A lot of this came about because of- property sprukers that encourage people to buy as many properties as they can using this type of loan, having mortgage payments occurring at different times of the month, using negative gearing and in general just using debt with little to no equity in these properties. Worst of all a significant number of them have mortgaged or used home equity loans putting their primary place of residence up as collateral. Now they are being caught by the switch to principle and interest loans, property has stopped rising and there is a real risk of rising interest rates.
My bank offered me property equity loans and I was absolutely horrified that they were even talking about it.
The RBA is stuck, it cant raise rates but it has too. Rising interest rates and 10yr bond yields are forcing up the interest rates in the US.
This is not going to end well. Ive been through a few property crashes in my time but this one could well be the worst simply because they really cant take rates lower and the cost of owning a home is becoming more expensive as everything goes up in price.
