I’ve just been reading the online news & apparently The Australian, by using the FOI Act, have accessed Reserve Bank documents which prove that Australia’s major banks have “ignored” the sub-prime crisis in the United States & rising interest rates and have been issuing higher risk home loans. In the last six months of 2007, banks informed the Reserve Bank that the proportion of new mortgages described as “non-standard” was increasing, this included loans with high loan-to-valuation ratios. I find this utterly unconscionable. I know that people should take responsibility for their own financial management, but unfortunately a lot of people just seem incapable of it.
Apparently households with annual incomes of $60,000 or more could borrow up to five times their annual income! That’s $300,000+! I’ve just done the sums & for a $300K loan over 30years at 8%, repayments would be just over $1,000 a fortnight – & that's just to minimally service the loan! And the great Australian dream will end up setting them back approximately $719K over the lifetime of the loan if they are only able to make minimum repayments – no wonder the banks are dishing these loans out - just look at the yields! The Australian has also found documented evidence that single individuals have been able to borrow amounts requiring repayments of 50-75 per cent of their net income! No wonder people are defaulting…..& the banks have also targeted people with equity in their homes & encouraged them to refinance & now, for some, that equity has gone. We ARE headed for a crisis.
Apparently households with annual incomes of $60,000 or more could borrow up to five times their annual income! That’s $300,000+! I’ve just done the sums & for a $300K loan over 30years at 8%, repayments would be just over $1,000 a fortnight – & that's just to minimally service the loan! And the great Australian dream will end up setting them back approximately $719K over the lifetime of the loan if they are only able to make minimum repayments – no wonder the banks are dishing these loans out - just look at the yields! The Australian has also found documented evidence that single individuals have been able to borrow amounts requiring repayments of 50-75 per cent of their net income! No wonder people are defaulting…..& the banks have also targeted people with equity in their homes & encouraged them to refinance & now, for some, that equity has gone. We ARE headed for a crisis.
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