Economic, Stock quotes & Markets :: World finance

Banks are loaning too much to people who cant pay it back

A WOMAN is staring down the bankruptcy barrel at just 24 and she’s not the only one.

An explosive 60 Minutes investigation, which airs on Channel 9 on Sunday, has discovered banks are irresponsibly loaning large amounts of money to people who just cant pay it back due to a collapse in the property market.

The 24-year-old, who was an ordinary income earner, was loaned $6.5 million by a bank and encouraged to invest in a highly volatile market in the little mining town of Moranbah in Queensland she bought 10 properties.

She has now obtained documents from the bank that loaned her the money, which show they knew there was a medium to high risk of the values collapsing and her homes being left abandoned by potential renters.

Reporter Ross Coulthart said he thought the case was an isolated incident, until he delved deeper and discovered this was what banks were doing in remote communities in Queensland, Western Australia and the Northern Territory.

It raises a question mark about the rationality of lending practises and why thousands of investors are looking at bankruptcy because they cant get tenants into their investment apartments or residential homes, Mr Coulthart told

The investors bought their properties during a peak in the market, some were $600,000 or $700,000 for ordinary buildings, but now some are worth just $100,000.

Renowned investment expert Jonathan Tepper, who has predicted mortgage bubble bursts in both Ireland and the United States, told Mr Coulthart Australia would be next.

Mr Tepper believes property values will plummet by 30 to 50 per cent, leaving investors with incredibly high loans to pay back and a lack of return from their investments.

Mr Tepper told 60 Minutes he had gone undercover to see how willing banks and brokers are to loan obscene amounts of money to people with average incomes.

The expert pretended to be somebody with a yearly income of $110,000 and spoke to property moguls developing multi-million dollar apartments.

He was offered assistance to buy a million-dollar apartment on 95 per cent borrowings.

When he asked property developers about how he was going to get a loan, they boasted about having someone on the inside that could help get the money, Mr Coulthart said.

That shows through Australian lending practises, especially through brokers, theres a lot of improper behaviour going on, and in some cases there are claims of pay slips being forged.

Mr Tepper told Mr Coulthart Australia is already seeing signs of the mortgage bubble burst and he thinks property in the country is ridiculously overvalued.

Mr Coulthart said people with an average income who wanted to buy an investment property

had to borrow 10 and 20 times their gross income.

That is a preposterous amount of lending, he said. Property values in Australia are out of control and the level of mortgage debt in Australia is something like 3.8 times the gross domestic product.

Mr Tepper said the mortgage bubble burst was a disaster waiting to happen, and while he doesnt know when Australia will suffer from this, he thinks it is imminent within the next year.

He questioned why people are being encouraged to borrow 10 to 20 times their gross income.

Its an unsustainable level of borrowing, he said.

The 24-year-old featured in the 60 Minutes report doesnt entirely blame the bank for the millions she borrowed, admitting to being greedy.

But she said while she didnt look closely enough at her capacity to repay the loan, she believes the banks also had a duty of care.

What this has taught her is banks are throwing money at people in the good times and now in the bad times banks will blame the borrower and say its their fault for borrowing all this money, Mr Coulthart said.

To some degree thats true, but they should have a duty of care to make sure people have the capacity to repay.

The documents the 24-year-old got her hands on in relation to her loan show the bank knew her investment was risky.

So it doesnt make a great deal of sense why the bank loaned this money, Mr Coulthart said.

The womans point is, yes she accepts some of the responsibility, but believes the bank has to acknowledge it made a mistake loaning the money.

The 60 Minutes investigation also tells the story of couple Simone and Shane James, who are $2.3 million in debt.

They invested in apartments in a remote mining town, which they cant fill with tenants.

When applying for the loan, they put down their family home as security, and now they have to sell up and declare bankruptcy.

They are shattered, Mr Coulthart said. They freely admit they made a terrible mistake.

The reporter said the couple knew this would make them the subject of public ridicule, but believed it was more important for other people to be aware of the lending practises.

They think there was a mistake made in lending the money, Mr Coulthart said. They are not blaming the bank entirely but there needs to be a debate that banks, despite what they are saying, are not in fact following due diligence or normal lending practises.

The 60 Minutes report reveals people are borrowing 95 or sometimes 100 per cent of the cost of their investments.

A lack of tenants and a struggle with repayments mean its resulting in multi-million dollar white elephants in Australias mining towns.

See the full report on 60 Minutes, 8.15pm Sunday night, Channel 9.

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Brexit turmoil hits aussie job market

THE market turmoil in the wake of last month’s Brexit vote caused an unexpected dip in job advertisements at the end of June, according to Seek.

Data released today by the jobs website showed a 3.2 per cent year-on-year increase in job ads on Seek in June.

But Seek said the annual growth would have been close to 5 per cent if not for a surprise dip in the last four days of the month.

Market volatility and uncertainty in the wake of the UKs vote to leave the EU, appears to be the likely reason for this unforeseen drop in job ads on Seek in late June, Seek Employment managing director Michael Ilczynski said.

During the first week of July we saw job ads on Seek mostly bounce back to be consistent with the stronger pace of growth evident through most of June, running nearly 5 per cent above the same period in 2015 and some 15 per cent higher than the corresponding period in 2014.

Unlike the Brexit result, the uncertain outcome of the Australian election in the early days of July appeared to have no significant impact to job ads on Seek.

Mr Ilczynski said the 3.2 per cent result was still positive, despite being much lower than the 11.1 per cent recorded for the same period in 2015. The drop was mainly due to Western Australia and Queensland.

The top five sectors all recorded growth with the exception of information and consumer technology, which was down 2 per cent year-on-year. Healthcare and medical was up 6 per cent, trades and services 7 per cent, administration and support 13 per cent, and manufacturing, transport and logistics 11 per cent.

With the growing and ageing population, the federal and state governments have made investments into health and infrastructure projects to accommodate our nations long-term needs, Mr Ilczynski said.

For example, spending has been made on hospital facilities and equipment, skilled specialist staff, roads and transport infrastructure upgrades, which is having an impact on job creation.

Nationally, the Seek Employment Index increased 6.2 per cent year-on-year, pointing to favourable conditions for jobseekers with slightly less applications for each role.

In WA, Tasmania and the Northern Territory its a hirers market, according to Seek, with a higher-than-average number of candidates applying for each job.

In NSW, Victoria, South Australia and the ACT, job hunting conditions for candidates are more aligned, with a reasonable balance between jobs advertised and candidates applying, Mr Ilczynski said.

Burger joint gets into text message war with disgruntled customer

A MELBOURNE burger joint has bitten off more than it can chew after one of its employees started a text message war with a disgruntled customer.

Stackd Burger Bar in Eden Rise has been flooded with bad reviews following a string of abusive texts to a customer, who said she cancelled her food order after being told it would take two and a half hours to arrive.

The customer then wrote a review about the experience and the fact she did not get a refund for the food, which she ordered from the Eden Rise restaurant via Menulog last week. The restaurant disputed she had not received a refund.

A staff member then allegedly sent her a flurry of furious texts, including telling her fake reviewing is illegal, that she was permanently banned from Stackd and threatening to take legal action over her review.

The woman denied she posted a fake review, saying she had eaten from Stackd before.

She repeatedly asked the restaurant staff to leave her alone and stop messaging, but they continued, calling her a joker who was only looking for free food.

They then threatened to contact all restaurants in Vic so no one delivers to u (sic) again.

The exchange was then shared dozens of times online.

Later, Stackd posted on its Facebook page about the drama, blaming the furious texts on an employee who had since been fired, before offering the customer a free meal.

It later removed its Facebook page.

The restaurant has since been flooded with one-star reviews on Google and Facebook check-in, with people calling the staffs attitude disgusting.

Menulog has placed the restaurant on high alert and will be monitoring its actions.

Comment was sought from Stackd.

Menulog television commercial: Courtesy Menulog.