More doom and gloom

Discussion in 'Property Market Economics' started by euro73, 20th Dec, 2018.

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  1. Lacrim

    Lacrim Well-Known Member

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    This is what I think they should do.

    New loans will be subject to current serviceability calcs.

    Existing loans/customers that aren't meeting current serviceability hurdles, or who can't afford P&I, to be given a reprieve until they do meet serviceability ie grow incomes/rents increase etc. I can't see how doing that will destabilise the system, and its a win win for all concerned - the customer, the bank, the economy.

    I also think all banks and financial institutions should be forced to have the SAME serviceability criteria. They should be standardised.
     
  2. Speede

    Speede Well-Known Member

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    Australia not North Korea.
     
  3. sash

    sash Well-Known Member

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    I am ok with North Koreas...so long as I get to be King Il-Sung :p
     
  4. kierank

    kierank Well-Known Member

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    There is one thing I have learnt over the last 40 years in this investment world and that is:

    “NEVER say NEVER”​

    I have a list of examples (some I have already posted on PC) where I have said it and later been proved hugely wrong :eek:.
     
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  5. marmot

    marmot Well-Known Member

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    For people that only have the one home and its their PPOR , then maybe ,yes try and keep them in their home , for those with multiple properties , they either sink or swim, and make some hard decisions along the way.
    With wage growth stalling over 5 years ago, it becomes rather complicated until it starts to really rise again.
    Its all part of the risk , if people cannot manage debt and have bought multiple properties, then its a lesson that need to be learnt.
    Perth and Darwin has seen some good losses over the last few years and you dont really see much spoken about owners and investors being helped out .
     
  6. Rex

    Rex Well-Known Member

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    Yes hard to make a case for extending IO periods outside of current serviceability criteria, this kicks the can down the road, makes the problem worse and builds in more financial sector risk.

    Correct, nobody over east gives a rats about Perth and Darwin property markets and owners in these cities have been left to fend for themselves during the recent Sydney/Melbourne boom. The sky has not fallen in, but there is a lot of quiet pain out there for investors and OOs which is yet another drag on these weak local economies.

    Perth is a good example of when you just let things unfold and watch people get locked out of refinancing. Tighter lending standards and 4 years of declining values sees heaps of people who bought in Perth since 2012 unable to refinance even without any change to term or loan amount, or be up for a hefty LMI bill again if they do qualify. People are just trapped in mortgages with high interest rates, hoping the bank is merciful with rate hikes. Some of the investors sell, further weakening the market, but OOs are generally sticking it out and making the repayments. Lots of money that would otherwise go toward productive spending in the economy is lost to the banks as interest payments.

    If/when this becomes a reality in Sydney and Melbourne, people will be up in arms and regulators will be falling over themselves to make changes.

    IMO banks should have the discretion to make exceptions to lending standards for refinance applicants, where loan term and amount is not changing, provided the customer is overall better off. This is by definition a better outcome for all and seems to be a no-brainer.
     
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  7. Kangabanga

    Kangabanga Well-Known Member

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    You cant trust bankers, let them make exceptions and soon u will end up with more dodgy loans and lax lending standards again.

    The new rules are meant to reduce risk, those leveraged up to their eyeballs and unable to refinance can always sell up, make the loss if need be and rent if they are unable to own.

    The way labor is winning votes, i think regulators are more keen to keep things tight.
     
  8. Lacrim

    Lacrim Well-Known Member

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    Where's Perth or Darwin?
     
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  9. Redom

    Redom Mortgage Broker Business Plus Member

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    By and large, this is broadly the case today. Lenders follow the APG 223 rulebook which pretty much tells lenders how to calculate serviceability line by line.

    Difference in borrowing cap for majority of borrowers between one lender and another is marginal now, very very marginal compared to a few years ago too.

    Given its Australia, leaves scope for some lenders to use income, employment, credit policy differences to cause different assessments though.

    As lending volumes fall, more and more begin pushing the boundaries (like in the past) though.
     
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  10. euro73

    euro73 Well-Known Member Business Member

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    We shall see ....