Global Financial Crisis (9 Viewers)

[icemaη]

It's moreso the concept of moral hazard, i feel like we are just encouraging more and more risky and destructive behavior. In America too, deposits up to 250k are insured. So you do know that anything above is at risk.

When losses are socialised there's nothing stopping the banks from making more risky bets, make a shit ton of money and then running to the government to make their customers whole when some of those bets fail eventually. Even though the claim is that no tax payer money is used for this not-bailout, customers will eventually pay for it.

 

Buy on AliExpress.com

[Enron]

BLM = rent seeking scam
SIVB = money launderer
Fed = enabler

So much shit in this country just needs to fail. @GordoDeCentral

Apparently that’s not true. Tucker made it up again

 

[icemaη]

Apparently that’s not true. Tucker made it up again

Supplies.gif

 

[Hist]

When losses are socialised there's nothing stopping the banks from making more risky bets, make a shit ton of money and then running to the government to make their customers whole when some of those bets fail eventually. Even though the claim is that no tax payer money is used for this not-bailout, customers will eventually pay for it.

Interesting move. A group of private banks step in to support a failing one. https://www.cnbc.com/2023/03/15/stock-market-today-live-updates.html

Maybe thats the way out: the institutions that are worried of contagion and domino effect are the ones incentivized to swoop in to save the day as a collective. Otherwise let the the dominos fall.

 

[swag]

Apparently that’s not true. Tucker made it up again

Yeah, I read that. Talk about a totally fabricated plant of a story that distracts from addressing the actual root causes.

I don't know if Tucker made it up. More likely someone played fast and loose mojo with a Claremont Institute database that conflated "COVID-19 relief" with BLM (among other things) and someone ran it up the flagpole knowing everyone would parrot it without checking for any accuracy. Because accuracy is boring.

A successful fake data troll indeed. Classic case of start with your conclusion then source the data to make it sound credible. As Ronald Coase put it, "If you torture the data long enough, it will confess to anything."

 

[Dostoevsky]

Interest rates in the US up by 0.25 again. Predictions are that 2 million people will lose their job.

 

[Strickland]

hey guys, I have a rather stupid question.

since the very end of 2021 I have an approximately 120k large, 30 years long mortgage for my apartment, I'm on 1.7% fixed rate + 6m euribor. at the start (early 2022) I was on 440 EUR monthly payment, which was split appxoimately 260 EUR principal and 180 EUR interest. then the war and interest rate spike happened. I repaid early 2k, but still after the interest spike kicked in end of 2022 the payment was 580 EUR, split in ~ 180 EUR principal and 400 EUR interest. after another 6 months the payment is 675 EUR, out of which only a bit more than 140 EUR is principal and ~535 EUR is interest.

the stupid question - so with higher interest rates the principal payment keeps shrinking and shrinking, at this point 80% of my payment is interest and the principal payment is almost half of what it was 12 months ago. does this mean that even when the interest rates go down I'm never returning to the 440 EUR because when that happens the remaining sum will be higher than the original projection that had my payments fixed at 440 EUR?

if I'm right on that, then my true increase should be calculated between the interest payments not just the full payment right? as in the delta of how much the ECB spike is costing me monthly is 535 EUR - 180 EUR interest = 355 EUR, not 675 EUR - 440 EUR = 235 EUR, right?

 

[swag]

Yeah, my Euribor mortgage is up too. People say that Portuguese don't like fixed-rate mortgages, which is crap. Because when I finalized my purchase last year, I looked for one and nobody was offering.

Anyway, if your principal keeps shrinking I'd presume it's because you're paying it off -- not that interest rates have anything to do with it.

 

[GordoDeCentral]

hey guys, I have a rather stupid question.

since the very end of 2021 I have an approximately 120k large, 30 years long mortgage for my apartment, I'm on 1.7% fixed rate + 6m euribor. at the start (early 2022) I was on 440 EUR monthly payment, which was split appxoimately 260 EUR principal and 180 EUR interest. then the war and interest rate spike happened. I repaid early 2k, but still after the interest spike kicked in end of 2022 the payment was 580 EUR, split in ~ 180 EUR principal and 400 EUR interest. after another 6 months the payment is 675 EUR, out of which only a bit more than 140 EUR is principal and ~535 EUR is interest.

the stupid question - so with higher interest rates the principal payment keeps shrinking and shrinking, at this point 80% of my payment is interest and the principal payment is almost half of what it was 12 months ago. does this mean that even when the interest rates go down I'm never returning to the 440 EUR because when that happens the remaining sum will be higher than the original projection that had my payments fixed at 440 EUR?

if I'm right on that, then my true increase should be calculated between the interest payments not just the full payment right? as in the delta of how much the ECB spike is costing me monthly is 535 EUR - 180 EUR interest = 355 EUR, not 675 EUR - 440 EUR = 235 EUR, right?

What do you mean the remaining sum? Like the principle? Nah bro interest rate has no effect on principle.

 

[Strickland]

What do you mean the remaining sum? Like the principle? Nah bro interest rate has no effect on principle.

yeah, principle. f.e. when my interest rate was 1.7% not just my interest payments where lower, also my principle payments were considerably higher. so if we stay another year with high interest rates, I imagine that when we go back I'll have paid off a couple of thousand EUR less on the original borrowed money than I'd have if Euribor hadnt spiked.

so naturally this shitty situation will also continue to cost me in the future, even when the interest rates go down, no?

 

[GordoDeCentral]

yeah, principle. f.e. when my interest rate was 1.7% not just my interest payments where lower, also my principle payments were considerably higher. so if we stay another year with high interest rates, I imagine that when we go back I'll have paid off a couple of thousand EUR less on the original borrowed money than I'd have if Euribor hadnt spiked.

so naturally this shitty situation will also continue to cost me in the future, even when the interest rates go down, no?

No, this is just how compounded interest works.

Say you have a 120000 euros loan at 4% , your monthly payment on a 30 year loan is 572 a month. To determine what goes to principle you simply multiply principle by rate and divide by 12, in this case: 400$. So 172 goes to principle. So the lower the interest the more will go to principle.

 

[Strickland]

No, this is just how compounded interest works.

Say you have a 120000 euros loan at 4% , your monthly payment on a 30 year loan is 572 a month. To determine what goes to principle you simply multiply principle by rate and divide by 12, in this case: 400$. So 172 goes to principle. So the lower the interest the more will go to principle.

Ok, but in my case the interest rate changes every 6 months and so does the monthly payment, because the interest rate is a fixed rate + 6m euribor, so they have to recalculate the whole 30 year projection if euribor changes.

What I'm saying is that by the time this whole madness is over, probably 3-4 years from now, my remaining loan will be f.e. 115k, while without the interest hike it wouldve been 108k f.e., because the principle payments are affected by the interest rate.

And when euribor is down they'll recalculate the monthly payment again and even with the interest rate down I'll continue to pay for the hike, because the monthly payment for the 115k will be higher than it wouldve been for the 108k. Or I'm seriously missing something.

 

[ßöмßäяðîëя]

No, this is just how compounded interest works.

Say you have a 120000 euros loan at 4% , your monthly payment on a 30 year loan is 572 a month. To determine what goes to principle you simply multiply principle by rate and divide by 12, in this case: 400$. So 172 goes to principle. So the lower the interest the more will go to principle.

Mortgages don't compound, they are straight-line.

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Yeah, my Euribor mortgage is up too. People say that Portuguese don't like fixed-rate mortgages, which is crap. Because when I finalized my purchase last year, I looked for one and nobody was offering.

Anyway, if your principal keeps shrinking I'd presume it's because you're paying it off -- not that interest rates have anything to do with it.

Principal shrinkage is a component of an increase in interest rate, not a reduction of outstanding principal. Is this an ARM?

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Ok, but in my case the interest rate changes every 6 months and so does the monthly payment, because the interest rate is a fixed rate + 6m euribor, so they have to recalculate the whole 30 year projection if euribor changes.

What I'm saying is that by the time this whole madness is over, probably 3-4 years from now, my remaining loan will be f.e. 115k, while without the interest hike it wouldve been 108k f.e., because the principle payments are affected by the interest rate.

And when euribor is down they'll recalculate the monthly payment again and even with the interest rate down I'll continue to pay for the hike, because the monthly payment for the 115k will be higher than it wouldve been for the 108k. Or I'm seriously missing something.

I can help you with this, I just need a lot more information.

What is euribor?

Also, I built a amortization calculator in excel i can send you, if you want to play around with your rates/balances/payments.

 

[s4tch]

I can help you with this, I just need a lot more information.

What is euribor?

brilliant

euribor is the "EURo InterBank Offered Rate", the most widely accepted euro based reference rate. you can read about it a lot, how it's calculated, who publishes it, , point is that euro based loans' rates are often tied to euribor

@Strickland i don't think you're missing anything, your latest post sums it up pretty well. i also kinda have a mortgage (my real estates are fully paid, it's just that my brother wasn't eligible so i took a loan for him), i opted for a fixed rate for the first 5 years, so i also expect a raise because of the current situation (plus covid effects). i know it's a bummer but it's the risk people should be aware of when applying for a loan. in theory the payment plans are very simple and straight forward, but when the rates change, then it can not only affect the total monthly payment but also the principle.

 

[GordoDeCentral]

Ok, but in my case the interest rate changes every 6 months and so does the monthly payment, because the interest rate is a fixed rate + 6m euribor, so they have to recalculate the whole 30 year projection if euribor changes.

What I'm saying is that by the time this whole madness is over, probably 3-4 years from now, my remaining loan will be f.e. 115k, while without the interest hike it wouldve been 108k f.e., because the principle payments are affected by the interest rate.

And when euribor is down they'll recalculate the monthly payment again and even with the interest rate down I'll continue to pay for the hike, because the monthly payment for the 115k will be higher than it wouldve been for the 108k. Or I'm seriously missing something.

Lol i think i get you now, you see the missed opportunity to reduce the principal as you having a higher principal but it's not, having a variable rate exposes you to paying higher interest rates, and with that comes less principal reduction.

 

[GordoDeCentral]

Mortgages don't compound, they are straight-line.

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Principal shrinkage is a component of an increase in interest rate, not a reduction of outstanding principal. Is this an ARM?

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I can help you with this, I just need a lot more information.

What is euribor?

Also, I built a amortization calculator in excel i can send you, if you want to play around with your rates/balances/payments.

https://www.nerdwallet.com/ca/mortg...s are compounded,the same payment every month.

"Fixed-rate mortgages are compounded semi-annually. That means that the rate you’re quoted is a bit lower than what you’ll actually pay once you factor in compound interest. For example, a fixed-rate mortgage of 6% has an effective annual rate of 6.09%.

With variable mortgages, you make the same payment every month. However, if rates fluctuate, so does the interest portion of your payments. When interest rates rise, more of your payments go toward interest. On the other hand, when rates fall, you’re making larger payments toward the principal. That means you’re paying off your mortgage faster."

 

[ßöмßäяðîëя]

So these all perform like an Adjustable Rate Mortgage, it appears?

 

[GordoDeCentral]

So these all perform like an Adjustable Rate Mortgage, it appears?

They are arms, tied to the euribor

 

[ßöмßäяðîëя]

https://www.nerdwallet.com/ca/mortgages/how-does-mortgage-interest-work#:~:text=Fixed-rate mortgages are compounded,the same payment every month.

"Fixed-rate mortgages are compounded semi-annually. That means that the rate you’re quoted is a bit lower than what you’ll actually pay once you factor in compound interest. For example, a fixed-rate mortgage of 6% has an effective annual rate of 6.09%.

With variable mortgages, you make the same payment every month. However, if rates fluctuate, so does the interest portion of your payments. When interest rates rise, more of your payments go toward interest. On the other hand, when rates fall, you’re making larger payments toward the principal. That means you’re paying off your mortgage faster."

https://www.thetruthaboutmortgage.com/are-mortgages-simple-interest-and-compounded-monthly/
Mortgages Are Simple Interest

• Simple interest means it’s not compounded
• So you don’t pay interest on top of interest
• What you owe in interest is pre-determined on a home loan
• And paid over the life of the loan

Here in the United States, mortgages use simple interest, meaning it is not compounded. So there is no interest paid on interest that is added onto the outstanding mortgage balance each month.

Conversely, think of an everyday saving account that offers you compounding interest. If you have a balance of $1,000 and an interest rate of 1%, you’d actually earn more than 1% in the first year because that earned interest is compounded either daily or monthly.

Put another way, you earn interest on your interest each day or month, which allows your money to grow more quickly.

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@Strickland

Are you trying to stabilize your monthly payment or pay off the principal faster?

 

[GordoDeCentral]

https://www.thetruthaboutmortgage.com/are-mortgages-simple-interest-and-compounded-monthly/
Mortgages Are Simple Interest

• Simple interest means it’s not compounded
• So you don’t pay interest on top of interest
• What you owe in interest is pre-determined on a home loan
• And paid over the life of the loan

Here in the United States, mortgages use simple interest, meaning it is not compounded. So there is no interest paid on interest that is added onto the outstanding mortgage balance each month.

Conversely, think of an everyday saving account that offers you compounding interest. If you have a balance of $1,000 and an interest rate of 1%, you’d actually earn more than 1% in the first year because that earned interest is compounded either daily or monthly.

Put another way, you earn interest on your interest each day or month, which allows your money to grow more quickly.

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@Strickland

Are you trying to stabilize your monthly payment or pay off the principal faster?

That's wrong, if it's not compounded why you paying 3 times the principal in interest over 30 years?

Look at formula for total payment:

https://www.investopedia.com/terms/a/amortization.asp