cobran20

NEWS: Aussies are $160bn ahead on mortgages

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AUSTRALIAN families are now $160 billion ahead on their mortgages, squirreling away an extra $30 billion since the start of the GFC.

About half of the nation's three million home-loan customers have taken advantage of low interest rates to pay down debt at a pace the likes of which has never been seen.

New Reserve Bank of Australia figures show borrowers are a record 14 per cent in front on their combined $1.14 trillion of housing loans.

In March 2008, as the global financial crisis was beginning to take effect, the mortgage buffer was 11 per cent.

"People are paying down their homes, they're not drawing down on equity to pay for things which was going on during the GFC,'' said Australian Bankers' Association chief executive Steven Munchenberg.

"House prices were going up and people were using the equity to invest or spend, but it would suggest they are not doing that now, they are very happily paying down their mortgages as quickly as possible.''

The RBA - which has cut its cash rate at the lowest level since 1960 - estimates borrowers are 20 months ahead on repayments.

That suggests a household with a loan of $300,000 loan would be $40,000 in front.

A family with a $500,000 loan would be $67,000 to the good.

AMP chief economist Shane Oliver said that prior to the big pay down, Australia's household debt had been at "very high and dangerous levels''.

Dr Oliver said it was important household debt was bought back to sustainable levels because high debt levels becomes a major problem if the economy takes a downward turn and unemployment rises sharply.

"It's almost as if there was an obsession with taking on debt prior to the global financial crisis, now we've got a bit of an obsession with paying down debt,'' he said.

"We've gone from an environment of consumption and borrowing and spending to an environment where saving and paying down debt is the new fashion.''

Home loan customers who are at least 90 days or more in arrears on their mortgage only applies to about 0.6 per cent of loans.

Clive Van Horen, general manager of home loans with the largest lender, Commonwealth Bank, said about 80 per cent of its customers were ahead: "It's being driven by a low interest rate environment and home owners not adjusting repayments down in line with falling rates.''

ING Direct, the nation's fifth biggest mortgage lender, reported a 30 per cent increase since the GFC in funds sitting in customers' redraw and offset facilities.

"People realised their debts were at uncomfortable levels and they weren't in control,'' said executive director of customers John Arnott.

Their mortgage book is worth $40 billion and customers are about $6 billion ahead in repayments.

Westpac's chief product officer David Lindberg said the bank had about $300 billion in mortgages and two-thirds of customers were in front of their repayment schedule.

"On an average $300,000 mortgage they are paying $266 more than they need to pay on their mortgages each month ... that would mean the average person is 7.6 years ahead of where they need to be,'' Mr Lindberg said.

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oooooh!

This can't be good for long time viability of banks.

In a couple of years they will have to present severe losses incurred because people paid out their mortgages early.

Banks make money on interest.

Think of how much interest is being shaved off the mortgage portfolio of most banks if the Australian mortgage holders maintain this levels of repayments. 7.6yrs worth off an average 25yr loan.

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oooooh!

This can't be good for long time viability of banks.

In a couple of years they will have to present severe losses incurred because people paid out their mortgages early.

Banks make money on interest.

Think of how much interest is being shaved off the mortgage portfolio of most banks if the Australian mortgage holders maintain this levels of repayments. 7.6yrs worth off an average 25yr loan.

That has to be balanced against the drop in bad loans if the overall loan repayment rate is going that well. Somehow, I don't think the banks are complaining at the moment.

Edited by firehawk

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Offset accounts. Are they unique to Australia? -Certainly had never heard of them in Toronto.

Can't you just call the bank and tell them the offset should now be paid against the mortgage mission accomplished?

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Can't you just call the bank and tell them the offset should now be paid against the mortgage mission accomplished?

I can't wait for the case where somebody has a $1M mortgage with $900,000 in an offset account and the bail-in causes them to have a $1M mortgage with $250,000 in the offset account. People who use offset accounts are just asking to be burned.

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Offset accounts. Are they unique to Australia? -Certainly had never heard of them in Toronto.

Can't you just call the bank and tell them the offset should now be paid against the mortgage mission accomplished?

You can transfer between your offset and variable mortgage online (st george).

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yeah i was just being a smart arse, im not sure you can transact at all during a bank holiday. I imagine you are screwed either way, as property prices should fall horribly in Cyprus now. although cash for gold places should be booming over there.

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