We are with CBA, and so therefore ‘impacted’ by the recent decision to increase rates by 0.45%.
The news isn’t welcome news, we’ve taken on a bit of debt to accomplish much of the changes this year. However, in a free market, you can simply ‘up and leave’. And I maintain that view.
If one doesn’t like the rate they are paying with their bank, go find a better deal, and then go for it, or if going for it isn’t desired, go to the bank and see if they want you as a customer (then you’ll know your true worth).
If we really did pay off this mortgage inside of 8 years, the bank would make a nice $60k off us – for next to no work. Not a bad deal. However, if we take 30 years to pay it off (what the contract says), they would make in excess of $255000 from us (just about 90% of the original loan) – an incredible outcome for them.
A sustainable solution to the loan is not to regulate banks. They’ll harp on about increased costs due to regulation (hey, that sounds familiar!) – or that regulation disrupts the free market, interferes with competition.
Unregulated markets work, they must, the laws of supply and demand self regulate the market. If you regulate the interest rates applicable, you end up with issues in supply and demand (not enough money to loan due to low rate of return, or too much demand, therefore too much money on loan).
The rates will go higher eventually, but I’m reluctant to fix the rate as the impact of that means the rate when it does drop, will cause us to lose out (and we have limits on redraw balances under that scenario, forcing us to have a higher balance).
We’ll manage, but if push comes to shove, we’ll need to chase out the best deal we can from other banks, and bargain with CBA for a better deal. They impose charges to break the contract, and then you have fees payable to refinance – so moving away from them isn’t likely to happen.
We had considered moving away from them before, when we were looking at the renovations to increase the loan, however, it became apparent a personal loan was more useful and represented our intentions better – so CBA caved in and gave us the loan.
Thinking back on it, I never really thought I would take on debt, I was never ever a fan of it – never had a credit card until we decided to buy a few things online – and that was all small.
So is debt sustainable? Probably not, it can be used to do great things, but the great things you can do with debt lose that achievement feeling you would otherwise get if you saved up for that very long time, and bought it!
The real reason we aren’t in a deep hole is because we have what is called ‘self control’. We don’t necessarily need $9000 owing on the credit card, it’s entirely within our control to simply put it away. The second reason is the tight cost management employed through my finance tracking setup that monitors every aspect of spending. This system ensures that jumps in prices are easily caught on and kept in control.
Without that system, we’d have to wait for the statement, and then review it, and even that wouldn’t categorise the spending, and show aggregate grouped figures – so it would grow out of control. I didn’t even put it together for that reason – the real reason I put it together was so we could find any transactions we didn’t recognise (with anything that was common / regular / normal, automatically categorised).
Debt is good, it is, if you don’t bite off more than you can chew.