Full Recourse to borrower? Four words for you: Blood from a stone.
Also, did you stress test the mortgage insurer too?
43% LVR, again, this number is based on bubble values. What's the LVR with 40% drop in prices? What % of mortgages go negative with 10%, 20%, drops in price? Hopefully this bank analyzes this stuff in house, even if they never show it to the public in a speech the NAR would have been pleased to give. The Fitch stress tests can't finish soon enough.
Chart on left. Forget the spike on the U.S. one for the moment, that is the bubble bursting. Right before that, leverage was holding steady at 40% for a surprising length of time, from 1994-95 or so. Below that is Australia. Sure, it's lower, but it's been increasing dramatically. It has in fact tripled since the 80s. That's not worrisome? That's not fundamental?
On the right we have, well of course households are "wealthy" their home values are inflated. That's the whole point. If every Australian sold out to the Chinese tomorrow and banked the earnings, then maybe that chart would mean something. Otherwise it's just paper wealth and it can vanish in an instant.
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