You are currently browsing the daily archive for April 5th, 2009.
The Federal Government is announcing that the major banks will give the unemployed as 12 month mortgage repayment ‘holiday’… which means that if they’re unemployed, they don’t have to pay their mortgage for a year. Sounds noble doesn’t it? Here are a few reasons that’s a stupid idea:
1) It’s a moral hazard. I don’t blame people for losing their jobs, but if you can’t afford a house then you shouldn’t have one. Let people with the capital buy the house, let the house prices fall so that they’re affordable once again (and you don’t need two incomes to pay a mortgage) and let the ex-home owners rent.
2) Even though you’re on a holiday, you’re interest isn’t. So you will be left in more debt by the end of that year than when you started.
3) It postpones the inevitable crash in home prices to a later date and thus compounds the pain we’re going to go through in the very near future.
4) Australians are already in too much debt, keeping them in debt is not the answer to their problems… if they can’t afford to have a mortgage, credit cards and a new car, they should not be subsidized by the government. They should default on their loans and start from a fresh debt-free base. Does that mean that their standard of living will dramatically decrease… yes. It is the unfortunate consequence of our debt-financed lifestyle with little to no savings.
This won’t make me exceptionally popular for saying this, but it’s the honest way to deal with financial problems facing our society. There are consequences for shaping our economy after America, that is credit-financed consumption with little to no industry… a credit crash is inevitable, and our standard of living will follow it.
God bless,
Washo
Recent Comments