On another thread I noted the following comments which I thought worthy of their own thread:
OK, so I can imagine there may be some people who do this. But I am interested in how many actually push things to this extent? The fact TF has agreed with this statement so strongly makes me question my previous assumptions which were that the majority of Australians would be pretty conservative on their personal borrowings and this level of pushing the limits would be restricted to only a relative few.
I note however that servicing tests from some lenders in particular do allow homebuyers with a steady job and no other assets to still sail very close to the wind in terms of spare cash flow over mortgage payments for personal expenses. When I compare this with the difficulty for investors with passive incomes exceeding the active incomes of others to get finance it leaves me scratching my head. But I can see that there is probably a much bigger market of loans for the homebuyers instead of investors so the pressure to relax standards in this area to gain market share off others (within regulatory limits) would be much higher. And no doubt banks would be happy for salaried folk to devote the majority of their working lives to paying interest to the bank...
So, a question for the bankers and brokers out there who deal with the "average" (that can mean whatever you want it to mean) first homebuyer or "mum and dad" upgrader - what proportion of these clients would go for broke (quite literally...) like this?
BTW I classify investors extending themselves to buy quality assets with strong cash flows in a different (more entrepreneurial) bucket. Really only interested in the proportion of people extending themselves to this extent for your more "garden variety" PPOR buyers...
Thanks in advance for any comments / experiences.
But of course; that's not what people do; you've gotta borrow as much as you physically can, pay the minimum repayment (because you're at your borrowing limit) and hope like hell the interest rates don't go up.
This would explain why a .25% change, or a jump in the price of petrol each week, sends so many screaming into the streets with shouts of.... "OMG!...how will I afford the groceries now?"
Requoted for truthiness
OK, so I can imagine there may be some people who do this. But I am interested in how many actually push things to this extent? The fact TF has agreed with this statement so strongly makes me question my previous assumptions which were that the majority of Australians would be pretty conservative on their personal borrowings and this level of pushing the limits would be restricted to only a relative few.
I note however that servicing tests from some lenders in particular do allow homebuyers with a steady job and no other assets to still sail very close to the wind in terms of spare cash flow over mortgage payments for personal expenses. When I compare this with the difficulty for investors with passive incomes exceeding the active incomes of others to get finance it leaves me scratching my head. But I can see that there is probably a much bigger market of loans for the homebuyers instead of investors so the pressure to relax standards in this area to gain market share off others (within regulatory limits) would be much higher. And no doubt banks would be happy for salaried folk to devote the majority of their working lives to paying interest to the bank...
So, a question for the bankers and brokers out there who deal with the "average" (that can mean whatever you want it to mean) first homebuyer or "mum and dad" upgrader - what proportion of these clients would go for broke (quite literally...) like this?
BTW I classify investors extending themselves to buy quality assets with strong cash flows in a different (more entrepreneurial) bucket. Really only interested in the proportion of people extending themselves to this extent for your more "garden variety" PPOR buyers...
Thanks in advance for any comments / experiences.