How to hold back a flood of mortgage defaults when loan holiday is over

G I love your common sense and real life analysis of situations!
So tired of seeing articles on these forums shared which are written by Jimmy the intern at DailyMail.co.uk and taken as gospel and cause for panic stations.

 

Commercial retail and office was staring down the barrel of trouble before covid19 .... 2020 simply hastened the process ... warehousing and experiences (I put dining in this category) should do okay

p.s. just bought my entire tapware and basins fit out, for the new build, online yesterday ... did the same for my lighting and hoping to do the same for my kitchen

 

Lizzie - where did you buy lighting online?

 

What's in it for the banks? Nothing. They are not charities that's for sure.

 

Not really, Vacancy rates in Sydney CBD were very tight.
I have friends in the law field telling me 1 year ago how things were tough with low vacancy and increasing cost. The date also correlated this.

I feel like some people work from home and in so assume everyone else does.
But pre-covid the notion the (Sydney specifically office space was on the decline in demand is fallacy)

Look at some articles form 2019

(i dont know anything about Melbourne) comments are Sydney only.

Office vacancy rates in Sydney hit 19-year low


Extract:


The effect of office vacancy rates on rental rates
As you’d expect with demand being so strong, rental rates are also at record-breaking levels.

Average CBD rental rates broke through the $1000 per square metre barrier in the second half of 2018.

And the record-smashing doesn’t stop there.

Years of capital growth in the Sydney CBD market has also seen the value of A-grade premises surge through the $20,000 per square metre barrier.

In fact, values have risen so sharply that average rental yields have dropped slightly, despite rental rates increasing. The average rental yield in the Sydney CBD is just under five per cent, which is still a healthy return.

 

Rovert Lightening ... a localish company and free delivery

 

But what's it like now? A percentage of companies and workers won't be heading back to the full time office when this is all over ... and retail vacancies have been increasing for a while

 

All im saying perception and reality are different things.

Like many here i propose a different point of view. Manhere are under the impression that people will not go back to the office or it will be an overwhelming percentage.

Out of my cohort of friends most are hanging their heads at home and can not wait to resume normal office life.Some are happy at home but in my group of friends im talking 90%+ want to go back to normal life. Many have already resumed coming back .

After 9/11 every one said no one will work from offices in the city the change to suburban office is upon us.

In the end this didnt happen.Even if a % did as Sydney grows as you can see by vacancy rates being super tight in 2019 right before COVID we ahve plenty of workforce that need or wants to be working together as a team in an office enviroment.

People don't understand human physcology and homosapien and a species ,.
We are social creature that requires interactions and face to face real human connection. The flirting the eating together is one thing that makes us human. Introverts will thrive working from home the other majority will not.

In so Introverts will work from home extroverts may choose office life.

But the part of the workforce working in the city and who prefer to do so will continue to do so once this situation is rectified.

You need to see past 12 months.

 

Fair enough. Many in my circle are looking at going back to work 2 days a week, but home the rest of the time.

Only time will tell how it pans out

 

This is the game plan, the sum effect will be like wage growth and rate cuts together. In fact, I’d go as far as to say there is no recession, this is the boom.


The entire thing is designed to blow of private debt slowly and put it on the public balance sheet. We’re in a debt jubilee.

 

I just love it when they say there's a bubble.

 

I don't know where @Lizzie bought her's, but I bought mine on Ebay.

 

why/how so? The P&I cliff wasn't imaginary. Still isn't. Yes, it has been deferred/ avoided temporarily , but it hasn't gone away. Unless borrowers who use IO extensively ( and there are more than a few who do) can refinance or extend their IO terms forever more, the P&I piper will come calling one day . When that day arrives, if their loan has to be serviced on a P&I basis over 20 or 25 remaining years their repayments will skyrocket. That remains a fact. I find it difficult to believe that would not bring repayment stress to some...perhaps even many....forcing some sales But because it's been avoided for the time being with emergency rate cuts and emergency IO extensions and emergency loan deferments, that shouldnt be confused with the issue being resolved.

 

agree it wasn’t imaginary, not at all - also a major reason for one of the biggest housing corrections in Syd/Melb market in decades in 2018.

On a macro aggregate economy wide level - this is no longer true, at least while the regulators keep their view of how much is ok in the system.

So long as the total stock of IO debt vs the new flows of IO debt are broadly similar over time and at a sustainable level (this part is arbitrary), the P&I migration is well and truly over. This occurred in a very very sharp way in 2018 with a mass migration of nearly 15% of all mortgage debt converting.

There may indeed be another migration later if the regulators want to deflate it further, but again, it’s measured by the level of new IO Debt vs the stock of IO debt deemed sustainable.

 

The term “correction” used to describe mid 2017 to mid 2019 makes me laugh , it wasnt a correction. This country hasn’t ever seen a correction... ever.

 

This is where you and I disagree @Redom . I believe some of the migration was completed by 2018, but not all of it. Peak IO was written in 2015 and continued into 2016 at the majors, so migration for that peak volume of IO debt wasn't /isn't due until 20/21...ie about now and into next year. Those borrowers were facing a very real P&I cliff if they were rolling out to P&I rates starting with a 5 - but instead have been "rescued" by much gentler P&I rates than would otherwise have occurred , and /or by the ability to refinance/ extend IO as the assessment rates became floating floating rather than fixed and benefited from the emergency rate levels introduced since the election and then COVID. I wrote about the "cushion effect" that would likely be required of APRA and the RBA at the time... and it's pretty much what had happened following the election and before COVID, anyway. The 2018 "correction" was nothing compared to what was coming if mortgage delinquencies had accelerated .... I'd consider modest adjustment a better way to describe the removal of froth that happened then.

But whatever the differences of opinion on whether the P&I migration was partial or whole in 2018.... those who have been able to dodge the cliff this time around will still be back at their banks or brokers asking for another 5 years of IO at some point in the next few years, and if their wages are down or rents are down and they are unable to refinance or extend they still face a potentially very serious issue.... Of course, the introduction of 40 year loan terms or the complete abandonment of sensitised P&I remaining term assessment rates - ie a return to "actuals" or ASIC throwing in the HEMS towel , or a combination of any of those 3 things , could kick that cliff down the road even further .... but I doubt APRA or ASIC are willing to introduce that kind of systemic risk to Australia's banking system in order to avoid some over leveraged borrowers with poor cash flow management who didn't heed years of warnings and opportunities to recalibrate, having to exit stage left .

And if it turns out that there are a lot of people unable to meet their payments when deferals end, thats a whole other thing again.... But I dont really know whether anyone has a real handle on how many people are genuinely in need of deferments or are just taking them because they can.... we won't know who is naked until the tide goes out . Seems extraordinary to me though that the majors are all variously projecting 10-15-20% price adjustments and some are even recommending people take their equity now and get out/sell before they are forced to sell and exit with nothing ....

Next 6-12 months = who the *&$# knows how this will play out ????? I just know I'd much rather have more $ coming in than $ going out, and have a portfolio that comfortably carries P&I ..... and not have to deal with the P&I what if's

 

You’re 100 % right in theory but probably only half right in practice. Expect every single ridiculous thing that can ever be dreamed up to get implemented.

There’s more in this, I wouldn’t have said it years ago but there’s plenty more in it.The crash is not going to happen, the public balance sheet will offset the private.

This is a debt jubilee, debt is rewarded, savings are punished . Debt is the way.

This is a debt reset, there is no recession

 

The madness continues, open homes in Brisbane, Southside, 100 k over median, people crying at open homes.

 

Australians with bank stocks may need to rethink their finances, leading analyst says

"The reduction of the JobKeeper payment from the beginning of October will mean the amount of cash the Federal Government is pumping into households and businesses will go from $14 billion a month to just under $3 billion.

That coincides with the winding back of loan repayment moratoriums, rent and eviction moratoriums and an expected increase in unemployment until at least Christmas".

"ANZ has 0.47 per cent provisioning for every $100 of home loans, the other banks all around 0.6 per cent … if we were to look back to 1992, the last time we had a recession, we're talking about loan losses that are significantly higher on that," he said.

"Which means we probably have more provisioning charges going forward. You add all of that up and prospects are down, is the way I would see it."