Royal Commission

<p><strong>EXPERT OBSERVER</strong></p>

<p>The most predictable thing in real estate is the outrage that emerges from some sections of the community whenever dwelling prices rise. Equally predictable is the willingness of mainstream media to indulge the disaffected few<br />
who think politicians and bureaucrats should be taking action to stop the markets doing what they naturally do.</p>

<p>There was considerable media coverage last week of a &ldquo;report&rdquo; from the University of New South Wales which called for &ldquo;the immediate creation of a Royal Commission&rdquo; because rising prices constitute a national crisis and young Aussies are &ldquo;locked out of the market&rdquo;.</p>

<p>One headline based on this report declared: &ldquo;House prices a time bomb ready to erupt in the absence of immediate intervention&rdquo;.</p>

<p>The lead author was someone smart enough to attain the title of &ldquo;professor&rdquo; but not clever enough to understand the dynamics of real estate markets.</p>

<p>Here&rsquo;s one quote that demonstrates how little the report author knows:</p>

<p>&ldquo;Rampant price growth has&nbsp;returned to the&nbsp;larger cities&nbsp;and is now&nbsp;spreading to&nbsp;regional Australia. This&nbsp;is&nbsp;in&nbsp;part&nbsp;due to the pandemic-fueled work-from-home revolution&nbsp;but&nbsp;is&nbsp;also because so many younger Australians can no longer afford the life they want as homeowners in the larger cities.&rdquo;</p>

<p>There are several errors in that one short paragraph, which would tend to destroy the credibility of the commentator:</p>

<p>1. Price growth did not start with the big cities and spread to the regions &ndash; it&rsquo;s been the opposite. The regions have been leading on price growth for some time, alongside some of the smaller cities - and the big cities, notably Melbourne, have belatedly joined the party.</p>

<p>2. The work-from-home revolution is not an outcome of the pandemic. It&rsquo;s been under way for several years and has been fueled by technology and people&rsquo;s desire for a better lifestyle. Sydney has been losing population to internal migration for the past decade and Melbourne for the past four years. This is one reason why regional markets have been leading on price growth. The pandemic has provided further impetus to this trend but it certainly did not create it.</p>

<p>3. The statement that young people can&rsquo;t afford to live in the big cities has been plucked by the professor out of his fundamental orifice. First-home buyers have been in the market in record numbers of the past 12 months, boosted by federal and state stimulus measures, and have been buying in Sydney and Melbourne as much as anywhere else. They have been leading the market and have been prime instigators of the price rises.</p>

<p>But, in one sense, having a major parliamentary inquiry would be a great idea because it&rsquo;s a sure way to ensure that nothing fundamental will change. Royal Commissions can take years to produce a report and will provide photo opportunities for politicians, but real action is unlikely to result. Watch a few episodes of Yes Minister to see how it works.</p>

<p>We&rsquo;ve had inquiries into the housing market in the past. The most recent federal parliamentary shallow dive into housing affordability spent quite some time giving the appearance of being serious about solving the affordability issue, before taking the easy way out by scapegoating an unpopular minority, foreign investors.</p>

<p>This gave governments a licence to slug overseas buyers with new taxes and charges, providing a new revenue source, while changing nothing that mattered. Affordability did not improve because foreign investors would never the problem. Nor are negatively-geared Australian investors, the other popular choice by the disaffected minority to shoulder the blame for rising property prices.</p>

<p>The reality is that we&rsquo;ve had exceptional price growth over the past year or so, without any major involvement from investors, who collectively have been sitting on the fence for the past three or so years. They&rsquo;re only now starting to come into the market.</p>

<p>Investors never lead market cycles &ndash; they react to them, as they are right now. Those calling for a Royal Commission into the housing market are essentially demanding an inquiry into human behaviour.</p>

<p>If people behaved sensibly and rationally - and did real research to develop real knowledge of real estate - we wouldn&rsquo;t have the nationwide market upheavals we have every 15 or 20 years, including right now. Prices are rising at extraordinary speed because most people are essentially herd animals. They&rsquo;re diving feverishly into the market because everyone else is, not because their actions make sense.</p>

<p>But it&rsquo;s not supposed to make sense, any more than the startling highs and lows of the share market make any real sense. The smart people were buying 9-12 months ago, well ahead of the current frenzy, because they were informed and could see what was coming.</p>

<p>But most just follow the pack and right now the herd is stampeding. Prices are rising rapidly, but for many of our major markets it&rsquo;s the first real growth they&rsquo;ve shown in 5-10 years. Perth and Darwin last had a market peak in 2013 and have been in decline ever since. Now, at last, those cities are delivering some value growth to the long-suffering majority who own their homes &ndash; but self-absorbed Sydney academics would like to rob them of their long-overdue time in the sun.</p>

<p>Similarly, cities like Brisbane and Adelaide have been stagnating for much of the past decade. It&rsquo;s not a crisis for home-owners, including those who had the foresight to buy recently, that values are at last showing some growth. The real crisis in the housing market, and the one that truly does need government action, is the chronic shortage of rental properties.</p>

<p>The solution to this problem is to encourage property investors to do what property investors essentially do, which is create a pool of homes available for rental. That means we want them to be out there buying properties in large numbers.</p>

<p>The New Zealand Government recently had a major brain explosion and essentially wiped investors out of the market by scrapping tax benefits. This compounded the earlier decision to ban foreign investors. The outcome has been a shortage of rental properties even worse than Australia&rsquo;s. Australia risks making the same mistakes, if the politicians listen to misinformed academics.</p>


Those calling for a Royal Commission into the housing market are essentially demanding an inquiry into human behaviour.

terryryder

Why we don't need a Royal Commission in to surging house prices: Hotspotting's Terry Ryder

<html><body>
<p><img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1"></p>
<p>GUEST OBSERVER</p>
<p>Is a royal commission into banking required? I think not. There have been many problematic incidents adversely affecting customers in the banking and financial sector in Australia – although whether they are more frequent and more substantive than elsewhere is open to question.</p>
<p>Moreover, examining those incidents, determining whether there are systemic causes, and identifying possible solutions can be done in simpler and potentially more effective ways. Indeed, even to the extent that the objective is to pinpoint responsibility for past wrongdoings, it is not clear that a royal commission has advantages over investigations by well-resourced and empowered financial regulators.</p>
<p>Royal commissions are likely to work best when there is one specific major issue to be addressed or where there is some substantive matter of policy formulation on which a primarily legal, inquisitorial, analysis can shed light. The current and recent concerns involve a wide range of different types of problems resulting in financial consumer detriment.</p>
<p>They involve actions of individuals within various types of financial organisations as well as how the objectives, culture, ethics and governance of the organisations themselves encourage, induce or incentivise particular types of behaviour.</p>
<p>These are not topics that are best addressed from a primarily legal perspective, or analysis of which requires the trappings and powers, and costs, of a royal commission. Rather, there is a need for analysis of what gives rise to these perceived problems and what policy (legislative or regulatory) changes might be made to reduce such problems.</p>
<p>And ultimately, some form of (at least implicit) cost-benefit analysis is warranted since the bad behaviour of concern is a byproduct of institutional arrangements and structures for providing financial services and products to meet the needs of consumers. Designing policy to balance efficiency and fairness in provision with mitigation of adverse effects is not a simple task.</p>
<p>Identifying problems and designing policy solutions can be done either via existing financial regulators with their existing (or enhanced) powers or through some other form of less costly and disruptive method of inquiry.</p>
<p>The recent David Murray-led Australian Financial System Inquiry (of which I was a member) examined the financial sector from a very broad perspective. Its terms of reference included reference to corporate governance and implications for outcomes for consumers of financial products and services consumers. But this was only one item on a long list of issues required to be investigated within a very short time frame.</p>
<p>The Murray Inquiry made a number of recommendations related to improving outcomes for consumers of financial products. One could argue that it would make sense to see whether the recommendations of the Murray Inquiry (once fully implemented), together with ongoing changes in global financial regulatory standards, improve the performance of the financial sector in this regard before undertaking another major review.</p>
<p>On the other hand it might be argued that the Murray Inquiry did not, reflecting the constraints of its terms of reference and short time frame, delve far enough into issues of ethics, culture, and governance. While these were front of mind in its deliberations, its approach was to design policy recommendations which would induce better outcomes.</p>
<p>These included addressing incentives created by conflicted remuneration arrangements, introducing manufacturer and distributor responsibilities for appropriate design and marketing of financial products and services, and improved resourcing and powers of financial regulators. That approach reflected a view that “good” ethics and culture cannot be created by regulation, that they are the responsibility of the leadership of financial institutions, but that policy settings can influence incentives to create and maintain good ethical standards and culture.</p>
<p>If it is believed that the problems are more deep seated, then perhaps further inquiry is warranted – but on topics which hardly warrant or need a royal commission. A number of issues come readily to mind. One is whether enforced structural separation of financial institutions would facilitate improved governance, risk-taking, staff-customer interrelationships, and remuneration and incentive structures.</p>
<p>Another is whether requiring directors of banks to put interests of depositors ahead of shareholders (much as occurs in insurance where policy holders interests are legally accorded priority). Yet another would be what increase in penalties for wrongdoing and increased resourcing for investigation by regulators would appropriately limit wrongdoing while not unduly harming efficient and innovative supply of financial services.</p>
<p>These types of issues require “research” more than “inquiry”. They are not the sorts of questions that a royal commission process is suited to answer. Calling for a royal commission looks to have been a smart political move. But like the Abbott Government’s Royal Commission into Trade Unions it would be tainted by political overtones associated with the inquisitorial nature of the process.</p>
<p>Far better to find an approach that will be seen to reflect the more explicit analytical approach necessary to answer the very complex questions involving the interplay between ethics, culture, incentives, governance and behaviour.</p>
<p><em><span class="fn author-name">Kevin Davis is r</span><span style="line-height: 1.3em;">esearch director of Australian Centre for FInancial Studies and professor of Finance at Melbourne and Monash Universities, Australian Centre for Financial Studies and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/kevin-davis-3497" target="_blank">here</a>.</span></em></p>
</body></html>

jchancellor-FAypfDUnLy

Why Australia doesn't need a banking industry royal commission

<html><body>
<p><img src="https://counter.theconversation.edu.au/content/64216/count.gif" alt="The Conversation" width="1" height="1"></p>
<p>GUEST OBSERVER</p>
<p>Bill Shorten is continuing to press for a banking royal commission by highlighting rising bank profits and escalating consumer complaints in recent years.</p>
<p>Shorten said the tribunal that some government MPs – including Liberal Warren Entsch and Nationals John Williams – are urging be set up to consider grievances would not solve the problem.</p>
<p>The backbenchers want the tribunal to be a forum to give redress without victims facing expensive legal costs; they say it should also be able to impose fines. The government, under pressure from Shorten’s campaign for a royal commission, has indicated it will consider the proposal.</p>
<p>But Shorten said there was already the Financial Ombudsman Service (FOS), a not-for-profit, non-government organisation for dispute resolution that provides a free service for applicants.</p>
<p>In 2008-09 there were 19,107 new complaints to FOS; by 2014-15 this had risen to 31,895, a 60% increase. Credit card complaints rose by 145%, from 6731 in 2008-09 to 16,458 in 2014-15.</p>
<p>The Commonwealth Bank’s net profit went from almost A$4.8 billion in 2006 to nearly $9.2 billion in 2015. The figures of the other banks were: Westpac, about $3.9 billion in 2006 to nearly $8.3 billion in 2015; ANZ, almost $4.5 billion in 2006 to more than $7.8 billion in 2015; and NAB, from about $3.6 billion in 2008 to about $5.8 billion in 2015.</p>
<p>Shorten said that the tribunal that the backbenchers advocated “simply won’t cut it”. “There is already an Ombudsman in place but the number of people getting ripped off has been going up and up.</p>
<p>“While the banks have been getting richer, the rip-offs and rackets have been getting worse. The Coalition MPs who say they want to stop these rip-offs have a duty to stand up to Mr Turnbull and tell him anything less than a royal commission is just another cop out,” Shorten said.</p>
<p>Meanwhile the government on Monday morning will release its draft legislation to protect the Victorian Country Fire Authority (CFA) and similar volunteer organisations from union power. Malcolm Turnbull promised the legislation after the issue blew up dramatically before the election, with a push from the United Firefighers Union (UFU) through a new enterprise agreement.</p>
<p>Turnbull and Employment Minister Michaelia Cash say in a statement: “As enterprise agreements are governed by federal legislation – the Fair Work Act – we are intervening to amend the act to ensure that these agreements cannot be misused to undermine volunteer emergency services organisations”.</p>
<p>They say the proposed CFA agreement discriminates against volunteers and provides the union with an unwarranted amount of control over volunteer operations.</p>
<p>The legislation “will invalidate terms in enterprise agreements that undermine the capacity of firefighting or state emergency service bodies to properly manage their volunteer operations”.</p>
<p>It will also give volunteer organisations the right to make submissions to Fair Work Commission agreement approval proceedings – a right they presently do not have.</p>
<p>“This long-running debacle has now resulted in the resignation of the Victorian emergency services minister and the CFA CEO as well as the sacking of the CFA board, who refused to capitulate to the militant United Firefighters Union’s demands. We will not stand by and let the discriminatory and offensive terms of this agreement undermine the effective use of the CFA’s volunteer firefighters,” the statement said.</p>
<p><em><span class="fn author-name">Michelle Grattan is p</span>rofessorial fellow, University of Canberra and author for The Conversation. She can be contacted <a href="https://theconversation.com/profiles/michelle-grattan-20316" target="_blank">here</a>.</em></p>
</body></html>

Shorten says grievance tribunal would not stop bank ‘rip-offs’

<html><body>
<div class="cq-article-content-paras section">
<p>Bank-owned superannuation funds are losing billions to industry funds a response of customers in response to their misbehavior that has been revealed at the banking royal commission.</p>
<p>AustralianSuper says it received more than $1 billion from new customers in each of July and August – double the amount of the same time last year.</p>
<p data-gtm-vis-first-on-screen-7770372_137="2971" data-gtm-vis-total-visible-time-7770372_137="4000" data-gtm-vis-has-fired-7770372_137="1">Chief investment officer Mark Delaney said the gains were due to transfers out of retail funds.</p>
<p>"We can see where the money is coming from," he told Fairfax Media. "It's money being rolled in and it's coming from retail providers."</p>
</div>
<div class="cq-article-content-media section">With more than $140 billion in funds under management, AustralianSuper is already the nation's largest super fund.</div>
<div class="cq-article-content-paras section">
<p>In the June quarter, the value of industry funds surpassed retail funds for the first time; the sectors hold $632 billion and $622 billion respectively.</p>
<p data-gtm-vis-first-on-screen-7770372_137="9010" data-gtm-vis-total-visible-time-7770372_137="1900">It appears while industry super executives were called before the royal commission they emerged largely unscathed.</p>
<p data-gtm-vis-first-on-screen-7770372_137="9010" data-gtm-vis-total-visible-time-7770372_137="1900">Hostplus was found to have fallen below community standards when it sought to keep low-balance members in the fund.</p>
<p data-gtm-vis-first-on-screen-7770372_137="9010" data-gtm-vis-total-visible-time-7770372_137="1900">Hostplus had been riding a wave of popularity generated by author Scott Pape, better known as The Barefoot Investor.</p>
<p data-gtm-vis-first-on-screen-7770372_137="9010" data-gtm-vis-total-visible-time-7770372_137="1900"><span>The Hayne royal commission gave industry super funds a surprisingly "cursory" examination, says former union boss Paul Howes.</span></p>
<p>KPMG wealth chief and former union boss Paul Howes told Fairfax Media he was surprised at "the significant amount of time that was dedicated to retail funds versus quite a cursory amount of time on industry funds."</p>
<div class="cq-article-content-paras section">
<p>Howes said consolidation of industry funds was the most important issue faced by the super sector and yet the commission spent comparatively little time exploring it.</p>
<div id="article-inline-ad" class="adWrapper">"We have 238 APRA-regulated funds in a country of 25 million people," he said.</div>
</div>
<div class="cq-article-content-paras section">
<p>"It is insane, and it is an indictment on our sector and the regulator that so many exist.</p>
<p>"What also surprised me was the lack of focus on returns," he said.</p>
<p>"I felt they talked a lot about fees ... transparency and disclosures, but ultimately the $2.7 trillion question for the sector is about returns. It was almost like the elephant in the room that was never mentioned."</p>
</div>
</div>
</body></html>

j.ballantyne1990-6AQqhLzZaK

After cursory examination, Hayne royal commission triggers influx of billions into industry super

<html><body>
<p class="post-title entry-title">EXPERT OBSERVER</p>
<p class="post-title entry-title">Labor's Bowen and Shorten had insisted they'd adopt all of the Royal Commission recommendations sight unseen - a pretty much ill-advised idea when you think about it - ostensibly because they wanted to be seen as 'tough' on the banks, but just as likely to put pressure on the government to clamp down on lending and credit further.</p>
<p class="post-title entry-title">What the ALP think-tanks hadn't foreseen is the major banks getting off relatively lightly and some cataclysmic reforms recommended for the mortgage broking industry, especially in terms of commission structure.</p>
<p class="post-title entry-title">The initial reaction from Bowen, on his Twitter feed, seemed to misread the mood:</p>
<div>
<div class="separator"><a href="https://2.bp.blogspot.com/-dsgb5a4Mt4Y/XFyPFXaKgdI/AAAAAAAAuWI/vgdeNgBxAHM9NNI2GOoMwVEAPG3HpLHdQCLcBGAs/s1600/CB.jpg"><img src="https://2.bp.blogspot.com/-dsgb5a4Mt4Y/XFyPFXaKgdI/AAAAAAAAuWI/vgdeNgBxAHM9NNI2GOoMwVEAPG3HpLHdQCLcBGAs/s640/CB.jpg" width="640" height="122" data-original-height="138" data-original-width="721"></a></div>
<div class="separator"> </div>
<div class="separator">The Coalition (and apparently even the Reserve Bank Governor) believe that ramming through such wholesale changes to the broking industry warrant caution, since they'd reduce competition in the market, line the pockets of the 4 major banks as they carve up more market share, and decimate the mortgage broking industry, putting thousands of brokers out of business.</div>
</div>
<div>
<br>My view is that overwhelmingly brokers add value to consumers, and help borrowers to navigate the maze.<br><br>Some of the information put forward by the banks during the hearings was misguided at best, misleading at worst.<br><br>Although naturally a 'best interest' test must be enforced, the existing model is superior to a potential fee-for-service alternative.</div>
<div> </div>
<div>It'll be interesting to see whether Bowen is so in favour of implementing all recommendations now.</div>
<div> </div>
<div>If I was a betting man I'd say the ALP will demur on this point, or give a waffling or non-committal answer...else they'll face instantly losing the votes of 16,000 brokers. </div>
<div> </div>
<div>Of course, they might well decide that they don't need those votes anyway given signals from internal polling, but let's see what their response is, if any. </div>
<div> </div>
<div><em>PETE WARGENT is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank">blogger</a>.</em></div>
</body></html>

pwargent-M4siyDbqQY

Royal Commission backfires on mortgage broker reform: Pete Wargent

<html><body>
<p class="post-title entry-title">EXPERT OBSERVER </p>
<div id="post-body-6541198538703456871" class="post-body entry-content">
<div>What a win it's been for the major banks last week.</div>
<div> </div>
<div>Hearteningly there's been sensible commentary aplenty about the misguided recommendations on the structure of mortgage broking, which don't make any sense with a 'real world' hat on. </div>
<br><div class="separator"><img src="https://3.bp.blogspot.com/-pL1yB52iNFg/XF1iUBBmg3I/AAAAAAAAuWU/6sYwVipdspstnDR_2fu2Cp6ffJpVlmJcQCLcBGAs/s640/CBA2.jpg" width="640" height="364" data-original-height="800" data-original-width="1403"></div>
<br><div>
<span>As prominent industry stalwart John Manciameli has pointed out, imagine the outcry when banks raise mortgage rates off the cuff by 50 basis points on 'funding cost pressures' (or whatever) and customers have to pay another $5,000 fee to refinance out of their loan (leaving the borrower paying </span><span>$10,000 just to get in and out of the deal).</span><br><span><br></span><span>Just one of a thousand potentially daft scenarios. </span>
</div>
<div><span> </span></div>
<div>Everyone agrees that there should be a 'best interest' imperative for mortgage brokers. </div>
<div> </div>
<div>But commission structures should be left alone, and the scenarios being discussed would just load even more power into the four major banks.<br><br>If broking ain't broke...</div>
<div> </div>
<div><em><span>PETE WARGENT</span> is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank">blogger</a>.</em></div>
</div>
</body></html>

Banks flying high; mortgage brokers thrashed: Pete Wargent

<html><body>
<p class="post-title entry-title">EXPERT OBSERVER</p>
<p class="post-title entry-title"><a href="http://petewargent.blogspot.com.au/2018/04/housing-finance-at-6-month-high"></a><strong style="color: #333333; font-family: Tahoma, Helvetica, Arial, sans-serif; font-size: 12.16px;"><span style="text-decoration: underline;">Housing finance to slow</span></strong></p>
<div id="post-body-3782979424120573100" class="post-body entry-content">
<div>The Housing Finance figures were released for February 2018 this week, reported as "Housing finance falls in February" (Australian), "Falls felt for February" (Rate City), and so on.</div>
<div> </div>
<div>Interesting interpretations, given that housing finance was...well, up!</div>
<div> </div>
<div>Anyway, having allowed a few days to elapse, here are four thoughts.</div>
<div> </div>
<div><strong><span style="text-decoration: underline;">1 - Loan sizes up</span></strong></div>
<div> </div>
<div>One less well reported thing that I picked up was the rise in the average loan size over the past year to non-first homebuyers. </div>
<br><div class="separator"><a href="https://3.bp.blogspot.com/-sFMQ5qZidWg/WtGJFCzTDCI/AAAAAAAApZs/aQj0azYhYZIaNO6P5i4e-tqwiXO6IcE0gCLcBGAs/s1600/A.jpg" target="_blank"><img src="https://3.bp.blogspot.com/-sFMQ5qZidWg/WtGJFCzTDCI/AAAAAAAApZs/aQj0azYhYZIaNO6P5i4e-tqwiXO6IcE0gCLcBGAs/s640/A.jpg" width="640" height="370" data-original-height="799" data-original-width="1380"></a></div>
<br><div>Across the states, Victoria has been the main driver of rising average loan sizes, although each of the most populous states has seen an increase over the year. </div>
<br><div class="separator"><a href="https://1.bp.blogspot.com/-CTDOLXluGZk/WtGdsxOO_wI/AAAAAAAApa0/gZ5P9igaXOweuEskDqxF_Lbb_8RxHBnmwCLcBGAs/s1600/B1.jpg" target="_blank"><img src="https://1.bp.blogspot.com/-CTDOLXluGZk/WtGdsxOO_wI/AAAAAAAApa0/gZ5P9igaXOweuEskDqxF_Lbb_8RxHBnmwCLcBGAs/s640/B1.jpg" width="640" height="376" data-original-height="813" data-original-width="1377"></a></div>
<br><div>As a result, owner-occupier commitments rose +1.3 per cent in February, and investor loans were up +0.5 per cent, taking total housing finance to a 6-month high of $33.52 billion.</div>
<div> </div>
<div>Drilling the trendlines through the data shows that total housing finance has essentially been flat for 15 months now, while a fair chunk of refinancing has been in evidence within that total.</div>
<br><div class="separator"><a href="https://1.bp.blogspot.com/-1Bjss393W5U/WtGJFgDnoVI/AAAAAAAApZw/njaKD7l4b0YeEKNbUqyQmx4zk0-Po1RswCLcBGAs/s1600/A1.jpg" target="_blank"><img src="https://1.bp.blogspot.com/-1Bjss393W5U/WtGJFgDnoVI/AAAAAAAApZw/njaKD7l4b0YeEKNbUqyQmx4zk0-Po1RswCLcBGAs/s640/A1.jpg" width="640" height="376" data-original-height="812" data-original-width="1377"></a></div>
<br><div><strong><span style="text-decoration: underline;">2 - First homebuyer incentives bite</span></strong></div>
<div> </div>
<div>Another notable trend was that first homebuyer loans were up by a third from a year earlier, driven by New South Wales, where the number of first homebuyers doubled from February 2017.</div>
<br><div class="separator"><a href="https://4.bp.blogspot.com/-5ibkv7O3WjA/WtGJGTuCnxI/AAAAAAAApZ4/1T7jjV8_T0w5zCq41Wx86Xe0xZPWDGBowCLcBGAs/s1600/A3.jpg" target="_blank"><img src="https://4.bp.blogspot.com/-5ibkv7O3WjA/WtGJGTuCnxI/AAAAAAAApZ4/1T7jjV8_T0w5zCq41Wx86Xe0xZPWDGBowCLcBGAs/s640/A3.jpg" width="640" height="382" data-original-height="815" data-original-width="1359"></a></div>
<br><div class="separator"> </div>
<div>Homebuyer commitments for new dwellings rose by +6.6 per cent from a month earlier, but are now in a trend decline from 4-decade highs. </div>
<div> </div>
<div class="separator"><a href="https://1.bp.blogspot.com/-1ntJnZ5ey7U/WtGJHSE47qI/AAAAAAAApaA/uQkffE2SL4sQjzMQMv9_3JghWoZw38fNACLcBGAs/s1600/A6.jpg" target="_blank"><img src="https://1.bp.blogspot.com/-1ntJnZ5ey7U/WtGJHSE47qI/AAAAAAAApaA/uQkffE2SL4sQjzMQMv9_3JghWoZw38fNACLcBGAs/s640/A6.jpg" width="640" height="376" data-original-height="797" data-original-width="1350"></a></div>
<br><div><strong><span style="text-decoration: underline;">3 - Prevalence of non-banks</span></strong></div>
<div> </div>
<div>Thirdly, the trend result for non-bank lending declined in the month, and remains at only around half the peak levels of a decade ago, but will nevertheless remain a key point of interest as lending standards come into focus. </div>
<br><div class="separator"><a href="https://1.bp.blogspot.com/-HIFtpR1pkCw/WtGJHYBPHsI/AAAAAAAApZ8/spmSAsGYg9ME6AkJBC5Jjs_eRtOZTkWHgCEwYBhgL/s1600/A4.jpg" target="_blank"><img src="https://1.bp.blogspot.com/-HIFtpR1pkCw/WtGJHYBPHsI/AAAAAAAApZ8/spmSAsGYg9ME6AkJBC5Jjs_eRtOZTkWHgCEwYBhgL/s640/A4.jpg" width="640" height="388" data-original-height="815" data-original-width="1340"></a></div>
<br><div><strong><span style="text-decoration: underline;">4 - Royal Commission to slow lending</span></strong></div>
<div> </div>
<div>Overall housing finance beat expectations despite a small decline in the actual number of home loans. </div>
<div> </div>
<div>The Reserve Bank of Australia (RBA) noted in its Financial Stability Review that an average of $120 billion of interest-only loans per annum are <strong><span style="text-decoration: underline;">due</span> </strong>for conversion between now and 2021.</div>
<div> </div>
<div>Nothing unknown there, though some people misread that as $480 billion of loans that <strong><span style="text-decoration: underline;">will</span></strong> convert to principal repayments, which isn't going to happen.</div>
<div> </div>
<div>Elsewhere, Moody's reported 30+ day delinquencies at 1.45 per cent, down from 1.52 per cent a year earlier, despite some trouble spots including Gladstone, central Queensland, some suburbs of Perth, and other parts of Western Australia. </div>
<div> </div>
<div>A final point, and a key outcome to watch over the days and weeks ahead is the impact of the Royal Commission into banking misconduct.</div>
<div> </div>
<div>It seems that borrowers will now be required to be provide statements on all debts, a loophole closure which appears likely to be a wise move. </div>
<div> </div>
<div>However, there could be some overreach in terms of brokers needing to audit bank statements to support declared living expenses broken down by category, the aim being to reduce the typical reliance on benchmarks. </div>
<div> </div>
<div>There are many problem with this, not least that borrowers tend to have multiple bank accounts and credit cards these days with different banks.<br><br>Certainly private banking clients and affluent borrowers have never been subjected to such scrutiny, which may lead to some interesting discussions! </div>
<div> </div>
<div>Given that loans are already being assessed at mortgage rates way in excess of the rate actually being paid, it seems like overkill.</div>
<div> </div>
<div>If implemented forcefully this will slow the mortgage market and reduce transaction volumes as brokers and borrowers get to grips with the new requirements.<br><br>Mortgage brokers would presumably also need to consider switching to a fee-for-service model to compensate for the exponential increase in paperwork and compliance.<br><br>Regulators in the UK went through their own mortgage market review (MMR) in 2014 which ultimately lowered the risk of borrowers over-stretching and made the industry more professional.<br><br>The MMR also temporarily gummed up the lending market, so we'll have to see what plays out Down Under. </div>
</div>
</body></html>

Royal Commission

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Royal Commission

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News