Housing Crash 2019??, page-193

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cevatt

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02/10/18

17:01

Post #: 35967047
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Originally posted by Maestro73 ↑

Originally posted by rvajna
The banks seriously should look at not lending beyond 70% on residential properties. They should also seriously ask can mortgage insurance be trusted lending beyond this. Also, they should look at issuing shares to raise capital to cover extra defaults. There may be many properties out there with negative equity which need to be dealt with before it becomes a major problem.
I think the borrower/community would have a problem with reducing the LVR to 70%. The LVR is already ~50% for studio apartments and one bedders (from memory) - the bank know they are harder to offload; reducing it to 70% for all residential would mean the borrower would now have to come up with a 30% deposit or fork out thousands extra in mortgage insurance, which is often funded as part of the loan. If funded, they will be paying even more interest on the now larger insurance costs.

Reducing the LVR further is one of those, damned if you do and damned if you don't situations.

In terms of property in negative equity, the banks used to review loans annually which included an updated valuation. Fairly straight forward, usually outsourced to an external valuer. Potential problems are usually picked up fairly quickly. I imagine the risk could be increased by the speed at which house prices fall, but whilst I see them falling I don't see them in freefall.

Whilst lower house prices could create problems for some existing borrowers, lower house prices also open the door to a larger number of potential new borrowers. One door closes another one opens.

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yes. also you can get an 80% LVR if you buy mortgage insurance. So for houses you should still get 80% if you shop around.

The worst cases are those who bought in 2017 with a 20% equity. With a 10% falling values they still have 10% equity. It is unlikely many people will hit negative equity

In the suburban market if the prices fall to the $650000 level in NSW which might happen in suburbs 40-50 km out then they become buyable for the first home buyer who can buy with no stamp duty

so the market might be slower but many newbies can get in.

I don't see a fall greater than 10% peak to trough except for some unfortunate people

WBC Price at posting: $27.24 Sentiment: Buy Disclosure: Held
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