Non-prime loans as high as 20%?

[ROE]

http://smallbusiness.theage.com.au/starting/finance/non-prime-loans-higher:-analyst-911068001.html

Hello what have we here... first Australia have 5% of subprime, then 10%, now 15-20% ..who the hell do you believe ?

 

[Bill M]

Reading into that story it doesn't surprise me that we would have some local exposure. There were always the "low doc" and "no doc" loans but they still needed a mortgage against the property. It is a bit different from the situation in the USA with masses of defaults. I remember when I wanted a loan 5 years ago, I went to a mortgage broker. I never met the person, I did everything online but they still checked me out severely and I still needed the parent lender to ok the loan in the end. I doubt anyone could get a loan for 300 or 400K these days without any paperwork and checks made but then nothing would surprise me.

 

[numbercruncher]

Id also like to know the amount of aussie equivalent ARM, ie/ mortgages taken fixed a few years ago about to reset to significantly higher Intterest r ates.

interesting quote from the article ...

North admits the Australian situation is different to the US, where 35% or loans are 'non-prime'.

''But in some ways (it's) worse because mortgage stress is more widespread across middle Australia and not just the sub-prime group,'' North says.

North says the lenders and regulators may underestimate the impact of interest rate rises on mortgage stress because of misleading data in the loan applications.

He says with rising interest rates and spreading mortgage stress non-prime loans are at risk.

''We will start seeing whole suburbs where people just can't repay,'' he says.

 

[numbercruncher]

I just read the days of no-doc and low-doc, "may" be drawing to an end, if proposed regulation goes through .....

New legislation could spell the end for cowboy brokers, writes Lesley Parker.

Public submissions on proposed legislation to regulate mortgage brokers closed on Friday with a row building over the likely impact on low-doc and no-doc loans.

Brokers say the draft legislation, if passed as it stands, could potentially stamp out such loans, which they describe as a legitimate form of finance for borrowers such as the self-employed.

http://www.smh.com.au/news/money/whats-up-with-nodocs/2008/02/18/1203190744519.html

 

[dhukka]

http://smallbusiness.theage.com.au/starting/finance/non-prime-loans-higher:-analyst-911068001.html

Hello what have we here... first Australia have 5% of subprime, then 10%, now 15-20% ..who the hell do you believe ?

Good find ROE, expect to hear a lot more about this in the future IMO. Interesting comments about the RBA underestimating the impact of interest rate hikes. We've definitely got another one on the way possibly two. Should make things interesting for 'stressed' homeowners.

 

[gfresh]

I found out a few people I know that are on 6.5% or so fixed loans. They seem to have chosen the 3 year fixed rate option, about 2 years ago.. which means in 1 years time, they may be in for a large jump, right as rates may be at their peak.

In fact I imagine that may be the case for quite a few people. Jumping from a 6.5% fixed rate to a 9.5% interest rate, or just refinancing another fixed at close to 10%.. Just a quick calc, going from a 6.5 to 9.5% with 300k principle remaining:

$467/wk to $604/wk = $137wk extra.

A lot of the 'fixed for 5 years' from the period of 2003 (or 2004) must be resetting this year, and next.. Even 10 year fixed will be a huge jump as rates were very low 98/99, however I'd assume a large amount of principle, and large appreciation would have offset this - so may not be a concern.

The key question I guess is how many are on 3 or 5 year fixed rates??

 

[xoa]

Plenty of dubious loans have been made in Australia. They're subprime in everything except name. It could be argued that lending standards here are worse than in the United States.

I walked past my CBA bank on Friday and I saw a large placard advertising a 0% deposit home loan on a honeymoon rate, targeting "first home buyers and investors". If that's not subprime then I don't know what is.