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Does the same apply to mortagees?
Use of a margin lending facility through your broker Gumby (otherwise known as trading on margin). On some stocks (e.g. big four banks) you can borrow up to 75% of the price of the stock towards the purchase. The size of this facility is limited by what you qualify for given your assets and income of course.
Does the same apply to mortagees?
Yes it can, assuming you want to avoid the use of mortgage insurance, you need to come up with at least 20% down to secure the purchase if you qualify for the loan.
Not so with property which is always an estimate.
With an equity margin loan, if you don't meet a margin call the stock is sold the same day. You must then fund any shortfall.What happens when someone provides the 20% CASH to buy stock and they only own a 20% stake in the real estate (mortgage) they are using as equity to borrow to buy the stock and they end up defaulting on the loan?
Don't know what insurance options are available to lenders to insure against bad valuations.What happens if the real estate property is overvalued? Can the bank or margin loan lender take out insurance in that situation? Where the value of the property/collateral is overvalued at the time of the loan?
Not sure, someone else may be able to answer that question.Specifically, what are the statutory requirements of the Australian lender to "inquire" into the borrowers capacity to repay the loan?
With an equity margin loan, if you don't meet a margin call the stock is sold the same day. You must then fund any shortfall.
Don't know what insurance options are available to lenders to insure against bad valuations.
Not sure, someone else may be able to answer that question.
Cheers mate. I know it took time but thanks for getting back to us.
My next question is: If the borrower can't meet the shortfall and the return on the loan doesn't occur from the borrower? Should the taxpayer meet the shortfall? ala the USA fiscal bailout of the overleveraged.
Do Australian lenders have policies in place to make sure there isn't a three-peat eg US, Europe, Australia etc. of this diabolical rip-off process?
Cheers mate. I know it took time but thanks for getting back to us.
My next question is: If the borrower can't meet the shortfall and the return on the loan doesn't occur from the borrower? Should the taxpayer meet the shortfall? ala the USA fiscal bailout of the overleveraged.
Do Australian lenders have policies in place to make sure there isn't a three-peat eg. US, Europe, Australia etc. of this diabolical rip-off process?
There a are a number of things coming together that give me a nasty feeling about the property market and our overall economic future
1) Steve Keens article really does demonstrate how hocked to the eye balls our general population is. Other analysis would show that excessive home home loans as well as credit card debt, store card debt(another variation of CC debt) are really squeezing many, many people.
2) The interest rate increases this year have to be having an effect consumers balance sheets and in particular cash flow. $400,000 loans with an extra 1.5% interest is eyewatering.
3) The sharp increases in gas, electricity and water costs is also pressuring people. Less net disposable income means a bigger than expected drop in retail sales. This already seems to be happening
4) Petrol is on the increase. Oil has gone up $10 a barrel in the last couple of months. That equals another 10c a litre at the bowser. All adds up.
It's worth remembering( and Steve Keen also pointed this out) that much of our previous economic growth was fueled by debt. We are now at the stage where this debt expansion seems incapable of being continued and in fact must contract.
In that context i just can't see how people can continue to pay even the current housing prices let alone any increases.
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Obviously some people, particularly those in and around the mining industry will be okay. I just can't see how the rest of the population will hold it together.
Anecdotally I can't remember a quieter Christmas around the shops.
I just can't see how
House prices inflated: IMF
Australia's house prices are overvalued by 5-10 per cent but any price correction is ''likely to be orderly'' and the result of income and rent rises rather than a collapse in prices, says the International Monetary Fund.
Analysis of Australian house prices by the IMF found cyclical factors such as low interest rates, the commodities boom and levels of disposable income contributed to inflated house prices, but their overvaluation appeared milder than in the past.
Australia's price-to-income ratios - the proportion of income spent on housing costs - was high, above 10-year averages by about 20 per cent at the end of June, an IMF working paper said.
Advertisement: Story continues below In Canada, similar ratios were at 15 per cent and in New Zealand 26 per cent.
The ratios were good indicators of overvaluation in countries such as Ireland that subsequently had a correction, the paper said.
By comparison, Ireland at the peak of its housing boom in 2006 had a price-to-income ratio of 40 per cent.
hello,
yeah thanks fella's
thankyou
professor robots
Exactly how I feel. As someone said to me the other day, "I don't want to be stuck with a 1M mortgage and a 500K house".basilio I agree, lets not forget the aud is protecting us in some ways with petrol prices. Me personally I am saving up a 20% deposit for a house, but unless there is some sort of correction i'm not going to bother. Has nothing to do with not being able to afford it rather refusing to pay for something clearly (in my view) overpriced.
Yes, those pictures are nuts. Again though, I think it seems to simplistic to compare housing situations in Australia and China to those in pre-2008 US. As far as I know, the Chinese government is responsible for building this stuff (and it runs surpluses as far as I know), so its more a case of government wastage than mad appreciation-speculation like what happened in the US.it just goes on and on....
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