I took the interest only loans in 2013 and was told by the bank 10 years. The bank confired this at a meeting this year.

Realist I was caught in the 1989 to 92 banking crisis. Fortunately I didn't mess around but sold property investments ASAP copping the losses.

If possible save your own home. I did and started again. This time with caution about using debt.

I will use debt but only as long as I have the funds to cover that debt in a crisis.

Forget the tenants or the promises about being self sufficient just get out now before the fear hits too many and the market collapses.

Back in 1992 discounts of 35% were common on forced sales.

It's your beloved Lieberal mates that caused this mess, Loathsome. Sue them, not Labor, d/head.

Nobody forces anyone to sign a bank contract. Reading the fine print is essentiol. Also interest only always reset and credit isn't reliable. Debtors need to understand the risks and wear the consequences of market corrections.

I am 5 years into the ten years, IO (Interest Only), they have said they WILL NOT now do the ten years "due to government policy". 

I purchased two of the properties about 15 years ago, one of those two have reduced in value since that time. Whilst one has marginally increased. The one that marginally increased was valued at $367,000 in 2013, today it may get $190,000 - $210 MAX. I paid $180,000 in 2005

If you live in WA and own a home you will know that most areas have declined, some have utterly collapsed.

The "Real problem as I see it" has been exptrapolated to the best of my abilty in my post - I am not a "comunicator" my writing style leaves a lot to be desired - I am sorry you cannot see "the problem", but, I have exhaused my writing skills to explain it better.

I see, so the lender wants you to correct the LVR (loan to valuation ratio)? The lender wants you to put more skin in the game. I have no idea what your financial position is so I ask..is this possible? 

I see, so the lender wants you to correct the LVR (loan to valuation ratio)? The lender wants you to put more skin in the game. I have no idea what your financial position is so I ask..is this possible? 

I am 5 years into the ten years, IO (Interest Only), they have said they WILL NOT now do the ten years "due to government policy". 

What does your loan contract say?

As I've said before, if lending conditions are now different to what you signed up for as per the fine print in the contract ... suggest you contact your lender, then ombudsman if the loan conditions have been breached by the lender.

Realist,

I am a bit puzzled. You say you are five years into your ten year interest only loan. Did you sign legal documents to say you are undertaking the term of 10 years?

If so, that's legally binding. Are they now telling you they are breaking a legal agreement?

Btw, RC means Royal Commission.

I live in Perth

@Abe

No I did not sign - I was told and simply accepted what was said. Having said that - In Jan this year in a meeting with *** It was confirmed they "would have said that" but, things have changed, rules have changed... on and on.

Thanks Abe & RnR for deciphering the Acronym...

Realist,

I was hoping you’d say you had in writing a document stating the period of 10 years, without that the buggers have you and many others over a barrel. The option to extend does not exist any more. You can refinance to another loan, but your circumstances may not allow that or you can stick to the principal and interest loan, which could be very expensive for you.

Last resort may be speaking to your lender and see if you qualify for a hardship debt. If they have a heart and extend the loan by say a few months or even a year, this may give you time to sort out your funds. If all fails and the only option left is to sell, then hopefully the market will pick up a bit within that time. At least our slump in WA is not as bad as some other states, e.g. NSW.

Good luck, nothing is worth ruining your health for.

Abe,

Good post.  I imagine that Realist has a five year IO term and it would have been usual for the lender and the customer to look forward to more terms where the interest rate might vary but he wouldn't have been forced into re-application as is happening now and other factors have changed.  The goal posts have been moved and quite substantially.  -Thanks to APRA as the dead hand of the government and encouraged by the Opposition!

Mums and Dads investors have become the political football and the sacrificial lamb, to mix metaphors.

Whenever government interferes in the housing market there is always tears.

Has nobody been watching the huge price rises far beyong fundamental values and thinking it was a problem?

All markets correct to fundamentals sooner or later simply because so many sellers and buyers are involved.

This was going to happen regardless of outside influences.

Get out now and cop the loses is a sensible option. It could be decades before property prices rise again and anyone over 35 hasn't got the time left to ride it out.

These investors had measured risks and successfully treated those risks for years.  This isn't a simple regulatory risk, it was a deliberate, crippling bolt from the blue, with malice intended.

Arguably the regulator knew full well and it was the intent of politicians too, that these ordinary investors who were providing much-needed shelter for others as well as for themselves, a certain segment of the population, were to be treated most unfairly and roughly indeed and become the grist for the mill, the collateral damage of political gamesmanship.

I am rather hoping that these poor victims can organise themselves and obtain legal advice of what can be done with a view to a class action to the ombudsman and whoever.

@LJ

<SNIP>These investors had measured risks...

I only wish I had your command of the English Language. I cannot (Not yet learned how) transmit "nuance" or "inflection" through my written words. I do not want to use swear words or insult to compensate, as I believe it diminishes the content.

Anyhow, I sincererly thank you for your worthwhile addition to the debate.

Warm Regards.

Realist,

I meant what I wrote, it was a deliberate targetting of a sector of the investing public - who were doing the right thing of providing shelter for others and providing for their own and their family's future at the same time.

APRA, the government and the Opposition knew full well that while these small 'mums and dads' investors were large in number, they would have difficulty organising themselves to protest, they had little political clout (GetUp wouldn't be representing them for starters) and both sides of politics were using them as a scapegoat.

However I believe that these many thousands of investors CAN wield a big stick if they choose to and the first foot forward should be to hold dignified, orderly protest meetings with speakers (try the Property Owners Association, the Real Estate Institute, what about Whittaker and ors) say in the local club.  Invite a known responsible journalist, not the gaggle of hacks.

It is not too late.  Both sides of politics are sensitive and exposed where dignified meetings and simple facts are concerned. You can do what you have done here but in an advertisement to a meet in the local church hall to start the ball rolling.  Invite the grey vote, there are skilled people among them and they have time on their hands.

@LJ

There is significant "hope" in your words. It will take me time to understand the posibilities and organise myself. I too have time. I have only been on this site 3 days. I am on no other site(s).

I can see already, there is lots of 'intelect' here and it stands to reason lots "out there" also. Harnesing this and creating the needed synergy is daunting.

However, this year I have faced many things, seen my MP, met with my bank, seen a legal service, met with centrelink. Little has been achieved so far, other than, my wife & I will no longer "take the easy way out".

Thank you again 

Realist

That's the spirit.  From small friendly meetings, bigger things can grow.  Think too of the thousands in similar shoes and more to be affected as time wears on.  Many are reeling with shock and are disempowered, not used to organising to demand fair treatment for themselves.  They have always copped what came along without complaint.

It is like a game of golf: you and they have to play the ball as it lies.  It does not matter what the result of the next election is either.  Excepting that Labor don't like positive gearing either.  

LJ positive gearing isn't a problem. Realist needs to act as an investor. Either reletting at higher rents if he can or selling at the best price and hopefully saving his own home. Property investing using debt is always very risky.

I was reeling with shock back when rates hit 23% on business loans as were many others. We dealt with it. Those who acted swiftly lost the least.

Property investors like positive gearing. It limits the risks and makes sense especially using interest and principal as well.

Property has been overpriced since before 2006 on fundamental values.

I was taught only positively gear at yields of 6% after costs. That financial planners have been putting these mums and dads at risk for 12 years is bad enough but not selling when profits were to be had is the sign of a poor speculator.

This wasn't investing it was speculating akin to gambling.

@LJ

Hi LJ,

It is truly epidemic!

I KNOW with certainty, that there are so many, they are causing a significant impact on services. 

See https://www.abc.net.au/news/2019-02-05/wa-leads-nation-in-debt-help-calls-amid-growing-housing-stress/10779028

Note the date in the URL (Uniform Resource Locator) Feb 19.

Kevin Rudd wanted a 'Big Australia' and it is growth that creates demand which in turn increases prices. Infrastructure.  Housing and infrastructure cannot keep up, the government has no interest in developing and managing its own welfare and low cost housing so government is forcing Australians into high density, medium and high rise apartments.

That and the many high taxes levied by government on the milch cow of residential property development and ownership.

A Labor government can always promise jobs, but because of their anti -business attitude they have some difficulties. West Aussies elected Mark McGowan partly because of his promise to create 150,000 jobs by diversifying the economy. He is a long way behind his target. Labor insist on increasing taxes to business, increasing their on costs in other areas (energy etc), so its little wonder they arent employing in big numbers. For example, the notion of a progressive payroll tax is not an incentive to hire.

While WA is fast becoming a basket case, Tasmania is a shining example of the private sector doing the heavy lifting for an improved economy on the back of jobs growth. And if I may add increased values in real estate because of the higher demand. 

I don't do "vents" Realist...I deal only with facts.

You are right no one, including myself, knows the "dynamics"of your situation..One can go only on what you have posted on the thread and I stand by my comments about the property market in Perth, especially.

The property slide is more than expected to halt this year..do your own research and if you ask around you may find out people are buying and selling houses every day in Perth and are getting the prices they ask for. 

You can't honestly expect top dollar for suburbs like Camillo and Armadale..be realistic!

Hope it works out for you. G'day from WA...

Sophie,

What prices are they getting?  Where is you evidence that prices have not dropped and the only sellers are those with a bank's boot on their neck?  Or that in the case of the first home/unit market the developers are getting anywhere near the prices that would encourage them to stay in the game?

Valuers for instance Herron Todd White and more relevant in Realist's circumstance the banks' valuers and the limits on IO loans set by APRA may not be as positive as you are, at least for the immediate future. 

The WA government's hope is that migration might provide a boost or at least slow some of the decline in prices, although prices for the outer ring of Perth may still be dropping.  Perth's inner circle has hopefully bottomed out and there could be a cautious, slow climb.

Opportunists and smarties can make a killing out of forced sales.  But would anyone imagine that is good for the market, the rental market in particular and for the State?  Flippers replacing the intended/planned long-term investors, the aspirational mums and dads investors, does not augur well for the rental market, which should see price rises and instability in supply.

I am surprised you chose Herron Todd White as an example..perhaps you don't live in Perth or you'd know they are one of the most "conservative" valuers. 

As for your question "what prices are they getting?" ..you'd have to do your own research yourself..just key in which area you're interested in etc and see what comes up. Obviously, I cannot reveal my relatives' transactions.

Sophie,

The problem for Realist and the thousands of other Mums and Dads investors like him is that leaving aside the new high bar loan application conditions forced by APRA as the dead hand of the federal politicians, the bank's new valuation will be very low, taking into account the most recent and obviously poor prices being experienced through the market interference by Canberra.

However, young couples will also be considerably disadvantaged for the same reasons.  They want to buy but cannot and those who can will take what they can get in loan terms and charges.  The banks and the financiers win even bigger than before.

The only ones advantaged by Canberra's political gamesmanship and market interference are the banks and the quick-witted opportunists, the property 'Flippers' and other scavengers.  Of course there are also the sharp types who are hoping for small investors to be herded into financial products, shares and managed funds - a swamp of saltwater crocs and other nasties.

The politicians still get paid and look forward to their super superannuation, golden handshakes and golden parachutes.  At the changing of the guard in Canberra it will still be the same old, same old.  And the new lot, mainly leftovers from the failed Rudd and Gillard governments have got there by stepping on the head of ordinary battlers like Realist.

@ LJ

I am not totally devoid of sympathy for Realist and others like him. Unfortunately when people go into business transactions with eyes wide shut, sadly, there are bad outcomes. Therefore I feel it's always a good idea to pay the extra and get any contract etc. thoroughly examined by a legal person. Your life savings depend on it.

I have always thought this type of loan was disastrous and have always advised people not to do it. Interest only loans should never have been allowed and one would think here in Australia, we would have learnt from the subprime mortgage disaster in America. Anything other than a traditional mortgage is a massive gamble. 

Those who took out interest only mortgages should have read the small print ..but all some saw were dollar signs..especially in the case of property investors.

My heart goes out to the young inexperienced ones who thought they were on to a good thing. Now, many of them may have children and are suffering.

Sophie,

You are blaming the victims of the shabby political gamesmanship in Canberra that coldly and deliberately aimed at having blood sacrifices to 'prove' either side of politics had more hair in the nose than the other side and was 'tougher' in 'forcing' prices down. The mums and dads investors were a convenient target for the reasons outlined earlier by me.

Of course, both sides were not inclined to admit the strong push on prices of decades of over-enthusiastic population growth through mass immigration.  But then both sides of the Parliament need mass immigration to show 'growth' and so too does the big end of town that Labor is also beholden to.

IO is a well-established bank loan option of long standing.  It was perfectly usual for the banks to roll over the loans, applying the new interest rate when the period was up and this was a common understanding.  There is no evidence that investors went in with their 'eyes shut' as you say. But no-one just no-one can adequately treat regulatory risk and the interference by the major political parties in the housing market.  That is either by action where the government is concerned or as is the case where Labor is concerned by speculative gossip, deliberate lies and threats - aided by the tabloid media and the taxpayer-funded national broadcaster!

APRA's changes were outrageously cruel, a blunt weapon taken to small investors who did not have any political clout and could at least where Labor is concerned, be abused as the 'Progressive' (Marxist) Left's despised 'capitalists'.  APRA turned the residential loans market on its head.

It is sadly obvious though that APRA, the government, the Labor Opposition and the Royal Commission have had nothin g to say about the banks' highly illegitimate usury in charging ramped up interest and whopping charges to anyone stressed by a loan and who misses a payment. 

Why do you say that either side of politics, the Rn and the 'fact-finding' ABC are turning a blind eye to such obvious nasty commercial practices that allow the banks to foreclose and wreak even more damage to the small mums and dads investors?

Opposition treasury spokesman Chris Bowen said Labor's plans will put first home buyers back on a level playing field with investors, "bringing the dream of owning a home back in to reach of many ordinary Australians".

"We want Australia to hand on a better deal to the next generation and part of this involves putting in place policy settings which reverse the lowest home ownership rates in 60 years," he said.

Labor's policy has not changed since details were announced before the 2016 federal election, but few analysts and investors have dug in to understand the finer details.

Treasurer Josh Frydenberg said Australians who negative gear are not necessarily rich, "and many are ordinary mum and dad investors."

"Negative gearing has long been recognised as a practical investment vehicle for Australians," he said.

"It is an inconvenient truth for Labor, but the reality is that the overwhelming majority of Australians who negative gear, around 70 per cent, only do so with one property."

Grattan Institute analysis of tax office data shows some middle income earners negatively gear but the benefits overwhelmingly go to high-income earners, with almost half of the tax benefits of benefits going to the top 10 per cent of income earners.

Labor's abolition of negative gearing is not really an abolition, it is a quarantining or a seperation of personal exertion income and investment income. And as such offsets can still be made for all assett classes.

Yes under Liberal or Labr Governments only the top 20% of income earners should even consider investing. The benefits of Liberal policy only ever go to the very top. We know this and yet the middle still fall into the trap.

Negative gearing does not work if your tax base is low.

Positive gearing doesn't work at high valuations and low rents/yields.

Anyone that doesn't understand an investment shouldn't be doing it. This wasn't investing it was speculating on capital gain through a boom and they got the timing wrong.

Labor changes may bring prices back to fundamentals so that real investors can once again supply rental markets through positive gearing and the young can once again afford to buy in at the bottom.

What did people thinkAPRA would do when bank book values were looking sicker and sicker.

Remember bank depositors are not safe either and bank shareholders, hybrid and bond investors are at risk as well since the Bail In was passed.

Our banks are shaky and it wasn't caused by an investigation but by greedy practices.

"Negative gearing does not work if your tax base is low."

This is the "unfairness statement" often wheeled out by the Marxists at the ABC.

Fred Casual's job only pays $50k and he only pays $6k in tax, but he should have the same tax advantages that are afforded to John Worker who earns $120,000 and pays $34k tax."

Lowering income taxes can have a structual disadvantage but not so for the majority of low income earners. Why would a low income earner feel the need to lower his income even further, while at the same time,  increasing his risk?  

"Negative gearing does not work if your tax base is low."

This is the "unfairness statement" often wheeled out by the Marxists at the ABC.

Fred Casual's job only pays $50k and he only pays $6k in tax, but he should have the same tax advantages that are afforded to John Worker who earns $120,000 and pays $34k tax."

Lowering income taxes can have a structual disadvantage but not so for the majority of low income earners. Why would a low income earner feel the need to lower his income even further, while at the same time,  increasing his risk?  

Well, thats true Noty. Here we have a Labor supporter, negatively gearing 2 properties, complaining about the LNP Fed Government, and the banks, because the WA Labor Premier has been unable to stop the declining jobs market, which is resulting in low assett values. Can it get any more unbelievable? 

So don’t vote for millionaire champagne communist Bill and his millionaire union mates then

i agree 

Loathy the mendacious Lieberal shill is trolling again...

Right on Triss, ignore short crutch loathie.