Mortgage cliff clouds over property market

Recent data suggests that Australia’s deferred mortgage cliff has shrunk considerably since the nation went into lockdown earlier this year.

According to APRA’s latest monthly update, the number of mortgage deferrals had fallen by around one-third, from a peak of 488,249 mortgages in May to 324,894 mortgages in September.

CBA’s latest update also showed that the number of customers on mortgage holidays had shrunk from a peak of 10.8% in June to just 4.0% in October:

While the risks to the property market from large numbers of forced sales has clearly subsided, they still remain a concern according to two new surveys.

According to financial comparison site Mozo, more than one-quarter of households on a mortgage holiday worry they may be unable to resume payments next year:

Some 27 per cent of respondents on a mortgage holiday told Mozo it would be “touch and go” whether they could make principal-and-interest or interest-only payments when deferrals end.

Almost two-thirds (62 per cent) of home owners surveyed said they were worried about selling their home or foreclosure.

In a similar vein, the ABS’ latest COVID-19 household impacts survey, released yesterday, reveals that 11% of Australian households with a mortgage experienced trouble meeting repayments over the four weeks to mid-October, more than twice the proportion in June (5%) during the peak of the coronavirus recession:

For those who live in a home owned with a mortgage, those reporting that someone in the household experienced problems paying the mortgage for their home or investment property was higher (11% in October compared with 5% in June).

With mortgage rates still falling and the banks willing to ‘extend and pretend’ deferrals well into 2021, the risks are manageable.

It is simply not in the banks’ interests to force a large number of mortgage holders to sell, since this would place downward pressure on property values and could result in further forced sales.

Unconventional Economist


  1. Honestly it feels like ground hog day

    I’m seeing now everyone saying the property will boom next year, ANZ, VIMAL, CBA, AFR, MSM, the list just goes on and on

    On NOV 17 2019 it was the same rhetoric as now 10/15% boom 2020 and another 15% in 2021

    core logic data says accross AUST Property prices for the 2020 year from start of the year except for a few places here and there, smaller zones are flat give or take

    Just open your eyes and look what they are doing to hold this house of cards up

    The list goes on and on

    Honey moon rates 1.99% teasers (they aren’t real interest rates they are from free money from RBA to suck you in to borrowing money to keep their Ponzi scheme going, interest rates are 3 to 3.5% accross the board

    Banks are giving people mortgage repayment holidays without too much explanation (banks are shxx scared to ask for the repayment) because they know what will happen

    The government has borrowed $100 billion to give to people to eat repay mortgages and borrow more money that the giving $100s billions free money

    There are no external buyers now so really the only buyer is someone who is selling, other than a few people buying stock market and investment property for yield, but that money is coming out if the bank with zero%, so if rates go to 1.5% deposit rates will go negative …. few innocent first hime buyers …..

    Guys the list goes on and on

    No analyst I’ve read n AUST. has really any idea of the financial crisis that’s about to hit……really from pre Xmas into Easter. They are blind and only focussed on RBA free money nothing else

    They have no idea of the external shock about to hit the world

    Guys you are now flogging a dead horse, there are 2 or 3 cards holding this “house of cards” up

    Every time they come out with propaganda and some fake rubbish policy it’s just another card they are pulling out

    The economy in 2021 is going into a manor downturn

    Governments & Central banks are trying to stop DEFLATION

    They cannot stop it, the DEFLATIONARY CRASH is coming and it’s so powerful that no one can stop it

    The financial system is on the edge of collapse

    House prices are not going up in 2021, They are going straight down

    Good luck to anyone who thinks otherwise

    We have now passed the point of no return, there were 2 choices

    A Financial Stability
    B Keep the Ponzi scheme going to try and stop the economy going under at the expense of Financial stability

    They chose B

    • There will be zero people on mortgage holidays by March – they are all being bought up by the banks via the $200 Billion line of credit.

      I find it amusing that people have not put two and two together. The line of credit almost exactly matches the amount in default plus a bit of leeway.

      Solves every problem there is.

      • boomengineeringMEMBER

        It’s not in the bank’s interest to force a large number of mortgage holder’s to sell because they own the properties until the mortgage is repaid and their own security is tied up in the high value of the title deeds they hold.
        Btw ride finished already.

      • Exactly. The TFF is funny money matched to the needs of the major banks. The size of the TFF will increase as necessary to avoid mortgage default issues.

    • reusachtigeMEMBER

      LOLOLOL how’s those sun rays going bloke? Looks like they are shining brightly on the property market. LOLOLOL.

      • I love you Reus but you are flogging a dead horse

        Shining brightly

        Mate if it was shining brightly, they wouldn’t need 100s billions free money from RBA, hundreds of billion in loan repayment holidays, honey moon rates 1.99 and zero % deposit rates, and cash rate at zero

        Hey when are the big news stories coming out

        RBA interest rate CUT coming …… all over media
        The big cut 0.1 to 0 woohoo

        Then the media will be saying negative rates work woohoo

        The great big negative rate debacle be because that’s next

        The Lord of the Sun has given you another chance to get out

        What goes up eventually comes down. sorry to inform you we still have sunspots and gravity

        They both play a part

        Re SUNSPOTS

        Each down turn has got worse each cycle as each solar minimum gets lower

        This crash which starts in DEC pre Xmas and into Easter will be the worst in our lifetime

        House prices aren’t going up

        Unemployment will be 30% mid next year

        We are weeks away from the greatest financial crisis msybe in history

        • reusachtigeMEMBER

          Oh wow. What’s wrong with you people? Year after year after year of rubbish. In your case month after month after month all leading to zilch. Meanwhile, BOOM!

        • We are weeks away from the greatest financial crisis msybe in history

          Suggest you listen to a few podcasts featuring Prof Kelton, on MMT. That should open your eyes.

    • Yup, I’m noticing the global playbook seems to be the same.

      Saw a video on the UK yesterday that spoke about their housing market. Banks went cold on lending because they could see the inevitable outcome, so the Government stepped in and literally just gave them the funds to keep playing the game. The banks are now just pseudo-Government zombie businesses. Ergo executive payments need to be capped in line with senior public servants.

        • boomengineeringMEMBER

          Housing market ?? and I thought they were homes to live in. Well we could always have a cabbage market and borrow to the eye balls for the investment cabbage.

    • Rates are *not* 3-3.5 across the board.

      You can get 2.5 without even trying.

      So we’ve gone from a massive 60-80% crash in April 2020, to what, negative sideways movement if not outright rises (waves at Bangalow and Byron).

      Massive forced sales to what, a few?

      Vaccines (nope, that was never going to happen, but it looks like it may) and economy re-opening.

      What is going to cause this crash. If it didn’t happen March-Sept 2020, what is going to cause it?

      • Swampy
        The crash is there
        They are holding this whole thing together with sticky tape
        They are desperate to plug every hole
        You know where that ends up
        Swampy, you are going to see the greatest financial crash, worse than the 1930s in 2021
        All they’ve done is delayed it again & made it worse
        Swampy there only solution is just get people to borrow more, government to borrow more

        It’s going to be ugly beyond what anyone can see

        Forced sales sure if you tell everyone in the country who can’t pay their mortgage or just don’t want to that they don’t need to
        Of course there are no forced sales, they are at home watching Netflix, I know because I know a lot of them

        I always said Byron would go up, I just had a friend buy an apartment above the shops in Byron, when he told me what he paid I nearly fell off the chair

        He said I don’t care if I need to get out of Melb I’ve got somewhere to go

        Mate Melb peole with money are buying sight unseen, I know many of them, they don’t care they want an escape route out of VIC
        That’ll finish in time

        And you know what the discussion is with all these wealthy Melbounians

        Do they buy in SE QLD or N NSW

        You know why

        Daylight savings, many Melbournians buying up there won’t go to QLD because of no daylight savings

        Day light savings is biggest concern

        Doesn’t worry me that much

          • Reusa
            Trump hasn’t lost yet.
            The media doesn’t decide who wins and Biden doesn’t decide either.
            This is going to be decided through the courts.

  2. These are falling not because people have a job – its because the banks are buying back the bad loans with their $200 Billion line of free RBA money – that is exactly what it was for – a gigantic sponge.

    This prevents the houses being listed, keeps families in their homes on minimal rent, prevents a flood onto the market preventing a crash and also makes it look like there is large buyer demand.

      • There are 1 or 2 cards left

        AUST unfortunately is going to have “the great AUST housing crash”

        We are in the next Great Depression it’s just being covered up

        I’ve also heard that from senior bankers

        And all those bank reports Goldman’s etc, that’s what they want you to believe, the smart ones in all these places know exactly what’s coming ……

        If they publish the truth they lose their job

        • working class hamMEMBER

          Hasn’t the TFF backstopped the Banks loan book?
          The transfer of bank debt to the people of Aust is already well on its way. WFH and Syd/Melb CBD exodus will transfer wealth into regional markets providing a floor until the the next election, with god knows how many rortable “stimulus packages” along the way.

        • chuckmuscleMEMBER

          Could either of you explain the mechanics of how the TFF let’s banks buy back the bad loans?
          In other jurisdictions post GFC it was a government capitalised bad bank that bought the rubbish off private banks. Doesn’t seem the same set up to me. I also don’t understand why bank would want to buy back the bad loans? And buy off who?
          I want to believe, but the TFF would appear to be a poor way of going about it…

          • CM
            Honestly don’t even worry, I’ve never even bothered even looking what it is, it’s just more BS to make you think everything is ok

          • working class hamMEMBER

            Not sure if you meant me or not?
            But my understanding of the TFF, was that it allowed banks to transfer its debts from foreign capital markets to the RBA which has a much lower rate. Assuming the housing market continues to slide, the banks will transfer more of their debt into this space.
            The RBA then controls the rate, negative could be on the cards, without the official cash rate going below zero.
            Banks still have profit margin, debt is almost free and Aust Govt picks up the tab.

          • chuckmuscleMEMBER

            Thanks both WCH and bcinch.
            So from what I understand, the claim is it is the bank debt which could turn sour for foreign capital sniffs out something rotten. In turn that would spike bank credit risk and inevitably those higher bank borrowing rates would have to be passed onto the end borrower = highly indebted working class punters, thereby bringing the whole system crashing down.
            Maybe I have just finally joined the dots as to why the TFF is referred to as stealth nationalisation of our banking sector (and in all honesty was it ever not going to end this way?). We are looking more Chinese by the day.

          • ‘Banks still have profit margin’.

            Time will tell but the onus is on the banks to manage internal costs more than ever because the margins are historically tiny. There’s only one way they tend to do that…….

            They’re now an arm of Government and pay scales need to be aligned.

          • Nah Jimbo – Execs can still earn the big bucks – just need to remove more real workers. It will cover a year or 2 of bonuses then there will be some massive stuff ups and they can raise a big provision or two (“one off”), outsource the remediation to consultant mates and repeat.

          • boomengineeringMEMBER

            Why wouldn’t banks still make a profit at negative interest rates if they pay mortgagee holders 1% to borrow but charge 5% to depositors, especially if the gov’t succeeds in cashless society.

          • The TFF – Banks are allowed to borrow a certain portion of their book at 0.1% from the RBA. This reduces the need for more volatile and higher interest rate capital pools such as offshore. At the moment the TFF is relatively small % of their book but the theory many on here believe, including me is that they will take the rates to 0% and allow banks to borrow up to 100% of the book from the TFF.

          • @Gareth ‘…take the rates to 0% and allow banks to borrow up to 100% of the book from the TFF’.

            What do you think that would do to home prices if that were to happen?

        • That’s all well and great, but literally every metric suggests that won’t happen in 2021. Hasn’t happened this year and I can’t see it happening next year. There is far too much liquidity funny money floating around.

          And your claim of 30% unemployment in 2021 in your other post is hilarious.

          Seriously dude you need to adjust your timing to your doomsday mega bear calls.

          • 90k
            I’m not always bearish

            I said in 2018 to buy ASX at 5500 to 7,000
            I said that bonds would rise through the roof from 2018 to 2020
            I said for long term gold will rise in AUD, I said even 2/3 months ago buy on dip at 2450
            I said USD would rise in January this year into crisis

            Not everything goes down in a major crisis

            Bonds may go up first before down, gold fell first in GFC as USD rose

            I’m telling you there is going to be a major crisis, somethings will fall some rise

            There is no magical rebound in 2021

            Anyone who thinks so on a different vaccine announcement every week … is kidding themselves

            REAL UNEMPLOYMENT will be 30% mid next year as job keeper finishes

            Let’s talk after Xmas break ……

            We are headed into serious deflation

            Deflation is horrendous

            We haven’t lived in a deflationary environment

            Stagflation is bad but deflation is a disaster

            We are headed into deflation first then stagflation

            Central banks are doing everything to stop deflation

            They can’t stop it this time

          • boomengineeringMEMBER

            Hear what he said REAL unemployment not counting 1hr/wk as employed. Before anyone criticizes bcnich please absorb the content fully, then go for it if you will.

          • Thanks BCN and Boom. They gaslight you really hard with their “official” stats. Always good to be reminded of the real figures.If I remember correctly, it’s already over 20%.

          • @boomengineering – I did read his post. It said exactly this “Unemployment will be 30% mid next year.” Perhaps you should re-read it? Then he said afterwards, oh not the official metric of unemployment, just some other metric which has not yet actually been stated. Total backflip.

            Arasaka – respectfully, I’m not gaslighting bcnich? I’m challenging his bearish, doomsday is just around the corner, broken clock is right twice a day predictions he spams this blog on every second day. They are, generally, tail case outcomes and he presents it like its an 80% probability ‘look out now’ event. Every post, just lines of doomsday waffle. Just like the ‘don’t buy now’ guy that posts on this blog, where if anyone actually followed what advice, they would have lost a lot of money the past 8 years.

            If bcnich feels entitled to on almost every property post on this blog to spam everyone with chicken little doomsday predictions, he needs to understand and accept that also entails some healthy criticism, and especially from other paying members of this blog that hold a differing viewpoint. It goes hand in hand.

        • Whats your opinion on mortgage rates going up for the last few months in the UK, bcnich.
          the B.O.E set the interest rates at .10 back in March i believe.
          The reason given for the rises is huge mortgage demand and low staff availibility due to covid, the later sound s a little sus. But outside my experience also.

          • J

            I don’t know UK
            but I guess they realised these borrowers are never going to repay their loans and the bank needs to raise rates or go under

            Next year in AUST banks will raise interest rates to survive

            Also credit spreads across the board will increase like GFC

            Default risk premium

            This is a joke

            You’ll see cash rate at zero everywhere but banks will widen their spread

            I can’t see much under zero for depositors, everyone will stiff their money under the bed
            Lenders will need 3 or 4% at a minimum to survive l
            It’s nothing hugely scientific

    • Er, but they don’t have to ‘buy back’ the loans – they’re either on their balance sheet already and if they’ve been packaged up into RMBS and sold off, then it’s not their risk anymore.

      I think the situation is more simple than you think – the TFF is simply there to provide funding relief, make sure the banks aren’t too squeezed by market forces. Profitability is already under severe pressure as it is. The TFF also allows banks to offer mortgages at competitive rates – thus these teaser rates you see around. But the TFF is not a blank cheque — banks can borrow from the TFF up to an amount that represents 3% (or so) of their total liabilities. Sure, this can be expanded down the road but at this point only a relatively modest amount can be made available to the property market before the teasers will disappear.

      There are no conspiracies here — just a central bank making easy money even easier.

      • chuckmuscleMEMBER

        Sounds right to me. Could even remove the need, since it is only a fake construct anyway, for capital ratios. Why should banks even have to borrow to fund lending? Especially if we are going to nationalise the banks, why don’t the brain donors and oxygen thieves at APRA and the RBA just go there directly, instead of p!ssing around with sh!t like the TFF?

        Seems like we play this pantomime so we can tell ourselves that banks are well regulated and market forces still operate. We all know they don’t, let’s pull back the curtain and watch little Philly and Wayno madly pulling levers to keep it all chugging along.

        No reserve requirements, no leverage ratios, make as many loans as you like at whatever rate you like too grow your book, if it goes bad we are going to nationalise them anyway so lets just go there without f%cking around. I would genuinely support this if the new money created was being hosed at businesses/creativity/productivity, but we all know what levers these muppets are adjusting.

        • This is true. But you would be pretty p!ssed off if the banks were paying their executives 7-figure sums and their shareholders huge dividends while the banks were effectively nationalised.

  3. Easy answer. With a mortgage at minus 5% the owner of the debt gets a weekly rebate of their principal if they need it, or a reduction in their gross debt. Instant Debt Cliff cure-all.
    Who will pay for it? We will, via the abovementioned Government line of credit.
    Debt doesn’t go away; it just gets transferred. And it’s all going to be transferred – to me and you.
    (NB: There’s actually some sort of sense to Negative Mortgage Rates if the collective gross debt amount stands still i.e. spread the Government Debt over a very long timeframe of repayment that an individual can’t. But it won’t; it can’t. More and more will be assumed; compounding the problem, and no amount of low interest rates is going to either cure that, or stop it)

        • 90k and Tony

          Come on you are both smart guys

          You have to be joking …

          How long do you think that will last for.
          What a disaster.

          You go to the supermarket and they pay you to take food…….

          This is how desperate they are

          Start a new business

          Business plan

          I will pay people to take my products …..

          Come on

          These are the arguments I am getting against me now…

          Now I know I am right

          • I always bring it back to the raw basics – if money’s free and work is redundant in the equation, who’s going to wipe your @rse when you’re a babbling geriatric no longer able to DIY? Society will fall apart with this model.

          • The thing is the supermarket needs to pay for the items you get, the money from the bank/government is simply an electronic entry into a bookkeeping system that can be generated infinitely at no cost/effort.

        • Yes, it is happening but what I haven’t been able to determine is whether negative rate mortgages can be interest-only ad infinitum (Oz would love it!) or what the principal repayment schedules are. There’s a big difference in outcomes for the borrower during deflation with falling real wages.

      • Correct. Mind you, collapse is pretty much baked in the cake right now and I would certainly support it happening sooner rather than later 😉

    • chuckmuscleMEMBER

      I used to think negative rates were a bad idea, but quite frankly I’m warming to them. Couple of things required (1) macro pru to stop asset bubbles, I know everyone will laugh at this, (2) it punishes countries like China and Germany who run chronic surpluses (3) a government not beholden to an ideology of balanced budgets so they can issue all the debt required to balance the CAD so the private sector doesn’t go crazy
      This would go a long way to balancing out the demand deficit, yes it screws internal savers, but either they have loads of assets and have had a good run so spend you [email protected] or they only have a few grand here and there and think they can live off the interest from that, delusional. It is a wealth transfer no doubt, from savers (old peeps) to borrowers (young peeps)

      • I was a young person with high savings, I hated rate cuts. A friend of mine is still holding off with $300-400k of savings. I tell him to do something with it. So it’s not always old people losing out to young people..

      • Actually(TM) I’ve got quite a good wad in the bank for that, TYVM… And I’m certainly not an oldbie by any stretch of the imagination… so I resent your generalization.

      • How old are these old people? I’m mid-thirties.. and it’s shafting me unless I agree to a million dollar debt noose to what.. pay for the excessive debt someone else took a while back. Still fair?
        I don’t mind spending that dough on something productive. But housing is NOT A PRODUCTIVE ASSET – any economics subject/lecture will tell you that. So you can’t convince me that savings is worse than p1ssing it away on a non-productive asset. Sure, incentivising me to spend on something productive is OK, if I’m getting shafted for not doing that.. but no, it’s also rewarding for those that spend on a non productive asset. And here’s where the problem is.

    • This means you can go on the dole, buy an investment property an become rich. That is why this scenario will never happen.

      • It’s actually worse than that. All renters would migrate to owner occupiers if this occurred, decimating the rental market… never going to happen. It would certainly put a rocket under the construction industry, but leave lots of property empty.

      • The absurdity of this idea is that if you were unemployed and had a large enough loan you wouldn’t qualify for the dole.

    • ‘Debt doesn’t go away; it just gets transferred. And it’s all going to be transferred…’
      Yep, the public balance sheet has already been expanded to pump prime more private debt. So more rate cuts and QE and some UBI will fix things, fix things for asset holders such as land bankers and fund managers.

  4. Just finished reading the book “The Road to Ruin”, by James Rickards. Sensationalist stuff, but he certainly nails where we are at. The theme of the book is that the elites always win. Certainly see it playing out in real time.

    • Absolutely they’ll always win, so the strategy of all Australians should be to vote against Australian assets to be sold off, retain our sovereignty, and stop population growing.

      Unless we do, we’re fked.

      Instead, we’re watching GLOBAL elites buy residential real estate, national assets be sold off, secret free trade agreements, and ludicrous levels of immigration.

      We’re doomed if we don’t stop it.

      • “1984” in other words.
        Orwell was on to it :
        “Ministry of Truth. On the telescreens, almost all figures of production are grossly exaggerated or simply fabricated to indicate an ever-growing economy, even during times when the reality is the opposite.”

        • The elites have infiltrated EVERYTHING, including the workers party.

          We are far more down the line than 99% of Australians would believe.

          Our kids kids will be serfs. All the assets we pass down will be used to survive day to day, and taxed away and transferred to the elites.

          It is utter madness we’re watching, while most of the electorate are consumed with wokeness, paying off insane levels of debt, selfishness, and reality TV.

          We have been played like a fiddle.

          • Quite right.
            In 2007 a Sydney city record was paid for a property in Vaucluse – $50 million, incl S/D, and I thought the buyer was nuts. $50 million was a lot of money back then. Today? That same property, probably cosmetically enhanced at best, would probably fetch a quarter of a billion dollars during furious bidding. Sounds like a lot of money. But will it be in another 10 years time? Not the way we are going, and why that same owner isn’t about to sell. In fact, they’ve added quite a few properties to the family holding since then, across the globe.

          • boomengineeringMEMBER

            This is the problem Janet, prices now seem astronomical but in a few years may take more fiat to buy the same even if wages are stagnate purchasing power with selling that RE may have dropped in relationship to the perceived gain.

          • boomengineeringMEMBER

            Wouldn’t let me edit so.
            even if wages don’t keep up with the property price increase, the purchasing power of the profit of the RE sale may have decreased as a result of flooding the system with said fiat, but this is still a better alternative to depositing in a bank where you lose even more money value looking from the sidelines.

    • Poochie the Rockin DogMEMBER

      I think more people are waking up to how globalism has done nothing but benefit the elites – theories like comparative advantage are BS, of course countries with better technology would dominate and use that to create even more advantage in the future stopping the innovation/growth of countries which are behind. If I (someone who is not trained in economics) can see that then many other people should be able to too (just not economists because they take their ideology from the elites)

      • boomengineeringMEMBER

        We non economists at MB blog are well aware but when trying to explain to the masses, the usual reply is that they don’t care because they have no money in the bank anyhow.

        • And I can confirm this in spades. In my circles, the general attitude is ‘ don’t have money in the bank, in fact I owe them money, … not interested’

          It’s quite jarring to see the glint of insanity in their eyes whilst stating that they actually owe money to the bank.

      • As individuals, a country and society, we were infinitely better off back in the 80’s.

        How anyone thought globalisation was in our interests is the most perplexing issue I’ve experienced.

  5. pfh007.comMEMBER


    Who could have possibly known that more NIRP and QE by the RBA was about propping up their asset price bubble.

    Surely they were just trying to lower the AUD to bring Speedo knitting back on shore.

    Those cheeky monkeys really fooled us!

  6. “It is simply not in the banks’ interests to force a large number of mortgage holders to sell, since this would place downward pressure on property values and could result in further forced sales.”

    Ahhh… trends hey…

    • Lines of defense:
      1) it’s not in the buyer’s interest to bid lower the prices for their own future homes
      2) it’s not in the interest of the sellers to allow their property to be “given away(TM)”
      3) it’s not in the bank’s interest to flood the market with forced sales
      4) it’s not in all the banks’ interest to all put even any forced sales through
      5) if all that fails, the government won’t let it happen anyway, so there!

      • oh I agree – I guess my point is all the factors you listed above are not new. MB keeps talking about the ‘cliff’ – the reality is, if the major players are willing to move the goalposts, they are willing to move them again (and again, and again).

  7. ‘With mortgage rates still falling and the banks willing to ‘extend and pretend’ deferrals well into 2021, the risks are manageable.
    It is simply not in the banks’ interests to force a large number of mortgage holders to sell, since this would place downward pressure on property values and could result in further forced sales.’
    It’s almost as if this blog started last week and hasn’t been around for a decade.