APRA must immediately ban ANZ’s new ponzi-mortgages

Today I am in shock, which isn’t easy these days. Via the AFR comes the ASIC chief referencing post Hayne Royal Commission bank reform efforts:

“I am still not convinced that there’s enough wherewithal and ownership by leaders of these financial institutions to actually finish the job,” Mr Shipton told the Australian Competition and Consumer Commission’s national consumer congress in Melbourne on Thursday.

You don’t say. Because at the AFR comes an ANZ gone absolutely mad:

ANZ is set to overhaul lending to property investors by doubling the maximum interest-only period from five years to 10. It will also increase the maximum loan-to-value ratio from 80 per cent to 90 per cent.

If these mortgage are even within APRA requirements then it’s time that they are not. Didn’t we just learn our lesson on interest only loans? How they can inflate property markets, destabilise the financial system, predate upon borrowers and distort economic activity?

The new loans are assessed at a minimum floor rate of 8.25%, which is a very high hurdle to cross. They’re marketed only for high-income professionals with stable jobs. That very few of them will get issued is some comfort.

Yet they are obviously the thin end of the wedge. If these kinds of mortgages were to spread (and they will if allowed to pass) then it is instant bubble material. There’s hardly an Australian specufestor that would not grab one given repayments are so distant that they might as well be never.

That defines the simple fact that these are unserviceable debt. Unless the underlying collateral appreciates wildly for a decade then at reset the remaining period of repayment would render the loan utterly onerous.

In short, such loans are designed for one purpose only: collateral inflation. These mortgages are FAR worse than anything we had before the Hayne Royal Commission.

I can only think of two explanations for ANZ’s behaviour. It either bespeaks a banking culture so inured to accountability that it hovers entirely above the law. In which case the bank is literally spitting on APRA.

Or, ANZ is hemorrhaging investors at such a rate owing to previous lending standards that it is throwing up a desperate signal flare.

Either way, APRA must ban these ponzi-mortgages immediately. For Australia.

Comments

  1. “for Australia” ?

    Nothing, by the banks, ever, is done “for Australia”.

    Who’d disagree?

    • Much to learn you still have…my old padawan.

      Government of the banks, by the banks and for the banks shall not perish from this continent.

  2. I can think of a third explanation: APRA (likely in partnership with their good mates at the RBA) is encouraging the banks to loosen up a bit.

    The drop in lending to investors is massive and must be scaring the pants off the authorities. They need to get some credit back in the investors hands pronto to avoid a real bloodbath.

    I reckon more likely we see other banks follow ANZ’s lead than it is we see APRA cracking down. .

    • Yes, it has come to the attention of the parasites & their regulator jockeys that it’s probably against their best interest to kill the host completely.

      The problem is that the host is already in terminal decline, and thanks to the RC, very aware of the blood-sucking and massively distended ticks attached to its eyeballs.

      That’s an image of a specufestor right there.

    • C.M.BurnsMEMBER

      the banks are ignoring ASIC, APRA and the Government. They are acting purely in self interest – it’s game theory on steroids.

      ANZ will be providing a mechanism by which they can extend some of their existing IO loans; and/or they are hoping to lure ‘very good’ profile investor customers from other banks, most likely because they have too many sub-prime IO investor mortgages and need to balance out some ratios for reporting purposes.

    • I’m with @csfn, brace yourselves for a veritable renaissance of new ‘extend and pretend’ ideas. It is so far the hallmark of this century!Banks, regulators and gov in a joyous festival of creative ways to avoid reality, defy gravity, getting away with it – all messed up. Huzzah!

    • kiwikarynMEMBER

      This has the property lobbyists stench all over it, they pressure the Govt, who pressures APRA and the RBA, who then greenlight the banks. The kitchen sink will be thrown at this. The RC is done, nothing happened, the banks are free to do whatever it takes to stop the ponzi from collapsing and taking them down with it. And should things eventually collapse anyway, well some other guy will be CEO in 10 years time.

    • ‘A real bloodbath ‘?

      The most severe and durable downturn in Australian RE in 40 years isn’t a real bloodbath?

      • Still haven’t lost the gains since 2008, let alone from back in 99′ when our bubble started. It will only be a real bloodbath when people realise they are worse off than they were last millennium.

  3. “We have decided to increase our focus on the investor market,” an ANZ spokesman said. “These changes demonstrate our continued appetite in the investor market, while ensuring we remain in line with our APRA requirements.”
    What segment of clients are they going for? High income professionals with a property portfolio some 10+ years away from retirement?

    • Strange Economics of IO and NGMEMBER

      High income Negative Gearers getting in before NG is removed if Labor get in.
      90% of NG tax deductions goes to high incomes, as they pay 47% tax.
      The RC was about corruption, there’s no risk perceived here – property will still go up 50% in the 10 year period ..

    • Without NG a loan of this sort would make no sense. 8.25% vs a gross Yield of 3 or 4%? Taxpayers to the fore again, propping up developers and subsidising wild punts by speculators. Oh, and when it all goes t1ts up, recapitalising the banks. You couldn’t make this up.

      • The rate at which they assess your service ability is 8.25% , not the rate the customer pays ( which will be close to 4%)

      • kiwikarynMEMBER

        The interest rate is 7.69% or 7.54% if you package your loan – serviceability is calculated on an 8.25% rate

  4. It’s the serviceability that kills it for your average speculator. And if you exclude the masses then this won’t pump prices for average houses. Much ado about nothing I think. Might make Scummo happy and be able to do a media release stating banks are lending again. Future ammo against labor when the recession hits.

      • You haven’t been paying attention to why the credit squeeze is here. You view should apply across the board – but it does not fit.

      • kiwikarynMEMBER

        You are assuming the banks are going to rigorously examine mortgage applications. Or perhaps they go back to just accepting whats on the paperwork. After all, there has been no penalties for banks failing to use borrowers declared expenses, just for using the HEM (and even then, so far there hasnt been any penalties for that either). The game has changed – the banks are being actively encouraged to resume negligent and illegal lending. The Govts coffers and election chances depends on it. The regulators have turned a blind eye to it, the Govt is turning a blind eye to it, the RC report didnt even touch on it – so its game back on.

      • What ?

        You’re literally just making up your own fantasy world – the banks are in full blown damage control mode, they are breaking up their lending divisions, and facing hundred billion dollar law suits – which they KNOW they will lose.

        All the Hayne Commissions recommendations have been adopted except trailing commissions.

        You’re purely making up doomsday scenarios which have no bearing on reality and running with it.

    • This.
      Who is going to qualify for a mortgage with 8% interest on strict income assessment on a $1.2 Million mortgage ? Very very few.

      • I think the point HnH was making was that 8.25% will soon be 5.25%. Thin end of the wedge and all that

    • I think it’s really for the family who bought 1 investment property vs the people with the portfolio since on a 10 yr up loan serviceability requirements are much higher. Maybe not good for the taxman but for prioritising other debts and having those households work off their Ppor debt might be worthwhile.

      • Precisely. Why should doing it tough speculators be subjected to rates as onerous as 8.25%? A fair go is what they deserve — it’s the Aussie way!

    • Oh no, we can’t have that. High interest rates are evil.

      We should just regulate what cheap debt is allowed and what cheap debt isn’t allowed. You know – let the Government pick winners and losers.

      Hail the MP Troll(olololol) Hammer!

  5. It’s a signal flair.

    They are saying they are still open for business (although unlikely anyone will actually qualify for the loan) with an extra shout out for investors who might want to get in before the ALP form government.

  6. “Today I am in shock, which isn’t easy these days”

    HnH, if one is to understand the great mystery, one must study all its aspects, not just the dogmatic narrow view of responsible lenders. If you wish to become a complete and wise leader, you must embrace…a larger view of the Force. Be careful of the prudent, HnH. Only through me can you achieve a power greater than any portfolio managers! Learn to know the Moron Side of the Force, and you will be able to save your portfolio from certain death…..

    • “a solar panel on the roof”

      Nice lie from the ABC about electricity.

      “Australians stay at home with mum or dad longer, looking to save for a deposit or to save on their expenses, which makes a lot of sense”

      It does not make sense to right wing shock jocks who say Aussies should be kicked out of home when they turn 18.

      I wonder if this couple are against mass immigration.

      • I also wonder how they feel about Mass Immigration or why the ABC didn’t mention that a population surge has caused a shortage of rentals in Hobart?

    • Don’t forget the ABC writer of this article was caught out last week doing a snow-job about mortgage refinancing where the subject of the article was not disclosed as being a real estate agent.
      The same old trope: “housing is affordable if you just make a few sacrifices”

    • Seeing as banks actually don’t care about risk (courtesy of a taxpayer backstop) a 40 or 50yr loan can only just be round the corner. Affordability problem solved! Of course, you’ll never really own the home – it’ll be like renting a home you pretend to own.

  7. Tassie TomMEMBER

    My heart sinks reading this article, but thank you HnH for screaming “BULLS**T” from the rooftops. This sort of garbage needs to be stopped.

    Imagine that – 10 years paying a large chunk of your income to the bank, and 10 years later you still haven’t paid off any capital. Hoping for “equity” so you can sell it for more – what if you sell it for less?

    This is the casino on steroids.

      • +1000
        TT – you nailed it. This product is purely designed for speculation. Who will participate? speculators and mugs. Speculators understand the risks and mugs don’t. Most mugs are mugs because are too lazy to research and chose to listen to BBQ experts and old wise men who can’t add. What I am trying to say is if/when both, speculators and mugs, lose their money I will not feel sorry for any. fck em.

    • @ Tassie Tom

      How is that different from stock exchange?

      Gamble is inseparable from nature and no prohibition will ever stop it (as it never did stop anything).
      Same applies for IO loans.
      IO loans are response to both money market (cheap money) as well as housing speculation market (positive feedback). Not the other way round as article suggests.

      Nothing wrong with IO loans of any kind the bank wants to offer – if these are treated as speculative loans and not eligible for tax benefits of any kind and the only limitation .gov.au should impose is the risk limit for the issuing bank (e.g. IO portfolio in relation to % of capitalisation).
      * Prohibition of the product is not an answer to demand
      * Prohibition of the unlimited risk from a speculative product… well that’s the job APRA has.

      • LOL, can’t edit my comment within seconds of posting.

        Above is in response to: “This is the casino on steroids.”

      • Tassie TomMEMBER

        I guess the difference to the stock exchange is the level of gearing.

        Compared to a margin loan on the stock exchange – no difference, except that it is more readily available to the “common mug” and much more is available. Imagine trying to get a $600,000 margin loan to gear up $150,000 worth of share equity into $750,000 worth of exposure. In housing we call that “prime lending”.

      • Banks should be free to take whatever risks they like except they cannot have a taxpayer backstop. This is the issue. It really is time to explicitly remove this backstop otherwise just nationalise the big 4 right now and run them for the benefit of the country.

    • Worse still, it could be a flat or falling market, and you have to factor in still being able to earn the wage you got the loan on. It’s a bad as you can get. If you look at the macro every sane analyst is saying it’ll be a decade or more of zero gains.

  8. MountainGuinMEMBER

    Even under the guise of ANZ self interest, with the poor construction quality of many apartment complexes, how do u tell bank share holders that a long period IO loan in a crashing market for shoddy buildings is a good decision….
    Will the targeted high income orofessionals maintain thier high incomes for at least 10 years?
    This smells very bad…

    • “Will the targeted high income orofessionals maintain thier high incomes for at least 10 years?” – well, they have to maintain high income for more than 10 years as they need to pay off those loans. And these people have to be in their 30s to have a chance of repaying such loan. But the product is aimed at speculators it seems. Gives people enough time to holds during falling market and then flip. It might work depending how far these falls will go, size and speed of price recovery, how much rent can be generated, quality of the building (lol) etc..
      I can’t see too many smart people taking such product but some addicted gamblers aka speculators will.

    • Just sold my ANZ shares this morning. Now hold very few financial stocks. Nice dividends though……

    • Yup. ANZ investors could vote with their feet on this one then the product would be withdrawn. The stock market is a voting machine!

  9. proofreadersMEMBER

    “In which case the bank is literally spitting on APRA.”

    ANZ knows that APRA has always been useless, will always be useless and is in the banksters’ pockets?

  10. One last tilt at the windmill. The results do not matter so much, its the fact they are having a go. Long live the ponzi.

  11. reusachtigeMEMBER

    Ima gonna get me some of these great loans and gear up into this coming mega hyper intense boom!

  12. HnH maybe it is time to realise that the nobility in Australia are genuinely trying to destroy the middle and lower classes here ?

    I know it is hard to accept like finally realising that your mother does not actually love you and never has. But once accepted everything else they do makes sense.

    To paraphrase the great Mr Morris of these pages, “The peasant revolt is over”. We will now revert to the system that existed beforehand.

    • It is said that the chains of habit are too light to be felt until they are too heavy to be broken.

      The great contribution of the information age has been that facts will be masked in the flood of alternative facts so that no one but the selected few can access quality information. Plus, the space is saturated with tons of distractions digital gadgets provide. Throw in the hand-to-mouth daily routines of mortgage stress, and viola, we have foolproof invisible chains.

      It can’t go wrong, can it? Just in case, it may still be a good idea to have insurance in place. This is where the vibrants become handy. We now have enough of them strategically distributed along susceptible locations so that they will act as pressure relief valves if some of the chains failed.

    • Australia is a colonial resource state – always has, always will be. We are given just enough monetary leeway to avoid the revolt or wider cognition of this fact.

      Governor Philips is Governor Morrison.

  13. proofreadersMEMBER

    “They’re marketed only for high-income professionals with stable jobs.”

    How first mover is that of ANZ? A product for employees of regulators, and able to be tweaked for other bureaucrats and for politicians?

  14. St JacquesMEMBER

    We need a depression, one that makes the people want to kill the bankers and other FIRE sector scum and their political muppets with their own bare hands. That is the only way we will get the fundamental changes we need. A catastrophic crash is far more desireable in the long run than this slow, endless per capita stealth melt that’s turning us into a Pacific Argentina. Lord Dudley was so bloody right.

    https://www.youtube.com/watch?v=Vq7JSic1DtM

    • I doubt we would be in “revolt” for too long, before some “Benevolent Power” entered Australia too save us from ourselves and our Iron Ore, Coal, Gas, Farmlands, Water, Empty Dog boxes etc etc.

      • St JacquesMEMBER

        That thought has crossed my mind many a time. It could get very ugly,l very quickly.

  15. “How they can inflate property markets, destabilise the financial system, predate upon borrowers and distort economic activity?

    HnH, is this a trick question?

  16. This is a great product for investors to lock in maximum negative gearing benefits ahead of Labor’s repeal of the lurk.

    I expect a massive rush of people will be grabbing this.

    • Agree. This is the last chance saloon. Although there is a risk for these speculators that credit (and prices) dry up without the tax shelter.

    • Fortunately APRA will be swinging their Macropru Troll Hammer down on this foolishness!

      To prepare the market for those economy saving interest rate cuts that some folks are demanding.

      After isn’t that what Macropru is all about.

      Making the world safe for ZIRP.

    • You’re close Peach, but no cigar.

      It’s a great way to lock in an long-term income stream for the bank (from overpaid muppets who are idiotic enough to negatively gear into a crash and hope the still have a job) and ensure bank bonuses get paid this year.

      • We are both right. I’m just talking about the demand side incentive,while you’re talking about the supply side incentive.

      • Fair point Peach

        Still, seems to me this is akin to Blackstone in the US, swooping in and buying up everything in distress (with borrowed dosh) and then renting it out as rent to own (if you never miss a payment date) and making out like bandits as a result

      • You’re absolutely correct as well. As P points out, just on the supply side. In fact, it would be very surprising if the silver donut doesn’t already have this product out there.

      • If enough investors get into the market (even a normal number vs the large number we’ve had in the past few years) vs the almost zero doing it now that might stop a market crash however or put a floor in it. Then who is the real muppet? In the GFC I saw them offering to FHB’s 110% loans (deposit + LVR + full house prices). People I knew who took it up I thought were completely bonkers at the time gearing into the crash – few years later they benefited massively and have been on easy street since while the prudent got a higher loan later as life forced them to eventually buy. i.e. sentiment is already really low out there. I’m not a bull by all means but there’s a reason many people here are upset by this move – because it is a small but bullish signal on property.

  17. Alternate theory for ya.
    ANZ has been volunteered to put out an even more extreme product and wear the flack, to make yesterdays extreme seem far more reasonable.
    Business as usual post RC. Whocoodanode.

    • Yep, RC over, only thing that had teeth and really scared or worried the banks, obviously not under their control.
      Smirky ScoMo and CC Frydenberg (Cheshire Cat) don’t worry them at all.

      • Ken henry made it quite clear the RC didn’t scare the banks at all. Unfortunately for him, speaking the truth in public and potentially alerting the sheeple is something that simply can’t be tolerated by the powers that be.

    • kiwikarynMEMBER

      Yes. They’ll be busy handing out 5 year IO loans at 4.99% interest and 10% deposits to anyone and everyone else. But no-one will be watching …

  18. They wouldn’t be selling the last chance to lock in a big rentseek/tax shelter on an established home would they. Lol

  19. The likes of The Australian and Ross Greenwood have been screaming blue murder at APRAs refusal to ever avail itself to the media. Byers flat out refuses to be asked questions of any kind. They are a corrupt, immoral bunch of turds deep in the banking/PHC pocket – hence Byers’ five year extension recently, despite the crap that’s gone on for two decades.

    If you really want to know where Byers is on this you’ll find him fast asleep under his desk like George Constanza. MP leaders LOL!

    • Even StevenMEMBER

      Disagree. An independent regulator should remain independent, not engage in a dog and pony show with the media. I’m already concerned these regulators are at risk of becoming too politicised. Better they stick to their speeches / statements on monetary policy / regulation.

  20. well given ANZ just announced it lets wait for the other 3 and the trickle over to the rest of the entire industry…

  21. I can’t see anyone taking out these loans with a view to short to medium term capital gain. They may slow the dumping of investment properties onto the market and allow for more orderly RE price reductions. Too sudden and large a reduction in property prices is very likely to cause large reductions in consumer spending by everyone who owns property and a larger recession than we will otherwise have. ANZ are quite brave to suggest it now and depending on how RE prices go in the next few months regulators will probably support them.

    • ANZ, brave?! More likely scared witless. They KNOW what’s coming – we all do – and anything they can do to try and stall the inevitable will be thrown at the looming economic disaster.
      All this will do is add more fuel to the already uncontained fire.

  22. No issue with these loans apart from a bad public relations blunder from ANZ. Servicing done on P&I term (20 years) at 8.25%. Good luck to your average clueless speculator trying to get that loan.

  23. You understand that taking out a loan where you are contracted to pay down the principal over 20 years (after a 10 year interest-only period) instead of 25 to 30 years will REDUCE the amount someone can borrow… right?

    This product would work well where someone on a high income has PPOR debt and wants to pay down this non-deductible debt while borrowing for investment, without stretching themselves financially.

    Looks like a good option to me, but expect demand for it will be limited.

    • It’s more about maximising the tax shelter. Actually, just another case for limiting negative gearing on established housing as in substance it is capital speculation with a shelter.

    • It reduces the interest rate risk as well for the bank and should also result in a lower interest rate all else being equal. That being said, does not change the poor economics of the investment. Aggressively gearing into a highly illiquid asset with negative cash flows, relying on someone else to buy it from you for a higher price and lower yield. Be interesting to see whether marginal investor gets lured in..

      • The policy (monetary and fiscal) put has been in place for a long time. It’s brave to bed against it.

  24. Today I am in shock, which isn’t easy these days.
    Evidently you’ve lived a sheltered life and haven’t spent much time with Junkies when they’re Jonesing.
    Trust me it’s not a pretty sight and logic is one of the first causalities
    When was young and kinda living on the streets myself I had a Junkie girlfriend who funded her drug habit by traditional means which mostly meant time spent on her knees in the alleys of Darlinghurst (back when it wasn’t a hipsters hangout) Now the payment formula worked kinda along these lines $25 for the BJ + $25 if you were pretty + $25 if you looked young. Now here’s the problem as a strung out junkie you couldn’t possibly feed your habit on the base fee you needed to be getting a little extra.
    When things got really bad she would beg me to hit her as hard as I could to get those veins to pop so she get get the needle in cleanly and not waste a drop of the good stuff.
    But here’s the problem: A badly bruised and beaten strung out junkie doesn’t look very pretty nor do they look particularly young really they just get this old worn and jaded look in their eyes. That combination dramatically reduces your earnings potential and locks you into a lifestyle to be spent on the bottom rung of our social ladder doing stupid and harmful things just to feed the habit..
    So what’s my point…..Well like it or not Credit is a drug, you can use it or abuse it, but you shouldn’t ever expect your dealer to tell you that you’ve transitioned from a little recreational use to obvious abuse. I guess the message is that our little Aussie whore economy needs to buy knee pads, the serious kind that floor installers use, because we’re way beyond the point where we can still pretend to be young or pretty so we’ve got to do some wholesale level cut-priced servicing to even have a hope of meeting that next Mortgage payment.

      • Sorry mate but that old black dog has been following me around a lot these days.
        Usually I have the good sense to hit delete but sometimes the story just want’s out so bad that I can’t delete it it kinda like a story that has earned it’s right to be told.
        Anyway enough of this soul searching before I’m tempted to go somewhere really dark, there are plenty of corners of my past that I’d rather not shine a light on.

      • ErmingtonPlumbingMEMBER

        Intense?,….pfft!
        I have no doubt Reusa that your “life style” is no less risky than Fishos.
        I hope your both getting regular STD checks.

      • reusachtigeMEMBER

        ^^ Hey bloke, I don’t go near that unsociable sh1t. I like to party and my relations enjoy being touched tenderly and often, thank you very much!

    • ErmingtonPlumbingMEMBER

      “but you shouldn’t ever expect your dealer to tell you that you’ve transitioned from a little recreational use to obvious abuse. I guess the message is that our little Aussie whore economy needs to buy knee pads”

      We could buy Guillotines instead of those knee pads and just kill all the dealers instead.
      Aren’t all wars debt related?
      Better to die on our feet than live on our knees and all that.

      • Yep excerpt I’m far more into Patti than Paul
        There’s a little place, a place called space
        It’s a pretty little place, it’s across the tracks,
        Across the tracks and the name of the place is you like it
        like that,
        You like it like that, you like it like that, you like it
        like that,
        And the name of the band is the
        Twistelettes, Twistelettes, Twistelettes, Twistelettes,

    • Good post, and thanks for sharing. You are not really any fundamentally different from anyone else, just a little more exposed to your own inner darkness – take heart. Praying you stay strong and find support you need. Always welcome here 😊

    • Super graphic comment.

      I think there is still time for Oz to be saved – but the turnaround has to come soon or its all over for us as a nation.

    • fisho, that post is beautiful. It should be stored forever in the MB hall of fame, alongside anything Mr Morris slaps down.

  25. Had a bad feeling this would happen just didn’t think the banks would have the nerve to push it so soon after the RC. Brace yourselfs

    • Well, it’s not like they are going to have another RC for a few years, are they?

      Two options here:
      1) this product has already been cleared by APRA
      2) this product is test of APRA by ANZ. Launch a product and see how the regulator reacts. Use this feedback when designing future products.

  26. It will be interesting to watch if the market turns around. What more validation do you need that it is dead when this happens and house prices still tank?
    It will then mean, in hindsight, this was a cover for the banks to say in the future “we didnt cause the crash. We were open for business.. we even open the gates for more investors (though this time we had to do real expense verification, not HEM which we didnt really callout as a major difference). Well, the demand was gone like we kept saying. Not our fault.”
    I actually want to see this happen to test the edges of this bubble.

    • This is probably accurate
      No one yet knows how much debt is too much.
      Does anyone wish to leave any money on the table
      So if a few punters get wiped out, what is OUR risk??
      Nil

  27. Even StevenMEMBER

    Comments on this thread are interesting. I think vast majority agree the volumes of this loan being sold will be small – so financial stability risks aren’t high.

    So what is everyone worried about? Protecting the specufedtors that take out such loans? Protecting the banks?

    In the end, it’s a nothing. Looks poor from a branding perspective, but won’t amount to anything.

    • If the volumes are small now that is not a guarantee that this will not change.
      Protecting banks from mirror image of themselves being TBTF, well, that’s a tough but important task.

      What is worrying for me is that the article calls for product ban based on ideology rather than anything else.

    • Not sure if “worried” is the right word, but you would only need a small shift in weight to tip the balance if the market were already near the tipping point.

      • Even StevenMEMBER

        Tip the market how? To the downside?

        Volumes will be small. Individual specufestors will burn. I’m fine with that.

        Might it add very slightly more selling pressure into a falling market (if the borrowers lose their jobs)? Or does it slightly prop up a falling market? Could mount a case both ways…

        This is a beat up. Won’t make a difference either way.

  28. Hill Billy 55MEMBER

    There have been some comments along the lines that house prices will be higher in 10 years. Got to hand it to the ANZ that they are playing to the tune that’s hit the airwaves and is rising to number One. I guess that is how the “system”works these days.

  29. This is just a marketing scam. None will even apply for such loan, and surely not get approved. Whoever can finance IO loan at 8.5% either already has portfolio or doesn’t want a loan.

  30. kiwikarynMEMBER

    Perhaps its a nefarious attempt to exploit their current customer base coming off IO loans – “hello, we’re just letting you know that we are happy to renew your about to expire IO loan on a new 10 year term at 7.69%. This is still cheaper than what you will pay if you don’t agree to our terms, and we force you on to P&I at the variable rate. Have a nice day”. All these new 10 year loans can then be packaged up, securitised, given an AA rating, and sold as a stable long term bond. #everybodywins

    • Ha. There will be a bit of this. Can almost imagine being in the meeting where all the ideas (and benefits) are being thrown in.

  31. This is so they can roll over the IO loans that are just about to reset which are over the 80% LTV ratio. They obviously don’t want to revisit this issue again by stretching the term out the 10 years.

  32. On a 500k mortgage, the applicant would be able to demonstrate that the can afford post-IO period repayments of $5,850 per month. If we assume their living costs are 60% of their take home pay and the mortgage repayments the rest, the total income pre-tax would be something like $300k p.a. to qualify.

    While that is not unheard of for a household, my assumptions are pretty generous, that doesn’t leave many “investors” to play the market. Doubly so if existing debt is taken into account.

    • Meh not that hard. Two DINK city professionals + rental income + living on scraps like a mortgage slave gets you to 200k probably. As your income rises doesn’t mean your expenses have to either. I think this is to prevent the reset for the majority of investors – those in a middle class home with both working and 1 investment property. I.e. they could pay off the loan but for tax reasons they want to lock in any grandfathered benefits as long as possible and put the extra cash somewhere else.

  33. Looks like they are trying to flatten out the interest only reset spike. It would keep marginal borrowers from defaulting if they are forced into PI. Looks more like survival attempt than growth to me.

  34. Maybe this is a signal that ANZ has been chosen to be the sacrificial lamb and all the bad debts transferred. One of them has to go, sorta thing.

  35. Too deadly bruv

    It’s pretty amusing really, tards always get blindsided by developments such as this. Throw a couple of rate cuts on top too. But MPLOL right?

    Do u really think you’re gonna get a big nominal price crash now? LMAO

  36. Couple of obvious mistakes but not too bad:

    https://www.smh.com.au/politics/federal/fuelled-by-the-block-property-turned-on-its-head-in-2003-and-we-ve-been-feeling-it-ever-since-20190313-p513wu.html

    “Median house prices in Sydney peaked at $498,000 in 2004 before edging down.”

    That’s got to be a mistake as RE in Australia doubles at least every seven years, so the median price in 2004 can’t have been much more than $250k.

    “The depression that swept most of Australia in the early 1890s started on the back of a collapse in house and land prices in Melbourne which, at the time, was the nation’s largest city. Prices had run up by 32 per cent between 1888 and 1891.”

    It was obviously much more than that, because RE this time couldn’t cause a recession because the boom was milder than the Melbourne boom of the late 1880s.

    “[RBA Board Member] Fraser noted the bubble had grown so much that a taxi driver who had just sold a property in Sydney’s western suburbs asked him for advice on whether he should buy three or even four more investment properties.”

    Shoe shine boy much?

  37. The Beetrooter Advocate

    A) Explains SCUMMO being so happy.
    B) Channeling Miggie: Some of us did try and tell you all. Repeatedly. This is just the beginning. There are no lengths they will not go to.

    Can’t wait to read Reusa’s comments btw.

  38. The ANZ scheme is nothing but a rental scheme with an option to keep the renter on the hook for remaining amounts if sold at a loss.
    It’ll become the banks biggest income.

  39. Don’t think there will be too many of these loans. But there will be a few investors keen to get in before the cut-off date when negative gearing goes. I’m not sure that would be a wise strategy, but there is probably a niche market.

    I’m thinking of people with high incomes and kids thinking they will give the house to the kid in 10 years time – the capital value doesn’t really matter as their priority is the kid having a future place in a nice area. In the meantime, the taxpayer is helping to cover any negative cashflow.

    • I was assuming the point was you wouldn’t be the owner in 10 years, but I was imagining people who were going to flip, not that that looks an awesome strategy atm.

  40. Jumping jack flash

    Like all the good bankers running the economy, they keep proclaiming that debt is essential, it is good, it makes you strong and healthy, and most importantly, they completely ignore the effects of the interest.

    They’re banks, after all. The interest is their lifeblood, and shhhhh, don’t draw attention to it! Nobody mention the interest!

    If nobody mentions the interest then nobody will realise that whatever the debt is spent on must generate enough return to cover the interest completely, and that’s just to stay still. If you want proper debt-induced growth then the return on the investment fluffed by the debt must be higher than the interest due.

    In our case there is absolutely no return generated by the investment of the debt – only the fake growth that was caused by the growth of the debt! There is no extra productivity created by this debt.
    Therefore in our case, the interest will be sucked out of the productive economy, and it will be very bad.

    Smarter people than me can decide if there is enough capacity to cover the debt repayment plus the interest now, after everyone was fooled into thinking that the debt growth was actual growth, and then started systematically closing down the means for generating the interest repayments because it was now unnecessary – who needs to actually build anything? We have evolved into an economy of debt – the new paradigm. We now use new debt to cover the interest on the old debt.

    Yes.That old trick always works!

    • ‘They’ the bankers, the RBA, the governments, 3/4s of the population abolutely believe that the current paradigm which you described IS ‘the service economy’ and house price inflation is ‘growth’, ‘They’ have legitimised a ponzi scheme and continue to do so.

  41. Let this piece of Shiz country burn. It deserves it. I’ve never seen so many greedy pigs thinking that they’re decent people.

    • +1
      As a consequence, I have my passport ready, no debts, minimal assets.. But no fking idea where the grass is truly greener

  42. I am in shock today also, but due to Christchurch events. 40 plus murdered. Puts mortgages and in fact most of the clickbait we see most days in perspective really.