Mortgage Cliff?

[waterbottle]

If your in mortgage stress you have options particularly when you’ve been with a bank for an extended period.
if you can demonstrate sever hardship you can ask to cap your interest rate at what you can afford and add the extra to the back end
As one example
the bank doesn’t want to foreclose people for a couple of % over a few years.
if you can’t negotiate have a professional act on your behalf.
My wife did this in 87 and banks were way tougher then!

Also the assessment buffer for certain refinances has been dropped to 1% compared to 3%, so might be worthwhile speaking to a broker

 

[Sean K]

Bouris smells trouble.

 

[Value Collector]

USUALLY refinancing depends on the lender being willing to lend against the collateral offered

the Christopher Skase saga was a brilliant example where lenders were sold a dream ( not a crystallize-able asset )

homes/blocks of units are not that hard to value , so lenders will get nervous early on anything approaching negative equity

the extra twist can be when job cuts flow through the economy

The lenders have a buffer provided by the borrowers deposit + the principle paid during the loan. I don’t think that property has dropped anywhere near enough to eat up the 20% deposit most loans have.

Also, even if the loan goes negative equity the bank is likely to “Extend and pretend” and just try to keep those principle and interest payments coming in, in the hope that the loan comes right eventually by either the loan being paid down over time or the home price rising.

 

[Value Collector]

Bouris smells trouble.

You’re a Military guy, think back to when you were a young Digger doing the Friday morning Battle PT session.

The RBA is a bit like the PTI pushing every one to keep putting in. Yes there is a chance that some of those in the weakest financial position will be under some severe financial stress, Just like Smoking Joe from the Q-store and the wheezers from HQ look like they are going do die half way through the workout. Some of them might even have to default on their loan a bit like some guys that drank to much the night before might throw up during the PT session.

But, once the PTI/RBA see the signs of people throwing up, they will ease off a bit, and the majority of the group will sweat, but won’t find the work out overly hard.

It’s just the same rule as always, keep fit and don’t be last, and eventually the PT session ends and you will be stronger because if it.

 

[Dona Ferentes]

Bouris smells trouble.

2 out of 3 ain't bad.

 

[frugal.rock]

He did admit to being filthy

 

[Sean K]

He did admit to being filthy

I'm glad you picked that one up.

 

[farmerge]

Bouris smells trouble.

Mr Yellow Brick Road is not presenting a very happy looking face in this pic. Is he losing customers with all the rate hikes.

 

[Sean K]

Mr Yellow Brick Road is not presenting a very happy looking face in this pic. Is he losing customers with all the rate hikes.

Not good for his business perhaps.

 

[MaxRowe]

Hi. While banks usually test borrowing capacity with a margin for leeway, the uncertainty of future rate increases can put some people in a pickle. It's hard to predict the exact impact on the economic recovery, but let's hope we have the capacity to navigate through this smoothly.

 

[Telamelo]

Hi. While banks usually test borrowing capacity with a margin for leeway, the uncertainty of future rate increases can put some people in a pickle. It's hard to predict the exact impact on the economic recovery, but let's hope we have the capacity to navigate through this smoothly.

Some homeowners face a 63% increase in their monthly mortgage repayments as they are hit with much higher rates.

https://www.news.com.au/finance/economy/interest-rates/looming-mortgage-cliff-as-some-borrowers-come-off-fixed-loans/news-story/615c6c054e4f42a51b5f58ed8ee6b0c1

 

[farmerge]

Hi. While banks usually test borrowing capacity with a margin for leeway, the uncertainty of future rate increases can put some people in a pickle. It's hard to predict the exact impact on the economic recovery, but let's hope we have the capacity to navigate through this smoothly.

There will be those that will survive and most unfortunately those that will go under. A very distressing thought.

 

[Sean K]

No one seems to be worried about this.

Is anyone shorting banks or descetionary retailers?

 

[farmerge]

No one seems to be worried about this.

Is anyone shorting banks or descetionary retailers?

View attachment 160336

Things that cause dramatic action like suicide This is a worrying scenario.

 

[divs4ever]

No one seems to be worried about this.

Is anyone shorting banks or descetionary retailers?

View attachment 160336

shorting ? not me

however i have reduced my holdings in the banks so far this year ( for various reasons ) and some retailers were reduced as well

currently my 'bank holdings are MQG , ( with a LOT of profit taken) ABA , KSL , MYS , SUN ( doing it's best to exit banking , itself ) and a small number of WBC


the more important question IS will i buy banks at a discount this time like i was in 2011 and 2020 ... maybe not this dip

 

[Sean K]

It seems that this mortgage cliff thing hasn't eventuated in Australia.



A funny thing happened on the way to Australia’s great post-pandemic slowdown. The wave of mortgage losses we have been waiting and bracing for hasn’t arrived.

There has been a ripple of losses to be sure. Financial stress is real, painful and slowly rising in pockets across the economy, particularly among younger people. And these numbers are only now starting to show up on bank balance sheets.

Even with the cash rate either at or near its peak, the lag effect of interest rate rises mean the losses will grind higher for the rest of the year.

Perspective is needed. The increases are coming from historic lows. And given we are this deep into the cash rate hiking cycle, any losses banks are seeing are well below the average since the global financial crisis.

The doomsday cult may not want to hear it: There’s no mortgage cliff.

Australia out of the economic trough just yet, but we are certainly learning how to live with it. No bank boss is prepared to declare the worst has passed – particularly with some of their customers really feeling the squeeze – but the mood is becoming more confident inside each of the big four.

Betting against banks​

Investors who were betting against Aussie banks in anticipation of red ink spoiling their balance sheets have long packed up and moved on to other targets. And it’s easy to see why. So far this year the average of big bank shares are up 10 per cent and the broader ASX 200 is up 1 per cent.

A quick run through of the banks’ mortgage books, and it shows the class of 2018 – people who took a mortgage out six years ago – are those feeling the pinch the most and have been late to repay their loans. In bank terms, these should be the hardened borrowers who have been used to paying off a monthly mortgage. Nor do they have anything to do with taking out an ultra-cheap mortgage during the pandemic.

Westpac, a bank that counts mortgage customers in the millions, had 190 properties in possession at the end of March, a drop of 20 in the past six months. Most of those were properties under construction where builders have gone bust.

National Australia Bank had around 140. This was up by six properties over the past two years. Yes – six.

The forward indicator of lending losses tells a similar story. For Commonwealth Bank, missed mortgage payments after 90 days, the most severe bucket, is gently pushing up and well below historical averages. Credit card losses, the most forward-looking indicator for financial stress, have barely moved.