Bigger Bets Everywhere

Borrowing More To Get Less

First-home buyers are borrowing staggering amounts more than they were five years ago, and getting less market for their trouble. Equifax data shows the average first-home loan sought in South Australia and Queensland has jumped around $230,000 since 2021, while West Australians are chasing a whopping $250,000 more than they were back then — all while incomes have barely moved and borrowing power has actually shrunk under higher rates.

Nothing says “housing affordability policy” quite like a scheme that helps fewer people borrow more money.

Retirement, Brought To You By Your Own Roof

More than 40,000 Australians have now taken out reverse mortgages, with 8,000 of those signed in just the past year. The Gold Coast, unsurprisingly, is the reverse-mortgage capital of Australia. Many seniors are using the money to fund the next cruise, but it also reflects the widening gap between superannuation and the actual cost of staying alive in retirement.

For plenty of people it’s an option that works, but there’s a catch: because repayments usually aren’t required, compounding interest quietly eats the equity, sometimes leaving less for aged care, medical bills, or the inheritance the kids assumed was coming.

Judo Cops A Cold Shoulder

Judo Bank spent years building a reputation as the small-business lender the big four couldn’t be bothered with and everybody loved the idea of the little bank with big ambitions. Now, after admitting it could lose up to $122 million on bad debts this financial year everything changed. After informing investors that three loans had gone bad — to a blind and curtain manufacturer, a financial planning group, and a construction services company — Judo’s share price tanked 40 per cent in a day. Just six weeks earlier, management had told investors everything was fine.

The boss, Chris Bayliss, says the bank simply didn’t have visibility on those three borrowers. Awkwardly, banking sources say loans of that size are supposed to land in front of the board every month. With construction firms going into administration in the thousands and Judo’s exposure to the sector running into the hundreds of millions, “we didn’t see it coming” is doing a lot of heavy lifting.

Canberra Tightens The Tax Rules, Banks Loosen The Purse Strings

Just as the government guts negative gearing along with the capital gains tax discount, Westpac has decided the smart move is to make it easier to become a property investor. The bank has cut its minimum deposit for investment loans from 10 per cent to 5 per cent (with mortgage insurance) and stretched its maximum interest-only term out to 15 years.

The timing would be funny if it weren’t so on-brand. Westpac’s economists predict investor activity will fall 34 per cent as the tax changes bite and one assumes this is an effort to attract some of those who remain in the market. Despite the concerns about tomorrow, Australian Finance Group’s most up to date figures show the mortgage market just had its strongest June quarter ever — $28.1 billion lodged. It looks like someone didn’t get the memo.

A Light Shines On Non-Bank Lenders – At Last!

From November, non-bank mortgage providers, car finance companies, personal loan providers and buy now, pay later operators will be dragged into Australia’s Consumer Data Right regime, forced to hand over pricing, fees and eligibility data the same way the big banks have since 2020.

Non-bank lenders already back a fair chunk of the market with a total $72.2 billion loan book, but their pricing has traditionally been harder for punters to compare, partly because a lot of it is tailored to the individual. Now, borrowers will be able to line up those offers side by side. CDR usage has already grown 135 per cent in a year to 1.3 million users, so somebody’s paying attention. Transparency: it only took six years to reach the sector that arguably needed it most.

Australia Spent The World Cup At The Pub, Obviously

Research by the ANZ Insights team reports that its customers have so far spent a whopping $7 billion during the FIFA World Cup with money splurged in pubs, cafes and takeaway outlets. The same phenomenon occurred during the 2022 World Cup when the bank’s customers spent $11 Billion. The bankers claim we’re seeing spending patterns that reflect the excitement and social connection major sporting events create. Even when the event is overseas and our team is bundled out in the early stages, Australians will always find a reason to order another round.

Norway Banked The Windfall, We Spent Ours

It’s slightly off piste, but here is a tale of how two countries handled their respective resource booms. Norway transformed its earnings from North Sea oil into an income generating-asset currently worth A$3 trillion by investing in markets around the world.

The money Australia earned from its mining and gas booms has largely been spent paying for government projects, infrastructure or directed into the Future Fund which exists to cover public servants’ superannuation liabilities. The difference matters now because a data centre and energy transition boom is predicted to be on its way and could be worth close to 13 per cent of our GDP. Research by Westpac staffers, suggests it might be the smart thing to take a page from Norway’s play book.

The Last Word

Add it up and the pattern’s hard to miss: everybody in this economy is reaching for more debt, more leverage, more exposure. Some of that appetite is being encouraged by policy, some of it by marketing, and some of it, frankly, by nobody stopping to ask whether it’s a good idea. History suggests we’ll find out the hard way, same as always. In the meantime, enjoy what is left of the World Cup — someone’s got to spend responsibly.