Before I take a stance on an emotional and tough issue, and in advance of  expected criticism, let me say that I  personally should hate the banks. Should despise them with a passion.

After all I’ve personally been on the receiving end of their cold blooded decisions that cost me my family home and my farm and vineyard business. The seeds for my financial destruction were sown in the Labor years of interest rates approaching 20%. And overdrafts at 25%.

But I don’t hate the banks. It was ultimately my fault. I borrowed too much and lived too well. They didn’t hold a gun at my head to lend me money.

 I can’t help remembering those days when I see today’s headlines and stories of admittedly gruelling financial hardship with people losing their homes. Having their houses repossessed from under them.

The Herald Sun Page One headline screams Homes Dream Over. And it says fifty Victorians a week are being hit by repossession notices because they can’t pay their mortgages.

Interest rates are rising and they will again, it seems, next month, as the Reserve Bank tries to punish people into having less money to spend  to curtail inflation.

(Of course there’s another risk factor there. About 30% of homes in Victoria are mortgaged. That means that people who invest in money lending see their returns going up. They have more to spend and that fuels inflation too. But that’s a sidebar to this story.)

The Herald Sun quotes a couple of personal stories under the headline Banks’ Bitter Pill. It says Ian and Kristine Green of Hampton Park are at their wits end. And they probably are.  They owe $10,000 more today than when they took out their mortgage in 2006. That’s not unusual even when rates aren’t edging up. Many loans are front-ended on interest.

They’re both working full time and falling short of meeting their full repayments and have been threatened with repossession.

Ian may regret something he told the newspaper ‘Kristine gets paid more than me – she gets $550 a week cash in hand’. That’s usually a euphemism for ‘black money’. If true, the tax man will come knocking to add to their woes.

He says ‘in a lot of ways I’m angry with the finance  people’. Why? Because they gave you more money than you could afford to pay back if the rates rose?

And then there’s Rodney. He had fallen $3000 behind on a  $170,000 mortgage and the NAB repossessed it.  The 40-year-old salesman was ‘between jobs’ at the time and he said  ‘I was about five payments behind but the bank gave me no warning’.

Hello? Five payments behind. Did you go to the bank? Did you try to negotiate? No.  Rodney turned to the booze and also lost his girlfriend. Not enough money to pay overdue loans but enough to buy alcohol.

And then the telling quote ‘It was my first house. I could only buy it by the skin of my teeth. I probably shouldn’t have bought it.’

Even the Herald Sun  in an editorial asking the banks to be sensitive concedes ‘… the urge to achieve the Australian dream has led many to ignore the future and borrow more than  they could handle’.

And therein lies the real problem.

Thursday, February 21, 2008

© Copyright Derryn Hinch 2008