Rising Home Loan Rates Will Cause Need For Financial Assistance

According to a survey by Finder, many Australian households would be pushed into financial hardship if their home loan rate increased out of cycle.

The survey found one in 20 (5%) of Australians with a home loan would require financial assistance if their home loan rate went up.

Further, more than half of borrowers (53%) – equivalent to 1.5 million people – would attempt to negotiate a lower rate if they suffered a rate rise.

The survey also found that one in four (25%) would refinance to another lender if possible, equalling an estimated 725,000 homeowners with a mortgage who would consider switching lenders if their interest rate went up.

Sarah Megginson, Finder home loans expert, noted that thousands of Australians had been left ‘debt vulnerable’ by the COVID lockdowns.

Further, Ms Megginson added that should rates go up, shopping around for a cheaper mortgage would be advised.

“Competition in the market is fierce so get on the phone and negotiate. Ask for a better deal – odds are, the rate your bank is offering new customers is lower than what you’re paying,” said Ms Megginson.

“If they won’t give you a better rate, take a walk to another lender and get a better deal. It’s easier than you think and you can save thousands of dollars a year.”

Could a recession be the best time to launch a tech startup?

A recent study suggests that is the case. The authors found that tech startups that began operations during the 2007-09 recession—and received their first patent in that time—tended to last longer than tech startups founded a few years before or after. And those recession-era companies also tended to be more innovative than the rest.

“The effect of macroeconomic trends is not always intuitive,” says Daniel Bias , an assistant professor of finance at Vanderbilt University’s Owen Graduate School of Management, who co-wrote the paper with Alexander Ljungqvist, Stefan Persson Family Chair in Entrepreneurial Finance at the Stockholm School of Economics.

Drawing on data from the U.S. Patent and Trademark Office, the authors examined a sample of 6,946 tech startups that launched and received their first patent approval between 2002 and 2012.

One group—about 5,734 companies—launched and got their patent outside of the 2007-09 recession. Of those, about 70% made it to their seventh year. But the startups that launched and got their first patent during the recession—about 1,212 companies—were 12% more likely to be in business in their seventh year.

These recession-era firms were also more likely to file a novel and influential patent after their first one. (That is, a patent the researchers determined was dissimilar to patents in the same niche that came before it, but similar to ones that came after it.)

So, why did these recession-era firms outperform their peers? Labor markets played a big role.

A widespread lack of available jobs meant that the startups were able to land more productive and innovative employees, especially in their research and development groups, and then hold on to them. More important, the tight labor markets also meant that the founding inventors—the people named on the very first patent—were more likely to stick around rather than try for opportunities elsewhere.

For startups started during the 2007-09 recession, founding inventors were 25 percentage points less likely to leave their company within the first three years. On average, about 43% of founding inventors in the entire sample left their startup within the first three years.

“Our study really highlights the importance of labor retention for young innovative startups. Retaining founding inventors cannot only help them survive, but also thrive,” Bias says.

Rising Home Loan Rates Will Cause Need For Financial Assistance

Surveyed Australians show concern for rising rates.

A study suggests that when jobs are hard to come by, the best workers are more available—and stay longer