Australian banks are sitting on A$500 Billion of ‘Liar Loans’ according to UBS.
In US dollars, that’s about $400 billion, quite a significant amount of money for a relatively small economy.
Here’s something else for policy makers to worry about as they attempt to engineer a soft landing in Australia’s property market.
The country’s lenders could be sitting on A$500 billion ($402 billion) of “liar loans,” or mortgages obtained on inaccurate financial information, according to an estimate from UBS Group AG.
A survey by the firm of 907 Australians who took out a mortgage in the last 12 months found only 67 percent stated their application was “completely factual and accurate,” down from 72 percent the previous year. The most common inaccuracies were overstating income and understating living expenses, the survey found.
These findings “suggest mortgagors are more stretched than the banks believe, implying losses in a downturn could be larger than the banks anticipate,” analysts including Jonathan Mott wrote in a note to clients dated Sept. 11.
I have no idea when some of these property bubbles truly bust for good, but they will, to devastating consequences in Australia, Canada, and China.
Mike “Mish” Shedlock
“History doesn’t repeat, but it rhymes”
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Looks like they have a lot of printing to do down there, to fill that hole. But at this point the only political way out is significant devaluation of the “money.” Only a matter of time.
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And if Australia says it’s 500 billion, it’s at least a trillion…
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If a sovereign entity under-reports inflation, and constantly spends more than it takes in. If that entity pays a yield that, after taxes, does not even cover the inflation they admit to….
…is that an example of a liar loan?
If it walks like a duck, quacks like a duck, and lies about its income/expenses like a duck
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Lying is one thing that’s bad enough for lending. How about the routine allowance of unrealized capital gains to function as collateral in place of cash. Meaning: there is no equity in the Australian housing market.
http://www.news.com.au/finance/economy/australian-economy/issuing-new-loans-against-unrealised-capital-gains-has-created-an-australian-house-of-cards/news-story/853e540ce0a8ed95d5881a730b6ed2c9
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Rules out the chances of a gradual cool down in the housing market.
Reminds me of fractional reserve lending that banks do.
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In other words, this should be bullish for equities?
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I’m still completely astonished that after we went thru this crap a mere few years ago, people could still think that somehow ‘now’ it’s different that back then…then again, in some ways it is because the house of cards is now much bigger.
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+1
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It’s because those who profit from it aren’t the ones who suffer.
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“I’m still completely astonished that after we went thru this crap a mere few years ago, people could still think that somehow ‘now’ it’s different that back then…”
The same phenomena occurs with political party loyalty.
How many times do voters need to have the true colors of their bought major party revealed via so many promises with no results before they realise that their, for example, smaller government conservative party ISN’T anything remotely like that simply because of their need to fund campaigns which puts them under the ownership of many of the same deep pocket lobbies that own their so-called opposition.
The financial illusion is driven by greed, the political side by the aversion to believing in the reality of one’s actual powerlessness in any election above that of a small town.
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Political beliefs – and associated economic beliefs – are what one thinks should be the best way to survive in this corrupt senseless government created world.
Some think it best to steal, some to work, and some to mooch. In two out of three ways, government brings out the worst in people.
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It’s called institutional amnesia
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This is likely true but the bubble is not likely to burst until rates start higher. When the tide goes out we will see what’s what and our banks are still pretty dependant on overseas loans so it definitely could get ugly. As well we have some big spending in WA that’s gone bad and NSW has really ramped up spending with electricity being sold of to pay for big infrastructure projects when there is a construction boom. Similar things elsewhere I presume. Both banks and state Governments could end up in a world of hurt and their is no sign of control yet at the federal level.
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The country’s lenders could be sitting …
Except banks don’t lend. Instead “Bank loans create bank deposits” but only largely sham liabilities wrt the non-bank private sector. This is the crux of our continual problems with banks – the accounting is bogus.
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Today, Australian bank stocks are flying. No stopping this beast.
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Canada’s housing stopped appreciating pretty much nationwide in 2013.
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Looks like Australia will remain a debtor’s prison.
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Sixoo
Ironically, Australia was founded as a prison for the Brits to lock up those who couldn’t pay their bills and had no money. We’ve probably gone full circle.
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Just remember….
…there’s a whole lot of belief out there.
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Aussie bank stocks are roaring ahead after this came out. Go figure
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No worries. Australia is as underpopulated as Mongolia, a GDP as big as Russia, more asset rich than anywhere else on earth and prepared to sell anything to the highest bidder – and bankers that are inured to boosting the economy and their profits by 5-7% pa entirely without any significant (measured) inflation according to the Bureau’s of bullshit statistics. What can go wrong.
A great friend used to have the theory that if you drive fast enough you will never hit a Roo (kangaroo! – particularly the pink kind:-) Seems to work – anyone want an opera house, or harbour bridge?.
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Some people say a man is made outta mud
A poor man’s made outta muscle and blood
Muscle and blood and skin and bones
A mind that’s a-weak and a back that’s strong
You load sixteen tons, what do you get?
Another day older and deeper in debt
Saint Peter don’t you call me ’cause I can’t go
I owe my soul to the company store
(Tennessee Ernie Ford)
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