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Got Interest Rate thread

889 posts in this topic

Macrobusiness has been saying' next move is ... down.   

The banking commission's revealed shenanigans suggest we're coming into tighter credit for housing.   Should be interesting!

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We know rates will rise eventually.  And your chart shows NOW might be the start of this whole new trend that we havent seen since 1970s

Exciting times!  Lessons from the 70s:

wages didnt keep up with inflation as well but commodities did. House prices came down in switzerland (in real terms)  as rates rose.

 

 

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australias banks are fully in real estate

you guys should start banking elsewhere, spread your risk!!!

look for banks who lend mostly to mining companies in the west, as mining should improve from now on.

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2 hours ago, Swaize said:

australias banks are fully in real estate

you guys should start banking elsewhere, spread your risk!!!

look for banks who lend mostly to mining companies in the west, as mining should improve from now on.

I'd guess that all our banks are heavily invested in the local RE market.

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12 hours ago, Swaize said:

maby theres one local to Perth?

 

according to this:

https://reiwa.com.au/the-wa-market/perth-metro/

perth real estate peaked longtime ago and isnt in a bubble  therefore the banks should be safe

Most banks are owned by the top 4 banks in the country. So if there is a country wide drop in prices, they're all affected.

Perth based financial institutions would not be big and better hope for commodity prices to pick up as their books would be full of mortgages started whilst the boom was on.

Their saving grace is that, unlike the US, owners cannot just return the house keys and walk away from the home loan.

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On 6.5.2018 at 1:00 AM, cobran20 said:

 their books would be full of mortgages started whilst the boom was on.

Their saving grace is that, unlike the US, owners cannot just return the house keys and walk away from the home loan.

WHAT you can actually walk away from a house by just leaving and the bank has to take it back and you dont owe anything anymore??  even if the house value is lower than what is owed (due to prices that fell)

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3 hours ago, Swaize said:

WHAT you can actually walk away from a house by just leaving and the bank has to take it back and you dont owe anything anymore??  even if the house value is lower than what is owed (due to prices that fell)

That is the case in 11 out of 50 US states - known as non recourse lending. Lenders can pursue borrowers for the shortfall between what they get for the house and the amount owed in the other states. 

So the assertion that " Their saving grace is that, unlike the US, owners cannot just return the house keys and walk away from the home loan. " is mostly not true because:

  • In 78% of American states it's a false statement.
  • In most cases (both here and the USA) where the banks sells a house for less than what is owed on it there is little other assets owned by the borrower that can be chased by the bank.

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3 hours ago, zaph said:

That is the case in 11 out of 50 US states - known as non recourse lending. Lenders can pursue borrowers for the shortfall between what they get for the house and the amount owed in the other states. 

So the assertion that " Their saving grace is that, unlike the US, owners cannot just return the house keys and walk away from the home loan. " is mostly not true because:

  • In 78% of American states it's a false statement.
  • In most cases (both here and the USA) where the banks sells a house for less than what is owed on it there is little other assets owned by the borrower that can be chased by the bank.

Not quite true:

Everything You Need to Know About Recourse & Non-Recourse Loans

Quote

...

Whether you have a recourse or non-recourse loan depends largely on state law. If you’re unsure of your loan type, research your state to determine its laws regarding these loans and how impending foreclosures or asset seizures affect you. Non-recourse states include Alaska, Arizona, Washington, Utah, Idaho, Minnesota, California, North Carolina, Connecticut, North Dakota, Texas and Oregon. These states only allow non-recourse loans.

In other states, you may have either type of loan. If you have a recourse loan, the state allows your lender to pursue a deficiency judgement to recoup its money. Most states restrict a lender’s ability to pursue a deficiency judgement beyond the fair market value of the asset...

 

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50 minutes ago, cobran20 said:

I said mostly not true. You say not quite true. Similiar.

It would be interesting to know the % of loans written in the US that are recourse/non (today and pre GFC). I bet most loans would be recourse if the state allows it. If a bank can get recourse it's going to - or charge a higher IR or lower LVR.

I think the point of discussion is:

  • Was non recourse lending a significant contributor to the crash in the USA housing market?

I'd say no. They were not as widespread as Maude Flanders would have you think. IMO liar loans and liar banks contributed far more.

  • Are our banks any better off, or are housing market less likely to crash, because we have recourse lending and the USA doesn't?

Again no. While Australia is recourse, there is mostly no real recourse in foreclosure. How many people have significant assets that can be sold up by a bank outside of a home? 

 

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3 hours ago, zaph said:

I said mostly not true. You say not quite true. Similiar.

It would be interesting to know the % of loans written in the US that are recourse/non (today and pre GFC). I bet most loans would be recourse if the state allows it. If a bank can get recourse it's going to - or charge a higher IR or lower LVR.

I think the point of discussion is:

  • Was non recourse lending a significant contributor to the crash in the USA housing market?

I'd say no. They were not as widespread as Maude Flanders would have you think. IMO liar loans and liar banks contributed far more.

  • Are our banks any better off, or are housing market less likely to crash, because we have recourse lending and the USA doesn't?

Again no. While Australia is recourse, there is mostly no real recourse in foreclosure. How many people have significant assets that can be sold up by a bank outside of a home? 

 

Did nonrecourse mortgages cause the mortgage crisis?

It looks to me as if Australian banks are 'safe' from the riskiest borrowers with a high LVR (80%+) via compulsory mortgage insurance:

link1

link2

 

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