The Entirely Predictable Effects of The Banking Royal Commission

From the ABC, this article titled Payday loans increase as households pushed into risky credit from non-bank lenders.

After increased scrutiny and accusations of irresponsible lending were levelled by the Hayne Royal Commission, banks have pulled back on new finance and tightened credit — something experts said was having the unintended consequences of pushing households into often riskier forms of credit offered by non-bank lenders.

Oh really. Actions can have unintended consequences?

What did people and politicians think were going to happen when you crater the value of most people's main asset and at the same time cut off the most common form of lending without addressing the reasons people were borrowing in the first place?

But the ABC being the ABC they waste the next third of the article on an anecdotal sob story about a woman who doesn't know the meaning of the word "budgeting".

And just re: 'payday loans' - you're never going to have short term unsecured loans to people who need them at low rates because by very definition those are the riskiest loans and you need high rates to offset that risk. You can't regulate out of that because you can't force people to lend out money as charities. The people needing these loans will either pay high interest, or starve.

Anyways, just another example of emotional outrage of the masses overruling a search for actual solutions. "Banks Bad!" Yeah yeah. Hope people like the alternative.

Thoughts?

Related Stores

royalcommission.gov.au
royalcommission.gov.au

Comments

  • +30 votes

    Thought?

    Easy. Don't borrow something you can't return (as soon as possible)

    • +45 votes

      Sounds simple right? It is. But if people could stick to this, we wouldn't have needed the (irresponsible lending part of the) banking Royal Commission in the first place.

      Last I heard, a couple was suing Westpac (as part of a class action) because they understated their expenses in order to borrow to buy 3-4 investment properties that they're now making losses on. Their excuse? Westpac should've verified what they told Westpac more instead of believing them. Idiots. (Oh and of course, who knew property investment carried risks? Again, idiots.)

      • +60 votes

        I read about that one earlier today. Article says the wife was in tears that they had to sell 4 places and all they have left is a block of land. Apparently she didn't know she can't afford that many houses. And It is the banks fault… Thought that was sort of ridiculous

        • +9 votes

          Oh good, it's not just me that thought that.

          • +3 votes

            @HighAndDry: I read that story, my first thought so you overborrowed, and apparently their broker provided false information to the bank, but apparently it is Westpacs fault? Only thing I blame Westpac for is being stupid enough to lend out that much money without verifying affordability to repay it, thus taking on a risky investment and setting themselves up to lose money.

            • +3 votes

              @AdosHouse:

              broker provided false information.

              From memory the argument is that Westpac didn't follow the legislation on assessing income (basing it on HEM (House Expenditure Measure) & NOT individual circumstance) and so apparently gave them a loan they couldn't afford.
              This was a Big criticism that Royal Commission made.

              Secondly why brokers tend not do fake docs:
              - brokers spend 2 years working under another broker before they can do loans that are not supervised
              - IF a broker is found to be doing dodgy stuff their aggregator will remove them and no one other aggregator will allow them to join their company. Without an aggregator you can't get access to lenders products
              - IF a broker is found to be doing dodgy stuff - they will basically lose ALL their trail payments (the Royal Commission will eliminate this loss -> making the banking system better = lol).
              - Additionally any loans that are Fraudulent the Banks/aggregators can sue you to recover all payments made by them. If you did this with multiple loans you could easily be looking a bankruptcy. And you have 30 days to pay it all back.
              - ASIC can sue the credit licence holder, who will also sue you.
              - Finally you could easily be looking a criminal charges, who could also impose jail sentence plus financial penalties.

              So loss of income, total loss of employment/business (sector wide), lawsuits, bankruptcy and Criminal charges - One could argue the penalties are harsher than other industries?

              Thirdly do you think banks that actually Lend the money do checks? I mean they make Billions (so cheap to setup lending systems) and its basically their money (raised through bond sales mainly). So obviously they are going to do what they can to avoid people going into default. So yes they do their own checks. They pull credit report, they can pull a list of properties you own, they do employment checks, they check documents for irregularities (now with Ai!), they require 3rd party verification (accountant letters, etc), etc.

              In reality, what has usually happened (80%+ of all cases) is that people have over extended and then something has happened - loss of job, sickness, etc, and then they can't pay their mortgages, and they usually have All their mortgages with one bank and then the bank starts selling off the property. Then they look around to blame others. And then they cry to whoever will listen.

              Oh and why was this case publicised? Do you think the Lawyers want this case settled with Westpac because they know they will lose, but Banks are hating all bad publicity at the moment due to the RC?

              *please note I am not a broker nor work for the banks - so don't ask me… well anything really. Go away.

            • +1 vote

              @AdosHouse:

              Only thing I blame Westpac for is being stupid enough to lend out that much money without verifying affordability to repay it

              The industry standard at the time was to use the brokers to verify the details? Isn't that kind of their job? Isn't that why brokers have to be accredited and do training etc.

              Maybe this was before there was more standards in the industry.

              I get that some bad eggs in the bank did some dodgy stuff, but it is a bit rough to tar and feather the 100,000+ people that work in the banking industry for some issues. Then also give airtime to these kind of stories which are really people desperately trying to dig themselves out of a financial hole they put themselves in. They knew what they were doing but are using this as a "victimless crime" to try and get out of it.

        • -5 votes

          ooooh i missed this. Was she blonde??

        • +1 vote

          yeah, wtf that was a weird one

        •  

          And It is the banks fault…

          Really depends on the circumstances.
          Did the woman honestly not realise she couldn't afford it?
          Did the bank push her into the finance knowing it was beyond her means?

          IMO (without reading the article and knowing the full circumstances) they're both at fault.

          Anyone should know enough about their own financial position to know if they can afford something.

          The bank should also do their own due diligence and advise the customer if they shouldn't be taking on the finance.

          • +4 votes

            @Chandler: If they had been honest about their situation the bank wouldn't have offered finance. They lied specifically because they knew the bank would not lend them money. They knew, but still did it, and now they want to blame everyone but themselves. I hope they lose and have to pay Westpac legal costs.

          •  

            @Chandler: Disagree - it's on the customer to obtain financial advice and decide if they can afford it. If I purchase products which I don't need or can't afford, it's my fault and not the person that sold it to me. The exceptions to this would be high-pressure sales tactic and false advertising.

            • +1 vote

              @infinity03: Sort of catch 22…

              Same goes for gambling and drinking.. after certain limit ball goes to seller and not purchasers…

              Imagine person ask for 10 million loan with Salary of 50k a year and bank approves it? Bank should be responsible in terms of lending.

              In above example, person would never be able to repay and bank knew it. Person goes to Centerlink and we taxpayers have to share that 10 million burden…

              •  

                @vr4indian: @brendanm @infinity03

                You would expect all that - that the bank wouldn't offer finance to people who can't afford it. But as some of the findings have shown, banks are often irresponsible.

                Every time I've applied for finance, I've had to provide payslips etc. I wouldn't be surprised if the woman in this example wasn't asked to - I had a colleague get pre-approval for an amount that (apart from being more than he asked for) was more than he would be able to afford (especially if interest rates rose), and when he asked about providing documentation like payslips they declined, saying they didn't need them. And this was a major bank.

                Yes, people need to be responsible for their own finances, but some people really are clueless, and it seems the banks are more than happy to throw money at them.

                Who's to blame? IMO, both. But who should be held to a higher standard? IMO, both, but the bank really should do better.

      • +13 votes

        Not just idiots. Greedy idiots.

      • +9 votes

        I know another example of a couple who wanted to buy a house, but spent all of their money on luxury items with the assumption that their parents would give them money for the house. When their parents refused, and the banks wouldn't lend them any money, they complained bitterly that houses are too expensive and banks are nasty. Some people just refuse to take responsibility for their own actions.

      • +2 votes

        Sorry are you saying banks arent in the wrong after all the activities they have done? I personally have been lied to multiple times by a banks financial planner and due to the lies and lack of any planning on his part, i ended up losing a lot of money on my shares.

        •  

          Username does Not checkout.

          Fin planners are now almost all owned by financial institutions, even unofficially (they sold off due to RC, but that biz only sells their products…. :/ ).
          Plus now the banks are getting into robo-advice and wanted to get rid of the head count. Thanks RC!

          I Heart the RC.

      •  

        But people can't stick to it, that't the thing.

        Just like if people stuck to a good moral compass we wouldn't need locks on our doors.
        Just like if people could behave themselves when drunk we wouldn't need thousands of cops on patrol every weekend.

        People do stupid stuff, that's a known. People will take more than they can afford, that's a known, cavemen probably did the same thing and I'm sure humans will be doing the same in 100 years. Personally I think they should suffer if they make stupid decisions, but I also don't think we should give stupid people rope, especially when it's been shown to ultimately effect the taxpayer when shit hits the fan.

        Hopefully the class action fails, hopefully banks practice more scrutiny and conservatism when handing out 30 year loans… hopefully the public purse isn't raided if the whole thing proliferates.

    • +1 vote

      Agreed with caveat.

      Buying safe assets which also double as a necessity, ie a house, doesn't fall under the same category because the money is never really spent. Apart from stamp duty, the value of the house can be liquidated.

    •  

      That our government should have think that lol, now they are fixing budget By charging more tax lol.

    •  

      Sure. Which bridge are you living under while you save up, and where did you get that cardboard box?

      Median house price in Sydney has gone nuts. If you're renting you're much better off with a loan that will let you own the house earlier and will allow you to modify it without seeking permission (which may be refused) from a landlord. Most of the jobs are in the cities now. What do you want people to do exactly?

  • +9 votes

    I reckon it's pretty obvious when the credit tap is closed people will either have to

    1) spend less
    2) get money elsewhere

    You'd have to be fairly ignorant to not see this coming from a mile away.

    The Westpac thing is dumb on both sides. The borrower shouldn't have borrowed 1.8 million on a single income. Westpac shouldn't have lent that much without checking whether the borrower could afford to move from IO to P&I. Ultimately this is just greed by the bank employee chasing sales goals/bonuses, greed/ignorance by the borrower (houses only go up! every 7 years doubles!) as well as poor financial & operational controls within Westpac to prevent this situation in the first place. Plenty of blame to go around and probably not the last time we hear about these paper millionaires.

    •  

      greed by the bank employee chasing sales goals/bonuses

      Sometimes it's just one bad egg, but what the royal commission has shown is that the banks created situations where their sales people made less money if they did the right thing. They should have to answer for that, and we shouldn't let them foist the blame onto individual employees for not being willing or able to quit to make a point (or lose a big chunk of their income).

  • +3 votes

    Don't understand why regulators don't go behind Small time payday loans. Most of these small payday lenders will shut shop even at a small mention as they pretty much know they are doing irresponsible lending. I don't understand why government never goes and hit these small pay day lending businesses. In the US many actors running these had to pay billions of dollars in fines

    • +5 votes

      Because that may trigger underground lending.

      If the idiots using payday loans are using them because the big banks have rejected them, it looks like they'll sink as far as they need to to spend money they don't have.

      •  

        This.

        Also I Never think its wise to let 1 industry sub group (the Banks) control the whole lending industry.

  • +36 votes

    There is more irresponsible borrowing than there is irresponsible lending.

    • +1 vote

      100% Correct!

    • +5 votes

      Absolutely. This should be the preface to any article, paper or regulation on "irresponsible lending".

      And, of course, this is what breaks the system for those of us who know what we're doing. The idiots ruin the system and everyone then gets treated like an idiot.

      •  

        I know a friend, who told me about the couple, who used 2 credit cards with some 20k-30k limit to put down the deposit to their third house. Not sure, what situation they are currently under. But if you don't have the deposit to pay, don't buy it.

    • +1 vote

      Totally agree.

  • +7 votes

    And what about the poor couple who bought 5 investment properties and now can’t pay it back, and are suing westpac.

    Bloody ridiculous people don’t work out there own budget

    • +4 votes

      Exactly….when they were getting capital growth from those properties, not a peep from them.

      Now with negative growth, suddenly they are destitute and it's Westpac's fault.

  • +1 vote

    I think it has been said all along from the very start.

    People who are insisting Royal Commission will ultimately end up the loser and the smart ones have already factored in this to delay the effect as long as possible.

    What do people think if they forced the hands of the banks? Of course the banks will retaliate.

    Here is what I am predicting next. The banks will look into "good" customers as these sort of customers don't complaint when they go bad and will take care of them as they will continue to happily trigger the "reject" button to those marginal or bad customers (aka first home buyer or the likes) because the cost of servicing them vs money coming from them is too much and would be cheaper rejecting them.

    These customers will get credit report marked (thanks to CCR) and they would make more enquiries to meet their needs and more credit reports being marked eventually landing on a bad deal (eg: AfterPay, LoanShark and Co, etc) and here we go again.

    If you haven't already paid most of your mortgage and possess as many credit cards as possible (to use for debt swapping to 0% BT), then life would be a lot tougher.

    Yes, RBA may reduce interest rates but banks don't have to follow as people can see.

    Already some Ozbs can't get finance unless they have to cut their credit cards and with HEM method being phased out, every single expenses including bubble cups will get scrutinized.

  • +11 votes

    Not entirely surprising… as someone who's worked at a number of the so-called evil banks over the past decade, I've always been surprised at the lengths to which they go to avoid bad debt.

    Now they've got all of the Responsible Lending obligations hanging over them, it's progressed to a whole new level.

    To be frank, most of the stuff in the responsible lending and the resultant Banking Code of Practice are less about stopping the Banks from being evil and more about nanny state mollycoddling of stupid borrowers.

    So, now that Responsible Lending has been done to death, I call for a Royal Commission into Responsible Borrowing. Let's see people take some personal responsibility for their actions… or maybe I'm just getting old.

    •  

      You're spot on, but more than that.

      Here's a little secret that many don't want you to know … sshhh … banks don't want to lend money to people who can't pay it back!

      If you listen to some commentators out there, you'd think bank representatives are hanging out on street corners throwing money at anyone who's gormless enough to take it and don't care whether or not they can pay it back. Spoiler alert … if you don't pay it back, the bank makes a loss!

      You'd think these multi-billion dollar profits all come from writing loans that will never be repaid!

      As you say, responsible lending, codes of practice, etc. are all designed solely to save idiots from themselves. The problem is it also stops those who know where they're doing from from working with a bank to achieve an outcome, all because it doesn't fit some bureaucrat's definition of "responsible".

  • +9 votes

    The housing bubble was going to deflate regardless of the RC. If governmewnt reduced the amount of taxation they impose then people might not have to borrow to survive as they would have the money. Of course there will always be those who borrow and spend unwisely for stuff they don't need and that will NEVER change. But the whole thing also gives us another lesson in false economics, namely that property prices don't rise and fall according to market supply and demand, but rather they rise and fall inline with the supply of credit and therefore will always be open to manipulation by those who control credit. Also, in Sydney at least, around 50% of the cost of a new house is pure taxation. So not only is government inflating the cost of housing but we have to borrow (with interest) an extra 50% to accommodate them. And that's on top of all the other taxes we are burdened with. So with a decline in housing there will be a corresponding decline in government tax receipts. And we have the loony labor government (not that the LNP are much better)going into an election promising to spend hundreds of billions MORE for stuff that is not beneficial nor needed while at the same time pinching dividend imputation credits from low-income people and burdening us all with even more taxation.

    This year is shaping up to be VERY messy. News reports today increasing predictions of recession (as if we weren't already in one?), house price collapse and overnight cash rate cut to zero.
    Aud to 60c against usd.

    All to unfold within the next few months and household debt is at record highs.
    Labor are already effecting the property market and more to come in the stock market with franking credits. The consumer will slow right down with the dropping in the wealth factor as well. Car sales have already fallen off a cliff and that's directly related to property values. People are tapped out but luckily for us, Labor reckon its the best time to pull the rug from underneath savers, workers , mortgagees, record debt holders and retirees and tax them even more. How can taxing most people (directly or otherwise) be a good thing? Taxes get passed on as a carbon tax would be passed on. How can it be a good thing when the country is tapped out on debt? I can't imagine what other ideas they want to implement.

    Some of us can remember 'the Recession we had to have'.
    Except back then we were paying 17% interest on our housing loans…today it is next to nothing. That in itself causes a massive further problem as the RBA cannot reduce rates to stimulate the economy as they could and did back then. We have the perfect storm brewing now…Tightening monetary policy by Central Banks, projected slump in building construction due to the current oversupply and tighening credit, Labor if elected will likely decrease Defence spending, increase taxes and force their crazy 50% renewables target on to the country sending businesses broke and along with the Greens will block any new mines pushing unemployment up further.

    And then yesterday the Chinese banned Australian coal imports. You think that's not going to hurt? The AUD dropped a fair bit yesterday already and the flow-on effect hasn't even had time to kick in. Hopefully it's just a political stunt by China, but if it isn't……?

    Good luck Australia we are going to need it.

    •  

      You would be another person I have heard in the last 2 months predicting recession.

      I think you would be right.

    •  

      well said. I was going to look for a property but i think thats the worst time. have to wait.

    •  

      The only thing saving Australia is our high(ish) employment rate. IF that goes were screwed.

      And the latest Credit Reporting changes will make it 3x worse. We c/would even have a British style bank/s failures.

      Wonder why the 'impressive' Turnbull let those changes in?

    •  

      Martin North has been warning us for some time now
      https://www.youtube.com/watch?v=M2tYQ627OpY&ab_channel=WalkT...

    • +1 vote

      How is 50% of the cost of a new house taxation?

      • +2 votes

        That was from a HIA report from a few years ago (probably higher now) where they added up all the direct and indirect taxation involved in building a new house. Sydney was 45%, Melb and Bris were about 35%. I'll see if I can find the report for you.

        Edit: Here you go, like I said, it's a few years old now so I guess the tax would be even higher.

        https://hia.com.au/IndustryPolicy/Tax-reform

        Information was gathered and collated on all the taxes that contribute to the final price of a new home. The results demonstrated that the residential (new home) building sector is not only heavily taxed, but it is the second most highly taxed industrial sector in Australia.

        The CIE study showed that the Australian housing sector contributes nearly $40 billion in taxation revenue to federal, state and local governments in Australia each year – 11% of the total taxation revenue collected by all tiers of government.

        Further, the new housing sector accounts for 1.2% of the Australian economy’s value added yet contributes 2.8% of all taxation revenue.

        The total taxation burden on a new home can now be well over 40% of its purchase price - most of which is borne by the home buyer. This means that the tax component of a new home is now so large, it usually exceeds the costs of land. The Tax Forum acknowledged the array and magnitude of taxation on new housing. It will hopefully be the first step towards the removal of (or at least sizable reduction in) the myriad of inefficient taxes on housing.

        •  

          I just tried to find some details on the breakdown of that 45% cost being tax and 45% is a very misleading attribution. 17% of that 45% is a 'Hidden' tax attributed to bad zoning, and 'innefficient' climate management policies - which means they have attributed costs of water saving, and storm water treatment, and the cost of not being able to build multidwelling apartments into this number.

  • +3 votes

    Payday loans have a legitimate role to fill in society but they need to be much better regulated than the pathetic and predatory regulation they currently operate under.

    • +2 votes

      Propose a set of regulations and I'll tell you why they won't work (or already exist). Current regulations for fraud, misrep, extortion, unconscionable conduct - already cover basically all potential issues. The rest is just good old human greed and financial irresponsibility. I'm not too high on our chances of regulating that on the part of borrowers.

      • +1 vote

        It needs to he prescriptive legislation for pay day lenders rather than consumer protection/credit protection.

        Prescpritive in terms of interest rates, fees, % of loan against monthly income (which does already exist) etc

        • +1 vote

          Right. And then you'll see payday lenders leave the market and pop up using different structures (like Afterpay).

          You're basically wanting the government to not just regulate but completely control an entire industry. It's wholly unworkable. And how are you going to stop borrowers from lying about their income to borrow more? How much verification are you going to force lenders of a few thousand dollars, on weekly repayment terms, to do?

          And plus - you're putting in huge regulatory compliance issues in something that'd include a friend lending a few hundred dollars to a friend. That nice friend is now breaching these laws, or not able to legally recover the money, or both.

          • +1 vote

            @HighAndDry: Payday lenders are regulated under short term loan requirements & already required to verify income.

            I'm not talking about lending to mates as that cannot be regulated

        •  

          If interest rates on payday loans are restricted noone will offer them. The rates of default are high because the people are irresponsible. Rates have to be high to offset the losses. % of loan already exists in responsible lending.

          • +1 vote

            @brendanm: Interest rates are already restricted which is why they charge such high fees

            •  

              @chumlee: So you want them to be lower? They shouldn't be, and neither should the fees. They need to cover the risk. If people don't like the fees and interest, don't use the service.

              For a laugh, have a look at reviews for RT Edwards. People complaining because they paid far more to rent an item than to buy it outright. It's pretty basic maths to figure this out, but people don't look. That's how it works though, they don't have the money to buy it outright, and want the item now, and are far more likely to default on payments, so the prices are what they are.

              •  

                @brendanm: People renting furniture and electrical items are not likely to be financially literate and will be vulnerable. Society cannot rely on for profit businesses to operate fairly and with morals - royal commission showed this

                •  

                  @chumlee: So what are we going to do? - force them to take IQ tests? O'h your too thick to get a loan… :/
                  (Actually I think this is actually a very big issue - especially if 10% of the population Cannot be financially literate).

                • +1 vote

                  @chumlee: They can't multiply 50 X 48 (example) and figure out that that number is higher than the $1300 that the 65 inch tv is, that they can't afford and don't actually need?

  • -1 vote

    LNP = Ray White

    Government sponsored Ponzi scheme that is property. This show trial is try to get voters off their back. Those LNP members will have their overpaid cushy job in mining and banking (eg. Mike Baird) long before the the slow controlled crash happens.

    •  

      Yes its the LNP…. And thats why Bill Shorten was AGAINST a Royal Commission when he was LABOR Minister of financial services.
      Because Bill is a member of the LNP…..

  • +4 votes

    The people needing these loans will either pay high interest, or starve.

    That is a rather simplistic black and white way of looking at it (yet not reality).

    There are many many other options. Nobody needs to starve. I doubt the payday loan shops are in tiny little country towns. Even small towns have churches and churches will help out, so people won't "starve" .

    If they are in a or near a city…. well they can eat quite well for free indefinitely tbh.
    So many food vans, free lunches, free dinners, free BBQ, Free bakers delight, just to name a few.
    Then you have all the take home food options, vinnies will even deliver sometimes, salvation army will give an eftpos card, anglicare, just to name a few. Usually once you are in contact with one organization, they will give you a list. I think the local council even puts out the list here.
    http://www.wollongong.nsw.gov.au/services/community/director...

    So nobody needs to "starve"

    I think as mentioned above, some people (probably most people) will 'spend less' .

    I don't think the average person is keen to sign away their next pay at massive interest rates.
    A gambler, addict, yes, especially the compulsive gambler, because they think/hope to double or tripple what they borrow, thus making the initial interest charged not relevant.

    And anybody who is needing money so they don't "starve" can get plenty of help without spending a cent. You should see how many of the crew that frequent the food vans are quite overweight, they sure asf ain't starving, quite the opposite. They will get given fresh meals, coffee/milo/tea , then offered clothes and food to take home also. One I know of even clears fines up by attending the food van, lol. So you get $50 or something off your fines each time, for going and getting a free meal & coffee :)

    • +2 votes

      No one literally starves in today's society. But that just makes it worse - it means these people are voluntarily taking out these high interest loans for non-essential purchases, without being forced into them by hunger or actual necessity, at all.

    • +1 vote

      Yes, there's a Payday Loan ATM coming to a tiny little country town near you.

      •  

        Those payday machines, are not in any tiny little country towns. They would be unlikely to ever be a viable business investment to put one in a tiny country town of 100 people.

        Churches, on the other hand, are quite often in tiny country towns, even if there is no shops. And churches will be happy to assist if someone is "starving" or in severe hardship some other way.
        They basically act as a subsidiary of the larger entity. Ie. Anglicare, which has a huge office in city, you can go to Anglican church and they would offer similar assistance. 'Vinnies' is part of catholic church, and no matter whether there is a vinnies office or store, all Catholic churches everywhere no matter how small, seem to have a st vincent de paul function for those in need.

    •  

      I love eating almost spoiled food and fighting with pigs when they pour bakery treats into a trough.

      J/k.

  • +5 votes

    https://www.dailymail.co.uk/news/article-6727375/Westpac-ban...

    how about these clowns. Borrowed money to buy 5 investment properties now they are suing westpac because they can't repay it.

    No one believes your crocodile tears

  • +4 votes

    I bet there are a lot of people in this situation who were lent money they couldn't afford but their 5 investment properties have gone up so they aren't complaining.

    Do we go to all these people and say "mate, we lent you this money we shouldn't have so we are calling the loans back and selling those profitable properties and using those proceeds to compensate those we have lost money from our irresponsible lending?"

    We should, otherwise it creates a situation where people have no downside risk and will try to game the system.

    The end result of this litigation is that banks will be scared to loan funds to all but the most secure borrowers, which isn't a bad thing if we want to stop property speculation.

    • +9 votes

      Exactly. This is basically property speculators crying poor because their gambles didn't pay off and hoping to socialise their losses onto everyone else. As you said, would they be willing to share their profits if they were successful? Ha.

    • +11 votes

      100% all the gronks who borrowed and overspent, should be accountable for their own actions. they are bloody adults ffs

      likewise the people who bought franchises and put up their house as equity.

      i wish i could sue the casino for overspending on roulette last night, they failed to advise me what could happen

  • +13 votes

    I personally think that the stories we have been seeing lately are deliberately being told to minimise the other, bigger problems that were highlighted out of the Royal Commission. No one feels sorry for the lady who lost everything on what was an empire of cards waiting to crumble. She should have known the risks. The same for the 20 year old who borrowed money at huge rates for a holiday - should have known better.

    These obfuscate the more concerning internal decision making of "profit above all else", like fees for no service, charging fees for advice to dead people, and all of the add-on insurances.

    It's the same tactics the banks employed at the start of the Commission, trying to deflect onto the mortgage broker industry.

    • +2 votes

      It's the same tactics the banks employed at the start of the Commission, trying to deflect onto the mortgage broker industry.

      They might be trying to deflect from other issues (like fee-for-no-services) but considering that Westpac is the one being sued in this class-action lawsuit, I'm not sure of this particular motive. The heat is still very much on the banks.

  • +3 votes

    Hopefully house prices drop drastically along with rents as well. Completely unsustainable. Once upon a time a single wage earner could buy a simple house and pay it off over 30 years or so and live a reasonable existence, its just not possible at the moment. Businesses are going bust at a alarming rate.

    • +1 vote

      Hopefully house prices drop drastically along with rents as well.

      As I kept telling people, this is not how the property market works.

      Lower prices = less properties = higher rents.

      Rents and property prices will never move in sync, just because of pure demand and supply. Don't take my word for it:

      https://www.news.com.au/finance/real-estate/renting/rent-loo...

      The challenge I think for the policy now is that the policy modelling done by both sides has shown that Labor’s policy would lead to fall in prices and a rise in rents.

      • +3 votes

        The challenge I think for the policy now is that the policy modelling done by both sides has shown that Labor’s policy would lead to fall in prices and a rise in rents.

        Citation needed. Oh wait, here it is:

        realestate.com.au’s chief economist, Nerida Conisbee.

        No vested interest there. Nope. None whatsoever.

        I can also selectively quote the article:

        As usual, the truth probably lies somewhere in between the two parties’ positions.

        Governments of any ilk in Australia love to take more credit for their influence on interest rates and housing prices than they deserve to. Fundamentally all of them govern based on the same principles of largely deregulated markets and privatisation unless it's not politically expedient to do so.

      •  

        As I keep telling property "experts", that's not how economics works. In the words of John Maynard Keynes, "investment is a beauty contest and the least ugly wins". I know its a foreign concept for a lot of property "experts", but the rest of us are primarily interested in something called "returns".

        For example, I invest mainly in infrastructure stocks, which return about 9% after franking. This compares to about 2% for Sydney real estate, making it a fairly unattractive asset class at this point in time, unless you belong to the Church of Property.

        However, if Sydney real estate were to halve in value overnight, the relative returns would roughly double to about 5% (presuming rents remain the same), meaning that they would become much more attractive to buyers interested in yields (super funds would come under that category). Even apartment builders would keep building, Harry Triguboff has said that he isnt worried about falls in sale prices, because he can always make money renting apartments out.

        The other issue you're probably forgetting is that landlords can't charge a cent more than what people are prepared to pay. If rents go above that level, people will stay with their mum and dad, share accommodation or do whatever else they can do to survive. So rents can quite easily decline at the same time as property prices (just like they've done in Japan over the past twenty years).

        Dont take my word for it:-

        https://www.abc.net.au/news/2019-01-10/sydney-house-rent-pri...

    • +1 vote

      Once upon a time as a kid 20 cents would buy me a bag of lollies.

      Once upon a time peteol was 40 cents a litre.

      Once upon a time the average wage was $250 a week

      If you have a time machine that's great but otherwise we live in today's world

      •  

        Yeah but the point is housing has surged to for some over 70 percent of their wage and that's a 2 bedroom place outside of the CBD. And that's not paying off ones own mortgage. Id rather be paying off my own loan than my arsehole landlords

  • +6 votes

    I think you need to step back, and start seeing the forest instead of the individual trees.

    •  

      Did you want to elaborate on that? Because from where I stand, the sob-story is the tree, and this:

      Since April 2016, 3 million additional payday loans totalling $1.85 billion have been written by about 1.6 million Australian households

      is the forest.

      • +15 votes

        A news outlet publishes a sob story, and you get red in the face and start shouting at the screen I-TOLD-YOU-SO!I-TOLD-YOU-SO!
        But it doesn't mean anything. Sob story's can be found in the best of times. News outlets probably keep them on file, and just pick them out when they need to (if they don't manufacturer them completely)

        In the real world, everyone has an agenda, and they bend the facts to suit that agenda. You think that you're outside the system? That the writers and editors don't know you'll react this way? They do.

        And that statistic is weird. Why go back to April 2016? Unless you're trying to make it seem like theres a clear correlation where none exists, and your fishing for data to back that up.

        • -7 votes

          A news outlet publishes a sob story, and you get red in the face and start shouting at the screen I-TOLD-YOU-SO!I-TOLD-YOU-SO!

          You'll note I specifically ignored and disclaimed the sob-story part of the article in my OP here:

          But the ABC being the ABC they waste the next third of the article on an anecdotal sob story about a woman who doesn't know the meaning of the word "budgeting".

          So I don't really know what your issue with me or this thread is. Again - care to elaborate on what you think the "forest" is here? Your comment has almost more questions than actual comment.


          In the real world, everyone has an agenda, and they bend the facts to suit that agenda. You think that you're outside the system? That the writers and editors don't know you'll react this way? They do.

          Anyway, this is a non-comment. I'm well aware that I'm in "the system" and that all the media I consume will be subject to the individual biases and agendas (deliberate or inadvertent). You can't 100% mitigate this issue, but you can certainly ameliorate it by sourcing information from multiple places ideally on opposing sides of the respective political, ideological, economical lines, and making up your own minds about that.

          But that happens before I post a thread. I'm not going to post a bloated thread with a billion links to varying sources - I'll choose the one that I believe best summarises the issue I'm talking about in as objective a way as possible (and call out any parts of the article I believe are stupid - like the sob story), and link that. People can do their own research if need be.

          • +7 votes

            @HighAndDry: The idea that an increase in payday lending (over the past 3 years!) has a direct correlation to the effects of a banking investigation is not self evident. And even if it was, to criticize it would be to suggest that there was a better option available (Let the bankers go on with immoral behavior! After getting away with it, we can trust them not to escalate it further. Because as everyone knows, greed is self regulating)

            The forest is society. A person with an agenda to push points at a few sickly trees and says 'Look at those trees! The forest is dying because we stopped using x!'
            But in reality those tree's and x have nothing to do with each other.

            • -5 votes

              @outlander:

              The idea that an increase in payday lending (over the past 3 years!) has a direct correlation to the effects of a banking investigation is not self evident.

              Many things that are true aren't self evident. Many things which are true are actually counter-intuitive.

              And even if it was, to criticize it would be to suggest that there was a better option available (Let the bankers go on with immoral behavior! After getting away with it, we can trust them not to escalate it further. Because as everyone knows, greed is self regulating)

              This is just a bunch of unsupported claims. Limiting this conversation to purely mortgage lending, I see nothing "immoral" about banks lending money to people (who are fully mentally competent adults) who've asked for loans and who've voluntarily secured those loans against property.

              The forest is society.

              Oh good. In which case the economy might be that forest's base soil? That soil is dying.

              • +10 votes

                @HighAndDry:

                I see nothing "immoral" about banks lending money to people (who are fully mentally competent adults) who've asked for loans and who've voluntarily secured those loans against property.

                Thats because you are always looking down. You can't conceive of someone looking at you, the same way you look at 'dumb people'.

                But if something were to happen, let say the share market is intentionally crashed, and you lose all your money, and then someone else came along and was like "What, you don't have money stored in various foreign banks, or your own private security force, or the means to manufactor goods for trade? You just expected everyone else to take care of that for you? Well, you only have yourself to blame, don't you!"

                Then I think you'd feel differently.

                • -6 votes

                  @outlander:

                  the same way you look at 'dumb people'.

                  I try not to look at dumb people. I worry that it's catching.

                  Then I think you'd feel differently.

                  Nope. I think you're underestimating not-dumb people here. Only "dumb people" think that their investments in the stock market is any kind of safe.

                  Stock market crashes are a known risk. It's a small risk, but that's why you diversify.

                  Of course, if the entire economy crashes - as may happen BECAUSE OF THE ROYAL COMMISSION KILLING THE PROPERTY MARKET (irony) - there's not much any one individual can do, much like if there was a Giant Meteor ^TM headed our way. In that case you hope you have enough canned food and bullets saved up.


                  Also, I get that it's no fun being one of the "dumb people" but why do you think it's anyone else's fault that they're dumb? It's not their fault, but neither is it anyone else's responsibility. Unless you want to set up some kind of zoo to keep them in.

                  • +11 votes

                    @HighAndDry:

                    there's not much any one individual can do

                    Actually there's plenty. An economic crash would be a disaster for some, but a huge opportunity for others. It would take someone exceptional to navigate the course (sadly not me) but it could be done if you could predict the pattern to some degree of accuracy.

                    Dumb people have their purpose. Just think, If you wiped all the people you considered dumb, you would be the dumb one. Who would you use to feel superior then?

                    It's not their fault, but neither is it anyone else's responsibility. Unless you want to set up some kind of zoo to keep them in.

                    Yeah, a zoo could work, if enough effort went into the enclosures. Who knows, we might be in one now…

      •  

        In terms of the overall pile of debt, 1.85 billion is pretty small beer. So its certainly not the forest.

        And the 2 bit lenders that fund that borrowing can hit the wall when all those people default, without endangering the wider financial system.

    • +1 vote

      Too many problem trees makes a problematic forest.

    •  

      Remember… only YOU can prevent forest fires.

  • +2 votes

    yeah but what about those guys that bought 5 houses and are suing westpac

  • +4 votes

    Here's an article from 2015 of Australia's largest recipient of Centrelink funds.
    Gotta laugh at the lady who ended up paying $2900 for a Dyson Vacuum - like she really needed it.
    Plenty of $10 vacs at Vinnies.

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