Nerfonomics

[Flow-Rider]

yes, but the point I've bene making is that in an imperfect system, its not always the banks fault. Id almost argue that more often than not its the clients fault. This class action's lead plaintiffs lied on their application. If they're the lead, what sort of others make up the class?

I don't agree with people not taking responsibility of their own actions, but banks must have a fair idea when these types come in for a loan. It just says volumes that the case is even allowed in a court. A lot of these types will probably end up at private lenders, paying even more interest on the money they've borrowed.

 

[Squidfayce]

When I got a house loan 20 years ago banks barely checked anything, my employer wasn't giving out payslips and they asked for a letter from the employer, the employer asked if I wanted more than the amount they paid on the letter and said they had done it many times before. I was living with parents at the time, and they didn't even check. A friend of mine had bankrupted themselves about 7 years previously, and later applied for a loan using a deposit from his brother in law, straight after he got the loan he gave it back. He was shocking with money.

The bankruptcy would have fallen off the credit file after 7 years. Unless there was a need to, the bank may have opted to not check the national personal insolvency index (costs $). Again its one of those things that you have to make a judgment call based on the information in front of you.

 

[Flow-Rider]

The bankruptcy would have fallen off the credit file after 7 years. Unless there was a need to, the bank may have opted to not check the national personal insolvency index (costs $). Again its one of those things that you have to make a judgment call based on the information in front of you.

Yeah, but no savings record of the deposit, he had outstanding fines with govt departments that they made him pay out also, so they must have had an idea.

 

[Squidfayce]

I don't agree with people not taking responsibility of their own actions, but banks must have a fair idea when these types come in for a loan.

Sometimes they are and those get declined. If you're a liar, you get put on a national fraud register. This happens every day. even hudereds of times a day. But you cant catch 100% of the bullshit 100% of the time. Controls within this space work to mitigate or reduce these risks, but there is no way to eliminate it and be commercially viable. The technology and regime i mentioned before is a step in the direction to solve all of this. Will it? Who knows. It will be better at it though.

It just says volumes that the case is even allowed in a court

No it doesn't. Its a class action. MB is banking on making a point based on an aggregate of examples of a particular type of failure. What they're presenting to teh court is alleged evidence of a systemic failure by heavily relying on benchmarks and not verifying customers expenses, not that the lead plaintiffs were stooged. I just cant believe that they're the best they have. This could get laughed out exactly like ASIC got laughed out when trying to sue Westpac for 200k examples of exactly the same issue in 2018. THAT time Westpac had actual agreed they were in breach and wanted to settle with ASIC for $35M, and the judge said, "hang on, i DONT agree" and sent ASIC packing penniless.

Judge roasts ASIC bank crackdown

Corporate regulator's push for bank's to verify expenses halted by judgment which finds expenses such as first class travel, fine food and expensive wine are not relevant.

www.afr.com

take a read. I find it incredibly brave of MB to take this on given that judgment. it was a landmark case i believe

A lot of these types will probably end up at private lenders, paying even more interest on the money they've borrowed.

Or having to sell. Or not be eligible for credit at all. People aren't just entitled to credit. You can bet that many of these will hang on until their debts are so high from enforcement costs they end up on ACA.

 

[Squidfayce]

Yeah, but no savings record of the deposit, he had outstanding fines with govt departments that they made him pay out also, so they must have had an idea.

govt fines often dont make it to credit files, and theyr egenerally slow to actually litigate if at all. No savings history used to not be a problem. Evidence of paying rent is enough then as it is today. Saving history is great, but it excludes those who otherwise can afford a mortgage but because theyre renting cant get funds together fast enough. Its actually good compromise that doesnt penalise lower income earners from owning a home.

 

[Flow-Rider]

govt fines often dont make it to credit files, and theyr egenerally slow to actually litigate if at all. No savings history used to not be a problem. Evidence of paying rent is enough then as it is today. Saving history is great, but it excludes those who otherwise can afford a mortgage but because theyre renting cant get funds together fast enough. Its actually good compromise that doesnt penalise lower income earners from owning a home.

The bank actually asked him to pay them out, it must have come up on a register somewhere. Even he was surprised that they found them. If you give someone a home loan on the pretence that they have 20% of the deposit but then they don't, what does that say? It was the bank that told him to do that too.

 

[Squidfayce]

The bank actually asked him to pay them out, it must have come up on a register somewhere. Even he was surprised that they found them. If you give someone a home loan on the pretence that they have 20% of the deposit but then they don't, what does that say? It was the bank that told him to do that too.

You know you can get a home loan with as little as 5% deposit right? Banks used to do 110% loans and let you finance new furniture inthe deal. This whole 20% isn't really a thing. Never was. That's just the cut off where you don't have to pay LMI, which is usually capitalised onto the loan anyway. Net changes to somones repayments per month are generally negligable

 

[Flow-Rider]

You know you can get a home loan with as little as 5% deposit right? Banks used to do 110% loans and let you finance new furniture inthe deal. This whole 20% isn't really a thing. Never was. That's just the cut off where you don't have to pay LMI, which is usually capitalised onto the loan anyway. Net changes to somones repayments per month are generally negligable

This was years ago, I'd assume he'd be a high risk lender especially after finding him with outstanding money owed from years ago, he already had been knocked back from other major banks. If it wasn't a thing to get him over the line, why didn't they just give him the loan in the first place?

 

[Squidfayce]

This was years ago, I'd assume he'd be a high risk lender especially after finding him with outstanding money owed from years ago, he already had been knocked back from other major banks. If it wasn't a thing to get him over the line, why didn't they just give him the loan in the first place?

Commitment. Its a psychological tool. We'll give you this money if you pay x off. Makes customers feel more loyal to the lender for the opportunity and less likley to default.

 

[Dales Cannon]

Back in the Mesozoic era when we applied for our first loan the bank rep tried to tell us we were overstating our living costs and wrote a number about 60% of what the wife and I had calculated. I scrubbed that out and wrote in our number. Admittedly we owned the land because it was silly cheap as the last block in an estate with a massive gully running through it. We had no trouble qualifying for what was a modest amount in the circumstances but it was a silly tactic. That whole property after 15 years of improvements and upgrades nearly paid for our current block...

And the gully? $2k worth of D8 fixed that. Our house overlooked a lake...

 

[Flow-Rider]

@Squidfayce I told you Bro, my crystal ball is fairly tuned by wisdom from old age . Some people had a 2.5% buffer in 2019, I'd say it's a small percentage of borrowers but irresponsible lending in my opinion at this stage.

 

[Squidfayce]

@Squidfayce I told you Bro, my crystal ball is fairly tuned by wisdom from old age . Some people had a 2.5% buffer in 2019, I'd say it's a small percentage of borrowers but irresponsible lending in my opinion at this stage.

cant watch it at work, ill take a watch later. Are you saying you "predicted" people would be in trouble? Hardly much of a prediction. It was going to happen. It happens when things are going well too. Im just saying its not going to be an apocalypse.

No one had the crystal ball to anticipate runaway inflation in 2019 but what buffer would be acceptable to you? 10%, 20%? no one would get into homes then except people who probably don't need yet another one, furthering inequality.

In any case its a balancing act about making sure that people can pay and lending is accessible. You have to appreciate that a financial assessment is a "point in time". Can you pay based n what you've presented today. Affordability is never going to be able to be assessed looking forward for the life of the loan. Not even 1 year ahead. That's what the stressed rate hopes to do somewhat. Most people also progress in their earning capacity when things are normal. But a lot can happen in 30 years. Heck looks what happened in 2 years.

Peoples circumstances change and banks cant be held liable for that happening. People get divorced, lose jobs, become injured, have family tragedies, become disabled, battle mental health just to name a few. Would you have banks take blame then too because the customers circumstances no longer match those that were on the application? Where the line for you? Its good an well to bash a bank, but what's your solution to this? What in your eyes is "responsible"?

There are hardship options for customers experiencing short to medium term changes to circumstances. These include repayment deferrals, reductions in interest and/or payments etc, but these are not permanent and are a tool to help people get through short/medium term unexpected challenges. But there are times where you just cant recover. Its sad, but that's generally not the banks fault. It's also often not the customers fault. People lose their homes. Its just a fact of life.

After the royal commission we had lenders get so tight. Regulators set limits and banks abided. The market cooled, but had the unintended effect of only letting the haves access finance. Regulators then told banks to pull back, gave them the parameters, then complained that that also had unintended outcomes. The regulators think they have a handle on this stuff, but they don't always. The pre covid growth (2016/18) was as a result of APRAs macro prudential unwinding of investment caps which then made the market explode with investment which made housing even less affordable. Not the banks fault. Not the RBAs fault. Not investors fault. APRAS fault. Now they're at it again, tinkering with this shit.

Realistically, I'm actually a big believer that regulators should have little say in what is "responsible" . its too subjective and always disadvantages various cohorts of people. The banks should lend whatever the customer thinks they can pay based on their own budget with a handful of cursory checks by the bank that the bank sets its appetite around. i.e. less than they do now. If the customer over extends, tough titties. Leave the responsibility and consequences to the customers. Might make them a little more cautious and likely to become more financially literate. We always complain that people need protections, then we complain about being in a nanny state when laws and controls are implemented over society to protect them, and then complain when they are working as intended or have unintended consequences like everything should have been able to be predicted.

 

[Flow-Rider]

cant watch it at work, ill take a watch later. Are you saying you "predicted" people would be in trouble? Hardly much of a prediction. It was going to happen. It happens when things are going well too. Im just saying its not going to be an apocalypse.

No one had the crystal ball to anticipate runaway inflation in 2019 but what buffer would be acceptable to you? 10%, 20%? no one would get into homes then except people who probably don't need yet another one, furthering inequality.

In any case its a balancing act about making sure that people can pay and lending is accessible. You have to appreciate that a financial assessment is a "point in time". Can you pay based n what you've presented today. Affordability is never going to be able to be assessed looking forward for the life of the loan. Not even 1 year ahead. That's what the stressed rate hopes to do somewhat. Most people also progress in their earning capacity when things are normal. But a lot can happen in 30 years. Heck looks what happened in 2 years.

Peoples circumstances change and banks cant be held liable for that happening. People get divorced, lose jobs, become injured, have family tragedies, become disabled, battle mental health just to name a few. Would you have banks take blame then too because the customers circumstances no longer match those that were on the application? Where the line for you? Its good an well to bash a bank, but what's your solution to this? What in your eyes is "responsible"?

There are hardship options for customers experiencing short to medium term changes to circumstances. These include repayment deferrals, reductions in interest and/or payments etc, but these are not permanent and are a tool to help people get through short/medium term unexpected challenges. But there are times where you just cant recover. Its sad, but that's generally not the banks fault. It's also often not the customers fault. People lose their homes. Its just a fact of life.

After the royal commission we had lenders get so tight. Regulators set limits and banks abided. The market cooled, but had the unintended effect of only letting the haves access finance. Regulators then told banks to pull back, gave them the parameters, then complained that that also had unintended outcomes. The regulators think they have a handle on this stuff, but they don't always. The pre covid growth (2016/18) was as a result of APRAs macro prudential unwinding of investment caps which then made the market explode with investment which made housing even less affordable. Not the banks fault. Not the RBAs fault. Not investors fault. APRAS fault. Now they're at it again, tinkering with this shit.

Realistically, I'm actually a big believer that regulators should have little say in what is "responsible" . its too subjective and always disadvantages various cohorts of people. The banks should lend whatever the customer thinks they can pay based on their own budget with a handful of cursory checks by the bank that the bank sets its appetite around. i.e. less than they do now. If the customer over extends, tough titties. Leave the responsibility and consequences to the customers. Might make them a little more cautious and likely to become more financially literate. We always complain that people need protections, then we complain about being in a nanny state when laws and controls are implemented over society to protect them, and then complain when they are working as intended or have unintended consequences like everything was should have been able to be predicted.

People certainly need to take some accountability for themselves but even the video I posted says a lot of Australians are financially illiterate, and it's easy for lenders to take advantage of these people. A 7% to 10% buffer would have been a good start, knowing rates were almost 0 at the time. Reducing people's loan capacities will reduce the house prices and make them more affordable, prices won't drop off the earth, but they will fall as we're seeing now. Even developers and builders are complaining about getting finance in this current economy with all the changes.

The scary thing now is higher inflation with raising interest rates and very low numbers of unemployment. A lot of living expenses are still fairly high like rents, food, energy and fuel prices that haven't fallen that much. The European war is somewhat unpredictable, will it affect more global supply chains in the future, or will the supply from other nations catch up? I think mid year, next year will give a good indication where it's at, the lag of the higher rates should have caught up by then, inflation maybe curving downwards or more linear.

 

[Squidfayce]

@Flow-Rider years ago, one of the lender i worked for had a client apply for a small affordable home in Frankston. Largely regarded as a shithole for a long time (and still so by some) in Melbourne. The home she was trying to buy was 210k. It was an old 50's ex housing commission fibro and brick 2 bedder on 800sqm block. Single, person, single low income from part time work and disability pension.

She was able to afford payments based on her expenses that she provided to us. The problem with the assessment was that her expenses were significantly under the benchmark. She was basically saying she spent like 400 bucks a month on food, and she appeared to seriously understate her utilities etc. 30 bucks on gas for the quarter? yeah right.

thing was she was able to prove via statements and other records over a period of 2 years that she was living like a hermit and saving every penny she could. She was subsisting on cup a soups, noodles, the occasional reduced beef mince expiring that day etc. Not really a full or desirable existence, but this was her "normal" because of her situation. She met the stressed rate easily based on her income/expenses. But because of the benchmarking that had to be applied, could no longer "afford" the home, even though the money the benchmark says she spends just didn't match her actual habits. This on the face of "responsible lending", is a flat decline. You cant afford this.

Luckily, the lender i worked at was non conforming and actually lent her the money because her ability to substantiate the stupidly meagre existance over a number of years. Yes we gave her a stupidly high interest rate (rated for risk) and off she went.

Covid happens, lady loses her shitty hospo job. Cant pay her mortgage. Asks us for help. We send her to a financial counselor while defering payments for three months. Prices of property have gone up significantly in the time, the woman is sitting on about 600k of Equity. She gets the advice to sell the house, but where will she go what will she do with money but no job. She likes where she is. So she gets sent to a paid financial planner to work out what her options are if she sells the house.

She gets advice to subdivide. She sells a 500sqm parcel at the back of her place, keeps the 2 bedder on 300sm, pays out her 180k left and has a spare +200k in her pocket as a buffer. Mortgage free 45 year old home owner in a beachside suburb, unemployed, with 200k in the bank going into a pandemic.

Was it irresponsible lending?

This is an obvious edge case and worked out really well for this one individual, but the purpose of this example is that "responsible lending" is pretty subjective, much like justice peram points out in the above article. Who is the bank to say what the customer can or cant afford or what the customers expenses say about the future of the customers capacity to pay.

If we'd not lent this woman the money, chances are she'd never be a homeowner, let alone one thats mortgage free in her prime with a nice little nest egg of cash. Sometimes shit works out. Sometimes it doesnt.

 

[Squidfayce]

People certainly need to take some accountability for themselves but even the video I posted says a lot of Australians are financially illiterate,

This is a problem that should be addressed in our education systems. Too many people stuck in generational poverty never learn about finances because ethe people they learn from are themselves often financially illiterate.

and it's easy for lenders to take advantage of these people. A 7% to 10% buffer would have been a good start, knowing rates were almost 0 at the time.

you keep saying that lenders are taking advantage. This just isn't true for the majority of cases. 7-10% buffer? let me show you why that's crazy talk.

500k loan when rates were 1.9% makes loan repayments $1824 per month
stressed rate of +2.5% (4.4%) makes loan repayments $2504
If a +7% was applied (8.9%) makes repayments $3988
if a +10% was applied (11.9%) makes repayments $5105

So your suggestion is someone who can pay $1824 per month in mortgage payments should have $2164 or $3281 disposable cash each month after a $1824 in mortgage and $x,xxx living expenses? Are you crazy? Basically at a 10% buffer with ~2k (this is modest) worth of monthly expenses on food and utilities and selfcare/entertainment, somone would have to earn ~140k per year to be considered for a 500k homeloan under that figure. 500k doesnt get you much these days either, so probably more than 140k unless youre buying a shed in Walget.

The current rate at CBA is ~5.7% for a variable. not even close to the 8.9% or 11.9% that they would have been stressed at under your proposal. Looking at the way things ar emoving, i doubt we'll get to those rates (hopefuly not) because theyre talking about a recession. Were likley to go a bit higher then have to start cutting again when shit hits the fan.

But based on your proposal we'd be letting the wealthy get wealthier and anyone with a more normal or modest salary, well were basically telling them even though they can afford it, they can get fucked, property ownership is not for them.

Reducing people's loan capacities will reduce the house prices and make them more affordable, prices won't drop off the earth, but they will fall as we're seeing now.

You'd think so, on the face of it. Tell me, are houses affordable today? All this reduction in borrowing capacity does is impact people who can least afford to be impacted. Wealthy people are still off buying houses. Affordability wont be addressed with moving markets with rates anymore.

Even developers and builders are complaining about getting finance in this current economy with all the changes.

Fucking developers and builders are complaining when its raining money. They are the biggest bunch of sooks in the known universe. Most of them have been operating ponzi schemes for decades, rolling in volume and burning customer deposits on lavish lifestyles while delivering substandard stock and are now now expected to have to run a business in a way that's expected of them and its a shock. Take a closer look at the ones that are folding and where the money's gone.

The scary thing now is higher inflation with raising interest rates and very low numbers of unemployment. A lot of living expenses are still fairly high like rents, food, energy and fuel prices that haven't fallen that much. The European war is somewhat unpredictable, will it affect more global supply chains in the future, or will the supply from other nations catch up? I think mid year, next year will give a good indication where it's at, the lag of the higher rates should have caught up by then, inflation maybe curving downwards or more linear.

all these things coupled with reduced borrowing capacity just go to show you that even with houses somewhat cooling, they are less affordable than ever and only wealthy people who can absorb the shocks can continue to participate. Lets add the stressed rate of 10% too.

is it responsible to exclude all but the wealthiest from buying property? Is that responsible lending? You could argue financially sure, but socially, is it?

 

[Flow-Rider]

This is a problem that should be addressed in our education systems. Too many people stuck in generational poverty never learn about finances because ethe people they learn from are themselves often financially illiterate.

you keep saying that lenders are taking advantage. This just isn't true for the majority of cases. 7-10% buffer? let me show you why that's crazy talk.

500k loan when rates were 1.9% makes loan repayments $1824 per month
stressed rate of +2.5% (4.4%) makes loan repayments $2504
If a +7% was applied (8.9%) makes repayments $3988
if a +10% was applied (11.9%) makes repayments $5105

So your suggestion is someone who can pay $1824 per month in mortgage payments should have $2164 or $3281 disposable cash each month after a $1824 in mortgage and $x,xxx living expenses? Are you crazy? Basically at a 10% buffer with ~2k (this is modest) worth of monthly expenses on food and utilities and selfcare/entertainment, somone would have to earn ~140k per year to be considered for a 500k homeloan under that figure. 500k doesnt get you much these days either, so probably more than 140k unless youre buying a shed in Walget.

The current rate at CBA is ~5.7% for a variable. not even close to the 8.9% or 11.9% that they would have been stressed at under your proposal. Looking at the way things ar emoving, i doubt we'll get to those rates (hopefuly not) because theyre talking about a recession. Were likley to go a bit higher then have to start cutting again when shit hits the fan.

But based on your proposal we'd be letting the wealthy get wealthier and anyone with a more normal or modest salary, well were basically telling them even though they can afford it, they can get fucked, property ownership is not for them.

You'd think so, on the face of it. Tell me, are houses affordable today? All this reduction in borrowing capacity does is impact people who can least afford to be impacted. Wealthy people are still off buying houses. Affordability wont be addressed with moving markets with rates anymore.


Fucking developers and builders are complaining when its raining money. They are the biggest bunch of sooks in the known universe. Most of them have been operating ponzi schemes for decades, rolling in volume and burning customer deposits on lavish lifestyles while delivering substandard stock and are now now expected to have to run a business in a way that's expected of them and its a shock. Take a closer look at the ones that are folding and where the money's gone.

all these things coupled with reduced borrowing capacity just go to show you that even with houses somewhat cooling, they are less affordable than ever and only wealthy people who can absorb the shocks can continue to participate. Lets add the stressed rate of 10% too.

is it responsible to exclude all but the wealthiest from buying property? Is that responsible lending? You could argue financially sure, but socially, is it?

People that don't fit the buffer should just borrow less or within their capacity, they can buy a unit or townhouse rather than a freestanding dwelling with a pool and or renovation aspirations. Maybe when the asset has gone up in value, they can then safely refinance for something that they can comfortably afford. People were buying new cars and holidays from offset accounts, I bet many of them are shitting bricks now. The wealthier won't get the money they're chasing if banks don't give buyers the excess capital in the first place, Whose going to pay for a million dollar house if the banks will only loan them 800k, most peoples are just after capital gains.



Gross household income spent on mortgages, imagine if the rates go up a lot more than expected with added living costs. It's going to be a fine line for many to cross, sadly.

 

[Squidfayce]

People that don't fit the buffer should just borrow less or within their capacity, they can buy a unit or townhouse rather than a freestanding dwelling with a pool and or renovation aspirations. Maybe when the asset has gone up in value, they can then safely refinance for something that they can comfortably afford. People were buying new cars and holidays from offset accounts, I bet many of them are shitting bricks now. The wealthier won't get the money they're chasing if banks don't give buyers the excess capital in the first place, Whose going to pay for a million dollar house if the banks will only loan them 800k, most peoples are just after capital gains.



Gross household income spent on mortgages, imagine if the rates go up a lot more than expected with added living costs. It's going to be a fine line for many to cross, sadly.

View attachment 395462View attachment 395463

500k doesn't get you much these days. I didn't think I'd be the one saying this, but you're out of touch lol

 

[Chriso_29er]

500k doesn't get you much these days. I didn't think I'd be the one saying this, but you're out of touch lol

If resposible buffers were in place over the long term, good chance you could get in the market at a much lower entry point right now.
I've seen it graphed somewhere but there seems to have been a close correlation with changes to loan buffers and the crazy capital gains in the last 10 years or so. Along with other stupid policies to keep pumping property prices up.

 

[Flow-Rider]

500k doesn't get you much these days. I didn't think I'd be the one saying this, but you're out of touch lol

550k gets you a decent 3 bedder in Brisbane 25km from the CBD, near rail and buses, and heaps around the 500~550 mark outer Melbourne, people just expect to run before they can walk.

 

[Squidfayce]

If resposible buffers were in place over the long term, good chance you could get in the market at a much lower entry point right now.
I've seen it graphed somewhere but there seems to have been a close correlation with changes to loan buffers and the crazy capital gains in the last 10 years or so. Along with other stupid policies to keep pumping property prices up.

I'd like to see that graph because I've been working in the industry for 20 years and the stressed rate has always been between 2-3% in that time. Capital gains are a function of supply and demand. Make lending easy to access and cheap, supply is stressed while demand is high, prices go up. Make it expensive and hard to access, less pressure on supply, less demand, people take less for a sale.

There are various policies that run in tandem that influence too - ie during covid, giving 20k for new builds or Renos to keep the building industry afloat pushed demand up. Winding back gross investment ratio caps on banks pushed investor activity through the roof. Similarly putting tax withholding and cap gains restrictions on foreign investors slowed things down untill the Chinese started using Australian proxies for their purchases, at which point ot went up again. But price always comes down to supply/demand, not buffers in assesment rates.

Even at lower entry points, people are priced out due to inflationary pressures and stricter lending criteria and more expensive lending. There are litterally thousands of people who would have been able to get and afford a 400k loan 6 months ago, who can't get a 300k one now. What are they supposed to do? Where is the lower entry point for them in a capital city or regional center? Lower entry point would be fine if everything else was equal with 6-12 months or longer ago, but it's not. Borrowing capacity and affordability are diverging faster than they ever have before.