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Home repossessions start to bite

By johnboy - 14 September 2006 44

The ABC is leading their national news site with a story on a sharp rise in home repossession in the ACT.

Apparently low documentation loans from mortgage brokers are the main culprit as they’ve allowed silly people to over-extend themselves.

It is, however, good news for folk looking to get into the market as a rash of forced sales should drive the market down nicely.

What’s Your opinion?


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44 Responses to
Home repossessions start to bite
Maelinar 12:55 pm 14 Sep 06

stupid people do not deserve money, nor do they deserve the right to whinge when it gets taken from them on account of their own stupidity.

It never ceases to amaze me how rich dumb people are though.

Tempestas 12:48 pm 14 Sep 06

As a rule of thumb if you can’t get at least (ie actually save) a 10% deposit together, you probably can’t actually afford it. Not a hard and fast rule but a reliable one. If you can’t get a 5% deposit together, you definately can’t afford it.

andy 12:43 pm 14 Sep 06

i’m not quite to the hilt, but i’m close to it.
i got my rate fixed at 6.84 though, and i’m just working down the variable portion slowly.

THe bigger problem than people lending right to the wall, is consumer finance.
mr and Mrs mcmansion go out and buy their house, which they can reasonably afford. whether or not they need it, is stupid, they want it, and they’re entitled.
Then they think, oh we have this nice new house, we nede new furnitiure
so off they go to hardly normal, and borrow MORE money, more so, consumer finance, at stupid 27% interest rates, or don’t read the fine print.

in many cases, its the consumer loans, not the home loans, that get people into trouble.

Danman 12:03 pm 14 Sep 06

agreeing 110% with Snahon

snahon 11:53 am 14 Sep 06

But seepi, I’m sure you still evaluated the actual repayments against your situation before you concluded that you could afford it.

That is where some fall over, they sign up for their loan thinking that if the bank will lend them the money they can afford it. FI’s(generally) don’t take into account individual family lifestyles and thats where you as the borrower must.

Spectra 11:48 am 14 Sep 06

Roland: Got a link for that report? A quick google turned up nothing.

Seepi: Of course everyone’s circumstances are different, however job losses and spousal splits have not, to my knowledge, risen in a way that would explain the rise in repossessions (remember, we’re looking at reasons for the rise, not reasons for there being any repossessions at all). What has risen is debt as a percentage of earnings (read “people borrowing closer to their limit”), and the number of “low doc” homeloans being doled out (read “less checking of whether people can really afford to repay a loan”).

Danman 11:40 am 14 Sep 06

Snahon – “And BAM”

That just reminds me of Jay and Silent Bob “Bikkety BAM” – cheers for the smile 🙂

I could hear Jay despensing financial advice in my head

seepi 11:36 am 14 Sep 06

Everyone’s circumstances are different. I borrowed the max and ate rice and pumpkin for a year until I got a payrise.
People may have lost their jobs, or split with their partners, I doubt there are that many who simply found one rate rise pushed them over the edge. (Unless they work for Serco at defence!)

Roland GRNS 11:34 am 14 Sep 06

Check out the Consumer LAw centre’s actual report “they want to take our home away”. It’s not just about silly people being overextended.

And of course, the broker still gets a commission even if the borrower defaults on the mortgage.

snahon 11:31 am 14 Sep 06

Trouble is many don’t use their pea sized brain and think opposite to how FI’s present their information.

Instead of thinking about what they can afford as a repayment and asking “If I can repay X, what can I borrow?” they listen to the bells and whistles of the FI’s who say “We’ll lend you Y”.

And BAM they get in over their head. Silly silly people…

Thumper 11:28 am 14 Sep 06

I too can lend an obscene amount of money due to equity in my current house. In fact, quite mind boggling the figure that I could lend.

Scary.

However, I would have to agree with the comment about St George. They have done the right thing by me and know the meaning of customer service.

LG 11:19 am 14 Sep 06

I had a similar experience to Spectra – my ‘approval’ amount was obscene. More than double the amount of the home we bought.

People see their ‘borrowing capacity’ and suddenly shift from looking for a home that’s affordable to them to a mini-mansion…

Danman 11:17 am 14 Sep 06

Me and my fiancee are looking at buying another house and selling the one we are in.

We too were credit approved to an absurd amount.
Sure we could pay it off – but its the difference between eating rice and potatos fo 25 years or leading a normal lifestyle.

I would rather a house thats nice but not exuberant and a good lifestyle rather than blowing your budget on the morgage and not haveing any money for good clothes/food/lifestyle etc.

Plus you have to look out for those non bank lenders – some of them can be quite unscrupulous(sp?) and are paramount to loan sharks. St George all the way.

Spectra 11:07 am 14 Sep 06

I got a loan late last year, and was “approved” to borrow an obscene amount. An amount that I may have (just) been able to repay, but could never have managed if interest rates rose, or any kind of unforeseen financial issues popped up. I ended up borrowing less than half what they said I could, and getting myself a house I knew I could afford to pay off.

My guess is that many of these repossessions are people who saw the approval number and thought “wow – we could buy an awesome house with that”, then did so. Without thinking about the consequences.

For those people (who are in no small part responsible for the ridiculous increase in house prices), I have no sympathy.

jr 10:53 am 14 Sep 06

Commonsense would dictate that you do not borrow right to your limit…

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