The banking sector versus the people

It is both popular and therapeutic to bash banks. There’s a lot not to like about the banking class – they dress too well, tend to arrogance, receive ridiculous amounts of money for pretty basic work and are always on the hunt for that extra 1 basis point of rent. I like bashing banks too.

In the days before deregulation, borrowers would have to swear allegiance to a particular bank and – perhaps, if lucky enough – the bank manager might smile upon them and offer a  principal and interest loan of perhaps 70 per cent of the purchase price of a home. In those days people tended to frugality and saved to buy their 9 square home. No average Australian living in the 70s or 80s would even dream of having an investment portfolio of multiple dwellings.

Now we live in an age of easy money – getting a loan at a reasonable interest rate has never been so easy (one could always borrow from loan sharks but their terms were pretty extreme). Banks have been competing with each other to get the money out the door, and it seems that many did not undertake some due diligence, perhaps trusting that the brokers were ethical and that borrowers truthfully disclosed their financial situation. Also, some of the Australian laws prevented lenders from sharing information about overly exposed borrowers. Some lenders have been happy to provide 100% loans interest only.

This might work if housing prices were monotonically increasing. But that’s pretty much a Ponzi scheme.

I do find it curious that commentators and the like complain about the high cost of housing in Australia, but no one seems to want the price to fall. Well I do. House prices are too high in Australia for a variety of reasons, including zoning practices and overly optimistic forecasting. A major correction to house prices – say a 50% fall – would help improve housing affordability in Australia.

Now the ABC on its 730 report is mentioning the case of a 71 year old nurse who owns 11 investment properties with her owner-occupied home and has over $3 million in debt. The report paints the woman as a victim of excessive bank lending.

From the report it seems the woman was taken in by some fast selling of the get-rich-quick variety.

Yes, the banks shouldn’t have lent her that much money – but it’s hard to see why a bank would want to lend money to someone who can’t pay it back.

It is notable that the woman applied for loans from multiple banks – perhaps if she had sought 11 investment loans from one bank she may have received advice that it would be too risky. Did she disclose the fact of the other borrowings to each lender? We don’t know of course, but the 730 report seems to take a firm view that she is the victim and the banks have prayed upon an innocent person. I doubt that a single bank would have lent such a sum for such risk.

Did she really think that a nurse would own 11 investment properties? Or that a nurse would have a self-managed superannuation fund?

The facts will ultimately be revealed, but one cannot exclude that the borrower was a little greedy, hoping for easy money and perhaps not understanding risk.

It does seem extremely risky and foolhardy to take out over $3 million of interest-only loans to buy some investment properties.

If one could really borrow in such a fashion and get a positive return from such a strategy it would be akin to a perpetual motion machine – it is impossible.

If it seems too good to be true, it almost certainly is too good to be true. And whenever one borrows to buy an asset, one is taking on risk. High return is not possible without high risk. And if you’re getting on in years, don’t get sucked in by the get-rich-quick scheme.  Too many people have been driven to financial destitution by following the siren of the get-rich-quick scheme. And that includes the people waiting for their rich daddy or mummy to die.

Get on with your life, exploit your skills, invest wisely in a diversified portfolio, don’t overextend your borrowings and try to be debt free. Be frugal and stoic. Be honest and ethical. Treat people with respect. Take responsibility for your own decisions, and don’t play the victim. Don’t be jealous of others. Enjoy your life, whatever your circumstances. Not a very complex series of recommendations, but essential for the good life.

Sometimes – for very brief periods – I am sympathetic to the banks. They will be slammed for not lending to some borrower, but then slammed for lending to someone who cannot afford the loan. People like easy money, but not too easy – it’s very difficult to know where the dividing line should be.

About Lucius Quinctius Cincinnatus

I'm a retired general who occasionally gets called back to save the republic before returning to my plough.
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55 Responses to The banking sector versus the people

  1. Singleton Engineer

    This demonstrates the fact that consideration of the statistical outlying data is no more appropriate than examination, in the dark, of the trunk of an elephant. Neither discloses much about the nature of the beast.

    The outlier, in this example, is or course the mature aged lady with unrealistic expectations from a string of 11 zero-deposit mortgages and the whole animal is the total of all residential mortgages.

    7:30 Report focussed, as journalists so often do, on the hysterical.

  2. Greg

    At one point, they referred to a mortgage broker who filled in the loan application for her, and she basically signed a blank form. Did this mortgage broker organise all the loans with multiple banks, or did the nurse go to each bank herself?

    Presumably the nurse had been sold a get rich quick scheme. Looks like the only person that got rich was probably the broker with all the commissions. The biggest problem here may be a dishonest mortgage broker, and the woman’s greed.

  3. MPH

    Singleton – so if this nurse is the trunk, how would you describe the rest of the Australian housing market beast?

    One of my favourite movie quotes is “Never underestimate the power of denial”. Plenty of denial here from the nurse, the banks, the brokers, that the Ponzi would ever come a cropper.

  4. Marcus

    Did she really think that a nurse would own 11 investment properties? Or that a nurse would have a self-managed superannuation fund?

    Why not? Anyone can do it.

  5. max

    A NINJA loan is a slang term for a loan extended to a borrower with “no income, no job and no assets.”

    Ry Cooder No Banker Left Behind

  6. Another Marcus

    Something doesn’t seem right here. She has $3,000,000 debt. She would be paying, say, $210,000 in interest. If she is very lucky she will get 4% of the capital in rent. Thats $120,000. Where does the other $90,000 come from?

    Unless, she got into this a long time ago. The older property’s rents would more than cover the interest. We just don’t know.

    We do know that she’s got 11 properties at an average price of $273,000. They may be in Alice Springs or Tennant Creek, but if they are in somewhere a little more clement then she is sitting on a tidy fortune.

  7. Terry

    Why exactly must the bank explain the risks of the investment she chooses to make? Unless they were retained as Financial Planners to offer such advice.

    All they care about and all they should care about is whether or not they’ll get their money back (or their shareholders’), either by repayment or by selling the asset used as security.

    As long as they are transparent and divulge the terms and repayments, why should they be responsible for making her financial decisions?

    She’s an adult. You make your own choices and those choices have consequences. If you don’t know what you’re doing, hire an adviser that does. Take out the appropriate insurances, mitigate your risks and diversify your investments.

    The story says she has 11 investment properties and $3Mil in debt.

    What? You cannot live in one and liquidate the remaining assets for $3mil? ($300k each on average)? Really?

    Maybe the banks should mandate IQ testing before lending.

  8. Forest Stylist

    Over 40% of the cost of a new home in NSW is tax

  9. Mundi

    Plenty of people in real estate hit the wall just from prices stagnating when the GFC hit. They couldn’t even survive that let alone a contraction.

    The problem is that land zoning and building regulation is basically rusted on. They are not going to get reduced.

    In my local council they are actually making it worse by removing things that were helping to stem rent and price increases (banking grant flats, second dwellings, ancillary units). Think about it: everyone with property wants prices to go up. So does council who receive more income from higher land values.

    The only thing that will cause a price crash is increased interest rates. The younger generation and interest only clowns are loaned to the hilt. They will not survive even 7% or 8%.

    Right now interest rates are so low that literally any property can be positive greater with just a small deposit.

  10. cynical1

    A major correction to house prices – say a 50% fall – would help improve housing affordability in Australia.

    And would see 5mil over-mortgaged suicide victims.

  11. Entropy

    I had a bit of a look at some of the submissions to the current banking royal commission that came into my hands. I happen to know their circumstances. Let’s just say that the two I looked at weren’t quite truthful. They paint a picture of an innocent played by rapacious bank lenders. Truth is the banks had been very generous in not foreclosing on these people for years.
    However, I can just imagine how they would be portrayed by the media. It would be that sixty minutes episode from a few years back redux.

  12. Tel

    Now the ABC on its 730 report is mentioning the case of a 71 year old nurse who owns 11 investment properties with her owner-occupied home and has over $3 million in debt. The report paints the woman as a victim of excessive bank lending.

    So where is the problem? She speculated on Perth property market, some speculators win, others lose. The banks can repossess the properties and probably recover most of their money, and if the banks make a small loss they write off the bad loan.

    Of course they bring the “self managed super fund” into the story in the hope of making it illegal for anyone to look after their own super, because one person had difficulty. Make the regular guy pay the price for the outlier. Pretty old trick. Classic ABC. I see what you did there.

    Ms Schmidt has taken her case to the Financial Ombudsman Service claiming the loan was unaffordable in the first place.

    She claims she only saw three pages of the loan application form which she signed.

    When she applied recently for the full form, she said she was shocked by its contents.

    Ms Schmidt claims the document overstated her assets, including her superannuation, and underestimated her existing debts.

    All happened mysteriously huh? Gosh!

  13. Entropy

    Ms Schmidt claims the document overstated her assets, including her superannuation, and underestimated her existing debts.

    In the rural context, the trick is to overstate your livestock numbers and numbers you can turn off each year. How would the average bank lender know? And no doubt there was a period about 10- 15 years ago when brokers distorted the situation to the banks for a commission. The Landmark portfolio ANZ stupidly bought about ten years ago was chock full of these kinds of loans from people who should have sold up before foreclosure. The numbers just didn’t add up for the borrower, and the risk for the lender was mostly covered by capital gain.*
    Point is though the borrower signs this agreement. Have they not worked out what they can repay? Truth is they are gambling, taking the risk that it will all turn out alright.

    *the Great Australian Property Ponzi again!

  14. Rohan

    A major correction to house prices – say a 50% fall – would help improve housing affordability in Australia.

    And would see 5mil over-mortgaged suicide victims.

    I’m surprised that this LCQ imbecilic brain fart took 11 comments to be raised.

    FFS, everyone who purchased a home within the last 10 years would be taking a massive financial hit on what the purchase price was when they purchased it. If you live in a country town, that would be the last 30 years. The whole economy would unravel in a heartbeat.

    LCQ, go back to the plow you dickhead.

  15. Entropy

    In those two cases I mentioned above, the loans with the non factual info on stock numbers etc were loans given to borrowers already deeply in trouble. A combination of the borrower willing to sign a false statement (they know it’s false, despite what he little old lady says, they just believe it won’t turn bad, and they will never be called to account), the broker wanting to help them out, the broker’s commission, the previous lender happy to see them go, and the politics of rural foreclosure.

  16. struth

    Agree with Tel.

    We need a royal commission into government land release restrictions and zoning etc before we ever need to look at banks

  17. Entropy

    Problem is we do need a correction in property asset prices. How can it happen without massive harm? Growth in real estate prices is practically the only thing keeping the economy going, everything else is killed off.

  18. Jonesy

    Not going to be pretty. The banks demand outrageous stories from borrowers and brokers to even get the loan to stack up. I am comfortably paying my mortgage. My lender wants to give me more money. I go through the hoops by telling the guy….eeeeeverythingggg…they get amazed and start trying to hang up on me as a “bad risk”…even though I am comfortably paying my dues and am in front of the curve. This is what the banks want…rosy stories with excesses of surplus funds with nary a questionable withdrawl made. The banks want you to lie!

    As for that Schmidt woman. That scam would only survive in a WA resource boom. She would have followed the idea of using the increasing equity of her inflating valued properties to buy into more properties…the game is to sell at the top of the market to realise the inflated equity to pay for a core number of her investment. Have 11 spinning, sell 6 at the top of the market to own 5. Public servants or former government qango employees seem to love doing this…lots of exposure in regional towns….Pretty obvious Schmidt missed the tipping point and didnt get out on the way up…poor petal!

  19. Tel

    FFS, everyone who purchased a home within the last 10 years would be taking a massive financial hit on what the purchase price was when they purchased it. If you live in a country town, that would be the last 30 years. The whole economy would unravel in a heartbeat.

    Strangely, the Irish were able to live with a housing price downturn.

    Must be magic Leprechaun powers.

    Thing is, if we have a big price downturn, some people must necessarily end up as losers there. People who stretched themselves to the limit and took a risk that didn’t pay off.

    At the same time, if we do NOT have a price downturn, other people (the young people wanting to buy) will end up as losers. There are things in economics that can be a positive sum game (win/win all round) but selecting a price between buyer and seller is NOT one of those things. The seller always wants a higher price, the buyer always wants a lower price. Any interference with prices is a wealth transfer.

  20. Entropy

    Pretty obvious Schmidt missed the tipping point and didnt get out on the way up…poor petal!

    But she is A little old lady!
    Even if she is only 71, how dare you accuse her of being a risk taking gambler on the make!

  21. duncanm

    71yo sounds pretty canny, if not a little risk-taking, to me – what’s the issue?

  22. Entropy

    At the same time, if we do NOT have a price downturn, other people (the young people wanting to buy) will end up as losers.

    They are future asset holders Tel. Like future taxpayers, they don’t count.

  23. duncanm

    .. and it also sounds like she’s trying to scam her way out of her subsequent debt problem by crying ‘poor old lady, I didn’t know what was going on, puppy eyes, Alzheimer’s, etc..’

  24. duncanm

    .. (additionally) – elbowed a 70+ yo lady in the face on the weekend. Does that make me hate little old ladies?

  25. struth

    Really getting sick of arseholes blaming banks.
    What are banks doing wrong, that their customers aren’t accomplice to?

    No one forces you to borrow from a bank and no one forces you to buy a house.

    Case in point.

    Mine.

    Property prices were way to high for what you got for me to contemplate buying an investment property in Alice Springs, where I lived during the housing boom around the rest of Australia.
    My friends were almost hysterical, buy buy buy they said………you gotta buy a house and get in on the housing market, prices will always go up they said!

    I couldn’t see how that could be the case.
    My parents generation…..always put your money into bricks and mortar , son.

    Ok, yeah, not quite convinced.

    I didn’t buy at the start of the boom, being in Alice Springs is like living outside of Australia and you quickly lose track of what is happening in the rest of the country if belting around in the bush.

    I thought, OK, mining boom but the rest of Australian wages are stagnant, and prices will only go up to what the general population can afford.
    But then they kept going up and up and up, and I thought shit, at this rate I’ll never get a house.
    They didn’t come down.
    This can’t be right , I thought , It just can’t be right.
    So I bought a low price (still greatly overpriced ) old Queenslander in a regional town we had relatives in, near the coast, a few hundred k’s north of Brissy.
    I paid too much for the house but figured, and it looks like I was right, that those that over invested in the cities will be getting out when it all sour for them, and retire to areas such as where I have bought.
    The work has all closed around this area, it’s a disgrace, very depressed, yet the house prices have stayed the same due to the exodus from the over priced cities.
    I did not over invest.
    I didn’t win, due to maintenance costs and bad renters, and house prices haven’t risen since I bought, but they haven’t fallen.
    I believe they will crash soon and I do not want to be caught with a mortgage, but I have stuff all left to pay, so I should be right.
    It is now my home, and it’s modest and huge old Queenslander.
    A beautiful thing.
    I wasn’t, and haven’t lived beyond my means and I haven’t trusted the Australian market as those that told me , buy buy buy, get in on it.

    Those same people have had marriage breakdowns and are suffering terribly, unable to sell their overpriced crap Alice Springs house, and no one can afford to pay the rent they are asking, so 25 young renters move in and share in the destruction of the property.
    The jobs, unless you are a government parasite for Abo’s are disappearing, the crime levels are through the roof, and the owner occupiers can’t get out.
    If you wanted to play in the city markets, and it was beyond your means, bigger fool you.
    I don’t know why that’s the banks fault.

  26. Wal of Ipswich

    Like most Australians I have used banks over my life to churn my earnings & provide loans for the usual purposes (car & house). Apart from an occasional curt letter in my youth reminding me of a late repayment, this process has been fuss free. This is the situation for millions of Australians.

    The Royal Commission appear to be catering to entrepreneurs whose plans have come unstuck, and in true 21st Century style have recast themselves as victims, no doubt to be compensated at the expense of the sensible.

  27. struth

    My piece is purposefully simplistic.

    It may be that the banks were too easy in the lending.
    Then they can try to minimise their losses, or go down the gurgler.
    As long as Banks are not propped up by the taxpayer to avoid this , the natural cycle of the high risk takers sometimes losing will be and should be, the natural order of things.

  28. struth

    I didn’t win, due to maintenance costs and bad renters, and house prices haven’t risen since I bought, but they haven’t fallen.

    My point is that when the bubble bursts, it will be felt most in the cities.
    They will grab what they can and head for the hills, and I’ve got property in those hills, so again I don’t expect to win, just to minimise my lose or maintain the status quo.

    The insanity of buying property in Sydney or Melbourne I cannot understand.
    You are a slave as much as you want to be one.
    And if you are willing to work your life away to pay the top end of town, in taxes, rates, and interests, etc,etc and let them own you, so be it.
    Work out how much of your wage you do not receive after taxes and interest, apply it to the hours you work, and you get a good Idea just how many hours your slave arse is owned a week.

  29. Entropy

    The only way borrowers will stop signing contracts with false statements of assets, earning capacity and servicing ability will be if enough of them are prosecuted for it.
    At the moment they just shift blame to the banks.
    Now this isn’t saying the lender isn’t often complicit. They didn’t do their proper due diligence either. So let them take a bath in the inevitable fire sale. But the borrower signing a false statement to obtain money…hmm…there is a term for that isn’t there?

  30. a happy little debunker

    I have little sympathy for someone who attended multiple lectures on real estate based capital gains, took multiple loans, from multiple lenders on an ‘interest’ only basis, in order to get ‘wealthy’.

    Yes the lenders do require some scrutiny, on behalf of their shareholders – but the borrower has gotten everything she deserves.

  31. Terry

    A sudden “downturn” in property prices should not mean very much at all to an existing borrower.

    Their existing debt and their ability to continue servicing that debt are not directly related to the fluctuations of the estimated asset value they have that debt secured against.

    So, someone who paid $1mil for a home and borrowed $800k (80%) is not materially affected by that home suddenly being valued at $800k (or even $500k) so long as they can continue servicing the loan and they are not required to liquidate the asset.

    The real danger is not a sudden “correction” in house prices but the economic conditions that might be in force that precipitate such a downturn.

    To that extent, government intervention in the market has a much greater deleterious effect than peoples’ borrowing proclivities.

    Government (through their ever-expanding ‘regulators’) unnecessarily driving up the cost of living (eg RET) and the cost of borrowing (eg Interest Only lending growth limits and associated price hikes) is a far greater risk to how well borrowers might be able to cope with any increased servicing costs (ie further rate rises – yes, the cost of funds is now higher, despite a stagnant cash rate).

    That’s before we consider the out-of-control spending and mounting government which forces unnecessarily high taxation, further diminishing serviceability of any debts private citizens might have.

    Any economic downturn with its associated reduction in employment across the economy will cause those suddenly without income to be unable to continue servicing that loan, no matter what their asset is currently worth and regardless of whether rates have increased since they got that loan or not.

    Without income, a loan at the existing, say 4-ish% is no more serviceable than the same loan at 7%.

    However, one mitigant against such events would be for people to choose an interest-only repayment option, while banking the principal ‘for a rainy day’. In such circumstances, a sudden change in income can be temporarily offset until a replacement for that income can be sourced.

    What is very clear, is that many (most?) have no idea how banking works and most of them it seems, gravitate towards Australia’s principal growth sector – Government regulation – at the expense of consumers, tax payers and business profitability.

    But sure, let’s say our biggest problem is private debt levels and not the know-nothings that presume to tell everyone else how to run their finances.

  32. Grandma

    Who filled in her loan applications if she didn’t? Why did she sign part of a form? What sort of idiot signs something she hasn’t read and understood? Why are fools and their money so readily parted?

  33. sabena

    Grandma,quite.
    And not only did she do it once,she did it 11 times.To paraphrase Oscar Wilde,that looks like carelessness by her.

  34. John Constantine

    If their crony big banks can only bribe their crony political quisling Class to mass import tens of millions more house renters and bank account holders for their welfare bribes in a never ending flood, the Ponzi will never end.

  35. John Constantine

    Those that never believed the Australian government would commit economic and cultural genocide in order to bring about decolonisation and retreat from the racist Anglosphere missed the housing bribebubble.

    Look, we have cravings capitulated to the demands of the decolonisation clique that branch stack their United Nations, but your house is now worth twenty years average wages after tax, instead of four years average wages after tax.

    So you can’t afford kids or a non working partner.

    The big genocide, big decolonisation banks that have tied themselves to the mass migration Ponzi will go down when the Ponzi goes down.

    The bank executives will be saved by State bailout, so only shareholders will pay for management devotion to Stalin.

    Comrades.

  36. Alister Cameron

    I looked at the mess of paperwork all over her desk and floor. The little old lady wouldn’t know what was going on apart from her greed

  37. sisypus

    Eleven investment properties, seventy one years of age,three million in debt. Has anybody tested this womans mental competence? After all nobody gets out alive! Perhapse she has insider information on advancements in medicine, and we will all have an earthly presence for eternity.

  38. Bruce of Newcastle

    Australian real estate tends not to fall by much for some very good reasons:

    1. People who take out mortgages are financially responsible for the whole principal and interest irrespective of the house value (unlike the US where they can hand the keys to the bank if underwater.)
    2. Bankruptcy is horrendous.
    3. The bank can repossess the house without problems, thereby limiting losses.
    4. Mortgages aren’t securitized in Australia (afaik).
    5. We have no equivalent of Fannie and Freddie that banks can offload shonk mortgages to.

    Because of (2.), rather than bail out like Americans, home owners here tend to work their butts off to stay afloat until they can sell their house. So you tend not to get a flood of repossessed houses onto the market at the same time – unlike the US during the GFC.

    Likewise because of (1.) and (2.) people are very reluctant to sell out at a loss. This means house prices tend to stay up, and the fall only a few percent. Instead the time on market blows out from a month to a year or more. You then get extended plateaus in prices for a decade until the next boom because the houses stay on market for a year or two before the market clears.

    These fundamental policy setting differences mean you won’t get a 50% fall in Oz prices short of Australia collapsing Venezuela-like. Which is a real possibility. But if that happens we will be so screwed that the real estate market will be irrelevant.

  39. LBLoveday

    Quote: “…. the banks have prayed upon an innocent person”
    Like lending on a wing and a prayer?

  40. Tel

    Really getting sick of arseholes blaming banks.
    What are banks doing wrong, that their customers aren’t accomplice to?

    No one forces you to borrow from a bank and no one forces you to buy a house.

    Oh the banks deserve blame, but not for some old lady failing to get her timing right when riding the Perth mining boom and surrounding real estate surge.

    Most important problem is government guaranteeing bank deposits. Not so bad if they only guarantee a small amount, but ridiculous to consider this equivalent to “insurance” which is what they pretend. Government cannot insure anything, because government has no money. The only thing government can ever do with money is transfer from some people to others, thus we have all taxpayers being roped into sharing the risk of whatever a nominally private bank chooses to do with it’s loans portfolio.

    Another problem is that banking is both highly regulated and built around a central cartel. This is not an accident, governments love it because the banks operate as their agents… helping out with income reporting and tax collections. The big banks love it because they know it’s practically impossible for regular people to dodge around the banking system and loan money to each other in any sort of organized fashion. Thus, for example, I get small fractions of a percent interest on my so called “savings” account, while young people are paying close to 5% interest on mortgages. I would be happy enough to split the different and lend money at maybe 3% to anyone who has more than half their mortgage paid back (pretty much zero risk) but there’s no way to do that without running into a regulator somewhere.

    Well, you can do it on a small scale basis, but not as a corporation that takes in amounts from many savers which is how is needs to work. Anyway, lack of alternatives means that people end up with a substantial gap between savings and loans, where the banks can make bigger slice than what they would get in a properly competitive market IMHO.

  41. Speedbox

    Yeah but the whole issue will be academic when the next GFC happens. House prices, in addition to shares and most other assets, will plunge in value.

    I am one of those who is convinced a dramatic GFC is looming on the horizon. The extent of global debt (in all its forms) and consequent insanely inflated asset prices are simply too large to be sustainable. After almost 10 years of “emergency” low interest rates, there will be no reserve for Government/central banks to fight back.

    This lady who is now blaming her bankers will get to sell her homes in the current market and walk away with (probably) little or no residual debt. By comparison to the tens of thousands of other Australians (and millions globally) when the bubble bursts, she is one of the “lucky” ones.

  42. struth

    These fundamental policy setting differences mean you won’t get a 50% fall in Oz prices short of Australia collapsing Venezuela-like. Which is a real possibility. But if that happens we will be so screwed that the real estate market will be irrelevant.

    This is exactly right, hence I said, I still don’t want to be stuck with too much Australian real estate.

    I see the scenario of me getting my house paid off shortly and just living in it until death.
    Australia has all the right ingredients for a massive collapse and it’s base structures are about to buckle under.
    It will be a complete collapse when it happens and not a gradual slide.
    The immigration situation is a massive cost to this country as well, there is no benefit only cost, while it is a socialist welfare shithole with no employment in the private sector producing actual wealth (feeding each other Kebabs paid for by taxpayers in other words a service industry for tax hoovers) doesn’t create wealth , it steals it.
    The fact the traitorous ruling class see only mussies as an option, because they will bring upon the revolution quicker, divide and conquer.
    The sabotaging of our power decreed by the U.N. and regs for greens and bad I.R. that means billions of dollars wasted on infrastructure that never gets built.
    Our education system sexually abusing our kids and caring only about turning them into western hating Marxists, also much of this decreed by the U.N.
    Our ridiculous voting system, our ridiculous tax collection methods through federalism , and big end of town corruption made legal (we do corruption so well in Australia)
    There’s plenty more , the list could go , and I’m sure you could add to it.

    So all of these things are soon going to come together in the super storm of socialism and Marxism.

    We are going down fast and hard, when we go.
    That’s my prediction.
    Thank god I don’t own an $800,ooo home in the burbs of our cities with $400 ooo left to pay.
    In this situation Bruce, what do you think banks and government will do?

  43. RobK

    In addition to BoN’s comment of 11.33am; as i understand it Australian mortgages tend to be more of the variable rate whereas the US market is more fixed rate and interest only by comparison.

  44. Spring is coming

    I went to University in Melb the mid 80s. My lecturers advised us the housing market was a bubble and not sustainable. Yes you are right back in those days you need to save 30% deposit. Well I saved and ignored the market for as long as possible awaiting the correction. Yes there were minor ones. However the net growth in house prices was outstripping the deposit savings. Over the journey we have required less and less deposit $. A few years back we jumped in. Now we have a mortgage we cannot Jump over but also a v large capital growth. Still waiting for that 50% price drop! Even if it comes we are still in front. Melb house prices make no sense.
    Damned if you do, damned if you don’t .

  45. struth

    . Still waiting for that 50% price drop! Even if it comes we are still in front.

    How does that work?
    A fifty percent drop in the value of your property (remember, it could even be more).
    Your mortgage doesn’t change.

  46. If I get together with a mate, pool our money to buy a house, we’re both responsible. If it all goes well, we both benefit. If it goes arse over tit, we both lose.

    No different with banks as far as I’m concerned. If it goes arse over tit, both should suffer. Both made joint decisions.
    Especially so with credit cards I reckon. It’s OK for banks to push credit on people, it’s OK for people to accept them. Their decision, they live by it.
    But when it all goes sour, the people go (up to) bankruptcy, the bank often still comes out ahead.
    Joint decision, joint responsibility.

  47. Squirrel

    Continued availability of the federal government “guarantee” (albeit limited) of bank account deposits should be made conditional upon the banks winding back, and phasing out over a nunber of years, their dependence on foreign borrowings.

    That would take further heat out of a ridiculously over-priced property sector and reduce a dangerous risk to the federal government balance sheet. To the extent that it forced the banks to offer higher deposit interest rates, there would be a spin-off benefit to the federal government in higher income tax receipts and reduced eligibility for means-tested pensions and benefits.

  48. Speedbox

    Continued availability of the federal government “guarantee” (albeit limited) of bank account deposits should be made conditional upon the banks winding back, and phasing out over a nunber of years, their dependence on foreign borrowings.

    The Government guarantee on deposits is not to help the banks per se and does not need to be linked to their borrowing source. The guarantee scheme is to placate you and I that our deposit is safe (laugh, I near shit myself). Anyway, to restrict our banks to on-shore borrowing would slam the brakes on every sector including business. The resultant financial collapse would see us trading shiny beads for a loaf of bread.

  49. Norman Church

    Housing affordability is a complex problem that has never been addressed seriously (and that includes you, Bill Shorten, with your lazy tax grab around negative gearing).

    However, anybody who wishes to see a 50% collapse in property prices is wishing for an economic catastrophe that would destroy the economy and the lives of millions of Australians.

    People need to be careful what they wish for. Millennials thinking that a huge property crash is the solution to their property ambitions will find it hard to take advantage of lower property prices without a job.

  50. W Hogg

    One assumes anyone who has 11 properties
    – didn’t buy them all last week
    – has made a reasonable amount of money

    This should be great news – 11 families have been provided with rental housing, and the Senior Labor Figure has one more “millionaire” retiree to gouge his intended transfers to corrupt yoonyuns. The bank might even get repaid. If they don’t, it’s self-punishing; a bank that makes a dud loan loses their money.

    I really don’t get it. If it was a free country, the bank would make lots of good loans and a few bad ones. If the loans were poorly judged, that’s why we pay teams of bureaucrats at APRA with almost infinite power to take over the bank if necessary. But this seems to be presented as a consumer protection issue – the old bag shouldn’t have been ALLOWED to become a millionaire through “asset-based lending.” WTF should banks not be allowed to do asset-backed lending if they feel that the risk is sufficiently well covered?

  51. Ƶĩppʯ (ȊꞪꞨV)

    If there’s one thing I have learnt in all my years is never ever trust a banker. HAving seen first hand what bankers have done to people I know in business I have no sympathy for banks.

  52. waving not drowning

    Dear retired general,

    Your recommendations for the good life (in the penultimate paragraph) are well received.

    I want you to know that they have been incorporated in a letter to my eldest grandchild (about to turn 7) — in a sense, written to the man he will become.

    We all have influence beyond our knowing.

  53. Paridell

    Struth, if the price of Spring is coming‘s house dropped by 50%, he would still be ahead if its value had increased by more than that amount since he bought it. This is a very familiar scenario where I live. Prices would have to fall by around 90% to get back to what we paid for our house (in 1984).

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