Fears of housing 'fire sale' as interest-only loans roll into principal plus interest

So what stops the buyers refinancing?
Or are they referencing the bank's overall drop in their interest free loan portfolio risk (ie those products won't be offered going forward?)

I know a few that would probably feel a very big pinch if/when this affects them.

Me on the other hand, I bought an old dump of a place- cheapest house in the nicest suburb, and slowly getting it back up to more livable condition, while others are burdened with a debt 10 times their combined household income, I'm sitting on about 2x. The only down side is the mates don't visit as often for a beer- they think they'll get kooties from the dumpy renovation zone.
I guess life is more immediately comfortable in a 6 bedroom mcmansion with a media room and all the trimmings.

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Originally Posted by Toxic_Avenger

So what stops the buyers refinancing?
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If they cannot make the interest plus capital repayments needed for their existing loan, how would they be able to get another loan, given that interest only loans are now much more restricted? Especially once the market starts dropping (it already has!) and the lender is not prepared to lend as much because the property value has decreased and is expected to continue to drop.

It all depends on what real estate rubbish you read as to whether the market has dropped/will drop/might drop. Whether interest rates go up or down doesn't bother us as we paid the mortgage off 25 years or so ago.
Haven't saved anything though as I spent it all on beer..... :)
Yes there's plenty of huge houses around where we live all bought supposedly with high mining wages without a thought for the future. Banks are at fault for relaxing the old lending rules where you had to show history of wages earned plus not go over about 3 times annual wages or something with the purchase price.
I suspect any that lose their homes will blame anyone except themselves for not making provision for just this type of thing happening.
AlanH.

PS. A couple of years ago we thought of selling and got quotes from agents then a builder we know offered us nearly a 100K more...... but we're comfortable so stayed on. Maybe we should have capitalised on it but didn't and don't regret it.

Don't forget all those who forgot that a home is just that not an investment or a piggy bank and drew down the equity as prices increased to buy cars and holidays.

Yes I sold a boat to a bloke who quite openly boasted of drawing down on equity as often as he can to get more toys. According to him the good times were never going to end....
Personally I prefer to be debt free and pay off the credit card just before the end of the month, every month if I use it.

I wonder how many of those suffering from too many bills ever think of cutting down on their use of the mobile phone? That apparently is still a big cause of bankruptcies amongst the younger lot.
AlanH.

Quote:

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Originally Posted by JDNSW

If they cannot make the interest plus capital repayments needed for their existing loan, how would they be able to get another loan, given that interest only loans are now much more restricted? Especially once the market starts dropping (it already has!) and the lender is not prepared to lend as much because the property value has decreased and is expected to continue to drop.

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Fake in come evidence
Falsely declare living cost
Banks know it but they want more business

Win- win?

I know a colleague who works 13 days out of 14 days.
He starts the day 730 and ends 630. Quite a bit of a **** job he did sometimes. 20 minutes for a filling for example. now that's dodgy. But he has got too many mortgages.

Sometimes he work even longer hours for three months so that the payslip looks beautiful and he then go get a another loan.


Cheers

Quote:

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Originally Posted by ATH

Yes I sold a boat to a bloke who quite openly boasted of drawing down on equity as often as he can to get more toys. According to him the good times were never going to end....
Personally I prefer to be debt free and pay off the credit card just before the end of the month, every month if I use it.

I wonder how many of those suffering from too many bills ever think of cutting down on their use of the mobile phone? That apparently is still a big cause of bankruptcies amongst the younger lot.
AlanH.

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Yes plenty out there were riding the gravy train buying toys and adding it to their mortgage. They never thought their toys would depreciate and be worth a lot less when they needed to sell them, but still have to pay for them long after disposal. Investors had the negative gearing. So do come crying now.

caveat emptor
ˌkavɪat ˈɛmptɔː/
noun
[COLOR=#878787 !important][/COLOR]

• the principle that the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made.
  [COLOR=#878787 !important]"caveat emptor still applies when you are buying your house"[/COLOR]
  
  
  
  

Says it all really

I always thought this was called a Market Correction .

Those of us that bought homes and/ or businesses at 19% interest or above are I am guessing not really all that surprised. I'm certainly not, bought my first fishing trawler at 22.5% interest.

When our eldest daughter went to the bank to get the loan for her unit , she came back with 2 options ,interest only or I think about 7% in those days , we told her to do her sums and make all her repayments on 15% with no redraw or draw down option, if she couldn`t do that then she couldn`t afford to purchase it.

the market has dropped in Darwin about 20% since the last big gas project has all but wound up , if you are lucky enough to be able to sell you are taking a big hit on your purchase price if you bought during the bubble. The housing decline is alive and happening up here and I cant see anything in the near future that will slow it down.

The daughter is very happy she listened to her parents as she has paid a considerable sum off her loan , and if she decided to sell she could take the price drop hit and still walk away with a good deposit for her next home.

Sure the banks made it easy with interest only but at the end of the day the customers had to walk thru the door to sign up , haven't seen it mentioned at the banking royal commission that people were physically dragged thru the door. Sooner or later people have to take responsiblilty for their own actions.

Cheers Ean