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View Full Version : Wetpak 110% Home Loans.



duncan macgregor
13-04-2008, 12:39 PM
Stuff said today that Westpak are offering 110% home loans to people with good jobs. Now is your chance if you are about to go bankrupt to get that extra 10% before you shoot through. What a great oportunity for the smart business man to take them to the cleaners. That bank is now off my list of safe havens, for my money during this downturn in the market. Macdunk

Dr_Who
14-04-2008, 07:32 AM
Has Westpac not learnt anything from the subprime in the US? Very Sad. :confused:

minimoke
14-04-2008, 08:40 AM
Madness. Presumably 100% loan goes on the house which is a relatively secure asset from which you can secure most of the debt. But what about the other 10% - where will that go. The holiday; car; flat screen TV. Stuff no doubt that will have no residual value once the money is spent. Surely if you have the income to pay a 110% loan you have the money to save a deposit.

Dr_Who
14-04-2008, 08:43 AM
It is of a concern. What it immediately tells me is that the banks are flush with too much liquid cash and dont know what to do with it. All the mums and dads are putting their hard earned savings as cash in the bank as a safe haven.

Steve
14-04-2008, 09:03 PM
I'm sure that they charge a low-equity fee, but should they charge a higher rate of interest for this increased risk?

patsy
15-04-2008, 05:41 AM
Is this such a big deal?

A highly leveraged property "investor" is likely to end up with at least a 110% mortgage as soon as property prices decline - even without having been given a 110% mortgage initially. Even without any significant property decline, someone with a reasonable high mortgage may have effectively a 110% mortgage if we add up credit cards and bank overdraft facility to his/her entire debt calculation. So what's new?

CJ
15-04-2008, 04:44 PM
I'm sure that they charge a low-equity fee, but should they charge a higher rate of interest for this increased risk?

I beleive the low equity fee pays for a default insurance policy. Therefore it is not the bank taking the risk but the insurance company. The borrower is still at risk as they either have to pay the bank or the insurance provider (ie. the insurance is for the bank, not for you!).

Malcolm - dont use capitals for your whole post - ok if you want to highlight one small part but not for the whole think - PLEASE.

STRAT
15-04-2008, 06:21 PM
I understand the sentiment behind your reactions to this guys and girls but how is this any different to any other bank customer with a high percentage mortgage and a personal loan for a car or what ever? The only difference I see is the customer may be getting a better interest rate on the car :cool:

DISC I never borrow money to buy a car or a toy

STRAT
15-04-2008, 06:29 PM
change to kiwi bank;);)Hell no. I still have nighmares about the service I got from Postbank the one time I had a mortgage with them :mad:.
As for their "Kiwis for Kiwis" advertising campaign, mark my words that BS will mean nothing in a few years when they sell out to, as they call em "one of the big banks"
Anyone remember the same BS coming out of ASB? ( now called ASB bank which I guess means Auckland Savings Bank Bank:p ) Then there was Trustbank. Same BS and not much to trust :rolleyes:

Halebop
15-04-2008, 06:52 PM
I beleive the low equity fee pays for a default insurance policy. Therefore it is not the bank taking the risk but the insurance company. The borrower is still at risk as they either have to pay the bank or the insurance provider (ie. the insurance is for the bank, not for you!).

You might want to check the fine print on the underwriter. Various forms of payment protection insurance - be it GAP, Mortgage Protection, Loan Protection, Credit Card Protection have been very profitable for an extended period. Banks have looked covetously at the margins earned by insurers and pulled this line of business in house. The insurance is very much for the bank both in terms of premium income and their own loan covenants. ASB do it via Sovereign, ANZ via ING, Westpac via Westpac Life. So as the consumer you take some form of payment protection insurance effectively underwritten by the company you borrowed from. The fraught entanglement this represents is mind boggling for both insurer and insured (and largely the reason why banks have restrictions placed on them by post depression era legislation about the quantum of insurance they can write - banks get around this using holding company structures rather than insuring directly).

The financial, reputational and moral risk involved is simply stupid but both consumers and bankers appear cut from similar dull coloured cloth. On this side of the Tasman even our commerce commission has been taking a closer look at these types of transactions. I'd expect some bad PR sooner rather than later.

mattyroo
15-04-2008, 09:02 PM
Cannot see why so many of you are getting so over excited about this...

It clearly stated these were available only to: high income earners, with excellent career prospects.

It's certainly not like this class piece of kiwi subprime: http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10486861&pnum=0

Where is the personal responsibility going to be when it all gets messy? Oh that's right they'll be looking for this government to bail them out, that's what happens when you have a socialist state; you create dependency.... only thing is, it is decent wage earners like me who save these sorry sods' ass!

I would like to ask them a few pointed questions right about now....


Their loan started off at 100%, what is it now? 110%? So they do not own the house, are paying rent to the bank (at a premium) + are hindered by a huge debt that is continuing to grow. How are they going to escape from this?
How will they cope when their interest rate gets reset to current rates?
What contingency plans do they have for emergency funds?
How do they feel paying 2x rent on something that they will never own?
What is going to happen if one of them becomes ill and was unable to work or loses their job, or one of their children becomes ill?
How about unexpected expenditure required on the house?
What if the car broke down?
What if interest rates keep going up, and of course rates increases?

CJ
16-04-2008, 07:28 AM
Banks have looked covetously at the margins earned by insurers and pulled this line of business in house.

I bow to your superior knowledge on this on. never paid a low equity fee (and never will) so have never looked at the policy.

Surely they get someone to underwrite it though? If not, nothing wrong with self insurance provided they are pricing the risk propertly.

Dr_Who
16-04-2008, 10:02 AM
The answer to all this BS is for people not to live beyond their means. Whats all this crap about not beening able to afford a house? Of cos you wouldnt be able to afford a house if you constantly dream about a place in Orakei, Epsom, St Heliers & Remuera and trying to live the life of Riley. There are plenty of good quality housing out south and west ak area that are around $300k.

I dont feel sorry for those that load themselves with debt to keep up with the Joneses.

CJ
16-04-2008, 04:03 PM
Of cos you wouldnt be able to afford a house if you constantly dream about a place in Orakei, Epsom, St Heliers & Remuera and trying to live the life of Riley. There are plenty of good quality housing out south and west ak area that are around $300k.

$300k @10% = $577pw week.

I could afford to rent a place in Orakei, Epsom, St Heliers & Remuera for that.

Why buy in a falling/stagnant market.

tim23
16-04-2008, 04:26 PM
Renting is far better option now and for some time I suspect; these loans are mad!

Dr_Who
17-04-2008, 08:41 AM
$300k @10% = $577pw week.

I could afford to rent a place in Orakei, Epsom, St Heliers & Remuera for that.

Why buy in a falling/stagnant market.

I dont disagree with you, but for a couple with their first child, wanting their first property secure property as their home and with little savings, I would advice they purchase a property at a reasonable price. Of cos if you are all cashed up and understands the market and wants to rent, then do so by all means. But to most people who dont have time to research the fundamentals and wants security there are plenty of good quality houses out west and south at a reasonable prices. But of cos there are way too many people wanting to live the million lifestyle but cant afford to pay for it these days.

Arbitrage
17-04-2008, 10:14 AM
I am with you on that one Doc. A young couple I know have just bought their first home in Onehunga. It is a townhouse on a small section. They are aware of the market situation, but they wanted the security of their own place, and somewhere they could add value to. They have skipped buying a plasma tv, don't have Sky, and are concentrating on paying back the mortgage to get established for the longer term.

Yossarian
17-04-2008, 11:57 AM
There are plenty of good quality housing out south and west ak area that are around $300k.

Uh, you mean in Patamahoe or something???

You need to go WAY out south or west for a price like that. And then you have to spend your life (and heaps of $$$) in the car.

Disc: happy renting a property, close to the city, at < 4% yield.

Arbitrage
17-04-2008, 12:17 PM
Uh, you mean in Patamahoe or something???

You need to go WAY out south or west for a price like that. And then you have to spend your life (and heaps of $$$) in the car.

Disc: happy renting a property, close to the city, at < 4% yield.

Less than 4% yield? Rents are currently 5-6% yield in inner city Auckland and climbing. You have a bargain.

neopole
17-04-2008, 07:17 PM
Uh, you mean in Patamahoe or something???

You need to go WAY out south or west for a price like that. And then you have to spend your life (and heaps of $$$) in the car.

Disc: happy renting a property, close to the city, at < 4% yield.

Patamahoe is becoming an exclusive area of franklin, in clendon or manurewa you will easily find a sub $300k house.

Franklin is becoming the choice district to live for the ex south aucks tradespeople and professionals.... exception being mercer which is still under $200k for a house and 45 min CBD.
also... most new franklin residents work in the district now as it is growing like wildfire and there is a shortage of skilled workers.
and.......... we are about to get our first traffic lights too!!!

CJ
18-04-2008, 07:16 AM
Doc, Arbitrage - I agree. I have just helped my brother into a home as he has a kid on the way. they are paying a bit more than there rent but at least it is theirs and they have the security so they can focus on building up their business.

But alot of people dont need this security per se. Being a good tenant should be enough.

Yossarian
18-04-2008, 01:07 PM
Less than 4% yield? Rents are currently 5-6% yield in inner city Auckland and climbing. You have a bargain.

i think so, but my last place was closer to 3% so prices are going up!!

Still, not sure i agree with your 5-6% statement.

PS I always think it's funny how people state driving time to the CBD as if it's static... most people's calculations seem to be based on a drive at 2.30am Monday morning... you try it at rush hour !

pps where is Mercer anyway

patsy
18-04-2008, 10:28 PM
It clearly stated these were available only to: high income earners, with excellent career prospects.

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It's a real oxymoron coming from Westpac. They are happy to lend to "high income earners" who have been such d*ckheads with money to the point of having negative equity. What have they done with the "high income" they have earned?

Maybe all this bizo of "high earning" is just some marketing cr*p to make suckers making $60K to feel like they are high executive shots in the top tax bracket.

patsy
18-04-2008, 10:35 PM
It's certainly not like this class piece of kiwi subprime: http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10486861&pnum=0

Where is the personal responsibility going to be when it all gets messy? Oh that's right they'll be looking for this government to bail them out, that's what happens when you have a socialist state; you create dependency.... only thing is, it is decent wage earners like me who save these sorry sods' ass!
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This is a tragic story - tragic in the sense these people feel the obsessive-compulsive need to overextend themselves ridiculously only to feel they are homeowners. This is just New Zealand culture exercising unspoken pressure on people. Owning a house is what you "have" to do, you know. It doesn't matter if you screw up your life by absorbing an exorbitant level of risk and paying interest through the nose.