A Quarter of New Home Loans Are High Risk: What You Missed

One in five new subprime mortgages, Australia leads in global house price growth and new money tool launched for under-21s. Here are five things you may have missed this week.

One in four new mortgages is risky, banking regulator says

Latest lending figures show one in four home loans (24%) taken out in the December 2021 quarter had a debt-to-income ratio of six times or more – APRA’s benchmark for ‘high risk’ . This represents a 17% increase in subprime loans over the past 12 months.

The rise in subprime mortgages is a ripple effect of double-digit growth in house prices combined with wages that have only increased by 2.3% in 2021.

APRA has already intervened to limit risky lending. In 2021, the regulator raised the bank “stress test” interest rate from 2.5% to 3%. This means lenders need to check how well a borrower would handle loan repayments assuming interest rates were 3% higher than the actual loan rate.

Industry experts say APRA is unlikely to raise the stress test rate further given slowing house price growth and rising expectations of a Bank of China rate hike. Reserve.

If rates head north, many homeowners could experience severe mortgage stress.

Australia leads in global property price growth

It’s official. Australian home values ​​have risen at the fastest rate in the world in 2021.

Knight Frank has released its Global House Price Index, with Australia taking the dubious top spot as the country with the highest annual house price growth rate.

Global housing prices rose 10.3% last year. Australia nearly exceeded this figure, recording real price growth (after inflation) of 17.5%.

Turkey leads the rankings in nominal price growth (before inflation), with house values ​​increasing by 59.6%. But after taking into account jaw-dropping inflation of 36%, that figure fell back to around 17%.

Only a handful of countries saw property values ​​fall in 2021, including Morocco (down 7.4%) and Brazil (4.3%).

Knight Frank Australia Head of Residential Research, Michelle Ciesielski, believes we’ve reached a point where buyers are ‘tired’ after significant price growth, and she expects home values ​​in Australia to increase by 8% in 2022.

Three in five young people under 21 want more from their money

Australians between the ages of 15 and 21, known as Gen Z, are up for the challenge of getting the most out of their money.

A survey by money watchdog ASIC found that 57% of young people want to know more about investing and one in two (54%) want their money to work.

To support young people, ASIC has released a new resource called Get Moneysmart. It’s a collection of videos, tools, and calculators to help under-21s make day-to-day financial decisions.

ASIC Commissioner Sean Hughes said: “Many young Australians are active consumers with multi-faceted financial lives. They manage money, set savings goals, shop online , use debit cards and make payments with their phones.

“Learning early how to manage money, make informed choices, save and plan for the future helps young people be better prepared for important financial decisions later in life, as well as guard against common pitfalls and unnecessary risks.

Get Moneysmart is accessible through the MoneySmart website.

Meta faces court over fraudulent ads

Consumer Watchdog – the ACCC, has launched legal proceedings against Meta, the owner of Facebook, alleging that it engaged in false, misleading or misleading conduct by posting fraudulent advertisements on Facebook, which featured star of the well-known Australians.

The ACCC alleges that the ads, which encouraged investing in cryptocurrency or questionable money-making schemes, were likely to mislead Facebook users into believing the schemes were genuinely associated to celebrities including businessman Dick Smith and TV presenter David Koch.

The schemes were actually scams, and the celebrities featured in the ads had never endorsed or endorsed them. That hasn’t stopped people from pouring money into the schemes. A consumer lost over $650,000 in a scam falsely advertised as an investment opportunity on Facebook.

Fake celebrity endorsement scams are nothing new. In 2020, ASIC warned against fake endorsements featuring Waleed Aly, Celeste Barber, and Karl Stefanovic to promote crypto scams.

One in nine Australians are victims of fraud

The Australian Bureau of Statistics says 2.1 million Australians – one in nine of us – were victims of personal fraud in 2020-21.

ABS Director of the National Center for Crime and Justice Statistics, Will Milne, says, “Findings show an increase in the rate of personal fraud from 8.5% in 2014-15 to 11% in 2020-21.”

This growth was driven by higher rates of card fraud and scams. But it turns out that we’re also much less likely to report certain types of fraud.

Milne notes, “The majority of victims of identity theft (93%) and card fraud (95%) reported the incident to an authority, most often a bank or financial institution.”

In contrast, only one in two people who were scammed last year filed an official report. Computer repair scams are the least likely to be reported. Fewer than one in four people who have experienced these scams report the incident.

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James V. Hayes