US$ Housing Loans

[Leper]

Anybody had experience with these and know which banks offer the best deals? I met ANZ yesterday and they quoted ~6.1%, but I'm sure others can do better.

As an expat a lot of my income is in US$ and I'm looking at buying property in Aus in the near future, so thought this might be a smart way of doing it.... and even better if the A$ then heads back towards / above 90 cents.

 

[FrediKanoute]

Anybody had experience with these and know which banks offer the best deals? I met ANZ yesterday and they quoted ~6.1%, but I'm sure others can do better.

As an expat a lot of my income is in US$ and I'm looking at buying property in Aus in the near future, so thought this might be a smart way of doing it.... and even better if the A$ then heads back towards / above 90 cents.

Ok...wondering when this old chestnut was going to rear its ugly head. Foreign currency loans were in vogue in the late 80's/90's when people borrowed in Yen at low interest rates.

Many countries have lower interest rates than Australia. The UK Bank Rate is 5.75%, Japan is around 2% (I think) and obviously the US. If you do this then you need to understand the relationship between the Exchange Rate and Interest rates - it is basically an inverse relationship. As the interst rates in Australia rise, the currency appreciates relative to other currencioes because there is a greater demand for Aussie Dollares. Similarly, as interest rates in other countries rise, then USD/GBP/Yen rise and the AUD devalues.

Basically, you are gambling on exchange rates you single most valuable asset. Why would you do this? The example given that the majority of income is in USD is a good reason, especially in a situation where the USD's purchasing power is losing value, but deciding whether or not to consider how much longer you are likely to be earning USD's...is it s short term/long term situation, because you house purchase is likely to be a 15 to 25 year commitment.

If I was earning AUD and thinking about a foreign currency mortgage, I would consider a strategy where it was only a portion of the loan that was in a foreign currency and that that portion of the loan would be repayable in a short amount of time (ie no more than 5 years).

 

[HighettBomber]

Try NAB Asia, they allow people with foreign income to borrow inthat income against Australian property. They have a seperate web site to NAB.

 

[Leper]

Thanks for your comments guys.

The "carry trade" scenario you talk about (Fred) is (arguably) what is pushing up the AUD. Isn't this a great argument in favour of borrowing USD? If this theory is correct, so long as Aussie interest rates are > US, the AUD will continue to appreciate, and I'd be winning on both the interest rate and the exchange rate (principal less). And if things get tough I could always switch back to AUD.

It seems to me the Aussie exchange rate is more tied to the share market than interest rate differentials, especially if the last week is anything to go by. But yeah, the risk is always there that the A$ could fall on it's arse.... due to something like a change of government in Aus and/or the Yanks finally coming to their senses and stop blowing their balls apart in Iraq.

 

[Qsaint]

Thanks for your comments guys.

The "carry trade" scenario you talk about (Fred) is (arguably) what is pushing up the AUD. Isn't this a great argument in favour of borrowing USD? If this theory is correct, so long as Aussie interest rates are > US, the AUD will continue to appreciate, and I'd be winning on both the interest rate and the exchange rate (principal less). And if things get tough I could always switch back to AUD.

It seems to me the Aussie exchange rate is more tied to the share market than interest rate differentials, especially if the last week is anything to go by. But yeah, the risk is always there that the A$ could fall on it's arse.... due to something like a change of government in Aus and/or the Yanks finally coming to their senses and stop blowing their balls apart in Iraq.

If your income is in US $ then your risk is minimal other than a massive reduction in the value of the property