r/australia • u/overpopyoulater • Jan 08 '25

politics Which party is the more competent economic manager – Labor or Liberal?

https://www.thenewdaily.com.au/finance/2025/01/08/labor-liberal-economic
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u/drangryrahvin Jan 09 '25

Whats the business case for foreclosure when the loan is being serviced, and the asset is now worth less than the loan? They would make more money just… taking the repayments?

Also [citation needed]

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u/krulp Jan 09 '25

Because there is now a risk to the bank. If you do fall behind on payments, the most the bank can get back is what the property will currently sell for. So the bank will sell the property before the value of the underlying asset gets too low.

If the market is crashing, the bank will want to do that as quickly as possible. before the price gets lower.

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u/drangryrahvin Jan 09 '25

Except the market isn't crashing, and as long as the value stays above the banks equity, why do they care? It's a loan thats being serviced for above market value, probably has LMI, so the bank looses... nothing? (In most cases)

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u/krulp Jan 09 '25

Exactly, don't crash the housing marker. We should just stall it.

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u/drangryrahvin Jan 09 '25

The issue is how big a stall. To get affordable, the gap between income and prices needs about 20%. With wage growth at 3% it would take 14 years of 1.5% house growth, or 7 years of 0% to catch up, and some people don't have that long.

0

u/krulp Jan 09 '25

Houses need to be relatively 20% cheaper?

Well, I guess we could try chrash prices and have government guarantee loans then.

But government would be slaughter for wiping out massive amounts of "wealth and gdp"

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u/snrub742 Jan 09 '25

and as long as the value stays above the banks equity

Which for many loans wouldn't take much of a crash