Revenge of the mortgage ghosts

Australian Bankers Association (ABA) CEO, Anna Bligh, last week announced that banks would commence “the largest ever customer contact process in the industry’s history” as it seeks to contact around 400,000 customers that have deferred repayments on around $167 billion worth of mortgages.

According to The AFR, one in five deferred mortgage customers have “ghosted” their banks by refusing to answer calls, texts, letters or emails. This, in turn, suggests that around 80,000 mortgage holders could be experiencing severe financial difficulties:

Even if the banks have made some progress in whittling down the number of deferred home loans, it suggests that about 80,000 home loan borrowers, who owe a little more than $30 billion, have decided that their best financial strategy is to avoid having any sort of contact with their bankers…

One senior banker explained that people were obviously not talking to the banks in the hope that the problem might simply go away. But, he added, this situation could not continue indefinitely…

“The notes will get a little bit sharper to get a response,” he explained…

“One month after, three months after, the letters will get more severe,” he predicted.

The Australian Prudential Regulatory Authority has permitted banks to extend mortgage repayment relief until March 2021. But banks are still required to ascertain from borrowers whether they are in a financial position to commence repayments.

So, the fact that so many borrowers are refusing to answer calls is a bad omen and suggests that a significant chunk of Australia’s mortgage holders – in the order of 2% – could be teetering on the financial brink and may be forced to sell.

This highlights, once again, why I am cautious about Australian property in 2021.

In addition to the expiry of mortgage repayment holidays, emergency income support (JobKeeper and the JobSeeker supplement), early access to superannuation, and the moratorium on personal insolvencies and bankruptcies are all scheduled to end.

That’s a perfect storm of financial headwinds building for the economy and property market.


Unconventional Economist
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    • My guess is 4 to 6.

      This recession with the hard stop to immigration is uniquely suited to fully rogering Australia’s property markets.

      Why you’d buy now is beyond me.

        • hmmm. now that I think about it. they try to contact you – then if that doesn’t go, they send 1 registered letter, then (eventually) legal, I don’t know the specifics of delinquency time-frames, but that’s how it goes…

    • China PlateMEMBER

      won’t happen TailorTrash.
      At the end of the day no government wants the peoples to loose their homes and become………….well trailer trash.
      Capitalism is on hold, did you not get the captain nemo.

      • SnappedUpSavvyMEMBER

        its on hold till there is a vaccine then, well then at least immigration to 1 million a year with first home owner grants for each vybrant to give to the banks
        think indian families pooling their grants and buying houses, dog boxes, land, whatever they can get

      • thankfully we have more than 70% mono-media to lead the newsday. They just won’t report it; just like unemployment or clearance.

  1. Jumping jack flash

    With an average mortgage size of 400K, or thereabouts.
    This is an absolutely gargantuan pile of debt that nobody should ever need to be responsible for.
    What were they thinking?

    I suppose that enormous pile of debt is simply required to be obtained these days. There is no choice. Its either take on an absolutely huge pile of debt or go without. To be able to save up that much money from scratch would be nigh impossible. I’m guessing these poor fools had minimum deposit as well which would have been absolutely painful for them to save up at the time.

    No surprises these guys have done the emu on the banks.

  2. the “savvy” ones are selling now while the super “savvy” are picking the bottom. In 2 weeks time the ultra “savvy” will start selling while some leftover super “savvy” will still be picking the bottom. Mid Nov comes and the super duper “savvy’ start to sell with no super “savvies” left to pick the bottom.
    Mid March comes the cream of the “savvy” which is our politicians start selling. Corrupt does not mean smart.

        • September 2021 – prices will be 60% down by then, so will fall more the following year – but thats enough to jump in.

          November 2022 – thats when you start picking up your weekender, beach house and a nice flat at Hotham Heights for $150k

    • Speaking of which:

      “Man who go to bed with itchy bottom wake up with smelly finger!”

      It took a particularly wise man to come up with that one.

    • The Sydney Corelogic index has been very flat and even looking like turning upwards over the last month, but in the last few days as the so called selling season started it has started an interesting nosedive.

      The next month will tell an interesting story.

  3. too many people waiting to buy. It seems the property prices in Australia will never go down, defying all logics

  4. China PlateMEMBER

    who is going to crack first
    home owners forced to sell
    or the immigration flood gates opening up again.
    place your bets, place yourrrrr bets.
    no more bets

      • Yeah gotta get that backlog of desperate citizens o/s back into the country before the fishing expedition for more gullible and desperate foreigners (those willing to work for slave wages) can come into the country. Or maybe we’ll decide to p off the land of pooh bear a bit more and say open slather to the good people of HK before dipping into the other immi barrels? However I’m not really sure that the principled people of HK are they type of migrants we really want anymore.

        Anyway it’ll be interesting to see what our desperate betters end up attempting to do.

    • Jumping jack flash

      There are only a couple of solutions, how they get implemented is anyone’s guess:

      * Reduce debt eligibility further so people can be eligible for even larger piles of debt at the same financial circumstances, or worse, which will allow these poor distressed people to roll their debt onto someone else who is now eligible for the correct amount of debt to make everything right.

      * Government borrows/prints/QEs and hands it out to everyone to pay their mortgages (or at the very least, the interest) with.

      Maybe there’s something else that can be done? I can’t think of it.

      • Option 3 – Let it fail.

        Giving people money to pay mortgages indefinitely would end up with many assassinated politicians and bankers by very pissed off non mortgage holders.

        UBI could do this for those on low leverage, those highly leveraged will get washed out in the ensuing storm.

    • SnappedUpSavvyMEMBER

      home owners until there is a vaccine then, well then immigration to at least 1 million a year with first home owner grants for each vy brant to give to the banks
      think indian families pooling their grants and buying houses, dog boxes, land, whatever they can get

    • She suffered an abusive childhood so all subsequent criminal activity, particularly crimes committed while a police officer, must be forgiven.

      Also ugly as a hatful of ar$eholes.

  5. We know when the ultra low interest rate b.r.i.b.e money from the RBA to the Banks is not taken up that there are not enough warm bodies to take up the debt needed to keep the ponzi going, ergo, this is the last bite of the cherry.

      • Arthur Schopenhauer

        He’s the Sun God. You can’t knock the Sun ☀️ God. Of course it’s the Solar Cycle!

        (And if if it’s not interest rates, it’ll be an asteroid ☄️ or similar!)

    • RobotSenseiMEMBER

      They keep using this term “oversupply” like it’s going out of fashion. There’s plenty of demand for these places; it’s just not at their optimistic valuations. But it’s hardly like everyone who wants a place has one and there’s vacant units sitting around like a ghost town.

        • Jumping jack flash

          Everything is affordable if the bank gives you the right amount of money to buy it with.

          There is never an affordability problem in the New Economy, only a debt eligibility problem.

          NIRP /- UBI will fix this and lower the eligibility criteria. I don’t know what the delay is.

  6. Spoke to a guy yesterday – mid 40s, really worried about the debt on his mortgage and just wants it paid off in the next few years. How much remaining? Only a touch over 100k! Has managed to keep employment during the pandemic, but knows plenty who are panicking as they went all in on 1m+ refinances on low six figure salaries and are now unemployed and too old to retrain. Going to be a blood bath.

    • Rorke's DriftMEMBER

      These people borrowing $1m on low six figures kept me out of owning a home and still are. I am self employed with insecure contract work. Currently on high 6 figures but I could never nor wanted to borrow as much as those with low but very secure incomes who were keeping prices high. Even now, Id like to own a home but the market has been so distorted by these prks it will take years to come back to fair value or to release quality property that is still tied up. You cant sensibly buy for the foreseeable future as its a strucural long term falling market from unsustainable highs, so just a losing bet and have to defer until these debt slaves are washed out.
      Fk them all.

      • “Currently on high 6 figures”

        You realise “high 6 figures” is about $750,000 AUD/year and over, right? Not $150 – $200k.

        If you cannot buy on over $750k/yr there’s something seriously wrong with your lifestyle.

        • Rorke's DriftMEMBER

          Yes, high 6 figures bnwww. But to elaborate on my point, i have two years to run on a client contract (that can be terminated anytime). I’ll likely be unemployed after that at 57. If I pull money out of my company structure above $180k p.a. its taxed at punitive 47% income tax rates. (We favour people with existing capital in our tax system and try to prevent others building some without debt). So I first take a hit pulling the cash out, then its actually high risk to borrow big to buy a place without a longer term secure cashflow, not sure if the banks would even lend me as self employed and my age. More importantly, I’d have to buy a massively overpriced asset thats in long term structural decline. Decent property you want to own in Sydney are priced way above what you can buy from income and savings (no debt) at any level and are largely locked up by boomers anyway who got in ahead of me and will sit out their days in them. There are just massive distortions in our system that means it doesnt make sense for me to buy vs what I do which is invest in shares to convert income into building up capital I can eventually buy without debt when ongoing property price falls wont matter so much.
          The lesson learnt in the system of the last 40yrs is not to get 3 uni degrees or be entreprenuerial or work hard, the best strategy was to get a secure salaryman job on any income and borrow big and take the tax breaks. And the legacy of all those prxcks doing that will take years to unwind the distortions before its worth it for me to buy a home.

          • I’m not talking business income. Your business revenue has little to do with your personal income (though I grant you it makes life easier when your Pty Ltd is making bulk coin and many living expenses can go through the business).

            I obviously don’t know your personal circumstances.

            Assuming you live in Australia (your comment on Sydney prices) there are a few options for company/trust ownership that leave you with a decent property to live in, and done under tax advantageous scenarios. A good accountant should be able to elaborate (I assume you have the required contacts).

            With that said, if your idea of ‘decent’ requires several million dollars, that’s a harder sell than a current $1m property (which is basically a McMansion 25km from the Sydney CBD, but will be 30% less within a few years (hopefully)).

          • it won’t, we’ll see the bottom before 2023. eye of the storm and all that. not a solar cycle guy btw, I use galactic cycle (s2 star orbit). it’s more accurate.

          • Rorke's DriftMEMBER

            Bnwww I have a one man business, a pty ltd structure is for limited liability and a less draconian tax rate but its my income. Havent looked into owning my home in the company but unlikely to be better than privately owning long term a PPOR. Anyway, dont worry about my circumstances, Im doing ok. I stated all that above to try and illustrate a point about the system we’ve had. Its all debt based, supported by the tax system, all driving this massive housing/credit bubble built by salaried people for which the system is a tailwind whereas for me our economic system is a headwind. And so as these blinkered big borrowers are all scared now its turning against them, I say let it burn.

          • I’m 58, very similar circumstances and very very angry. I can’t express in a public forum what I’d like to do to a lot of people.

    • Jumping jack flash

      100k is a whopping great pile of debt to be on the hook for.
      Good luck to him!
      Maybe he is fortunate and on a substantially above average wage?

  7. Locus of ControlMEMBER

    “One month after, three months after, the letters will get more severe.”

    Ooh, words, scary.

    Let’s face it, it doesn’t get ‘real’ until the sheriff is on the doorstep to forcibly evict you.

    How long does it take to get to that stage?

    • People were reportedly still in ‘their’ home 4 yrs after foreclosure started during the gfc
      Can be strung out a while

      • personally don’t think it’ll get there; I think they’ll just NorthernRock the lowest quintile (ie. fixed 6% forever).

      • Jumping jack flash

        Also in the case of repossessions banks will hoard the properties rather than sell them all at once. US banks still have properties seized during the GFC, 10 years later.

        People were squatting in these places for a while before the banks’ hired goons showed up.

        • Dean MorrisMEMBER

          No they wont they will call up the LMI or Guarantee from the Bank of Mum & Dad.
          Remember they are covered for 20% if houses are down 10% flogg it off at 20% off buying price and claim the insurance.
          Don’t wait till prices drop 30% to only be covered for 20% ……Banks are ruthless when it’s their money on the line

  8. Dean MorrisMEMBER

    So what’s the price of a house that is listed but has………..
    “Reduced” “Contact Agent” “Set Date Sale” “Offers” “Auction” etc etc etc where no price is mentioned?
    Easy look up Suburb and set search to lowest to highest price or highest to lowest price (take your pick) and see where the house sits.
    If there are few listings in your suburb add a few surrounding suburbs.
    When a agent lists a property he has a “Sales Contract” that states if I get a offer of $xxx,xxx I have earned my commission.
    When they list houses on the net with Domain / etc etc they have to state that price no if’s but’s or maybe
    I have sold several houses & listed them and this has been explained by several agents.
    Remember a agent is not going to sign a wishy washy contract with no strike price that states no selling price