Crackdown By Regulators
  • 29 September 2017

Crackdown By Regulators

Paul Marshall CEO of Ratecity pointed out that Australia's big 4 banks have increased rates for investors paying interest only "the gap between those doing the right thing and paying down their principal and interest and those paying down is now significant. Time will tell whether the rate highs will be enough to deter investors" Read more here.

This is an amazing, short-sighted, ill-informed comment. What is "doing the right thing"? Is it making the banks incredibly rich? Isn't an investment my business supposed to maximise tax deductions and profits. A wise investor never makes a principal and interest borrowing but interest only, unless the asset it diminishing. Wise property investment is certainly proving to be a boom investment. Indeed property is the biggest single asset, that the average Australian has and it's extremely low geared at about 30% "doing the right thing" by the investor themselves, is to not pay the banks an extra 45% cash. Where do they get this cash from? Does it come from dipping into their savings? Does it come from cutting back on their spending? Either way, it's an attack on job creation. The public spending is the biggest driver of the economy.

"Doing the right thing" makes an investors cashflow perilous. The above extra cash comes at a real cost to the person and the economy. It is a short-sighted, stupid policy that is not even followed by the banks! True- all the money they borrow to give you they don't take on principal and interest!! No, they "do the right thing" and get it interest only.

What do the banks want and what does the economy want? What does the treasury want? Interest only makes an investor a safe client to a bank as they're easily able to handle their cash flows. Indeed, in the Club, our members at the most have to fork out five or six dollars a day. Most, fork out nothing. Principal and interest dangerously changes this cash flow to put them in a perilous position. Does the bank really want distressed clients? Do the banks really need this extra river of gold running from their client's pockets? Do they need it at the expense of their stability of their very own clients, why is the treasury and media quiet on this dangerous tilt in our economy?

The commonwealth bank was quick to catch the gate the federal government for its bank taxes as an "unprincipled and reckless tax grab" surely this 45% jump in your repayments is exactly what an unprincipled, and reckless grab for your cash is. Pot calling the kettle black.

Kevin Young

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