Banking Royal Commission

DavidSSS

Tiger Matchwinner
Dec 11, 2017
784
15
Melbourne
The ATMs were a technology issue not a regulation issue.

We were paid in cash because you could barely get it out of the bank with opening hours.

Since deregulation the banks have been let loose and we now have insane house prices. Just to give you some idea of the house price insanity, when we bought our house it cost 5x my yearly income, I now earn more in real terms and it is worth around 18x my income. I could sell my house in Melbourne and buy a nice apartment in the middle of Paris and still get change, this is just silly. From what I remember you could get a mortgage with 10% deposit. We also pay fees which we didn't before deregulation, fees on what has become an essential service as you can't get paid except via a bank account.

I looked up Bank Australia and it is a group of credit unions who formed a bank. Might look into switching.

DS
 

Baloo

Delisted Free Agent
Nov 8, 2005
34,088
35
Blaming the banks for insane house prices is a new one. The negative gearing and discounted capital gains tax on rentals is the real driver of house prices.
 

DavidSSS

Tiger Matchwinner
Dec 11, 2017
784
15
Melbourne
Baloo said:
Blaming the banks for insane house prices is a new one. The negative gearing and discounted capital gains tax on rentals is the real driver of house prices.
Lots of factors: negative gearing, capital gains tax discount, lack of public housing, but the banks have to take some blame in writing insane mortgages to cover the absurd prices. If the banks didn't lend the money (which they are likely borrowing from Japan at some tiny interest rate) the prices couldn't go so high.

DS
 

Baloo

Delisted Free Agent
Nov 8, 2005
34,088
35
DavidSSS said:
Lots of factors: negative gearing, capital gains tax discount, lack of public housing, but the banks have to take some blame in writing insane mortgages to cover the absurd prices. If the banks didn't lend the money (which they are likely borrowing from Japan at some tiny interest rate) the prices couldn't go so high.

DS
Maybe. But allowing that free market wasn't a bad thing. They could have gone further and stopped protecting the Big Aussie 4 and let serious competition in.

NG, CGT Discount are active measures by the government that ultimately increase the price of housing. There's a difference between the two scenarios.
 

Al Bundy

Premiers 2017 ! Go Tiges in 2019 !
Aug 27, 2003
6,392
1
RFC
Baloo said:
Blaming the banks for insane house prices is a new one. The negative gearing and discounted capital gains tax on rentals is the real driver of house prices.
Agree. Felt like no matter what you paid, you could claim on it. When the big hike hit was working close to some real estate agents in the eastern subs. What was interesting to hear was it was achievable to many overseas buyers to get finance using payslips from overseas.

(I could be wrong but remember the following), one of the big driving forces on an aggressive upward market was as follows;

In China you don't actually own the land but lease it for 99 years. Belongs to country. But buy the rights to use land
Also with the similar money though many turned to Australia to buy freehold property here and it was theirs.
Also they had cheap loans in China with very minimal (& super low) rates.
many jumped in. What they banked on was they could keep the property vacant for 3 to 5 years. Maintain their loans and then sell at good profits and made instant wealth

Govt acted. Firstly, Westpac stopping giving finance to people earning a wage overseas(using their payslips), Govt target certain buyers with higher stamp duties. That helped cool the market for over a year.

Biggest issue years ago was the interest only loans. Most with a 5 year period before P&I payment kicked in. It was meant to be temp loans to build or flip investment homes.

One example of one house in suburbs nearby was valued in the high 800s I had seen. Went on the market but pulled from the market due to probate. 7 or 8 mths later when cleared. Was sold around 1.3mill ! it was a crazy period
 
E

easy_tiger

Guest
DavidSSS said:
I could sell my house in Melbourne and buy a nice apartment in the middle of Paris and still get change,.

I looked up Bank Australia and it is a group of credit unions who formed a bank. Might look into switching.

DS
Imagine the paris prices if they had proper footy?

I might look into bank oz too. I was put of by their add narrated by an american. Which ad firm thinks thats a good idea ' hey guys, most people would have an australian voice on an ad trying to differentiate bank australia right? How about we use an american voice and try draw in punters with some cognitive dissonance?'

Im hitting peak cynism on these *****, and coming off a pretty high baseline. I bet the cEO of bank oz made his money screwing customers and the planet and is giving his conscience a brief sabbatical before sailing The Med
 

TT33

GO TIGES!!!
Feb 17, 2004
3,581
4
Melbourne
easy said:
Imagine the paris prices if they had proper footy?

I might look into bank oz too. I was put of by their add narrated by an american. Which ad firm thinks thats a good idea ' hey guys, most people would have an australian voice on an ad trying to differentiate bank australia right? How about we use an american voice and try draw in punters with some cognitive dissonance?'

Im hitting peak cynism on these *smile*s, and coming off a pretty high baseline. I bet the cEO of bank oz made his money screwing customers and the planet and is giving his conscience a brief sabbatical before sailing The Med
I'm with CUA & find them pretty good. They also have the options of various Insurances IE: Home, car, Medical etc. all at competitive pricing.
As for Credit Cards, they have their own credit/debit with a number of fee free transactions / month & you can now use most of the "major banks" ATMs fee free.
Home loan rates etc are good value as well.
 

22nd Man

Tiger Champion
Aug 29, 2011
4,370
23
Essex Heights
DavidSSS said:
The ATMs were a technology issue not a regulation issue.

We were paid in cash because you could barely get it out of the bank with opening hours.

Since deregulation the banks have been let loose and we now have insane house prices. Just to give you some idea of the house price insanity, when we bought our house it cost 5x my yearly income, I now earn more in real terms and it is worth around 18x my income. I could sell my house in Melbourne and buy a nice apartment in the middle of Paris and still get change, this is just silly. From what I remember you could get a mortgage with 10% deposit. We also pay fees which we didn't before deregulation, fees on what has become an essential service as you can't get paid except via a bank account.

I looked up Bank Australia and it is a group of credit unions who formed a bank. Might look into switching.

DS
Pre de regulation.... Banks ran higher interest margins to cross subsidise services ..ie borrowers paid more and depositors received less than they might otherwise.

passbook transactions.were largely manual as was cheque cashing ... These services were provided for "free" as in no transaction fees were charged ie paid for out of the gross interest margin ... So depositors and borrowers effectively subsidised the transactors.

I have an account with one of the major banks and I do dozens of payWave, atm, bill pay, ATMs every month. Not one cent in fees ... No interest is the offset but as balance is held only at level needed the foregone interest is neglible.

What I object to is retail outlets charging for card use...when cash purchases don't ...so there is no cost to business in handling cash .. Security, banking, counting? But then again we know that cash income is non taxable in most Australian businesses (a special "exemption" not available to people on salaries, or non cash industry) many who complain about big banks ripping them off have no qualms about short changing the ATO aka as the Australian taxpayer.
 

MB78

I can have my cake and eat it too
Sep 8, 2009
6,400
19
22nd Man said:
Pre de regulation.... Banks ran higher interest margins to cross subsidise services ..ie borrowers paid more and depositors received less than they might otherwise.

passbook transactions.were largely manual as was cheque cashing ... These services were provided for "free" as in no transaction fees were charged ie paid for out of the gross interest margin ... So depositors and borrowers effectively subsidised the transactors.

I have an account with one of the major banks and I do dozens of payWave, atm, bill pay, ATMs every month. Not one cent in fees ... No interest is the offset but as balance is held only at level needed the foregone interest is neglible.

What I object to is retail outlets charging for card use...when cash purchases don't ...so there is no cost to business in handling cash .. Security, banking, counting? But then again we know that cash income is non taxable in most Australian businesses (a special "exemption" not available to people on salaries, or non cash industry) many who complain about big banks ripping them off have no qualms about short changing the ATO aka as the Australian taxpayer.
Great posting.

I think they should make it illegal to do surcharges on cards. In most cases they well above the merchant surcharge they get charged from the bank.
 

Panthera Tigris

Tiger Superstar
Apr 27, 2010
2,367
0
DavidSSS said:
I've thought about using a credit union but have always been a little unsure about their credit cards which seem to be issued by a bank anyway.

What I've thought to do was to change to ME Bank as they are owned by the industry super funds rather than private shareholders, or even Bank Australia although I'm unsure as to their background.

Unfortunately I have been too lazy and stayed with what used to be a state owned bank, then again, since I just have my salary put in the bank, have limited savings and no loans (do have a credit card though) I'm probably not a very valuable customer anyway. I even committed the heinous crime of paying off the mortgage early and the mortgage was taken out so long ago there were no fees (remember, before bank deregulation, there were no fees, so, remind me again what was so good about deregulation, oh that's right, the banks would compete for my custom so I wouldn't suffer with one of those terrible passbook accounts which only paid 3.3% interest, now I get, ooh what was it, something like 0.001%, and, yes, the banks are stingy enough to go to a few decimal places).

DS
Mutual banks, credit unions and building societies are a good option. My grandfather was a builder and always banked and did business with a local building society. Introduced me to them with a Term Deposit that was a gift for my 18th birthday. I've banked with them in some form (along with other providers) ever since. They've now altered their license slightly to be a mutual bank, rather than a building society. But still have a far superior level of service to a shareholder owned bank, given their mandate is to operate solely for the benefit of members. These days any decent sized mutual can offer all the services a bank can for the average punter, usually with far better service levels and at competitive prices.

There's some large mutual financial institutions that cross state borders these days. Think of Newcastle Permanent Building Society and Police Bank for instance.
 

fastin bulbous

I Dig Syd
Mar 30, 2010
1,806
31
Darwin
DavidSSS said:
Lots of factors: negative gearing, capital gains tax discount, lack of public housing, but the banks have to take some blame in writing insane mortgages to cover the absurd prices. If the banks didn't lend the money (which they are likely borrowing from Japan at some tiny interest rate) the prices couldn't go so high.

DS
Me and my partner have just been offered a 700 grand loan limit. We job share 1.6 positions ( both work .8) below the average wage but get fed housing and pay no utilities. Personally I think the broker/banks are insane letting us borrow so much. I am not interested.

So in this I see that the banks are willing to let us over reach and fail as they know we are a tool to driving houses prices up further. They can just resell to another overstretching couple and win win if we lose. A fairly disgusting mind set.
 

DavidSSS

Tiger Matchwinner
Dec 11, 2017
784
15
Melbourne
fastin bulbous said:
Me and my partner have just been offered a 700 grand loan limit. We job share 1.6 positions ( both work .8) below the average wage but get fed housing and pay no utilities. Personally I think the broker/banks are insane letting us borrow so much. I am not interested.

So in this I see that the banks are willing to let us over reach and fail as they know we are a tool to driving houses prices up further. They can just resell to another overstretching couple and win win if we lose. A fairly disgusting mind set.
I've heard a few people say the same. Saw a couple buy a house near us for $2m a couple of years ago and the mind boggles at the interest bill even though they were selling their previous house the loan would have been huge. Just think of it, a loan of $700k at 5% would cost $35k per annum in interest alone, then you have to work on the principal. Don't know how people do it.

DS

PS: love your forum name :D
 

tigertim

something funny is written here
Mar 6, 2004
21,318
45
DavidSSS said:
I've heard a few people say the same. Saw a couple buy a house near us for $2m a couple of years ago and the mind boggles at the interest bill even though they were selling their previous house the loan would have been huge. Just think of it, a loan of $700k at 5% would cost $35k per annum in interest alone, then you have to work on the principal. Don't know how people do it.

DS

PS: love your forum name :D
$700000 @ 4% (not too many would be paying 5% and if you are you’re a nong) is $770 per week. A working couple can afford that.
 

MD Jazz

Tiger Champion
Feb 3, 2017
3,303
33
fastin bulbous said:
Me and my partner have just been offered a 700 grand loan limit. We job share 1.6 positions ( both work .8) below the average wage but get fed housing and pay no utilities. Personally I think the broker/banks are insane letting us borrow so much. I am not interested.

So in this I see that the banks are willing to let us over reach and fail as they know we are a tool to driving houses prices up further. They can just resell to another overstretching couple and win win if we lose. A fairly disgusting mind set.
So it’s the banks fault if you decide you can borrow that amount. And the banks fault if you default?

What crazy warped thinking..I like you’re posting but that’s simply absolving yourself of responsibility.
 

MD Jazz

Tiger Champion
Feb 3, 2017
3,303
33
DavidSSS said:
I've heard a few people say the same. Saw a couple buy a house near us for $2m a couple of years ago and the mind boggles at the interest bill even though they were selling their previous house the loan would have been huge. Just think of it, a loan of $700k at 5% would cost $35k per annum in interest alone, then you have to work on the principal. Don't know how people do it.

DS

PS: love your forum name :D
Interest rates are under 4%.

Not everyone works in the public service, some have high paying jobs or businesses and rely on their own efforts to pay such sums. Not everyone has such narrow thinking.
 

Panthera Tigris

Tiger Superstar
Apr 27, 2010
2,367
0
fastin bulbous said:
Me and my partner have just been offered a 700 grand loan limit. We job share 1.6 positions ( both work .8) below the average wage but get fed housing and pay no utilities. Personally I think the broker/banks are insane letting us borrow so much. I am not interested.

So in this I see that the banks are willing to let us over reach and fail as they know we are a tool to driving houses prices up further. They can just resell to another overstretching couple and win win if we lose. A fairly disgusting mind set.
MD Jazz said:
So it’s the banks fault if you decide you can borrow that amount. And the banks fault if you default?

What crazy warped thinking..I like you’re posting but that’s simply absolving yourself of responsibility.
I agree in part with some of fastin's post. But I'm kind of of the middle view on this.

A combination of banks reckless lending standards, in tandem with a significant portion of the population (over half of the population in some studies!!) that is clueless regarding money matters and barely financially literate, makes for a terrible combination.

It doesn't help that our culture has been bent so far outside the reality of what are genuine 'needs' vs 'wants' and hence, the concept of thrift is no longer as highly valued. All of these things touch on the vicious cycle that has us heading towards a day of financial reckoning.

My wife and I are mid-late 30s with two little ones and fortunate that we are in a position that we have paid our house off. We could have taken the 'right of passage' route and traveled on working holiday visas for a year or two (which we were very close to doing). But a job opportunity came up that allowed us to buy our first house in our early 20s, so we chose to take this option due to the financial security we could set up for our future life together. The housing boom was in it's earlier stages (though was already well and truly in swing - we certainly didn't buy at the bottom) and I could see that if we traveled for a couple of years and came back with no savings we would be in a far worse financial situation when we wanted to settle down and would be chasing our tails for the rest of our lives. We still live in this modest 1950s bungalow and have no intention of 'upgrading' to a bigger, flashier house.

Rather than buying into the banking sector's snake oil and marketing and using the 'equity' to upgrade our primary residence, or leverage ourselves into investment properties, or even worse (insane) - use equity in our house to buy a depreciating asset like a flash car, boat, caravan, have a flash holiday etc - we've taken the bread and butter (some would say, boring) path of paying off the house as quickly as possible and paying cash as we've saved up, to do modest upgrades and renovations to our house. My central premise has always been assessing, what are our fundamental 'needs' vs 'wants'. Once the fundamental needs are taken care of, then we can look at the 'wants'. We never own new cars, always pay cash for them (we have one reasonble car, then our 'second' car cost us under $4k and we'll drive it until it dies), never buy stuff on credit etc. A financial background very much built by growing up close to my thrifty depression/WW2 era grandparents. Living well within one's means was the central message.

We now have the freedom to take our kids backpacking with us, save for retirement, donate to charity, put some aside for a rainy day if we were to find ourselves out of work, those sorts of things. Banks want you to be a slave to your debt with them. Don't buy it. It was always instilled in me that if something being sold to you is too good to be true, it usually is. And that, you never get something for nothing. People should always keep these two thoughts at the forefront of one's mind whenever scrutinising anything to do with money and finance.
 

fastin bulbous

I Dig Syd
Mar 30, 2010
1,806
31
Darwin
MD Jazz said:
So it’s the banks fault if you decide you can borrow that amount. And the banks fault if you default?

What crazy warped thinking..I like you’re posting but that’s simply absolving yourself of responsibility.
Not absolving myself of responsibility at all. Myself and my partner will not borrow that amount. I am shocked that the banks would consider lending so much. I believe it is irresponsible and they should have learned their lesson by now.

Tim (sorry, I don’t know how to use the multiple quote function) - I am a middle to low income earner and work for a not for profit aboriginal arts corporation. My job is by no means secure. Also, I am 44. This loan will take me to 75 or 85?

Thanks David- Beefheart lives
 

tigertim

something funny is written here
Mar 6, 2004
21,318
45
fastin bulbous said:
Not absolving myself of responsibility at all. Myself and my partner will not borrow that amount. I am shocked that the banks would consider lending so much. I believe it is irresponsible and they should have learned their lesson by now.

Tim (sorry, I don’t know how to use the multiple quote function) - I am a middle to low income earner and work for a not for profit aboriginal arts corporation. My job is by no means secure. Also, I am 44. This loan will take me to 75 or 85?

Thanks David- Beefheart lives
Sorry, I didn’t see your initial post, was responding to DS. Yes, that’s one way of looking at it albeit a negative way. You obviously don’t have to borrow the full $700k, you may wish to borrow for eg $500k or whatever you feel comfortable with. So yes, it’d be a 30 year mortgage taking you to 74. But you could always sell the house at 65 when you retire and will have made presumably a profit and scale down.

But as you say you’ve made the right decision for yourself so no harm done. The bank offered you an opportunity, you declined, all’s well.
 

MD Jazz

Tiger Champion
Feb 3, 2017
3,303
33
fastin bulbous said:
Not absolving myself of responsibility at all. Myself and my partner will not borrow that amount. I am shocked that the banks would consider lending so much. I believe it is irresponsible and they should have learned their lesson by now.
It ultimately depends on what information you have provided in an application. Credit is difficult to get so it would surprise me if the bank has offered you something that is simply unaffordable.

Many people would not be able to afford current mortgages if they didn't have a job, it is one of the key things to consider when entering into a loan agreement.

It may or may not surprise you but a lot of people don't actually reveal all the facts (they lie) when making loan applications? Talk to any mortgage broker and you'll understand how much lying people do when applying for loans.

Nobody forces anyone to borrow money, if people are willing to make reckless decisions they must be willing to face the consequences. Yes, there needs to be some level of protection against unscrupulous practices and exploitation of the weak but many of the stories I've read around the royal commission are ultimately of normal people making poor decisions.