress tests.
• 24:09
  They do what the stress test is called,
• 24:12
  where they...
• 24:12
  I feel like I've heard my dad do a lot of stress tests.
• 24:14
  Yeah, so when I initially went to get for my mortgage
• 24:17
  at 3%, 6 years ago,
• 24:21
  the banks are looking at my income and expenses
• 24:24
  and being like, can she pay 3%.
• 24:25
  They're looking at it and going,
• 24:26
  can she pay 6% because if that's where interest rates go,
• 24:31
  we need to know that she's got a bit of flexibility in there
• 24:33
  and she'll actually be able to make her mortgage payments.
• 24:35
  But because interest rates have gone up so much so quickly,
• 24:40
  they've shot through that stress test amount for a lot of banks.
• 24:44
  And so people who were going in with asking for mortgage rates at 3%,
• 24:50
  and the banks were stressing at 6%,
• 24:52
  these people...
• 24:53
  I mean, no, okay.
• 24:55
  These people, it's shot through that now.
• 24:56
  It's like it's in the Sevenths.
• 24:57
  And so, it's out of that boundary now.
• 25:00
  They're in the kind of territory of like,
• 25:02
  oh gosh, we haven't even stress tested for these interest rates
• 25:04
  because they've gone up so quickly.
• 25:07
  Yeah, so...
• 25:08
  So are there people,
• 25:09
  quite a few people who are having to give their houses back?
• 25:12
  Like, what does that look like?
• 25:13
  So house prices peaked in New Zealand in December 2021.
• 25:18
  So that means if you're looking at a chart,
• 25:20
  it went like, it was going up and up and up and up and up,
• 25:23
  everyone came back overseas from COVID.
• 25:25
  Everyone wanted to head home.
• 25:27
  A lot of people were buying property here.
• 25:29
  And the house prices just shot up.
• 25:32
  They were up 30%.
• 25:34
  They were up 30% in 2021.
• 25:39
  So in 12 months, property prices went up 30%,
• 25:42
  which is absolutely nuts.
• 25:44
  And now they've come down 17% from that peak.
• 25:48
  So a lot of people that bought
• 25:51
  kind of around that December 2021 period or even shortly after
• 25:55
  will have bought at the top of the market
• 25:59
  and would have probably taken out very large mortgage amounts
• 26:05
  that when mortgage rates were low
• 26:08
  and now the property price has fallen 17%
• 26:13
  and interest rates have gone up.
• 26:16
  So you would be freaking out.
• 26:19
  Yes.
• 26:20
  And then add up diapers for sure.
• 26:22
  Yes. And so there would be a lot of people in this camp.
• 26:25
  And it's not a nice place to be.
• 26:27
  You obviously, when you buy a house,
• 26:30
  you kind of assume, especially in New Zealand,
• 26:33
  that it's going to be fine.
• 26:34
  You don't think it's going to go up 30% in the year,
• 26:37
  but you think, okay, maybe one or two percent or five percent,
• 26:42
  you know, you kind of think that it'll go,
• 26:44
  keep chugging along, keep going up,
• 26:45
  because this is a great place to live.
• 26:48
  You know, economically stable, politically stable,
• 26:50
  all those kind of things
• 26:52
  that we do have that demand for houses
• 26:55
  and we don't have the supply.
• 26:57
  We can't make houses fast enough
• 26:59
  for there are people that want to live here.
• 27:01
  So, but what a lot of people wouldn't have factored in
• 27:04
  is that all that aside interest rates
• 27:07
  have much bigger impact on house prices
• 27:10
  than desirability.
• 27:11
  All people wanting to live here,
• 27:13
  if that makes sense.
• 27:14
  Not really.
• 27:14
  Can you say that in a different way?
• 27:16
  So, if you were deciding where to live in the world
• 27:21
  and you saw a little old New Zealand down the bottom
• 27:23
  and you thought, hey, this looks like a great place.
• 27:25
  Great, great.
• 27:26
  What a beautiful spot.
• 27:27
  Beautiful open spaces.
• 27:28
  You know, economy is doing well,
• 27:31
  politically we're doing well sometimes.
• 27:34
  And so, it looks like a pretty attractive place to live.
• 27:37
  We're friendly people.
• 27:38
  You know, yeah, yeah.
• 27:40
  Like to thank the company friendly.
• 27:41
  And so, desirability or people wanting to live here
• 27:45
  is quite key.
• 27:46
  And so, from an immigration point of view,
• 27:48
  people want to live here in byhouses.
• 27:50
  And then also because house prices have historically
• 27:55
  done really well,
• 27:57
  locals also want to buy property.
• 27:58
  So, you've got both of those demand factors.
• 28:02
  You've also got supply not keeping up with those demand factors.
• 28:07
  So, you've got lots of people wanting to live here
• 28:10
  and locals wanting to buy houses here,
• 28:11
  but you don't, we can't build enough houses
• 28:13
  to keep up with demand.
• 28:15
  Therefore, that leads to house prices increasing
• 28:17
  because there's not enough supply of new houses.
• 28:20
  So, lots of people,
• 28:22
  not enough houses is essentially what that is.
• 28:25
  Which means house prices are higher.
• 28:28
  Yes.
• 28:29
  But the biggest thing that moves house prices,
• 28:33
  all that aside is interest rates.
• 28:36
  So, you're like, cool, box tick, all of that.
• 28:39
  Yeah, let's find property in New Zealand.
• 28:42
  Then, Wemmo, along comes at high interest rates.
• 28:46
  And that just blows everything out of the park.
• 28:49
  And that is why house prices are down.
• 28:51
  Well, it's the biggest reason that house prices are down,
• 28:54
  17%.
• 28:55
  And is it just because interest rates are so high,
• 28:57
  people are like, absolutely not.
• 28:59
  I do not, I'm not buying in this economy.
• 29:02
  Well, it's not really the economy.
• 29:03
  It's more if you took my situation.
• 29:06
  So, say, I didn't buy a house six years ago.
• 29:10
  And I've now got the same amount of savings.
• 29:13
  I want to get the same mortgage rate.
• 29:15
  And I'm going to the bank and saying,
• 29:17
  can I please borrow 900,000?
• 29:20
  I'm looking down the barrel of spending $60,000
• 29:24
  in interest payments.
• 29:26
  For me, I'm like, oh gosh, I'll actually,
• 29:28
  oh, just wait, I can't afford that right now.
• 29:30
  Whereas, old me, it was only,
• 29:33
  I mean, it's still a lot, but it was,
• 29:34
  it was only $27,000 in mortgage repayments.
• 29:38
  So, that prices out a lot of people.
• 29:40
  A lot of people can't afford that extra amount.
• 29:42
  So, they, therefore, I will just keep renting.
• 29:44
  I won't buy.
• 29:45
  So, you take out a lot of people that can't afford
• 29:49
  to service their mortgage.
• 29:51
  Yeah.
• 29:52
  The amount, they might be able to borrow,
• 29:54
  maybe the same, but they can't service that amount anymore.
• 29:58
  So, there's a whole pool of people that you're taking out.
• 30:02
  So, you're taking out of that demand side,
• 30:04
  whether it's locals, whether it's people immigrating here,
• 30:07
  those people can no longer pay that amount of interest
• 30:10
  because interest rates have gone up,
• 30:12
  therefore, they don't want to buy anymore.
• 30:14
  And so, that's what we're seeing with house prices falling.
• 30:17
  There's now not enough demand
• 30:21
  to offset that supply.
• 30:24
  So, I don't really understand what it means, though,
• 30:26
  for people who own houses,
• 30:29
  are there people who can't repay their interest,
• 30:33
  sorry, their mortgage, er, what's that shit?
• 30:35
  Yeah.
• 30:36
  So, I guess what you're asking is that,
• 30:38
  if I had, say my $900,000 mortgage
• 30:42
  and say my house price is now worth $800,000,
• 30:47
  I've still got to pay on that $900,000 mortgage,
• 30:51
  even though that price of my house is now,
• 30:53
  the debt is greater than the house price.
• 30:56
  And that's when banks get scared,
• 30:58
  because if they sell that house,
• 31:01
  or if I sell my house now,
• 31:03
  I've still got to pay back $900,000,
• 31:05
  even though I can only sell my house for $800,000.
• 31:08
  So, that's what you call a mortgagey sale.
• 31:10
  It's either when someone can't pay their interest payments.
• 31:13
  So, I'm going to the bank saying,
• 31:15
  I can't afford $60,000 a year in interest payments or mortgage payments.
• 31:19
  Or you're going to the bank saying,
• 31:22
  the bank saying, look, your mortgage amount
• 31:26
  is greater than the value of your property,
• 31:29
  which is a really scary position to be in.
• 31:31
  So, it's essentially like the $900,000 that you borrowed from the bank.
• 31:35
  Yeah.
• 31:36
  You still have to pay that back.
• 31:37
  You can't pay your $60,000 a year in mortgage,
• 31:40
  what's the word to it?
• 31:41
  Mortgage your payments.
• 31:42
  Mortgage your payments.
• 31:44
  But then also, your property is now worth less than the actual amount you've borrowed.
• 31:49
  So, if you were to sell, you have to figure out how you can buffer that $100,000 that's in between.
• 31:55
  And having to find a lot of extra cash to pay your mortgage repayments when
• 32:02
  the price of everything else is going up these days as well.
• 32:05
  There's a lot of houses that households that would be struggling
• 32:08
  because groceries have gone up, the cost of everything is gone in.
• 32:13
  And then mortgage rates on top of that,
• 32:15
  you'd just be sitting there going, oh my gosh,
• 32:18
  please don't go any higher, please don't go any higher.
• 32:20
  And that is so stressful.
• 32:22
  If you're just family and you might be homeless because you have to get rid of your house.
• 32:25
  I guess another way to look at it is that if house prices
• 32:29
  remained high or you know,
• 32:30
  it was still growing slightly and interest rates were going up,
• 32:33
  that would be a lot more digestible because I would know
• 32:37
  that okay, it's okay, I'm paying a lot of interest.
• 32:41
  But at least my price of my house is still worth,
• 32:43
  exactly.
• 32:44
  But now that's fallen, I'm paying high interest rates.
• 32:47
  I'm sitting there going, my house is worth not even anywhere near as much as it was.
• 32:51
  And I've got this gigantic amount of debt that I'm having to pay.
• 32:56
  And yeah, that's when it becomes bit scary.
• 33:00
  And this is why people say try and pay off your mortgage as quickly as possible because
• 33:04
  the quicker you can pay it off, not only do you interest rates
• 33:07
  that you're paying on that mortgage go down in terms of the dollar value,
• 33:11
  or also you're creating a bigger buffer between the amount that that house price
• 33:19
  can fall without actually impacting you.
• 33:22
  Oh my god, I think I need a break, my brain.
• 33:24
  I'm like, can you tell me something that's not this?
• 33:27
  Like two seconds, just wow.
• 33:30
  I know, this is why it's really hard.
• 33:32
  Like, I know you're like, I want to learn about it.
• 33:34
  I want to learn about it.
• 33:35
  It's like, maybe we do a course, not a podcast episode.
• 33:40
  Because there's a lot of numbers because there is.
• 33:41
  You're talking about interest rates, you're talking about debt,
• 33:43
  you're talking about, yeah, there's a lot going on.
• 33:45
  If anyone's interested in this in depth,
• 33:48
  whether it be a short course, maybe a podcast series that's purely on property,
• 33:52
  can you please let us know?
• 33:53
  Because it would be really good to know if there's interest here.
• 33:55
  Because maybe I'll just wrap it up.
• 33:58
  Hi, can we wrap this up?
• 33:59
  There's three questions which we get asked.
• 34:02
  Sorry, there's two questions we get asked quite a lot.
• 34:05
  And sorry, no, I'm sorry.
• 34:08
  There's three.
• 34:09
  I'm like, is this your question boy?
• 34:13
  There's three questions that we, there's three questions.
• 34:17
  They will get asked quite a lot.
• 34:20
  Should you pay if you're more good to invest your money?
• 34:23
  And this is one that we get asked a lot.
• 34:26
  And I'm all the same genuinely, it's not me,
• 34:30
  regaining.
• 34:31
  And if you want to have the answer, just DM me, just sign off.
• 34:35
  No, I'm listening.
• 34:36
  But yes, it depends.
• 34:38
  If you think that you can get a better return on your investments
• 34:41
  than the interest rate that you're paying.
• 34:42
  So if you think that you can get better than 6%,
• 34:45
  or 7%, whatever your mortgage rate is at the moment,
• 34:48
  then go for it.
• 34:49
  Oh, that makes sense.
• 34:50
  Because you'll be putting that money,
• 34:51
  you'll be growing it faster and you'll be able to pay it off,
• 34:53
  then go for it.
• 34:55
  But I guess 18 months ago, I would have said you should be investing
• 34:59
  because the stock market is doing fantastic
• 35:01
  and mortgage rates are so low.
• 35:03
  So therefore, you'll be able to make a lot of money
• 35:06
  in the stock market and pay off your debt.
• 35:08
  But now because that gap is a lot closer,
• 35:11
  it's kind of much of a muchness.
• 35:13
  You pay off your mortgage debt,
• 35:15
  or invest doesn't really matter.
• 35:17
  If people are really struggling to pay their mortgage,
• 35:19
  or what options are there for people?
• 35:24
  Yeah.
• 35:25
  So there are mortgage holidays, which you can go on.
• 35:27
  So if you ask someone, it's fun.
• 35:28
  Yeah, I don't want to go on one.
• 35:29
  I want to go on mortgage holidays.
• 35:30
  No, but you're effectively just deferring payments.
• 35:33
  So you're effectively not paying back anything,
• 35:37
  but talks to your bank because can you do interest?
• 35:39
  You can do interest only.
• 35:40
  That's another option.
• 35:41
  And you can also downsize your house.
• 35:43
  You could sell it and downsize something smaller,
• 35:45
  where you don't need to take on as big of a mortgage as you might have.
• 35:50
  So there are options out there,
• 35:52
  but it's very much just talk to your bank.
• 35:55
  And a lot of these solutions are probably good for a few months,
• 35:58
  but not long-term solutions.
• 36:00
  If you're just paying interest only,
• 36:02
  then you're not actually reducing the amount of your mortgage,
• 36:05
  which means you're just going to have to pay that interest for longer
• 36:08
  because you're not paying down that mortgage.
• 36:11
  Another question is when will it end?
• 36:13
  When will it end?
• 36:14
  When will it end?
• 36:15
  In high interest rates.
• 36:15
  When will it end?
• 36:17
  When will it end?
• 36:18
  I would love to know, but it all depends on inflation.
• 36:21
  So we're actually seeing that inflation is starting to come down slightly,
• 36:27
  so it's still a high growth rate.
• 36:29
  So it's not going, we're not seeing deflation.
• 36:31
  We're not seeing prices go down,
• 36:33
  but we're seeing them not go up as much,
• 36:34
  which is a really good sign,
• 36:36
  which hopefully means that interest rates will follow soon,
• 36:40
  or not go up any higher.
• 36:41
  But I think it's going to be pretty tough 12 months.
• 36:45
  I feel like my brain needs a massage or something.
• 36:48
  That was a really hard episode.
• 36:50
  I know, and I tried to make it funny and fun and easy.
• 36:53
  It wasn't.
• 36:54
  It's like, if Sophie leans me $1,000,
• 36:57
  I try to make it.
• 36:58
  I know, but it's just so hard.
• 36:59
  There's a lot.
• 37:00
  You could almost talk about just talk about interest rates for five hours every year.
• 37:05
  Yeah.
• 37:06
  And then, yeah.
• 37:07
  It would be really helpful to know an audience,
• 37:10
  people who are interested in property,
• 37:12
  who want to know more about the stuff,
• 37:13
  or is there a huge portion of our audience
• 37:17
  who already own homes?
• 37:18
  And they're like, oh, Sophie, come on.
• 37:20
  Like, it would be quite interesting to know if this is
• 37:22
  useful information for people or not.
• 37:24
  Or maybe also seemed in some questions,
• 37:26
  some more specific questions that you want answered,
• 37:28
  because there is a very broad topic.
• 37:30
  It's almost like sitting down and talking about stocks.
• 37:33
  You know, like, we could,
• 37:35
  we could, I mean, I could talk for hours.
• 37:37
  I feel like I have to talk for hours.
• 37:38
  Yeah.
• 37:39
  But that's a thing to know what you're doing,
• 37:40
  is you're sitting down and you're talking about one AC class,
• 37:42
  and there's so much that goes into it.
• 37:44
  Yeah.
• 37:44
  So it's kind of, maybe we do the property curves.
• 37:48
  Yeah.
• 37:49
  You know, it's almost like we do a whole podcast series on the Perth.
• 37:55
  We're going to rename.
• 37:56
  We're going to have the curve and the Perth.
• 37:58
  In the Perth.
• 37:59
  What about we could have the curve for crypto?
• 38:03
  Oh, yeah.
• 38:04
  Yeah.
• 38:04
  And the,
• 38:05
  the nerve for,
• 38:06
  and oh my god, where's this guy?
• 38:09
  The berth?
• 38:10
  The berth for Barnes.
• 38:11
  That's where the berth anyway.
• 38:13
  No one's interested in the berth.
• 38:14
  We're going crazy,
• 38:15
  because we've been talking about the Perth for way too long.
• 38:18
  We won't have coffee at this time again.
• 38:20
  I think we'll try and not do that.
• 38:21
  Sorry.
• 38:21
  Maybe keep our records to the morning.
• 38:23
  Yeah.
• 38:25
  Many learnings.
• 38:26
  Many learnings.
• 38:27
  Apologies.
• 38:28
  We will do better.
• 38:30
  We will do better.
• 38:31
  We promise.
• 38:32
  Please tune in next time.
• 38:34
  Thank you so much for listening to Raising the Curve.
• 38:39
  These conversations are designed to teach you everything
• 38:42
  that you need to know to be better with your money.
• 38:44
  From saving, to investing,
• 38:45
  to talking to your friends about your salaries.
• 38:48
  And if you liked what you heard,
• 38:49
  we would love it.
• 38:50
  If you could hit subscribe button, please.
• 38:52
  Yes, please.
• 38:53
  Better yet.
• 38:53
  Leave a review.
• 38:55
  It'll only take five seconds,
• 38:56
  and it would really make our week.
• 38:58
  Oh yeah.
• 38:59
  Our month.
• 38:59
  Okay.
• 39:00
  Lots of love.
• 39:00
  See you soon.
• 39:01
  Bye.