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OZ banks lax lending standards a massive risk
Topic Started: 12 Aug 2017, 01:33 PM (1,964 Views)
Ex BP Golly
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"Australia heading for a real estate price crash, experts say

Gareth Costa, PerthNow
May 22, 2017 2:33pm

ONE of Australia’s premier fund managers has warned there is a real risk of a house price slump similar to that in the US and Ireland because banks aren’t properly accounting for household income risks.

Analysts at JCP Investment Partners, one of just three funds appointed to manage Future Fund cash, have warned that “as exuberance towards the Australian home grew to now irrational levels, the old credit rules of thumb appear to have been left by the wayside”....

JCP head of financial research Matthew Wilson and senior economist Craig Shepherd said in a client note that the old mortgage lending rule of thumb used to be to “lend no more than three times gross income unless it’s a doctor, then maybe stretch it to four times”.

But their research suggested banks were now lending at about six times income.

“The banks appear to have weakened underwriting standards to pursue the asset-backed, lend-sustaining, credit-fuelled house prices,” they said...."


http://www.perthnow.com.au/news/western-australia/australia-heading-for-a-real-estate-price-crash-experts-say/news-story/a34607ada35f08f86b5d8c9f5da0d928

"JCP head of financial research Matthew Wilson and senior economist Craig Shepherd said in a client note that the old mortgage lending rule of thumb used to be to “lend no more than three times gross income unless it’s a doctor, then maybe stretch it to four times”.

But their research suggested banks were now lending at about six times income.

“The banks appear to have weakened underwriting standards to pursue the asset-backed, lend-sustaining, credit-fuelled house prices,” they said....."
"JCP head of financial research Matthew Wilson and senior economist Craig Shepherd said in a client note that the old mortgage lending rule of thumb used to be to “lend no more than three times gross income unless it’s a doctor, then maybe stretch it to four times”.

But their research suggested banks were now lending at about six times income.

“The banks appear to have weakened underwriting standards to pursue the asset-backed, lend-sustaining, credit-fuelled house prices,” they said....."
Edited by Ex BP Golly, 12 Aug 2017, 01:36 PM.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Rufus
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Ex BP Golly
12 Aug 2017, 01:33 PM
Analysts at JCP Investment Partners, one of just three funds appointed to manage Future Fund cash, have warned that “as exuberance towards the Australian home grew to now irrational levels, the old credit rules of thumb appear to have been left by the wayside”....

JCP head of financial research Matthew Wilson and senior economist Craig Shepherd said in a client note that the old mortgage lending rule of thumb used to be to “lend no more than three times gross income unless it’s a doctor, then maybe stretch it to four times”.
Actually that was never the case. We used 30% as a starting point and then moved it up or down depending on the factors involved. Capacity to pay analysis was really quite primitive in those days, we didn't even have spreadsheets.

Lending standards are very high at the moment, but credit analysts all think they will star in the next "Big Short" movie.
Jonathon Tepper is trying the same tactic. He'll lose money.
Take risks - if you win you will become wealthy, if you lose you will become wise
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Chris
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Rufus
12 Aug 2017, 02:06 PM
Actually that was never the case. We used 30% as a starting point and then moved it up or down depending on the factors involved. Capacity to pay analysis was really quite primitive in those days, we didn't even have spreadsheets.

Lending standards are very high at the moment, but credit analysts all think they will star in the next "Big Short" movie.
Jonathon Tepper is trying the same tactic. He'll lose money.
You really never get off song do you?

'Lending standards very high' pfffft, how do you write these things believing you are not laughed at.
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Rufus
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Chris
12 Aug 2017, 04:55 PM
You really never get off song do you?

'Lending standards very high' pfffft, how do you write these things believing you are not laughed at.
Well I can see the standard required by banks to get a loan approved, and you can see nothing.

I guess your blind nothing impresses you. I wonder why your decisions aren't working for you.
Take risks - if you win you will become wealthy, if you lose you will become wise
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stinkbug
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There's nothing wrong with lending standards. They have barely changed in years. Given how long we've allegedly been 'in a bubble' for, and how employment is supoosed to be going down the toilet (according to the bears), we'd have seen problems manifest in the loan books by now. And we haven't.

This story is a beat-up.
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While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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Simon_S
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stinkbug
12 Aug 2017, 07:13 PM
There's nothing wrong with lending standards. They have barely changed in years. Given how long we've allegedly been 'in a bubble' for, and how employment is supoosed to be going down the toilet (according to the bears), we'd have seen problems manifest in the loan books by now. And we haven't.

This story is a beat-up.
Won't be in the Next Recession....... :lol

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Ex BP Golly
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()
Edited by Ex BP Golly, 12 Aug 2017, 11:50 PM.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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stinkbug
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Simon_S
12 Aug 2017, 08:58 PM
Won't be in the Next Recession....... :lol
Irrelevant. Like most of what you post.

Like it or not, there's nothing fundamentally wrong with lending standards. If there was, we would be seeing the results.
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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Rat
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Filthy Rodent

Ex BP Golly
12 Aug 2017, 01:33 PM
Australia heading for a real estate price crash, experts say
They sure do. Often.

Posted Image
Edited by Rat, 13 Aug 2017, 08:05 PM.
Consumer protection laws extended to small businesses. Banks not permitted to repossess due to non-monetary defaults (for example, a fall in the property value).
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Simon_S
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stinkbug
13 Aug 2017, 06:23 PM
Irrelevant. Like most of what you post.

You mean there won't be another one........ :lol



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