Comments on: Following one link too few…a mea culpa http://www.stubbornmule.net/2010/05/following-one-link-too-few-mea-culpa/ Obstinately objective Wed, 08 Feb 2012 01:46:02 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Stubborn Mule http://www.stubbornmule.net/2010/05/following-one-link-too-few-mea-culpa/comment-page-1/#comment-7745 Stubborn Mule Fri, 28 May 2010 11:56:04 +0000 http://www.stubbornmule.net/?p=2961#comment-7745 <strong>Allen:</strong> thanks for pointing out the typo...it has been corrected. As for the LVR question, regardless of whether you believe property prices are over-inflated or not, a lower LVR gives the bank a bigger buffer. I don't see how it says much about the ridiculousness of the price. Perhaps your argument is that the LVR is only that low because prices have risen? If you use the original purchase price rather than the current valuation to calculate the LVR, CBA's portfolio average is still only 52%. While many home-borrowers might originally borrow 80% or more of the purchase price (and remember, if they borrow more than 80%, CBA takes out mortgage insurance), mortgage prepayment rates in Australia are high. Mortgages are typically 25 years in term, but the average life of Australian mortgage pools tends to be less than 5 years. So, CBA's portfolio is as low as it is because many of the customers pay down their loans faster than they are contractually obliged to. Allen: thanks for pointing out the typo…it has been corrected.
As for the LVR question, regardless of whether you believe property prices are over-inflated or not, a lower LVR gives the bank a bigger buffer. I don’t see how it says much about the ridiculousness of the price. Perhaps your argument is that the LVR is only that low because prices have risen? If you use the original purchase price rather than the current valuation to calculate the LVR, CBA’s portfolio average is still only 52%. While many home-borrowers might originally borrow 80% or more of the purchase price (and remember, if they borrow more than 80%, CBA takes out mortgage insurance), mortgage prepayment rates in Australia are high. Mortgages are typically 25 years in term, but the average life of Australian mortgage pools tends to be less than 5 years. So, CBA’s portfolio is as low as it is because many of the customers pay down their loans faster than they are contractually obliged to.

]]> By: allen white http://www.stubbornmule.net/2010/05/following-one-link-too-few-mea-culpa/comment-page-1/#comment-7742 allen white Fri, 28 May 2010 11:15:44 +0000 http://www.stubbornmule.net/?p=2961#comment-7742 you also should check your grammar for use of 'to' and 'too' - paragraph 2: and: "based on current market valuations, the average loan-to-value ratio (LVR) for CBA’s portfolio is 42%. This means that, on average, the value of the property is more than twice the loan amount. ,This gives the bank an enormous buffer against falls in property prices". Does it? Or does it merely highlight the ridiculous 'value' that doesn't exist? you also should check your grammar for use of ‘to’ and ‘too’ – paragraph 2: and:
“based on current market valuations, the average loan-to-value ratio (LVR) for CBA’s portfolio is 42%. This means that, on average, the value of the property is more than twice the loan amount. ,This gives the bank an enormous buffer against falls in property prices”.

Does it? Or does it merely highlight the ridiculous ‘value’ that doesn’t exist?

]]> By: Are Australia's banks about to collapse? | Stubborn Mule http://www.stubbornmule.net/2010/05/following-one-link-too-few-mea-culpa/comment-page-1/#comment-7728 Are Australia's banks about to collapse? | Stubborn Mule Fri, 28 May 2010 05:43:16 +0000 http://www.stubbornmule.net/?p=2961#comment-7728 [...] to Steve Keen. While Steve considers it an excellent presentation, he did not write it and I apologise for not confirming the source before publishing this post. I have now struck out the incorrect [...] [...] to Steve Keen. While Steve considers it an excellent presentation, he did not write it and I apologise for not confirming the source before publishing this post. I have now struck out the incorrect [...]

]]> By: Stubborn Mule http://www.stubbornmule.net/2010/05/following-one-link-too-few-mea-culpa/comment-page-1/#comment-7726 Stubborn Mule Fri, 28 May 2010 05:29:37 +0000 http://www.stubbornmule.net/?p=2961#comment-7726 Ooops is right! There's nothing quite like the sinking feeling you get when you realise you've made a mistake like that! Ooops is right! There’s nothing quite like the sinking feeling you get when you realise you’ve made a mistake like that!

]]> By: (theOther)Bernardk http://www.stubbornmule.net/2010/05/following-one-link-too-few-mea-culpa/comment-page-1/#comment-7725 (theOther)Bernardk Fri, 28 May 2010 05:21:32 +0000 http://www.stubbornmule.net/?p=2961#comment-7725 oops... Good to see the fast response Sean. oops… Good to see the fast response Sean.

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