'Restricted postcodes': NAB names suburbs where credit risk getting worse

http://www.smh.com.au/business/bank...risk-of-mortgage-default-20150928-gjwfwa.html

Really? Some of the Sydney suburbs are surprising

Sydney highest risk
This "B" group was dominated by Sydney suburbs, which accounted for 34 of the 43 postcodes listed in this category.

It included a range of suburbs from across city, ranging from inner-city areas such as Glebe and Chippendale, to Campsie, Kingsgrove, Chatswood, Baulkham Hills and Cabramatta.


Read more: http://www.smh.com.au/business/bank...ge-default-20150928-gjwfwa.html#ixzz3n0nZnb5c
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http://www.smh.com.au/business/bank...risk-of-mortgage-default-20150928-gjwfwa.html

Very interesting list. Category A restricted to 70% LVR,

Cat B restricted to 80% only, and contains a lot of Sydney suburbs including Chatswood.

Looks like the bank are observing people are behind their repayments ......

 

The Melbourne ones are just as I would expect.

The issue will be this, in combination with APRA and the downturn in mining, gets procyclical on the way down.

 

Interesting. Really interesting. Not many from Western Sydney.

 

Yes the Group B's are all CBD (and surrounds) for the other states yet for Sydney there are a few surprises

 

If they bring this into Darwin it will be a disaster.....

 

I actually think that list basically the majority of Sydney .. at least the place people actually want to live in

Makes sense tho. 2-3 weeks ago there's an auction in Macquarie park . It fetched $690K... for 2 bedroom old apartment

 

This is old news. The NAB published this about a month ago and it made the news. The NAB has had some of these restrictions in place for years. Must be a slow news day.

 

Guess so Peter - headline article this afternoon on smh.

http://imgur.com/RK93Ul1

Guess I missed the memo last time....

 

Will be interesting to see if the other banks will adopt a similar approach

 

Can someone explain the melbourne suburbs to me? Is it that people are behind on payments or is NAB expecting significant price drops in these suburbs?

Why would abbotsford be there? Is it apartment heavy?

 

They've probably determined that these postcodes are getting very high prices and there's a significant risk that they'll drop in value. Of the Victorian postcodes specifically mentioned, CBD & St Kilda Rd, these have always been on the NAB restricted list.

Most lenders have restrictions on certain postcodes in one form or another. Some restrict by simply not lending there, others by LVR, others in their credit scoring systems. Westpac actually has a list of specific developments/addresses that they won't touch. None of this is new information other than the list has been slightly adjusted.

 

Says in the article:

"In a note received by mortgage brokers last week, NAB listed more than 80 "restricted postcodes" across the country where it is capping the percentage of a property's purchase price it will lend, known as a loan-to-valuation ratio."

They did have a list but this appears it has expanded recently to include some unexpected suburbs.

 

Banks have access to a ridiculous amount of information. They know your address, wages, spending, everything and anything financial.

They know if you lose your job or take a paycut.

I have no doubt they're watching income flows for certain suburbs and probably even streets or addresses. They can see someone lose their job and start to run up the credit card to get by.

I'm sure they're seeing defaults increase but also incomes drop or credit use increase in certain areas. They can also see if someone is still saving or flatlining.

 

Probably they're investor-heavy areas. With more restrictions on investors these areas are bound to stagnate or drop a little. When the going gets rough they want to make sure that they were tough enough at the time of loan approval.
I doubt there are many defaults around right now. They know the percentages of OO and investor loans.

 

What these article are really trying to achieve is doom and gloom, "The property bubble is about to burst," headlines.

The article may be titled, "Restricted postcodes," but the headline on the site reads, "The postcodes most at risk of mortgage default." The article suggests there's a credit risk in these postcodes, but doesn't give any rationalisation of what 'credit risk' means. It could mean higher default rates, it could also mean overpriced properties where they see a future decline in values.

Most likely the NAB feels these postcodes are over valued with a risk of reducing in value in the foreseeable future. If the concerns were around credit default, they'd probably factor this into their credit scoring, rather than the LVRs.

 

NAB：these "risk" areas in Syd are reserved for foreigners - locals do not touch them please. Go Campbelltown.

 

"It could be NAB did this for internal reasons, such as being overexposed in those suburbs. Or it could be vote of no confidence in large parts of the Sydney property market," he said.

Interesting. What reasons can we come up with for a bank to do this on top of this?

 

Those things go hand in hand. Default rates won't rise significantly in a rising market, however in a market with potential oversupply (like those Melbourne suburbs listed) and resultant value drops, owners lose the ability to cash out if things get hard. Increases in default rates are then inevitable.