sorry if its been posted before
http://www.dailytelegraph.news.com.au/story/0,20281,17854374-5001021,00.html
http://www.dailytelegraph.news.com.au/story/0,20281,17854374-5001021,00.html
news: House price crush
- Thread starter pete_w
- Start date
I heard a story on that today, with Aussie John, Ross Greenwod and someone from Residex (I think).
A statement was made to the effect that, although in absolute numbers, it's gone up a lot in a year- as a percentage of the total number of people with mortgages, it's still a very small proportion of the defaulters in the late 80s (when the interest rates zoomed).
A statement was made to the effect that, although in absolute numbers, it's gone up a lot in a year- as a percentage of the total number of people with mortgages, it's still a very small proportion of the defaulters in the late 80s (when the interest rates zoomed).
Hi,
Okay, now according to those in the know, the fact that one or two banks are now foreclosing on mortgages, it means that all banks are evil and shouldn't be preying on people by lending them money, right?
I mean, this is a classic example where we can take a small percentage and use that to describe the whole industry right?
I mean the fact that these are battlers, it makes the whole industry of lending wrong?
And surely, having a registered mortgage should have protected them right?
(Oh come on, after all I've heard, surely I can have some fun?)
On the flipside, though, here are my personal views...
If the loans were for PPORs then the borrower has some protection under the consumer credit code.
If not, there's nothing to say they still cannot negotiate with the lender right?
In either case, it's not to the lenders benefit to foreclose anyway, since if I am reading this right the security is less than the debt, so if the bank forecloses they are going to realise a loss anyway.
Some possible solutions would be to either...
(a) reduce the interest rate - banks can do this, and do it all the time, its call "special" or "honeymoon" rates. They could agree that for a set period of time (say 2-3 years) the interest rate will be x which is less than the current interest rate; or
(b) Extend the loan term from 25 years to 40 years for say 2-5years.
What this does is effectively refinance the loan to a new "product" where the end result is that the repayments are smaller.
The goal is that either...
a) the borrower keeps paying until the market turns and they sell; or
b) they switch back to a normal mortgage later on.
However if its due to a lost job or something, then in theory that situation will turn around.
Having done wraps and seen where people have refinanced and seen reposessions (and yes in the case of the repossession the couple did switch to a refinance plan of their own creation - one they said they could afford - besides their repayments were less than the average rent in the area - so the inability to pay was not the result of the wrap). I am familiar with what is permitted under the code.
Also having seen my parents almost lose their home through the Government Housing plan HomeFund I know that its like to experience almost losing a home. So I think I'm in a good position to see both sides of the fence.
Getting back to our example above, some of the conditions I would include if the refinance was to proceed would be;
1) loan payments must be deducted straight from salary (not bank account)
2) all other loans must be reduced to their monthly minimum payments and the excess added to the homeloan
3) must see an appointed financial planner to develop a budget and then must meet regularly to maintain budget.
Just some thoughts
Michael G
Okay, now according to those in the know, the fact that one or two banks are now foreclosing on mortgages, it means that all banks are evil and shouldn't be preying on people by lending them money, right?
I mean, this is a classic example where we can take a small percentage and use that to describe the whole industry right?
I mean the fact that these are battlers, it makes the whole industry of lending wrong?
And surely, having a registered mortgage should have protected them right?
(Oh come on, after all I've heard, surely I can have some fun?)
On the flipside, though, here are my personal views...
If the loans were for PPORs then the borrower has some protection under the consumer credit code.
If not, there's nothing to say they still cannot negotiate with the lender right?
In either case, it's not to the lenders benefit to foreclose anyway, since if I am reading this right the security is less than the debt, so if the bank forecloses they are going to realise a loss anyway.
Some possible solutions would be to either...
(a) reduce the interest rate - banks can do this, and do it all the time, its call "special" or "honeymoon" rates. They could agree that for a set period of time (say 2-3 years) the interest rate will be x which is less than the current interest rate; or
(b) Extend the loan term from 25 years to 40 years for say 2-5years.
What this does is effectively refinance the loan to a new "product" where the end result is that the repayments are smaller.
The goal is that either...
a) the borrower keeps paying until the market turns and they sell; or
b) they switch back to a normal mortgage later on.
However if its due to a lost job or something, then in theory that situation will turn around.
Having done wraps and seen where people have refinanced and seen reposessions (and yes in the case of the repossession the couple did switch to a refinance plan of their own creation - one they said they could afford - besides their repayments were less than the average rent in the area - so the inability to pay was not the result of the wrap). I am familiar with what is permitted under the code.
Also having seen my parents almost lose their home through the Government Housing plan HomeFund I know that its like to experience almost losing a home. So I think I'm in a good position to see both sides of the fence.
Getting back to our example above, some of the conditions I would include if the refinance was to proceed would be;
1) loan payments must be deducted straight from salary (not bank account)
2) all other loans must be reduced to their monthly minimum payments and the excess added to the homeloan
3) must see an appointed financial planner to develop a budget and then must meet regularly to maintain budget.
Just some thoughts
Michael G
Guys,
And the other upbeat flipside is that individual net worth doubled over the last 5 years or so to a nice big fat healthy number. Anyone remember reading that and got a link? Most of this growth in personal wealth in Australia is a direct result of the property boom. So, sure, some poor buggers are defaulting on their mortgages, but the bulk of property investors have done very nicely thank you very much...
Cheers,
Michael.
And the other upbeat flipside is that individual net worth doubled over the last 5 years or so to a nice big fat healthy number. Anyone remember reading that and got a link? Most of this growth in personal wealth in Australia is a direct result of the property boom. So, sure, some poor buggers are defaulting on their mortgages, but the bulk of property investors have done very nicely thank you very much...
Cheers,
Michael.
michaelg said:
Sensible comments as always Michael. The media always tries to whip up a frenzy about "battlers" being pushed out of their homes by the big bad banks.
The reality is that there is ample protection for home buyers under the present law. If people aren't meeting their promises (and that's what the loan contract is - a promise to pay x$ back with interest over 20-30 years) then they should accept the consequences and take responsibility for their own actions in overextending themselves!
I may be stereo-typing here but I sometimes wonder if the defaults would have occurred if less tinnies were drunk, less ciggies smoked and less plasma tv's bought...
but maybe I'm just a bigot NigelW said:I may be stereo-typing here but I sometimes wonder if the defaults would have occurred if less tinnies were drunk, less ciggies smoked and less plasma tv's bought...
Or a realist...
What amazes me is young couples taking out 400k mortgages to buy their first home in some new estate in the outskirts of Sydney...
My first house was a rundown fibro dump because that's what i could afford without having a monsterous mortgage - these days young people wouldn't be caught dead in anything less than a brick mansion...
How true!FatBoy said:Or a realist...
What amazes me is young couples taking out 400k mortgages to buy their first home in some new estate in the outskirts of Sydney...
My first house was a rundown fibro dump because that's what i could afford without having a monsterous mortgage - these days young people wouldn't be caught dead in anything less than a brick mansion...
Just yesterday I was talking to a young lady who mentioned that she would never be able to afford to buy a home. She said "Don't you know you can't buy a house for less than $500k". I had a current Property Guide with me & showed her the range of houses she could get, starting from $185k.
The responses to the houses was "Ooh that's just a box", "Who wants to live there", "Yuck, that's yellow", "I wouldn't let my dog live in that one", "That one wouldn't be big enough", "Where's the pool", "I want a nice house", "I must have 4 bedrooms, & 2 bathrooms", etc.
My first house was a real dump. It was all I could afford. My latest PPOR is nothing special either as I would rather live in an ordinary house & build a future for my family than spend all my money on a McMansion.
Here here!skater said:
You go girl! My first purchase was an investment property unit. I couldn't afford to buy a house and move on in so bought an IP and rented a run-down unit to live in. Did that for about 5 years then sold the IP, sold the managed share fund and poured every spare cent into my dream home. Even then we bought the land at a discounted price and built it ourselves to save some more dosh. All done and dusted we now have a great home that we love and only owe the banks about $125K. But it was HARD work, and let nobody tell you it ain't...
BTW, over 1,000 posts now skates, keep em coming.
Cheers,
Michael.
