ABC’s 7.30 Report last night tackled irresponsible lending by the banks, which is expected to be under the spotlight of the Banking Royal Commission today.
The segment features a middle-aged nurse, Linda Schmidt, who borrowed millions of dollars interest-only to purchase investment properties around Perth and is now facing financial ruin.
The segment also features Digital Finance Analytics’ Martin North, who discusses the interest-only reset time bomb (chart below). North expects a 10% to 15% drop in property prices over coming years as a result of some $150 billion in interest-only mortgages having to reset to a higher interest rate, causing forced sales.
![](https://www.macrobusiness.com.au/wp-content/uploads/2018/02/qwefq.png)
North says the situation facing Australia is similar to the US sub-prime reset experience:
![](https://www.macrobusiness.com.au/wp-content/uploads/2018/02/next_wave_mortgage_defaults.gif)
Pass the popcorn!