NSW Government’s horror Housing Tax

We’ve lived in our house for 55 years. Most home owners will live in their “forever homes” for that sort of time too.

For a first home buyer where the land is worth $1.5m the current NSW stamp duty is around $67,500 paid over a 30 year mortgage @ $2,250  year.

The rate could easily be halved to make it $34,000 .

Under the new government proposal, annual Tax on Housing  for a first home buyer of a property with $1.5m of land would be: $400 plus .3% of $1.5m ie $4,500 = $4900 a year. Over 55 years they would pay about $270,000, or 4 times as much as they do now.

What a clever political strategy, painted as lowering the cost of housing by increasing it.

For richer people buying a home with a land content of $3m, stamp duty would still only be $150,000, paid over their mortgage term. $120,000 less!

The Housing Tax is heavily biased against younger, poorer people in favour of richer older people.

Good for government, bad for voters. A real win for property developers as the initial home cost plus tax is lower and  buyers will probably not think of  the nearly $5,000 a year in tax they will be paying for life on top of their mortgage.

I urge young and poorer people wanting to buy their first home to join Voters Network for lower, not higher home cost. There are many ways to cut home costs. Voters Network can help buyers understand them.

Greg Bloomfield, retired FCA, CPA

Tax time trauma – Don’t frighten the bank unnecessarily!

If you have a business or bank loan, and you submit your tax return through a tax agent don’t frighten the bank with a tax return that shows you are losing money.

Taxable Income
Taxable income comes from the receipts that the Tax Act says are taxable in that year less the expenses that the Tax Act says are deductible against that income in that year. One of the first things I learned when I started work with Price Waterhouse as a junior was that the tax figures did not necessarily reflect the profit of a business or a farm. I have been lucky enough to work with some of the biggest businesses and agricultural companies in Australia as well as running my own property development and equipment hire businesses, a Merino Sheep property in the centre of NSW and a beef cattle property in the Southern Tablelands as well as my national Chartered Accountancy/CPA practice and my bank loan solutions consultancy.

Net Profit
Profits come from what you receive minus what you spend running your farm or business during the year in question. That sounds the same as taxable income but in fact can be very different. The Tax Act is a political football doing  favour to some and disadvantaging others. Sometimes the accountant will burn the midnight oil to show that as far as the Tax Act is concerned, you earned very little taxable income during the year, while a true set of financial statements might show that you earned a fortune.

The Bank
The figures you show the bank up front should reflect the actual profitability of your enterprise and then be reconciled back to the tax return and assessment if you want to maintain a frank and truthful relationship with your bankers. They then are fully informed of how you a really going. It often happens when they are only given a tax return, that they get the impression that you are going broke and may not be able to repay your debt on time.

EOFY purchases
Many farmers and business owners heed the retailers and buy tax deductible equipment and supplies in the latter part of June just to get a tax deduction. To the bank that can make the figures look like a disaster. If you do that then your accountant should, in your Profit and Loss Statement, reduce the expenditure for the year by the cost of the stock of unused items that you purchased at year end to get the tax deduction. Again that allows the bank to see your true trading result instead of what your tax accountant or the EOFY sales pitch encouraged you to do.

Honesty pays
Always be honest with your bankers. But do get a qualified specialist accountant like those at GBAC to review your final financial statements for presentation to the bank. If you have had a bad year, and some will have this year, that specialist will spend some time carefully explaining what caused it and how it will improve in the years ahead. That particularly applies if you have been affected badly by Covid, drought, bushfires or floods . Banks will usually go out of their way to help you when you do the right thing and explain your circumstances to them.

Interest rates rising!!!

calm the beast
calm the rising interest rate beast

Don’t panic about interest rate rises on your loan repayments. Quietly check the impact. One solution is to cut other spending. Another is to extend the loan period to keep payments the same. Another to refinance elsewhere. There are always reasonably good solutions to loan problems.

GBAC Advisory Pty Ltd deals with them every day. It is just the media that strikes fear into borrowers hearts.

For those business owners or farmers wanting the best finance or refinance   the business loan app  or the farm loan app make it easy.

It may also be time to review your budgets and see what expenses can be lowered without damaging revenue or what could be increased to make a far bigger contribution to revenue.

The interest rate rise is no surprise

The certainty of interest rate rises has been discussed in the media for years, so as unpleasant as it may be for borrowers and pleasing as it may be savers, it should not be a surprise.

PLAN

So what can be done about it after I have borrowed. Lenders have been encouraged to ensure before approving a loan, that the borrowers could easily cope with a possible rise in interest rates. On top of that bankers have been skilled for hundreds of years in assessing the ability of borrowers to service and repay loans. So borrowers would be entitled to expect that the bankers carefully examine how easy it would be for them to cope with an interest rate rise. If the bank felt that they could not do so it would surely have not offered them the loan.

If the interest rate causes some borrowers to worry that they may not be able to cope with their loan in the event of further rises, they should immediately develop a plan for how they can cope with the debt. If they don’t they stand a chance of defaulting on the loan and losing the security property as well as any payments they have already made. The best solution to a current lender increasing the loan cost significantly, is to move to a new lender who is more likely to offer attractive terms in order to lure new borrowers into its client base. Of course any new lender will look at the credit record of the person approaching it for refinance. Therefore a borrower contemplating a future change in lender should make a very determined effort to keep payments with the current lender right up-to-date and if possible get one or two payments ahead. If they can do that for perhaps a year they should be in a far better position to negotiate a lower cost loan with a new lender at the end of that year.

 

This is not a time for knee-jerk reactions in response to a very small increase in the interest rate. This is a time for long-term planning and that applies whether the loan is for a home purchase, a business or a farm.

LIAR LOANS and DEBT TRAPS

Today’s media carries a large story which claims that a significant number of borrowers have told lies in their loan applications. However the head of ANZ counters with a claim that bankers are required to verify the information provided in support of loan applications. There is a big difference between telling a blatant lie like “I earn $100,000 year” when in fact I earn $50,000 a year. But finance is not everyone’s cup of tea. Many people are highly skilled at their trade, profession or job but are not in any way skilled in matters of money. So it is very easy for them to make mistakes. For instance when asked how much money they spend weekly on any particular group of expenses, many would have absolutely no idea. They simply take a guess at what it might be and that guess can be a long way out. The bankers however have access to massive amounts of data on what people in each pay bracket and suburb and age are likely on average to earn. They have teams of experts in finance and access to well tested computer software for analysing loan application data and situations where defaults occur. So when people talk about “liar loans” it is more likely that the borrowers simply did not know the correct answer and either made their best guess or just said anything in order to not ignorant.

What is far more likely is that bankers and their brokers are deliberately lending money to people who simply cannot afford the amount that they are borrowing or are so close to the wind that the slightest increase in interest rate would financially stress them. This is quite a common practice with moneylenders including Australia’s banks and it is a very profitable.

Many readers may have read the comment by Mr Ken Henry, former Treasury Secretary and chairman of NAB, who said that “the only responsibility businesses should have is to maximize profit.”

The debt trap helps banks maximize profit, because it locks borrowers in and allows debts to be increased by unpaid interest, which allows penalty interest to be charged and makes the interest and debt grow even faster.

The implication of what Mr Henry said is very important for borrowers to understand. It is up to them, not the bank, to make sure that they are treated fairly. Many people treated badly by the bank or a lender tend to go to Afca, the Australian Financial Complaints Authority in the hope of receiving justice. The fact that Afca is owned by the banking and finance industry, should indicate to those concerned about their bank debts that they are unlikely to get very much help from Afca.

Robo-advice, you’ve got to be kidding!!

When banks were deregulated I converted my Chartered Accountancy practice into a banking consultancy GBAC. That was over 30 years ago and in that time we have assisted borrowers all over Australia to obtain better loans, increase their earnings to better service their loans, to have banks compensate them financially for mistreatment and negligence and to enable them to get refinance or original loans by making banks compete with one another for the business, so that the borrower gets the best deal.

For businesses to obtain the best competitive loan we have provided a Business Loan App to attract a number of banks to put forward what they can offer by way of affordable and suitable loans. Then the borrower can choose the best. Having the best banker available as well as a loan that is suited to the business, is one of the ways for businesses to thrive.

Being myself a 4th generation farmer, familiar with the various unique factors that influence farming profitability, we also provide a Farm Loan App so that farmers will obtain suitable loans instead of the very inappropriate ones they frequently end up with. From all over Australia farmers bring their loan problems to us for suitable solutions. We have some unique tools to give farmers a fair go.

As soon as banks were deregulated in 1987 it became apparent that they would put ultra-high profits way ahead of service to customers. However we have seen that those who come through the GBAC borrowing facilities put their own profits ahead of the bank’s. Many banks use computers to assess customers for loan. It is no wonder their customers get treated so badly. Whilst my firm has been computerised since 1972 I can assure readers that in GBAC we give a personal service and do not in any way adopt the modern virtual robot trend, to deal with our clients.

If you don’t want to be accused of obtaining a “liar loan” or to be caught in a “debt trap” from which you cannot escape, please give GBAC a ring and join our long line of satisfied clients who are profiting from their loans, rather than simply boosting bank profits and their CEOs’ multi-million dollar pay packets.

 Debt Stress

Today’s media also carried a large story based on a UNSW study devoted to the number of people living in certain areas who are said to be under increasing debt stress. The article did not define debt stress. Anyone feeling unable to cope with the level of stress that they find themselves under should seek helpful solutions.

Financial counsellors can be very good at helping stressed borrowers to plan their way out of stress and getting the bank to back off a bit. However, it is important to know that they are partly funded by the banks, so if the bank has caused more serious grief, cheated or defrauded the borrower of large sums of money, the counsellors are unlikely to be able to help. GBAC really began on referrals from Rural Financial Counsellors who could not go past a certain point in helping borrowers. We, on the other hand, are happy to help borrowers recover what has been stolen from them by bankers in the scale discovered by the Banking Royal Commission. We are quick to report delinquent bankers to Federal Parliament with a suggestion that the banking licence of that lender should be cancelled.

The earlier that stress can be dealt with the better. Anyone borrowing who does not have very substantial income and liquid assets is well advised to make debt reduction the first priority in their lives. When my wife and I bought a house after years of searching to find anything that was affordable, we eventually found what we wanted at our price. Then, with no money of our own, but $1,000 from the government managed to borrow 95% with housing loan insurance. We stopped going out anywhere that cost. No coffee shops, movies, restaurants, take-away or holidays were on our agenda for the first 5 years. Our furniture was all second hand gifted. The car was second hand, small and oldish. It was tight, but we had a home. It is a reasonable model to consider because we learned to live light and eventually our income rose and the repayments became easier.

It was really forced saving. In our first 3 years of marriage we rented and saved nothing. From then on we saved hard in home repayments which gave us a roof over our head and potential superannuation that was completely under our control and not subject to substantial management fees.

If borrowers come to us stressed over a home, business or farm loan, we suggest that we do our research on their finances, then calm the lender down with assurances that can be met. That gives us time to refinance the borrowers through our loan apps with the very cheapest and best loans available and suitable to those borrowers. Unlike mortgage brokers, we do not take any commission. We generally persuade the new bank to give the borrowers a fee reduction from the money not paid in broker’s commission.

If a borrower just ignores a bank’s plea to get a loan back in order, that annoys the bank and it gets madder and madder the longer the default continues. At that stage the good relationship has broken and it will never be repaired. Nobody can afford to have a large loan with a lender who dislikes them. It can cost the borrower dearly. Once problems arise, deal with them, then once they are sorted out move to another bank that will have no memory of any disputes.

At GBAC we do not handle a large volume of borrowers. We just work hard to look after the ones who come to us. We are happy to invest substantial time and effort into each person, because borrowing is dangerous and we do not believe that is fair for banks to bully borrowers as they so often do.

Most banks are good if the borrowers follow the loan terms to the letter. The problem is that most borrowers do not even read or understand those loan terms. When we help anyone borrow we work through the loan terms with them to ensure they are happy with them. If not, we ask the bank to delete the offending clauses. Mostly they will if it is fair to them too.

Remember that a MORTgage is literally a “death pledge”. The lender is deadly serious about getting the money back in the agreed time frame and being paid interest on time too. Talk to them or us if there is a problem. Talking takes the heat out of dangerous loan situations.

Why you should join FairGO’s Voters Network?

Because democracy is a society in which voters are key.

They elect representatives (MPs) to a forum called parliament which controls the government.

Because they vote to choose who represents them, their voices carry great weight in parliament – if done politely, persistently and persuasively in the privacy of parliament rather than in public.

Businesses, banks and public servants do not have to show members of the public any consideration because members of the public have no authority over them whatsoever.

In the 1980s FairGO discovered that people being abused or neglected by government could get very effective help and satisfaction from parliament.

It had been found that many people had not received help when they wrote to the minister or contacted their local Member of Parliament (MP).

A special communication system called a Votergram was invented to take a person’s request to every Member of Parliament. It was an overwhelming success.

It was discovered that the more people who contacted the MPs on a given topic and the more good reasons for change that were put forward, the more the politicians would do.

It was also discovered that the quality of the message and strategy behind it made a big difference to success.

Voters Network was formed to assist interested voters to influence government easily and effectively by Votergram.

Voters Network Members are supported by skilled political persuaders in their requests for government assistance whether on personal matters (eg Hospital treatment or bank loan), community matters (eg school facilities) or matters of national significance (eg climate change). Membership is free.

Voters Network has no party-political affiliations or favourites. Its overriding concern is “Fairness for all”. It helps voters deal with THEIR issues, not its own. It empowers voters, not itself.

Voters Network is the place for nurses, doctors, patients, relatives, students, parents teachers and headmasters to come together to guide government to sensible, effective and fair policies and programs to make our hospitals and schools provide the best possible services to the community.

It is the place for all interested Australians who wish to see our society grow as a nation with a focus on fairness for all. Australians need to lead the people they elect as their parliamentary representatives, support and work with them to achieve the desired results.

MPs are not all-powerful kings, queens or dictators leading their people. They are there to work for and with the Australian people and in particular the people who elected them. They are very helpful.

Without that prompting from the people involved in delivering or receiving those services, improvement will not happen. More than with fairness and justice, democracy works like a tug-o-war with those who do most to persuade the politicians, receiving the most attention. That is not surprising as politicians depend on pleasing voters for re-election. But many rich and powerful organisations compete with the voters for political favours, in order to increase their wealth.

Fire flood and drought; Refinance, Foreclosure and Farm debt mediation

Fire flood and drought can bring the best of farmers unstuck.

Farmers have to cope with fire, flood and drought as part of a fairly unpredictable weather pattern. They can happen any time at the drop of a hat, without notice. For cropping they can be catastrophic but even for grazing they can bring a farm to its knees.

There is no doubt that good strategies need to be in place because as soon as you move out of one challenge you know that you are on your way to the next one. Farming is a business and business strategies are required. Problem is that these events are unpredictable and expensive, so how can they be dealt with? In particular how can they be dealt with in relation to something most farms experience but which is almost entirely incompatible with farming a farm loan?

When we negotiate loans for farmers we require lenders to allow flexibility in their loan documents to allow for any of these events. There was a time when bankers were the farmers’ friend. The banker would gently guide the farmer down a path of sensible and affordable lending. That was because the banking was government regulated and  systems used to be mainly manual, so life worked best for both the bank and the borrower if loan terms were met.

Then some bankers convinced politicians who did not know much about such things, to de-regulate banks. “This will create competition which will benefit all bank customers”, the bankers told the unsuspecting politicians. Bankers are as clever as all get out. Once they were de-regulated they set about building up their loan books by paying bank managers and staff commissions and bonuses on the basis of how much money they loaned out. As you can imagine they lent money like a man with 10 arms. Out it went as fast as they could sign up borrowers. Some banks loaned money in Swiss Francs which sent the debts skyrocketing when the exchange rate changed.

But the bankers discovered that this was no bad thing. Most of the debts were still recovered but the borrowers took longer to pay and some fell behind in payments – debt default. Computers were maintaining many bank records by then and sending out threatening letters as well as imposing interest rate penalties on borrowers who were late paying. No bank staff were involved.

The farmers could not argue with the computers so they just paid up. This worked well for the banks. Suddenly their loans were out for longer and they were earning a higher rate of interest. The debt often accumulated so the bank earned interest on overdue interest on overdue interest. This, over time, turned million dollar bank profits into billion dollar bank profits and executive salaries went to a million dollars a month.

In advertently banks had discovered a new phenomenon – The Debt Trap. If farmers were loaned money they could not afford to service and repay, the variable weather conditions including fire, flood and drought on top of commodity price changes and government policies, made their debt situation worse and they had to borrow more money to pay the interest and farm expenses. They often went repeatedly into loan default in the process.

Bankers knew that the one thing farmers never want to do is to sell the farm. Many see it as a personal disgrace or failure because the farm has been in the family for generations. The farm from which I have just retired was started by my great-grandfather in 1865, so there is a bit of history there. That resistance to selling makes the farmer work ever harder day and night to keep the big bank wolf from the door. Farm debt problems are not new. The 2nd cousin from whom I bought my cattle property had dealt with them when he took over from his father during the depression.

The debt mostly grows and grows, falling a bit in good seasons and rising a lot in bad ones.  That constitutes debt default, even if the bank allows it. The wise farmer will call banking debt advisors as soon as they notice farm debt problems and before they face deteriorating banking relationships. That is the easiest time to work out the best debt solution for the borrowers. Otherwise, eventually debt reaches about 80% of market value of the farm and at that time, after maybe a decade of receiving interest, the bank decides to sell the farmer up and take its money. After years of hard work that is heart-breaking for the farm family.

But it does not have to be. What the farmer needs is debt relief. Before a bank can sell a farmer up there must be a debt mediation between the farmer and the bank. We got into this field of bank debt negotiation thanks to the many Rural Financial Counsellors who worked with their farm clients as far as they could, but were not in a position to really crack the whip or hit the bank hard where it would hurt most. They were counsellors used to hearing people’s griefs and helping those people come to solutions themselves. But preventing foreclosure by a bank that holds a mortgage over the farm and has let a farmer breach the loan terms for years, takes a good bit more than a sympathetic ear. It takes time to find out what the bank has done wrong and then strategies to convert that bank abuse of its customers into getting the bank to write off debt, big debt, to compensate the farmers for the wrong done to them.

Greg’s widowed mother was financially abused by one of the Big 4 Banks and they eventually lost their home over a guarantee she had signed without any legal or financial advice at all. That was even before de-regulation. So he understood how banks worked. But in his Chartered Accountancy practice he acted for farmers in NSW, ACT and  in WA from the south to the Kimberleys and in the NT. Then he ran his own Merino sheep property in the Central West of NSW and cattle in the Southern Tablelands. By the time banks were de-regulated he was ready to take them on, launching his Moneygrams, now “AussieLoanApps” to help farmers obtain loans that took account of seasonal factors, commodity prices and government policy. It amazed him the advantages he could negotiate for farmers just by taking time and checking out what was on offer, as farmers do when buying sheep or cattle in the saleyards or at a stud sale.

One of his first Moneygram clients saved $300,000 on his loan interest. A farmer who the bank was trying to sell up, consulted GBAC and they had the bank write of debt to the extent of $5 million. He received refinance from another bank at $5m less.

Banks are very skilled at making super-profits out of customers, but farmers are very resilient and used to adversity. When the bank acts tough, the farmer needs to bring in the bulldozer like GBAC Advisory who don’t muck around. This will give the bank as good as they get plus some. Farmers deserve a fair go in a business that is so weather dependent that loan contracts have to be matched to revenue as they can be very easily. The silliest thing the politicians ever did was to sell PIBA and CDB to private enterprise.

When borrowing, farmers do well to avoid the bank paid brokers and use  www.aussieloanapps.com.au. When fighting the bank or seeking refinance they should go with GBAC Advisory which has about 50 years experience at looking after farmers and their finances.

Let Aussieloanapps lighten your load!

Why do banks make such huge profits and pay their CEOs millions a month?
Because some borrowers don’t seek competitive loans via Aussieloanapps.

Why do borrowers get caught in expensive bank debt traps?debt trap
Because those borrowers don’t see the trap as they would with Aussieloanapps.

Why do business borrowers earn less from their loans than the banks do?
Because they fail to seek loans that work best for them, not the bank, with Aussieloanapps.

Why do some farmers make less from their bank loans than the banks do?
Because they don’t ask Greg Bloomfield, the farmer who devised Aussieloanapps.

Why don’t you click Aussieloanapps and get the best loan on offer for you?

Aussieloanapps are backed by people, not computers.

The Aussieloanapps people don’t get paid commission by the bank, like brokers do.

Take charge of your debt from the start, with Aussieloanapps

Provided by GBAC  – always on the borrowers’ side!

Providing the skill and experience to look after borrowers since bank de-regulation.

De-regulation let the Money-Lending Genie out of the bottle to prey on unsuspecting borrowers

Farm Debt Mediation

Because repaying farm loans has some unique features that can affect payment ability a NSW MP Richard Amery, when he was Minister for Agriculture had a special act passed to enable farmers and their lenders to talk over loan problems. He said he wanted to imagine a farmer and banker sitting under a tree chatting over their challenges.

Receipt of a notice from a bank threatening Farm Debt Mediation should not be seen as a problem, but as an opportunity. Sometimes farmers make more out of mediation than out of farming.

I may be worth you watching this Youtube video to see how it can work for you.

The video features Greg Bloomfield, founder of GBAC Advisory Pty Ltd which helps farmers all over Australia deal with their banks. As the song goes, “You don’t have to suffer in silence”. GBAC Advisory’s experience has been that that in farm loan disputes  “The customer is  almost always right.”

To find out more, email greg@gbac.com.au or phone 0428 417 496.

How banks bleed borrowers!

Sensational big bank profits put fabulous wealth into the hands of their CEOs. Banks are protected by politicians to whose political parties they contribute large amounts of money.

In the 2021 financial year the banks donated the following amounts to political parties:

ANZ                     $244,000

CBA                     $161,000

Westpac             $128,000

Nab                     $110,000

Total                   $643,000

Of course politicians received donations from other banks and moneylenders too. I suspect the total to be around $2m a year. Not bad! Donations are not the only “Encouragement” that banks give to politicians. The Australian Bankers Association is a powerful lobby run by an former state Premier who knows a lot of politicians and bureaucrats.

It was our federal politicians who “de-regulated” banks around 1987 to give them free-rein to charge what they liked and lend to whoever they liked, whether or not the borrower even looked like being able to repay the loan. If the bank had a borrower’s home, farm or business assets mortgaged as security it did not matter to the bank whether or not they could repay the loan. The bank could just sell them up to get the money back. – unless GBAC stopped them.

But what else can the politicians do but go along with the bankers when bank customers just ignore the politicians or bad mouth them. Politicians  get very little support from most bank customers, so they will not feel much like helping them instead of the banks.

Big four bank profits for the 2021 totalled just under $27 billion. In 2022 they will be higher.

Isn’t it amazing. The Reserve bank seems to regulate how much interest the bank pays  term depositors – about .25 %  a year, but it does not regulate how much they charge borrowers, say on credit cards, about 20%.

MARKUPS

That raises an interesting question. Banks are retailers of loans. They purchase a loan from somebody for one price and sell it out to somebody else for higher price. Retailers in lucrative markets probably do not do much better than marking up their goods by 100%. They buy goods for $100 and sell them for $200. I think that Woolworths marks their goods up by about 50%. They buy for $100 and sell for $150. Then they have to pay overheads, store rentals and staff wages etc. Woolworths made a net profit of just under $2 billion last year

So how do big 4 banks make so much money, about $27 billion a year?

Money comes free in a cheque account, but on term deposits and from the Reserve Bank they pay about .25% on average. That is one quarter of one percent per year. But the Reserve Bank loaned them a large amount of money at .1%.

When they lend to home buyers they mark up their loans by 1,000%, not 100%. That is they pay .25% and lend the money out to home buyers for 2.5%. Their Mark up is ten times what a retailer gets.

When the big banks lend to businesses on term loans for 10 or 15 years, they charge  about 4% to 5% per year. That is a mark up on the .25% they pay, of 1,500%

When the big banks lend to businesses on overdraft, they charge about 9% which is a mark up of 3,500%.

But the astronomical mark up is reserved for the ever-present, near essential credit cards. To credit card borrowers the banks charge 20% for their money , a mark up of 7,900% for their money. 79 times the normal retail mark up

Of course they have overheads, rent and staff to pay too like retailers, but you may have noticed that the bank computers do much of the work from answering your phone calls to assessing your ability to service and repay your loan. Like all retailers they have to write off some of what they have paid for. The dress shop has soiled or damaged clothing, the bakery has stale bread and the fruit shop has rotten fruit to throw out. Banks have bad debts to write off.

So it seems to me that our politicians sold us out to the moneylenders and have pocketed helpful donations and perhaps even helpful loans, ever since.

Not only did the politicians de-regulate the banks but they then cleverly sold off the government owned banks so there would be no honest inexpensive banks to compete with the big moneylenders who had been de-regulated.

But do our politicians like being owned by the moneylenders. I don’t think they do. Most politicians are honest people just like the rest of us, but until we support them they will not be game to take on the big banks.

The housing cost conundrum

The combined impact of house price and interest rate determines a monthly loan repayment on a home loan. So if interest rates are low, as now, people can pay more for a similar home than we did but the repayments still remain similar to when we borrowed @ 11.5% p.a.

But the house price never varies from the day of purchase, whereas the interest rate can rise. So it is not that simple! Paying a higher price for the house with low interest rate borrowings to begin with, poses a far greater risk to the borrower.

If the interest rate were to rise from 3% to 9% on a $700,000 loan the interest would rise from $1,750 a month ($21,000 pa) to $5,250 a month ($63,000 pa), quite a difference.

Assessing how much to pay for a house is not as simple as looking at the quoted monthly repayments, unless the interest rate is fixed for the term of the loan, which is unlikely.

For home buyers, a touring holiday of inland cities and towns in their state might reveal a beautiful environment where housing is a quarter of the price of capital city housing; people are nicer because the population is smaller and people get to know their neighbours and communities; the air is cleaner and healthier; there are more wide open spaces for children; the land is flatter and better suited to walking or cycling and solar power is abundant.

Just holidaying is fun anyway as well as interesting and informative. It may also open new horizons. Anyone in a debt crisis situation can always contact us at GBAC.