Housing Bubble Down Underby Douglas French
The Wall Street Journal reports that the median price for a home in major Australian cities just hit A$471,818 (US$394,661), a more than doubling of the median price since early 2002, reports the May 28th edition of Grant’s Interest Rate Observer.
“Revealed: The home loan that could save you a fortune,” writes Nick Gardner for The Daily Telegraph.
When high prices make homes hard to buy, enterprising lenders come to the rescue: remember negative-am, Alt-A, and I-O teaser-rate products circa 2004-2006 in the good old U.S. of A? Don Koch, CEO of Australia’s fifth largest bank, ING Direct, says “There is an urgent need to provide more affordable options and borrowers should be able to choose whether they want to repay the capital or not.” The people of Australia “are needlessly being denied the chance to buy a property while prices spiral out of their reach,” Koch claims. Yes, that whole down-payment and amortization requirement thing was deemed unfair not too long ago in America.
Koch goes one better, with ING Direct’s new Interest Only Perpetual Mortgage, borrowers can tote their loans from property to property, “accumulating equity from rising property prices as they go.” After all, real estate always goes up in price and ING wants to be your “mortgage partner for life.”
“Then, as they near retirement,” says Koch, “they could sell their property for a big enough profit to pay off the original loan and buy a smaller place outright, leaving them mortgage-free. Or they could keep the mortgage going and repay the original capital from their estate, after death.”
A check of the ING website reveals that Mr. Koch started with the company back in 1999 as Head of Technology and CIO. The brief bio makes no mention of Koch having any lending experience. Which may be why he claims, “There is no economic reason for banks to insist on regular capital repayment. It just makes the loan more expensive for the borrower.”
“It has worked fantastically in Europe as a way for people to get home ownership and build wealth throughout their lives. It just requires a change in mindset about how you live with debt,” says Koch.
We know how this story ends.
- Block on CNBC: Privatize the Roads
- Burgeoning Regulations Threaten Our Humanity
- How Government Forces the Poor Into Black Markets
- "America Has Ceased to Exist": Investment Guru Doug Casey on the Coming Economic Meltdown
- The Bond Trap
- Entrepreneurs Are Moral Heroes
- Faber: Fed is making rich richer, causing increase in income inequality
- Self-Described “Austrian Economics Geek,” Defender of Personal Self-Defense, Reads LewRockwell.com, Wants to Abolish the FDA, Supports the Right of Secession, Reads Fred Reed on LRC, Volunteered for Ron Paul Campaign
FAIR USE NOTICE
This site contains copyrighted material the use of which in some cases has not been specifically authorized by the copyright owner. Such material is made available for the purposes of news reporting, education, research, comment, and criticism, which constitutes a 'fair use' of such copyrighted material in accordance with Title 17 U.S.C. Section 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. It is our policy to respond to notices of alleged infringement that comply with the DMCA and other applicable intellectual property laws. It is our policy to remove material from public view that we believe in good faith to be copyrighted material that has been illegally copied and distributed by any of our members or users.