BFCSA estimates Australian subprime could reach $100 billion.

Is it possible to grow a housing bubble the size of Australia’s with prudent lending standards?

So it probably comes with little surprise when Denise Brailey from the Banking and Finance Consumers Support Association (BFCSA) suggests there could be an estimated $100 billion worth of toxic loans in Australia. Bill Hoffman of the Sunshine Coast Daily sums it up as “AUSTRALIA has the world’s biggest sub-prime mortgage problem per head of population.”

Today tonight has aired a story tonight on the large toxic loans banks are providing the unemployed. The video can be watched here.

» Toxic loans – Today Tonight, 10th May 2013.
» ‘Hidden’ loan trouble looms across Australia – The Sunshine Coast Daily, 4th May 2013.
» Victims reveal ‘rogue’ swoops – The Sunshine Coast Daily, 4th May 2013.
» Senate briefed on Subprime crisis : Day 1 – Who crashed the economy, 8th August 2012.
» Senate briefed on Subprime crisis : Day 2 – Who crashed the economy, 9th August 2012.
» Banks try to hold Subprime floodgates closed – Who crashed the economy, 10 August 2012.
» Banking and Finance Consumers Support Association




21 Comments

  1. Yes, the banks are greedy; yes, they ‘misled’ and ‘lied’; yes, they are total and utter bastards, BUT they are ‘salesmen’ selling a product, and they haven’t broken any laws. I’m not saying it’s right, I’m not saying it’s an excuse, but you have to ask yourself what kind of an imbecile would borrow $2.4 million KNOWING that she couldn’t possibly EVER hope to pay it back. The woman was on Centrelink benefits for goodness sake!

    The sub-prime crisis from toxic loans that kicked off the GFC in the first place cannot be squarely and wholly blamed at the feet of the banks. You’ve to also question the greed of the borrower. I have sympathy for those that have lost their homes and that will lose their homes, but until the law is changed by an Act of Parliament, the banks and mortgage brokers will not pay for it. ‘Legally’ they have done nothing wrong. The borrower/customer signed and agreed to the lies and the exaggerations. They were taken in by very persuasive confidence tricksters. They are accomplices to this disgusting practice which has resulted in inflated property prices and a bubble the likes of which we have never seen. You stupid, stupid, stupid people. You’ve been conned and now you want to be bailed out. Boo hoo. You made your bed, now lie in it!

    As I say, I’m sorry that you will be repossessed, and while I’d love to see these unscrupulous and disgraceful bankers and brokers behind bars, equally I have little sympathy for the toxic combination of greed and stupidity.

  2. As Jeff Kennett once famously said, “no amount of legislation will stop the stupid from being stupid”.

  3. “You can’t cure Stupid”.

    One wonders just how many more are in this situation – poorly advised? Or “victims” of blind greed (and the “Prices to the Moon!” Australian mindset)?

    Just think what the community COULD have done with all the misallocated funding. Problem is, once it’s spent, it’s spent, and all the Political gnashing of teeth and wailing isn’t going to get it back.

    “Interesting” times ahead for the “not quite so Lucky Country”!

  4. Did anyone notice how quickly the banks reacted to the rate cut on Tuesday. Each other was jumping over the other to slash rates first. Anyone know why?

  5. I think the banks feel they can probably stimulate some credit growth at the moment with the lower rates. Unemployment is still pretty good (who knows really). This coupled with the Australian psyche of prices to the moon might just get one hell of a dead cat bounce happening and really drive our debt to the moon over the next year before the mining boom collapses and the unemployment (which has been growing slowly) jumps and we are in a deep recession.
    There will be so much money tied up in this housing Ponzi debt bubble that it will be hard to stimulate the other sectors of the economy and instead of a slow slide for house prices it will happen quickly.
    We might have to wait 2 more years.

  6. Steve, you’re probably right. Just when we think the bubble can’t grow any bigger, the government/banks/whoever come up with new ways to inflate the bubble even more. Everywhere else in the world, if prices were so out of whack with rents, for example, the ceiling on prices would have been reached. But here in Australia negative gearing takes care of that. Although it just doesn’t make sense, maybe this bubble can defy gravity for a lot longer.

  7. However you want to look at this – ecologically, socially, economically, politically, food & fuel, we are entering a difficult time, recession, depression, collapse. Who knows?

    The longer we put it off, the harder we’re gunna fall. Better to be a somewhat early collapsing nation than a late one, with energy in the bank, available to put together ‘low tech’ solutions that will sustain us through this difficult period in history.

    Unless we put aside our ‘cleverness’ and start acting with some real ‘intelligence’ we will be up shite creek without a paddle.

    These FHOGs, low interest rates, and the like, are little more than a feeble attempt to hold back the flood gates that are soon to burst.

    After watching the above news story, it would be easy to poke fun at these people. Yet they are simply the first round of cullings. When will you, your father, brother, sister and mate be asked to step up to the plate?

    If you have some sort of awareness of Australia’s national, state and personal debt, it starts to feel far more real.

    In a system as stupid as ours, sooner or later, we all get hit! And there will be tears.

    Five Stages of Collapse
    http://howtosavetheworld.ca/2013/04/16/links-of-the-month-april-16-2013/

    1.Financial collapse: Faith in business is lost. Banks go bankrupt. Savings and net worth disappear.

    2.Commercial collapse: Businesses go bankrupt. Currencies collapse. Trade collapses. Shift from commercial ‘trade’ economy to barter and then to Gift Economy.

    3.Political collapse: Governments go bankrupt. Power devolves to local levels by default, and this leads to power struggles. Communications systems collapse.

    4.Social collapse: Trust in others is lost. Those who had power before collapse fight fiercely and desperately to hold on to it.

    5.Cultural collapse: Faith in the goodness of humanity is lost. Civilization collapses.

    A good time for a surf me thinks.

    Glenn

  8. Average Bloke
    I love the way so many of these stories do not have comments, we do not want the truth do we!
    Like others who have posted recently on different forums, I too am completely happy to see any fool leverage further into the Ponzi or assign themselves to a lifetime of debt because they have chosen not to educate themselves, or have listen to mainstream media.
    It is a pity but what can we do for these people.

  9. Working in Engineering in Perth I can tell you first hand that things are slowing down – people being let go, projects drying up and less work than their used to be so it appears that the boom time is over. So how are these high house prices going to be maintained? The next 6-12 months are going to be interesting times, don’t get caught with a leveraged property no one wants to buy for more than what you paid.

  10. ^ I know what u mean Steve.

    Just last night in a Channel 7(Spruik) Brisbane news break I was once agian delighted to be informed that ***NEWS FLASH***
    The real-estate bubble is back to normal! Prices to the Moon!
    Oh what joy!

    It was a very “1984” Orwellian moment.

  11. It all wasn’t as simple so people have make out in these comments with people being stupid. i was very educated. But often it is the poor who were never surviving that we’re dragged into this, the single parents, the lower income earners and normal people for other reasons then suffering ill health. Or with large unemployment trying to recover ground. Certainly is lot an easy road to take putting yourself into huge debt in order to try to build wealth, to make up for lack of superannuation, give your family a better life, because you can’t get the good jobs some get or aren’t on the gravy train of a great paid job. Just the Mr or Mrs Joe average.

    I got into my debt by one shonky builder while building my ‘dream home’. The building dispute, still going through the QCAT tribunal six years later. You can google that story and find out who he is. his name should be well publicised. From the time the BOQ knew of my dispute they made it impossible for me. Would not re-arrange the loans sensibly when i had to borrow more to finish the house the builder didn’t. 7 loans instead of two, albeit large, they totally created a lot of the problem by grossly screwy setups. They bank also falsified Loan Application forms and put my income down as a huge $325,000 per annum after I had signed them. All ‘calculated’ back by the reverse ‘ secret’ calculator. I trusted my bank manager. If he thought it would work I went with it.

    If the Tribunal and the BSA had done their jobs correctly the loans could have been coped with short term, but in hindsight, the evil cross collateralisation of loans, something most people do not even understand the consequences of, that did not need to happen, just greed on the bank’s behalf, when there was mortgage insurance anyway, that spelt the death knoll.
    BOQ’s policy, finance in, and then foreclose 18 months later. There is something very wrong about this bank here. More to do with a bank’s liquidity, posting a 91 mil loss, and deciding to drop the bottom third of its clients, to get back to posting a profit for shareholders? or save itself. All in 12 months. Dirty dealings definitely. We are not unintelligent people. We have just had a number put across us, by all depts, FOS, CMC and the like, who should have been there to protect the consumer, but who don’t.

  12. Tick Tick Tick Tick………. then you isnt there an issue with the low doc loans or is this the same thing…… So many people are going to lose it all.

  13. Mark @May 12th, 2013 at 10:32 pm, you want to know how high prices can be maintained? The government can do a lot more to maintain high house prices. It doesn’t matter who’s in power; both sides want a bubble. They could raise the FHOG, they could INCREASE negative gearing benefits, they could ramp up immigration even higher and they could allow even more selling off properties to foreign investors. Interest rates could also go lower, encouraging higher debt.

    The present Labor government have been pretty incompetent in nearly everything, but the one thing they have “succeeded” at is propping up the housing bubble. Look at Rudd, he tripled the FHOG, opened the floodgates and relaxed laws on foreign investment. Gillard is calling for an even bigger Australia than Rudd was and has encouraged more foreign investment. I doubt Abbott will want to pop the bubble.

    Sorry to be such a pessimist but it really is the government who is the enemy of affordable housing. I wish I could be proved wrong.

  14. Still Waiting:

    Thanks for sharing your insightful thinking. This is what has been lingering in my mind for some time as well.

    But I don’t think you are pessimistic at all. The objective observation is the precondition for any valuable thinking. Please go ahead and keep your objectiveness.

  15. in response to 14 above:

    they could increase the FHOG, immigration, and NG. BUT, jobs are presently being lost left and right, 457 visa’s are under scrutiny, budget has blown out, reducing NG has been suggested openly in the media etc. We all know (at least here) unemployment is understated by the stats.

    all this points to me it aint gonna grow any bigger. when it fully hits the fan is the Q. Similar situation in Canada as here, and worth having a look at what’s going on there too.

  16. Pete, I hear you, but you have to realise that even though Gillard has made a noise about 457s, she hasn’t done anything about it. Everybody knows it’s a rort, but too many are profiting from it.

    Unemployment is increasing but as long as the govt can continue to fudge the numbers they will boast about our low unemployment making us the “envy of the world.” Gillard is throwing $50 million at the Ford employees because they’re in the news but there would have to be more unemployment before the whole situation becomes more obvious. In other words, things are not as rosy as the govt or the media portray them but it can continue like this for longer than we think.

    Removing or reducing NG has been suggested but that doesn’t mean the pollies are actually talking about it except to say no, it will not be touched. And for once I believe them. They will not do anything with it, even if it was the last money-sucking thing on earth. You see, they know that removing it would pop the bubble, and why would they want to do that? Firstly, most, if not all pollies have investment properties themselves. Secondly, there would be a deafening uproar, not only from investors, banks, real estate industry and other vested interests, but anyone who has a property would be upset if their property/ies fell in price, especially if they found themselves in negative equity. If prices fell, so would the wealth effect meaning that people would stop spending. Retail would suffer. The whole country would plunge into recession. The thing is that it’s going to have to anyway because this whole thing is unsustainable, but as long as the can can be kicked down the road it will.

    I’ve been watching Canada and reading Garth Turner’s blog greaterfool.ca. It is similar there in that they have a lot of foreign investment and high immigration. The one thing you never read about on that blog or the comments though, is negative gearing. Apparently they have it there, but nobody even mentions it as being a cause of their housing bubble, so maybe it works differently there. Here, without a doubt it has been a major contributor to our housing bubble.

    You know, most Australians don’t even realise we have a housing bubble. Lasting as long as it has, a whole generation has never seen prices at affordable levels so they think high prices are the norm. Yet, in the early 2000s there was talk back then of a housing bubble. And yet, more than 10 years has passed and we have a much, much bigger bubble. It doesn’t make sense, but it has made a lot of people very rich, and many of these rich property owners will therefore be able to help their children get on the property ladder, keeping the bubble going. Those of us who have been aware of the bubble could never have predicted that it would last so long.

  17. I think you just have to ask the question what has caused other recent property bubbles to burst

    1. U.S.
    2. Ireland

  18. As we can see by the up and coming Treasurer, Joe Hockey, government cannot afford to support middle class welfare any more. Most of the so-called home-owners that I visit or know are struggling to feed themselves. They use childcare payments for preschool and schooling, negative gearing on investment properties and a gamut of other payouts and all I see are the signs of families under overwhelming debt making out they are on top of things.

    One couple I know have had NO CARPET for 10 years stating “carpet is not a priority.” whilst walking on what amounts to chipboard that separates the house from the mud! Yep, they drive BMWs (leased), talk up their life but anyone can see their clothes are cheap and they’re not eating properly. That’s only one example of the many.

    I once had a work colleague state to me that he “— couldn’t afford to send his kid to school if it wasn’t for school payments.” yet he boasts an investment property. Then to top it off he lost money on the share market.

    These people who are play-acting well off, aren’t. They’re gambling their lives away in a game that only the few will win, those being the banks, spruikers of real-estate and a few greed ridden construction moguls.

    Their children are mostly useless lazy dullards whom yes, they buy houses and expensive cars for, but the kids don’t have the motivation or inspiration to hold on to it. The times I’ve heard of children who can’t hold a basic job and expect everything to be given to them on a platter. Why? Because the parents are “buying their kids love” and the Government is buying their parents’ votes.

    Government’s hand will be forced due to external pressures and then it will be a field day on all suckers.

    I’m not sure whether I will still be living in Australia for that, I’m over the idiots and I’m looking to try somewhere else with different idiots. 😀

    Aussie seeks country where people live within their means. Please apply here….

  19. All across Australia I have friends and associates working in hundreds of different fields, yet they are ALL saying the same thing.
    “Work is drying up.”
    “People are getting laid off.”
    “It’s never been as quiet.”
    “We’re heading for a DEPRESSION.”

    I also talk to many business owners (small to medium size) and they are all of the same mindset.

    Unfortunately, most Australians are not too sharp. They are easily manipulated with third rate spruiking journalism and the propaganda machine that is the Government and Real Estate industry.

    What chance do these average Australians with their average intelligence have against such forces? Look at them? They are sheep.

    They were sheep with property, they were sheep with buying SUV’s, flat screen tv’s and keeping up with the Jones’. They were sheep with tattoos and they will continue to follow the flock, oblivious to reality. Try explaining to them that property DOES NOT double in value every 7 to 10 years and that a downturn is imminent.

    http://img94.imageshack.us/img94/3483/liesx.png

    The sheep need to learn and if they have to lose their livelihood to do so, then so be it. We need to get back to an Australia where people looked out for each other, greeted you on the street and bought a house as a place to live. How far most Australians have fallen, all in the name of capitalist greed and shallowness.

  20. @19 and @20 – I’ll add that the Australian sheeple will also fall for the Liberal rhetoric and unfortunately vote in Joe Hockey, a brute of a man, who will seal the fate of this country with that cock Tony Abbott. Haven’t you noticed how the political class in Australia aren’t exactly that sharp either? I’d go so far as to say most of them are bogan morons.

    I’d still rather be here than in Europe or the US though.

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