Ummmm. This doesn’t read well does it…
The Finance Minister is worried about the risk that interest-only home loans pose to the country’s financial stability – and that’s just the half of it.
This month is crunch time for home-owners and investors who signed up for the Government’s mortgage deferral scheme in last year’s economic downturn.
In the six months after the first lockdown, more than 61,000 bank customers deferred all repayments on consumer loans totalling around $21 billion. The deferral scheme was extended another six months and gradually, property owners restarted payments – but by the start of the year, the banks were still exposed to $2.4b in mortgages on which the borrowers weren’t paying back the principal or the interest.
At the end of March the scheme ends, and borrowers will face a backlog of principal and interest payments that have been mounting up for 12 months, for some of them.
In addition, there’s about $74b-$80b owed on interest-only and revolving credit loans – and most of that is owed by property investors.
It is that mounting liability, and the threat it poses to the country’s financial stability, that is alarming Finance Minister Grant Robertson. He has asked the Reserve Bank to advise him on targeted initiatives to quell speculation or investor demand, such as implementing debt-to-income ratios and putting limits on interest-only mortgages for investors.
Last week’s annual Demographia report into house prices in major cities listed Auckland as one of the five least affordable cities in the world to buy a house; it would take 10 years for the average worker to earn the price of a house in the city.
…let’s look at this charts…
So Grant turns on the taps to the corporate banks to start an orgy of property speculation that has now priced home ownership beyond the reach of entire generations and Grant’s worried NOW because this venal greed risks crashing the entire economy.
Note – Grant’s concerned when his policy failure risks collapsing the economy NOT when it was crucifying renters, the homeless, beneficiaries and the working class.
Those 4000 kids living in motels will be so pleased Grant its thinking about stern action to stop those greedy property speculators from fucking the entire economy…while they stay in those motels of course.
The truth (like everything else in fucking NZ), is that the under regulated free market has been warped by the wealthy for their interests and all Labour attempt is bullshit tinkering on the sides rather than challenge the dominance of neoliberal theology.
We have allowed the commodification of houses to be a means to make wealth and people are chasing that with all the nuance of meth addicts in a P lab.
If Labour wanted actual solutions, these 3 would do it.
1 – FLOOD MARKET WITH MASS STATE HOUSING REBUILD: End the scum landlord subsidy of housing allowances end putting money into the pockets of unscrupulous motel owners by rapidly building 50 000 new state homes. Scum Landlords can do as they please because the level of desperation amongst renters gives them total power. Flooding the market with 50 000 new state houses would rob scum landlords of that desperation.
2 – STATE HOUSE FOR LIFE: Allow beneficiaries to stay in their state home for life so that they can create stable communities and that their desperation is never transported back to Landlords.
3 – DEPOSIT RESTRICTIONS: First time home buys should be required to have 10% deposit, but the more properties you own, the higher the deposit. The reason the speculators can out buy any first time home owner is because they can use their multiple properties to leverage more debt. If you are a property speculator, you need to turn up with a 70% deposit to counter the leverage multiple properties allows them.
If Labour want to actually solve the problem they have to regulate the market and re-set it so that speculation is punished while first home ownership and housing of the poor is championed.
For too long we have allowed the the rich to dictate the rules, if Labour’s kindness is to be meaningful, it needs to challenge that dynamic.
Sadly Labour are not looking for solutions, they are looking for the pretence of a solution to ease criticism from their Left.
Unfortunately for Grant and Jacinda, their trickle down theory to help speculators has set off a shock wave of debt greed that threatens to collapse the economy.
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