APRA Needs Property Education Club

Lesson 1 for APRA_ Investor interest only loans are the safest loans by the banks.

Lesson 2 for APRA Property Club investors buy property for just a few dollars per day out of their pocket - very safe, lower risk loans.

Lesson 3 for APRA Moving these loans to Principal and Interest makes them unsafe.

Lesson 4 for APRA That's because the greedy banks can charge 50% more than, and sometimes triple, the mortgage repayments making the loan of course extremely unsafe.

Lesson 5 for APRA Homeowner loans that APRA considers safer are in fact far riskier than interest only investor loans.

Lesson 6 for APRA Homeowners must pay 30% tax on their wage and look to whats left to take home to pay Principal and Interest mortgages.

Lesson 7 for APRA Homeowners have to use this take-home pay to pay insurance, repairs, maintenance etc.

Suddenly Mr Byres Interest Only investors are far, far safer than homeowner lending. Mr Byres if you like we can put you in a brand new city quality property and you will be making $83 per week profit. A very safe lend for the bank.

Question to Mr Byres - "Working extremely hard with the credit squeeze to divert funds to the worlds only banking monopoly." Are you aware that all of the banks increased wealth which has doubled since the monopoly in 2008 is out of the pockets of everyday Australians? Are you aware that half of this increased bank wealth is transferred out of this country to overseas shareholders? Are you aware that this credit squeeze is taking money out of retail spending and consumers savings? If we have an economic downturn will you take responsibility for it? If we have a recession will you take responsibility for it?

A self-funded retiree needs 8 quality properties. You are making it impossible for anyone to get more than 2 properties. If you create a whole generation of pensioners will you take responsibility for it?

I find some quotes from APRA's recent discussion paper on the risks of property investing. These statements show that Wayne Byres, chairman of APRA is totally ignorant.

"Total loans have increased significantly from just under half to more than 60% since 1990"

"This level of structural concentration poses 1. prudential and 2. financial stability risks, particularly in the environment of 3. high household debt, 4. high property prices, 5. weekly income growth, and strong 6. competitive pressures amongst lenders." APRA commented.

"The broader banking sector would be vulnerable to economic shops."

APRA wishes "to moderate investor in interest-only lending." Banks will be required to hold more capital against these loans. The reason why?? APRA "Although, as a class, investment loans have typically performed well under the normal economic conditions in Australia, this segment hasn't been tested in nationwide downturn." The basis for this credit squeeze is "experience in United Kingdom and Ireland during the global financial crisis, showed that previously better-performing investment loans can fall in arrears in higher volumes than loans to owner-occupiers in times of stress."

APRA "significant share of interest only housing lending is a structural feature that increases the risk profile of the Australian banking system."

APRA's attack on workers wanting to improve their wealth continues with:

  • a request to look at serviceability not on the current rate of 4 or 5%
  • loans must be accessed on serviceability at a whopping 7% nearly 500% than the cash rate.

This is designed to make our monopoly banks are in a "strong and capital position". "To lock in the strengthening of the capital positions that has occurred (for the major banks) in recent years." APRA is also considering, "where there are exposures to individuals with large investment portfolio (such as those with more than 4 residential properties) will be treated as non-standard residential mortgage loans whereas loans secured by commercial property." In other words, I think we can rely on the banks to charge even more profit to such persons.

To ensure this massive nationwide credit squeeze really hits home APRA "subject to final calibration, APRA proposes that all non-standard eligible mortgages will be subject to a risk weighting of 100%.

Stay tuned,

Kevin Young

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