Australian Politics Forum - Loan Sizes Slashed, Banks Cracking Down

Bobby.

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Re: Loan Sizes Slashed, Banks Cracking Down
Reply #15 - Jan 5^th, 2016 at 6:14pm

longweekend58 wrote on Jan 5^th, 2016 at 5:04pm:

Bam wrote on Jan 5^th, 2016 at 4:34pm:

bogarde73 wrote on Jan 5^th, 2016 at 3:25pm:

The upside, which I put first, is probably many people will be saved from over-committing themselves.
The downside unfortunately is that it is a definite negative for economic activity.

Agree on the first, disagree on the second.

Before the banks tightened their lending criteria, the housing market resembled a Ponzi scheme. The housing market was overheated compared to the rest of the economy. If the housing market ended up collapsing - an unlikely but non-negligible economic risk - that would have been a huge blow to the economy.

With lending criteria for housing being tighter, the result would be a more balanced investment environment. Businesses in particular would benefit from more investment. So rather than being a negative for the economy, it could end up being a positive. We are trading a risk of collapsing housing prices with a more predictable economy. Even if the tighter lending criteria was a negative, it's not a huge one. I would rather have a balanced economy than one based primarily on people selling overpriced real estate to each other.

the tighter lending criteria is no more complex that banks responding to perceived increased risk and attempting to reduce it by lowering the amount they lend. it happens from time to time and if 2016 sees the economy continue to grow and unemployment continue to fall, the criteria will relax again. It is wholly unrelated to housing price policy.

Gee wizz Longy,

you're old fibro dump in Adelaide will be worth a lot less now.

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Swagman

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Beware of cheap imitations......

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Re: Loan Sizes Slashed, Banks Cracking Down
Reply #16 - Jan 5^th, 2016 at 6:18pm

Saul Goodman wrote on Jan 5^th, 2016 at 8:08am:

Bam wrote on Jan 5^th, 2016 at 8:05am:

Quote:

Mortgage broker Christina Parnham said the reduction was mainly because banks were requiring that prospective borrowers be tested against how they would cope with higher interest rates. This is despite the fact that actual interest rates being charged by banks fell over 2015.

"You're going to have to be able to service the loan at about 7.5 to 8 per cent," she says.

It's good to see the banks have had a reality check. Lending standards have been too lax for some time.

I have suggested that prospective borrowers calculate the maximum size of their loan as if interest rates are 10%. If a borrower cannot afford the loan with 10% interest rates, they can't afford the loan if they end up with less income. The borrower may not get as nice a house, but they would end up with a house that they are less likely to have to sell at fire-sale prices.

Agree do you remember the interest rates of about 17% in the 70-80s?

Ah yes, Paul Keating's legacy......

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Saul Goodman

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Re: Loan Sizes Slashed, Banks Cracking Down
Reply #17 - Jan 5^th, 2016 at 6:36pm

Bam wrote on Jan 5^th, 2016 at 9:09am:

Saul Goodman wrote on Jan 5^th, 2016 at 8:08am:

Bam wrote on Jan 5^th, 2016 at 8:05am:

Quote:

Mortgage broker Christina Parnham said the reduction was mainly because banks were requiring that prospective borrowers be tested against how they would cope with higher interest rates. This is despite the fact that actual interest rates being charged by banks fell over 2015.

"You're going to have to be able to service the loan at about 7.5 to 8 per cent," she says.

It's good to see the banks have had a reality check. Lending standards have been too lax for some time.

I have suggested that prospective borrowers calculate the maximum size of their loan as if interest rates are 10%. If a borrower cannot afford the loan with 10% interest rates, they can't afford the loan if they end up with less income. The borrower may not get as nice a house, but they would end up with a house that they are less likely to have to sell at fire-sale prices.

Agree do you remember the interest rates of about 17% in the 70-80s?

Yes, I had term deposits.

Lucky You

Most of us had home loans!

But thems were the times! Roll Eyes

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Saul Goodman

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Re: Loan Sizes Slashed, Banks Cracking Down
Reply #18 - Jan 5^th, 2016 at 6:39pm

Swagman wrote on Jan 5^th, 2016 at 6:18pm:

Saul Goodman wrote on Jan 5^th, 2016 at 8:08am:

Bam wrote on Jan 5^th, 2016 at 8:05am:

Quote:

Mortgage broker Christina Parnham said the reduction was mainly because banks were requiring that prospective borrowers be tested against how they would cope with higher interest rates. This is despite the fact that actual interest rates being charged by banks fell over 2015.

"You're going to have to be able to service the loan at about 7.5 to 8 per cent," she says.

It's good to see the banks have had a reality check. Lending standards have been too lax for some time.

I have suggested that prospective borrowers calculate the maximum size of their loan as if interest rates are 10%. If a borrower cannot afford the loan with 10% interest rates, they can't afford the loan if they end up with less income. The borrower may not get as nice a house, but they would end up with a house that they are less likely to have to sell at fire-sale prices.

Agree do you remember the interest rates of about 17% in the 70-80s?

Ah yes, Paul Keating's legacy......

Yes but we could afford to pay our 17%.

The poor kids of today would be stuffed at 12%

Hope your kids are loaded Swagman you being a credit manager!

Perhaps you should become loans manager!

Mmm no that needs brains, better consult aquascoot he has all the answers

Grin

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longweekend58

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Re: Loan Sizes Slashed, Banks Cracking Down
Reply #19 - Jan 5^th, 2016 at 7:36pm

Bobby. wrote on Jan 5^th, 2016 at 6:14pm:

longweekend58 wrote on Jan 5^th, 2016 at 5:04pm:

Bam wrote on Jan 5^th, 2016 at 4:34pm:

bogarde73 wrote on Jan 5^th, 2016 at 3:25pm:

The upside, which I put first, is probably many people will be saved from over-committing themselves.
The downside unfortunately is that it is a definite negative for economic activity.

Agree on the first, disagree on the second.

Before the banks tightened their lending criteria, the housing market resembled a Ponzi scheme. The housing market was overheated compared to the rest of the economy. If the housing market ended up collapsing - an unlikely but non-negligible economic risk - that would have been a huge blow to the economy.

With lending criteria for housing being tighter, the result would be a more balanced investment environment. Businesses in particular would benefit from more investment. So rather than being a negative for the economy, it could end up being a positive. We are trading a risk of collapsing housing prices with a more predictable economy. Even if the tighter lending criteria was a negative, it's not a huge one. I would rather have a balanced economy than one based primarily on people selling overpriced real estate to each other.

the tighter lending criteria is no more complex that banks responding to perceived increased risk and attempting to reduce it by lowering the amount they lend. it happens from time to time and if 2016 sees the economy continue to grow and unemployment continue to fall, the criteria will relax again. It is wholly unrelated to housing price policy.

Gee wizz Longy,

you're old fibro dump in Adelaide will be worth a lot less now.

went up $50K last year. imagine how sad that makes me feel:) and i paid $37K for it!!!

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AUSSIE: "Speaking for myself, I could not care less about 298 human beings having their life snuffed out in a nano-second, or what impact that loss has on Members of their family, their parents..."

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Bobby. Gold Member Offline Australian Politics Posts: 107265 Melbourne Gender:	Re: Loan Sizes Slashed, Banks Cracking Down Reply #20 - Jan 5^th, 2016 at 8:39pm longweekend58 wrote on Jan 5^th, 2016 at 7:36pm: went up $50K last year. imagine how sad that makes me feel:) and i paid $37K for it!!! Sell it now while you can still get a few pennies for it.
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longweekend58

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Re: Loan Sizes Slashed, Banks Cracking Down
Reply #21 - Jan 6^th, 2016 at 8:18am

Bobby. wrote on Jan 5^th, 2016 at 8:39pm:

longweekend58 wrote on Jan 5^th, 2016 at 7:36pm:

went up $50K last year. imagine how sad that makes me feel:) and i paid $37K for it!!!

Sell it now while you can still get a few pennies for it.

because there is a housing crash in progress? same old booby, same old crap

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AUSSIE: "Speaking for myself, I could not care less about 298 human beings having their life snuffed out in a nano-second, or what impact that loss has on Members of their family, their parents..."

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Bam

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Re: Loan Sizes Slashed, Banks Cracking Down
Reply #22 - Jan 7^th, 2016 at 8:24am

Saul Goodman wrote on Jan 5^th, 2016 at 6:36pm:

Bam wrote on Jan 5^th, 2016 at 9:09am:

Saul Goodman wrote on Jan 5^th, 2016 at 8:08am:

Bam wrote on Jan 5^th, 2016 at 8:05am:

Quote:

Mortgage broker Christina Parnham said the reduction was mainly because banks were requiring that prospective borrowers be tested against how they would cope with higher interest rates. This is despite the fact that actual interest rates being charged by banks fell over 2015.

"You're going to have to be able to service the loan at about 7.5 to 8 per cent," she says.

It's good to see the banks have had a reality check. Lending standards have been too lax for some time.

I have suggested that prospective borrowers calculate the maximum size of their loan as if interest rates are 10%. If a borrower cannot afford the loan with 10% interest rates, they can't afford the loan if they end up with less income. The borrower may not get as nice a house, but they would end up with a house that they are less likely to have to sell at fire-sale prices.

Agree do you remember the interest rates of about 17% in the 70-80s?

Yes, I had term deposits.

Lucky You

Most of us had home loans!

But thems were the times! Roll Eyes

I do have sympathy for those with home loans who had to pay those interest rates. But it does help to keep things into perspective. Interest rates were not the whole story.

Inflation had yet to be brought under control and was 10% or more for some of that time. Interest rates need to be greater than the inflation rate lest money lose purchasing value.

The average home loan was a lot smaller then in relation to household income. It was still possible to service a home loan with a single income.

Taking these into account, it's clear that interest rates needed to be a lot higher to have the same restraining effect on spending as a modest rise in interest rates has today.

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You are not entitled to your opinion. You are only entitled to hold opinions that you can defend through sound, reasoned argument.

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