Hi,
I think that is a sweeping generalisation....you need to define a 'bad situation'.
How true, this is not something new to the big 4, they have always been somewhat flexible when a mortgagee comes under financial stress to come to a financial viable arrangement with the mortgagee.
What constitutes a bad situation, well the devil is in the detail, yet to be made public, if ever by the banks.
lets be specific here shall we?
you can only apply for it if the bank is ready to foreclose and you are unemployed.
not because you missed a cupla payments because you got dropped back to 4 days a week.
much the same as accessing super money for financial distress.
Some of the above would be detail, along with your ability to meet future debt servicing, how much equity was in the asset, the current condition of the economy and most importantly Government influence in the decision making, they did grant the banks guarantees. You scratch my back, I will scratch yours.
Sounds to me like banks are only protecting their own interests, the last thing they want is a drop in re prices, they maybe left with a lot of "toxic assets" if they start foreclosing mortgages.
Yes, they are protecting their own interests called shareholders and exec bonuses, who wants RE prices to drop, but just willing it not to isn't going to be good enough, reduction in risk would seem like the safest action at the moment. They do risk having toxic assets if the rules of being granted the 12months relief are not in accordance with the current financial and economic environment to protect their business. The further the world contracts, the slower the economy becomes, the tighter the banks will be with granting relief.
there's still those 20% of people who have loans not with one of the big 4, so this doesn't apply to them.
I think the true indication of price movements is the fact that banks lower the LVR, which means they prepare for price falls.
Yes, the other 20% might not be able to access such relief or they will be told they can only if they are 8ft tall with 6 fingers.
The lowering of LVR rates will have a greater effect on property prices more than the 12 months relief option or the FHBG. If the bank does not receive cash flow from a mortgage for a period of time it has to be made up somewhere else, end result less capital, a reduction in the number of mortgages the bank can offer, tighter lending practices, less demand for RE, lower prices. What would happen to property prices if LVR's were reduced to 50%?
While I initial thought this the concept ridiculous, I think it has it merits but the extent of those merits will be determined by the banks and we will have to wait and see.
Unlike others I do not see this as putting a floor under the market, lower LVR rates from the big 4 recently results in less credit available making it hard to maintain current RE prices. Even the FHB may have to reduce their buying price range by not having a large enough deposit to meet the current median house price if the banks require a LVR 80% and none inclusion of the FHBG.
This pattern seems to be playing out in other countries around the world, maybe the world thought buy/consume now and paying later was in a 100 years time.
