BFCSA Blog

Led by award-winning consumer advocate Denise Brailey, BFCSA (Inc) are a group of people who are concerned about the appalling growth of Loan Fraud around the world. BFCSA (Inc) is a not for profit organisation in the spirit of global community concern and justice.

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First-home buyer plans a poor joke The Australian 12:37pm May 13, 2019 John Durie   The sheer hypocrisy of politicians is a wonder to see, with Prime Minister Scott “Cry Me a River” Morrison’s last-minute $500 million scheme to encourage first-home buyers a case in point. Two years ago, when he unveiled his $6.2 billion bank tax on budget night, Morrison was asked about the banks’ reaction and he responded: “Cry Me a River.” He has kicked the bank can down the road consistently ever since, being bettered only by the ALP, which has stupidly and mindlessly agreed to provide the same deposit backing as the Coalition. On the one hand the politicians are doing their very best to make it harder for the banks to lend money to anyone, let alone first-home buyers. On the other, in the final days of an election, they think it is a good idea...
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ScoMo's loan scheme nationalises bank of Mum and Dad Australian Financial Review May 13, 2019 1.00pm Satya Marar Satya Marar is the Director of Policy at the Australian Taxpayers’ Alliance.   It’s a week before the federal election and both major parties now endorse a housing deposit scheme where the government will guarantee 75 per cent of the standard 20 per cent deposit on home loans required in lieu of paying Lender’s Mortgage Insurance. The policy helps prospective home buyers enter the market as they will only need to save 5 per cent of the value of the property since the government (read: taxpayers) has guaranteed to pay the remainder. Although noble in intent, such heavy-handed intervention could have disastrous and costly results. Lenders generally demand a 20 per cent deposit from borrowers because it recognises the credit risk of financing a greater portion of the loan, and insulates the lender...
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RBA running out of options, and the banks aren’t helping The Australian 12:00am May 13, 2019 Michael Roddan   Not content with a record run of inaction on official interest rates now stretching to 30 months, the Reserve Bank last week made an unusual plea to the banking sector, asking the lenders to do the central bank’s job for it. With the economy slowing — there was next to no growth over the second half of 2018 and all indicators are pointing towards a tougher first quarter — discussion has rightly turned to how the RBA plans to counteract stalled household spending and slowing credit growth. The cash rate has been on hold at a record low of 1.5 per cent since 2016 and, amid the gloomy economic outlook, financial markets are now pricing in two cuts by the end of the year — a projection the RBA acknowledged it has...
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Bank funding costs hit 'record lows': Reserve Bank Australian Financial Review May 12, 2019 4.25pm Jonathan Shapiro   The troubling spike in short-term bank funding costs has now completely reversed while the decline in Australian interest rates means long-term bank borrowing costs are now at "record low" levels, according to the Reserve Bank. The significant improvement in funding costs, which had prompted the banks to increase standard variable mortgage rates last year, should provide a boost to the bank margins, but also intensify calls for them to pass on the savings to customers. In its quarterly statement of monetary policy, the central bank noted that the spread between the three-month bank bill swap rate and the overnight cash rate had contracted from around 60 basis points at the start of the year, to about 20 basis points, its lowest level since 2017. That has provided a reprieve for the banks whose...
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Scott Morrison expressed interest in overhauling negative gearing, according to official documents ABC News13 May 2019 Dan Conifer   EXCLUSIVE  Prime Minister Scott Morrison expressed interest in overhauling housing tax concessions, including negative gearing, just days into his time as treasurer, according to official documents. The Morrison Government's opposition to the ALP's housing tax plan is central to its re-election pitch. But Mr Morrison did not appear to oppose changes to housing taxation early in his time as treasurer, according to "sensitive" government documents. Obtained under freedom of information laws, a senior NSW Treasury official in October 2015 wrote: "The Commonwealth appears more willing to consider broader tax reform. "The Commonwealth Treasurer has indicated that all options need to be considered, including superannuation, capital gains tax and negative gearing." Mr Morrison in February 2016 said there were "excesses" in negative gearing and that the government was considering changes. That same month,...
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Home loan scheme could increase negative equity risk, economists say Sydney Morning Herald May 13, 2019 12.00am Clancy Yeates   Both major parties' pledges to guarantee thousands of mortgages with deposits of only 5 per cent could result in more people ending up with a loan that is bigger than their house is worth, if the house price slump continues, economists say. After Prime Minister Scott Morrison on Sunday announced the scheme to lift housing affordability, market economists said the idea brought with it the risk of borrowers finding themselves in negative equity, where the outstanding balance on a mortgage is greater than the house's value. After banks cut back on low-deposit home loans in recent years, Mr Morrison on Sunday unveiled a new scheme that he pledged would allow buyers to overcome the difficulties of saving for a 20 per cent deposit, which is what is generally required by banks...
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PM betting the house on $500m first-home plan The Australian 12:00am May 13, 2019 Michael Roddan   Scott Morrison has unveiled a $500 million housing affordability plan in a pre-election assault on Labor’s negative gearing and housing policies, pledging to underwrite home loan deposits for first-home buyers struggling to hit a 20 per cent target imposed by the banks. Under pressure to match the Coalition pitch to younger voters, Bill Shorten yesterday agreed to support the first-home deposit scheme, which was backed by the Property Council of Australia and Master Builders Australia. The First Home Loan Deposit Scheme will be available from the start of next year to first-home buyers who earn up to $125,000 — or $200,000 for couples — who have amassed a 5 per cent deposit. The Prime Minister’s proposal would fill the loan gap usually funded through private lenders’ mortgage insurance, which protects the bank from a defaulting customer...
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Australian property still world's most expensive despite sharp falls Australian Financial Review May 10, 2019 8.50am Duncan Hughes   Sydney and Melbourne’s median property prices are still about 60 per cent less affordable than booming Seattle and New York, despite nearly 18 months of sharp price falls in Australian markets, according to global investment bank Morgan Stanley. Australia’s two most populous cities continue to be in the world’s top five most expensive. Hong Kong retains the top spot, where The Peak recently reclaimed the title as the planet’s most expensive land. But a nine-bedroom 13th century chateau set in more than 7000 square metres of parkland in eastern France is cheaper than a two-bedroom apartment in Sydney, according to Domain. The cost of borrowing money to buy a property is also much more expensivein Australia than other global property hotspots such as America, Canada and Hong Kong, despite the cash rate...
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The case that could reshape banking Australian Financial Review May 10, 2019 3.41pm James Eyers, Misa Han   It's a case that will define one of the most fundamental jobs of a bank – working out whether to lend to a customer. On one side is the Australian Securities and Investments Commission. The regulator has taken Westpac Banking Corp to task over allegedly breaking responsible lending laws 261,987 times. It is a headline-grabbing figure for a regulator hell bent on pursuing a "why not litigate" strategy, after its own reputation took a beating during the Hayne royal commission. In ASIC's view, Westpac acted egregiously by using a "frugal" benchmark to estimate potential borrowers' living expenses – a figure which, in some cases, mimics the expenses of a family living close to the poverty line. On the other side, Westpac remains defiant. It insists it acted in good faith when assessing the...
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The coming of Aussie quantitative easing Australian Financial ReviewMay 10, 2019 10.13am Christopher Joye The author is a portfolio manager with Coolabah Capital Investments, which invests in fixed-income securities including those discussed by this column.   The Reserve Bank of Australia’s governor Phil Lowe passed our controversial intelligence test with flying colours by surprising many of the best forecasters in the business with his sensible decision to wait on rates. And contrary to claims at the time, this has no ramifications for the RBA’s inflation targeting regime—whether it goes in June, July or August does not make a jot of difference to the ensuing economic outcomes. While I personally felt Lowe would be mad to go in May, immediately prior to the meeting I was torn on what he would do in practice. Based on both the RBA’s past behaviours (where it has not hesitated to pull the trigger close to...
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Life after Libor: be prepared or risk financial meltdown, ASIC warns The Australian 12:00am May 10, 2019 Richard Gluyas   ASIC has warned chief executives of a possible financial meltdown unless they adequately prepare for the likely demise of the global benchmark interest rate Libor in 2021. In an alert reminiscent of the Y2K information technology scare that ultimately failed to ­materialise, the watchdog has written to CEOs of the nation’s top financial institutions to seek an assurance that they understand the risks associated with a global move to new benchmarks that were less vulnerable to ­manipulation. “The transition away from Libor may have significant implications for the entities’ risk management, operational processes and information technology infrastructure,” the letter said. “Insufficient preparations for the transition could have a negative impact on the entities’ business, clients and the markets in which they operate.” The letter, which was strongly supported by the Reserve...
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Construction jobs casualty of property market downturn The Australian 12:00am May 8, 2019 Turi Condon   The housing downturn is flowing through to job losses in the construction sector with employment in the industry falling at its steepest rate in nearly six years, according to the Australian Industry Group/Housing Industry Association construction index. Activity in the construction industry weakened further in April with the index falling 3 points to 42.6 for the month. Readings below 50 show falling activity. Employment fell 6.9 points to 39.2. “The housing and apartment sectors both remain firmly in negative territory and commercial construction recorded a ninth month of contraction,” Ai Group head of policy Peter Burn said. Weakness in the sectors was partially offset by an expansion in engineering construction on the back of large-scale publicly funded infrastructure projects. But Dr Burn said there was little sign of any near-term improvement. “There are now strong...
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Big banks on war path over NZ central bank’s bid to raise minimum capital The Australian 12:00am May 9, 2019 Richard Gluyas   The nation’s big four banks are on a collision course with the Reserve Bank of New Zealand, and judging by the hostile rhetoric there’s no sign of the combatants taking a backward step. Final submissions are due by May 17 on the RBNZ’s proposal to increase minimum capital requirements by $13 billion-$16bn for the three banks that reported half-year results over the last week — ANZ, National Australia Bank and Westpac. The central bank is due to make a final decision by September. The stakes are enormous given the big four earn 15 per cent of their combined profit, or $4.4bn, in NZ — a market where they control 88 per cent of industry assets. The combative tone adopted by the banks, set by ANZ chief executive Shayne...
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Westpac ‘outlier’ on loan approvals, ASIC case told The Australian May 9, 2019 Joyce Moullakis   Westpac has conceded it was an outlier among its rivals in the way it assessed a borrowers’ ability to repay interest-only loans before changing its policy in mid-2015. On the third day of a Federal Court battle against the Australian Securities & Investments Commission, the regulator’s lawyers peppered Westpac managers with questions seeking to establish that the bank didn’t adhere to responsible lending obligations. Jeremy Clarke SC, for ASIC, argued that from 2011 to 2015 Westpac didn’t make an adequate assessment of customers’ ability to repay mortgages when they changed from interest-only to principal and interest. Westpac’s Robert Love, head of credit risk optimisation, admitted the bank had been an outlier in how it assessed those loans but noted the process had changed following an internal review. “We saw this change as an enhancement to...
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Australia's riskiest suburbs for home loans revealed as banks push for higher deposits ABC News9 May 2019 Kathryn Diss   A new crackdown on property lending has emerged in the wake of the Banking Royal Commission, with borrowers now being asked for deposits of up to 30 per cent and banks throwing greater scrutiny on location and living expenses when assessing loans. The pull back on new finance comes in the wake of a scathing assessment of the nation's banks delivered by Commissioner Kenneth Hayne. But the squeeze on credit has coincided with tumbling house prices on the east coast, creating what analysts have branded a "perfect storm" for borrowers trying to access finance. While the biggest changes to lending standards happened between 2015 and 2017, banks have continued to bolster their assessment processes, now giving a specific focus to the living expenses of borrowers. In addition, data obtained by the...
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Australian savers doomed to be worse off after forecast interest rate cuts ABC News 9 May 2019 David Taylor   Millions of Australians who have stashed money at their local bank branch could soon be earning next to nothing, if the Reserve Bank cuts interest rates as expected. "It's potentially a gigantic issue," CLSA banking analyst Brian Johnson warned. Despite enormous pressure from financial markets, the Reserve Bank held its nerve on Tuesday and left the cash rate unchanged at the record low level of 1.5 per cent. But most economists expect it will cut the cash rate this year, probably twice. Normally when the Reserve Bank cuts the cash rate the banks follow suit by passing that rate cut onto borrowers. Mr Johnson said that was even more likely now in the wake of the banking royal commission. "When you think of the politics of where we are right now,...
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Austerity 'populism' burdens households, RBA: PIMCO Australian Financial ReviewMay 9, 2019 12.32am Jonathan Shapiro   Global bond giant PIMCO says the Australian economy will remain reliant on ultra-low interest rates and a highly geared consumer until politicians can achieve a better mix of fiscal and monetary stimulus. The $2.5 trillion fund’s Australian portfolio management head, Robert Mead, says a failure of governments to borrow money to spend on productive investments such as infrastructure represents poor economic management and will only serve to increase the burden on monetary policy at a time when the economy is weakening. “It has been a populist approach to balance budgets, which is all good in a perfect world, but we are not living in that world,” Mr Mead told The Australian Financial Review. “This is a world where the consumer has been asked to do all the borrowing and somehow that is OK, and we have...
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Austerity 'populism' burdens households, RBA: PIMCO Australian Financial Review May 9, 2019 12.32am Jonathan Shapiro   Global bond giant PIMCO says the Australian economy will remain reliant on ultra-low interest rates and a highly geared consumer until politicians can achieve a better mix of fiscal and monetary stimulus. The $2.5 trillion fund’s Australian portfolio management head, Robert Mead, says a failure of governments to borrow money to spend on productive investments such as infrastructure represents poor economic management and will only serve to increase the burden on monetary policy at a time when the economy is weakening. “It has been a populist approach to balance budgets, which is all good in a perfect world, but we are not living in that world,” Mr Mead told The Australian Financial Review. “This is a world where the consumer has been asked to do all the borrowing and somehow that is OK, and we have a government...
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Australian savers doomed to be worse off after forecast interest rate cuts ABC News 9 May 2019 David Taylor   Millions of Australians who have stashed money at their local bank branch could soon be earning next to nothing, if the Reserve Bank cuts interest rates as expected. "It's potentially a gigantic issue," CLSA banking analyst Brian Johnson warned. Despite enormous pressure from financial markets, the Reserve Bank held its nerve on Tuesday and left the cash rate unchanged at the record low level of 1.5 per cent. But most economists expect it will cut the cash rate this year, probably twice. Normally when the Reserve Bank cuts the cash rate the banks follow suit by passing that rate cut onto borrowers. Mr Johnson said that was even more likely now in the wake of the banking royal commission. "When you think of the politics of where we are right now,...
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Austerity 'populism' burdens households, RBA: PIMCO Australian Financial ReviewMay 9, 2019 12.32am Jonathan Shapiro   Global bond giant PIMCO says the Australian economy will remain reliant on ultra-low interest rates and a highly geared consumer until politicians can achieve a better mix of fiscal and monetary stimulus. The $2.5 trillion fund’s Australian portfolio management head, Robert Mead, says a failure of governments to borrow money to spend on productive investments such as infrastructure represents poor economic management and will only serve to increase the burden on monetary policy at a time when the economy is weakening. “It has been a populist approach to balance budgets, which is all good in a perfect world, but we are not living in that world,” Mr Mead told The Australian Financial Review. “This is a world where the consumer has been asked to do all the borrowing and somehow that is OK, and we have...
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