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Bank "Stress Testing" and Media hype?

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  • Bank "Stress Testing" and Media hype?

    Hi
    If the banks are stress testing their customers as per this.....

    "This test is done on principal and interest payments over a 30-year term at whatever their servicing rate is, typically between 6 per cent and 7 per cent."

    Then isn't all this doom and gloom reporting about how many people will lose their houses if interest rates rise all bullshit

    You get a loan at 2.5 per cent...bank has tested you at between 6 percent and 7 percent.....interest rates jump up to say 5 percent...you should still be able to pay loan and keep house true?

    Thanks
    Richard

  • #2
    Originally posted by richard56 View Post
    . . . . all this doom and gloom reporting . . .
    Quite right. We no longer have any investigative journalism in today's NZ tax-payer-funded, gummint-compliant donor-media.


    Even truer now than it was in the typewriter era.
    Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

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    • #3
      Quite right unless media also convinces your tenants that it is a breach of their human rights to have to pay rent to greedy landlord in which case you have also got a problem.

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      • #4
        Originally posted by richard56 View Post
        Hi
        If the banks are stress testing their customers as per this.....

        "This test is done on principal and interest payments over a 30-year term at whatever their servicing rate is, typically between 6 per cent and 7 per cent."

        Then isn't all this doom and gloom reporting about how many people will lose their houses if interest rates rise all bullshit

        You get a loan at 2.5 per cent...bank has tested you at between 6 percent and 7 percent.....interest rates jump up to say 5 percent...you should still be able to pay loan and keep house true?

        Thanks
        Richard
        Yes. Exactly.

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        • #5
          If only it was that simple. For example What happens when the job paying what’s required to service the loan at 5% is lost and there is no job offer forthcoming at the same or higher income?

          is there any requirement to have a contingency fund for long lockdowns and paid at 80% or less?

          cheers

          Donna
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          • #6
            Originally posted by donna View Post
            If only it was that simple. For example What happens when the job paying what’s required to service the loan at 5% is lost and there is no job offer forthcoming at the same or higher income?
            is there any requirement to have a contingency fund for long lockdowns and paid at 80% or less?
            cheers

            Donna
            That's a different topic.

            Losing your job will prevent you from paying your mortgage no matter if the interest rate is 2.5% or 3.5%.

            The OP is just talking about a 1% shift, (not a loss of income).
            Last edited by McDuck; 06-03-2021, 08:19 AM.

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            • #7
              This is why in the GFC so few people got hurt. It’s a great methods of ensuring future payments.
              www.ilender.co.nz
              Financial Paramedics

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