Why crypto will not die

thought it was based on the traditional mortgage repayments > 30% of disposable income

The problem with using an old metric is despite recent fall in real wages, it is still ~30% higher than early-mid 90s which is when that metric was last used to strictly assess loans. It was also a conservative metric and not necessarily a stress level.

i was trying to convey a slightly different (though related) point.

when I talk about the metric being arbitrary and uncalibrated, I’m referring not to where the threshold for what is going to be labeled “stress” is set, but about the level of “stress” at which something actually happens.

eg – is it when >60% of households in a particular area are in stress that loca lland prices begin to decline? Given that housing has been booming for decades, Northey has obviously not been able to even backrest the so-called “model” against a simple time series to identify the level at which declines happen (because they’ve not historically happened). So it’s all made up.

PS – to your point that the “30% of income” is questionable – that may very well be. After all, if your threshold for “stress” is disconnected from reality (eg say “>15% of household income”), then even if 100% of households are in “stress”, it won’t matter a pinch of shit.

True. As you and I mentioned, with rates falling and prices rising banks were extending and pretending. Stress and arrears were not allowed to contribute to falling prices. It will be interesting to see what happens if rates continue to rise though. There must be a point where banks start to panic. Although I expect govt to intervene and support distressed mortgages.

the form of government intervention will need to be broadly in line with the inflation management strategy:

• maximise population growth to undermine wages growth
• thereby reduce inflation and minimise interest rate rises
• Thereby also push up rents, increasing yields on property
• increasing rental yields are the platform for extend and pretend. Overleveraged owners can avoid selling and rent out a room or even move out to a small apartment & lease out the house (rentvesting) creating a cashflow that the banks can harvest

so possibly the gov can do some sort of tax relief/incentive for rentvesting…? Or allow renting out rooms without impacting cgt-free status of house…? or extend the absences allowed while maintaining cgt-free status from 6 yrs to 10…?

will need to speak to them to thrash out the details

Investors are not the ones under stress. If anything rent-vestors would be hurt

what I have in mind is that owner occupiers (who would otherwise be cooked) would be thrown a rental income stream that is bigger and more tax advantages than it might otherwise be.

That would undermine the raising rental yield hypothesis

because of increased supply? Yes, this is true. But not something that another 150,000 migrants (even if “temporary”) won’t fix.

Albo will bring back the FHB grants, and I still reckon we will see retrospective share equity for distressed mortgages.

grants would have to be fucking monstrous to make much difference at these price levels.

but perhaps retrospective shared equity (eg in the form of convertible loans? Possibly interest-free or interest-deferred) could work well to achieve the needful. That is a good idea.