Peak Insanity – My phone call today with a mortgage broker.

I have an urgent update for my followers interested in the state of the Australian housing bubble; something that seems to be showing cracks with every passing day.

A few months ago, my wife and I invited into our home a lovely lady from the largest mortgage lender in this country. We spent hours discussing our motivations for looking into loan options and what collateral we could offer should we decide to pursue a loan. This was an exercise simply in evaluating dispassionately possible courses of action for us.

For someone in the business of selling debt, I was impressed with her acceptance of our discussions on sound money and other non-mainstream financial concepts. We were congratulated on what an admirable fiscal situation we were in and the lender remarked that we certainly didn’t fit the demographic of her typical applicants; those who generally couldn’t budget and had debt already coming out of their ears.

We parted ways at the time having been approved for an amount that we would never wish to borrow.

Today I received a call from her to touch base. Perhaps loan quotas are down and she wanted to see whether there was any interest in pledging future decades of our labour to the bank. To be fair, I don’t blame her for this, it’s her job and we did invite her into our lives.

I had an honest conversation with her and discussed how I see growing signs that we’ve reached the end of the cycle. Here I’ll present you with pearl #1. Her response was:

”Do you think we’re at the end of a down cycle or up cycle?”

Now, for her to suggest that we are at the end of a down cycle implies that she sees prices turning to the upside from here and this I found staggering. The conversation continued. I mentioned Australia's record household debt, now around 189% of incomes and more than 123% of GDP as I’ve covered here and I mentioned the fact that 60% of investment properties are loss making according to the ATO.

I spoke of my concern at the political forces supporting artificial housing demand, namely our current 200,000 per year immigration figure in the context of the historical average of 80,000. Here I was presented with the rational argument

"But politics will always change so you may as well act without considering it"

Hmmm, I don’t feel particularly comfortable deploying funds while ignoring glaring deviations from historical trends that seem to be artificially supporting the price level of the investment category in question.

I told the story of the chap over the road from us who hasn’t been able to sell in almost half a year and I told her that my walks around the suburbs at lunch have indicated a supply side bias as photographed here. Then came crazy quote #3

"50% of economists get predictions wrong so it’s a coin toss, you may as well jump in"

Sure! Why not! It’s not like it’s an all-in bet with inter-generational consequences… oh wait…

I was then told that the banks are raising interest rates. That sounded like something I should be selling her as an argument not to buy, but I was comforted by her assuring me that

"That’s limited to interest only loans"

Phew! For a moment I was worried about spill-over effects. Doesn’t that statement sound very much like Bernanke’s “Subprime is contained”? She went on to say that my wife and I sound like

"People who would only buy when they find a property that suits them at the right price"

… implying that this is somehow something that normally should be avoided. Apparently many loan applicants are driven primarily by urgency, opting to purchase properties that don’t meet their needs or price simply to avoid waiting to find something that does.

At this point, I wished I could record the audio so that I could accurately quote the content for posterity on STEEMIT as I just couldn’t believe what I was hearing. Then came the Mona Lisa:

”This research and analysis that you do is not good for you, it’s hindering your ability to get into the market”

Translation: Don’t think, just buy. Sound like a statement that would flag a market top? My only comment to that was to remind her that she was obviously previously impressed with the results of my “research and analysis” when we first met and discussed our financial position.

So to conclude, at lunchtime I received a call from the top mortgage lender in Australia suggesting that I am hurting my financial future by researching and I should commit to a loan on a property now regardless of whether it suits my needs or budget.

What more can I say?

I post this in an attempt to supplement the efforts of those such as @cheekybuggy who are trying to bring what I fear will be a devastating economic downturn to the public narrative.