That's exactly right Paul, the way the default is handled by both the defaulter and the bank is entirely different here compared to the US.
It is as you've said.
But still others in this thread have likened our lo-docs and no-docs to the US sub-prime type loan, and in truth they are not at all similar.
Here, although proof of income is not required, other qualities have to stack up. For instance, you need to have equity of some sort against which to secure the (bulk of the) loan.
In the US, these subprime loans have becoma known as 'NINJA' loans - meaning No Income, No Jobs or Assetts. This amusing acronym speaks volumes about the way in which the money was handed out to totally uncreditworthy customers.
Here, our no-doc and lo-doc loans are far more secure than the US Ninja loan, and we also have only about 2% of the total loan book written as this type of loan. Versus their approx 20%.
So, im(humble)o, I see a flattening off because we've had a rapid rise in some parts of the country, - but not a collapse as over there.
And finally, of course we could expect the Banks (Ian McFarlane in this case as RBA spokesman) to tell us not to invest with a view to looking after ourselves in our retirements. It's not in the Banks' interests to have us use THEIR money to make money for ourselves is it? They HAVE to perpetuate a system whereby we get told to save save save and put our money in the Bank for next to no return, while they use it to make mega-bucks from loans and the overnight money-markets etc. Aren't we always complaining about how much the banks make? Well, they really really really want it to stay that way.
My two penneth
Cheers,
Quote:
Originally Posted by [1ponders]
While I don't pretend to understand the banking system at all, except that it is not setup to benefit anyone except the banks (cynicism reigns supreme) there is one thing I heard the other day on the ABC radio (from a high level finance/banking something or other) regarding the difference between Australian housing loans and American housing loans that will make a huge difference in the economies.
Apparently in the states if you are unable to meet your mortgage repayment you can simply go to the bank, hand over the keys to the house and walk away. You don't have anything to show for it but you are released from you debt.
Here in Aus even if you hand over the key you are still responsible for the debt. ie the banks get the house and you still have to pay it off. Now that is going to make a huge difference to the economy. People who can afford their mortgages won't be able to get out of them. They will still have to pay for them.
At least that is how I understood what was being said.
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