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BFCSA investigates fraud involving lenders, spruikers and financial planners worldwide.  Full Doc, Low Doc, No Doc loans, Lines of Credit and Buffer loans appear to be normal profit making financial products, however, these loans are set to implode within seven years.  For the past two decades, Ms Brailey, President of BFCSA (Inc), has been a tireless campaigner, championing the cause of older and low income people around the Globe who have fallen victim to banking and finance scams.  She has found that people of all ages are being targeted by Bankers offering faulty lending products. BFCSA warn that anyone who has signed up for one of these financial products, is in grave danger of losing their home.

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BFCSA: Moody's say Australia 2nd highest household debt = extra risk for Economy

Posted by on in ROYAL COMMISSION URGENT
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Loan limits firm up Australia's AAA rating but risks remain: Moody's

Australian Financial Review Apr 10 2017 6:31 PM

James Eyers

 

Australia's prized AAA credit rating could be firmed up by the prudential regulator's moves to target interest-only loans, according to Moody's, but the credit ratings agency is concerned that elevated household debt may amplify economic risk if housing markets turn sour.

Moody's Investors Service said to the extent new lending limits imposed on the banks by the Australian Prudential Regulation Authority cool growth in household debt and reduce mortgage risks, "the measures are supportive of the sovereign's credit profile".

Yet the ratings agency said Australia's household debt - which at 120 per cent of gross domestic product is the second highest in the advanced economies after Switzerland and the highest in the Asia Pacific - have added in extra risks for the economy.

"Elevated household debt, only buffered by limited liquid assets, would amplify the economic impact of a housing downturn," Moody's said in a report on Australia's sovereign credit profile, published on Monday.

"A simultaneous slump in house prices would aggravate the hit to consumption, as homeowners would feel less well off than previously. Given that household debt is also high compared to households' liquid financial assets, the latter would provide a relatively limited cushion to domestic demand.

"Overall, GDP growth would likely slow substantially in the event of a negative shock that involved a housing downturn."

Moody's said it did not expect APRA's new macroprudential policies would reverse the build up of household debt, which it expects to continue to grow, as low interest rates and expectations of continuing rises in house prices encourage purchases.

APRA's measures to cap interest-only mortgages at 30 per cent of new residential mortgage lending compared with almost 40 per cent of existing loans and its requirements for banks to justify loans made with small deposits are only likely to weigh on demand for property "at the margins", Moody's said.

Less than a month before the federal budget, Moody's said household debt "does not pose a direct or immediate risk to the government's balance sheet". But it warned that should the economy turn down, "highly leveraged households would likely cut back on consumption spending more sharply than less leveraged borrowers, crimping economic growth and fiscal revenues".

Reserve Bank of Australia governor Philip Lowe said last week that APRA's new requirements to reduce interest-only loans "should help the whole system pull back to a more sustainable position".

"A reduced reliance on interest-only loans in Australia would be a positive development and would help improve our resilience," he said.

"With interest rates so low, now is a good time for us to move in this direction. Hopefully, the changes might encourage a few more people to think about the merit of taking out very large interest-only loans when interest rates are near historical lows."

Ahead of the RBA's latest financial stability review, to be released on Thursday, Mr Lowe also pointed last week to high and rising levels of household debt. While arrears rates remain low and many households have built up big buffers in mortgage offset accounts, Mr Lowe said slow growth in wages was making it harder for some households to pay down their debt. "For many people, the high debt levels and low wage growth are a sobering combination," he said.

On Monday, Moody's called out "the large exposure of Australian banks to the property sector" as a source of risk for the sovereign. But it also noted that the banks' strong capitalisation and generally high financial strength "significantly reduce the risks of a banking crisis and any related costs to the government".

 

 

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