Tuesday, April 01, 2008

In which QP brings his inner stone-hearted bastard

Did anybody else catch Four Corners last night? If not, the feature story, 'Debtland', was on the out-of-control household debt crisis - the greedy lenders who dole out loans to, among others, barely-arrived Sudanese migrants who can scarcely speak English, and the Poor Ozzie BattlersTM getting foreclosed on left, right and centre. In many ways, it was Aunty's glossier, classier take on a Today Tonight/ACA standard (with a much more comprehensive analysis of the US sub-prime mortgage crisis).

Did I sympathise with certain subjects, such as the family above or the disabled pensioner who was somehow granted a $200,000 loan based on her walfare cheque and tiny part-time wage alone, who is now (d'uh) in penury? Of course. But did I sympathise with Dianne, teary with child in arm as her Kellyville McMansion was repossessed and passed in at almost half of what they originally paid for it? Hell no.

Dianne's explanation for why she allowed herself to take out not one, but two mortgages, at 10% and 20% respectively? 'Because they kept giving them to us.'


Sorry, but the heart gets stony around those who choose to mortgage themselves up to their eyeballs, way beyond their means, then whinge when - gasp - they discover repayments are unsustainable. It is their choice to opt for a Kellyville palatial nightmare - and of course, the full Buy Now, Pay Later Freedom/Harvey Norman furnishings that must necessarily accompany - instead of finding a long-term financially sustainable alternative. If they're too stupid not to sit down beforehand and do some elementary budgeting - if they're so uselessly passive they cannot say no to a cheery lender throwing lots of money at them, believing there's no catch - they deserve whatever they get.

I say this as someone who managed to get himself into around 10k of CC debt, so I'm hardly Captain Sensible Budgeter myself. But even I could recognise at that point the best option was to deny myself any further credit cards or limit increases on the existing ones. It's a debt into which I shouldn't have fallen so deeply but at least I'm not allowing it to get any worse.

I also say this as someone who recently entered the Sydney rental bear pit and knows the plight of the renter is every bit as treacherous as the buyer's. My partner and I were forced to leave a lovely place we'd occupied for nearly two years, and whose rental value in that time alone increased by about 35%. With a Dianne mentality, we could've chosen to commit ourselves to paying a few extra hundred dollars a month so we could stay in the apartment block of the neighbourhood to which we had become accustomed. Instead, we found a place within our current, feasible level of rent payment - and bang went the good neighbourhood and harbour views, hello major traffic noise and a couple of extra kilometres for daily commuting.

Not that the place we found is bad - it's just not exactly what we wanted or as good as what we've been used to and able to afford in the past. That's the point - at some periods in some markets you can't just expect to have everything you want. If you can't afford the Kellyville Mansion boulevards, opt instead for the significantly cheaper suburbs literally on the other side of the main road. That way you don't get repossessed, and the rest of us don't have to suffer the inevitably increased interest rates to curb your profligate spending. Everybody wins.

It's not that the story didn't raise valid points about the avarice of major banks and credit lenders. It seems to me a simple reform the Rudd government could undertake to address this poisonous baiting is to compel all lenders to specify in monthly/quarterly statements not just the amount a borrower must pay to cover the interest, but how much they must pay to complete the amount within the interest-free period. Of course it's not in the lenders' interests to do this so let's legally enforce them to instead.

But living beyond your means is a lifestyle choice, and a poor one at that. If you're genuinely too dim not to realise that nice shiny houses, furniture, cars etc don't just magically appear without some significant pain later down the track in the absence of some basic forward planning, you have absolutely no right to seek sympathy once the pain invariably kicks in. Take some personal responsibility, peeps.

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At 1/4/08 2:45 pm, Blogger E said...

Didn't anyone stop to think that paying so much for a house when there are so many other uses for the money (like saving to become independent) was stupid?

At 1/4/08 11:07 pm, Blogger Andrew said...

Some people really do need protecting against themselves. Those who are above them really ought to think about their material desires. I would call the latter, victims of Australian society.

At 12/4/08 6:25 pm, Blogger Ruth said...

While I think a lot of people are dickheads, accepting mortgages and loans they can never pay off, I think it is a wider societal problem, too.

SO many people who are in their 20s now have grown up with this ideal of getting married, buying a house and renovating the fuck out of it, that they automatically presume it's what they can and should do. Better Homes & Gardens, Renovation Rescue, The Block, Backyard Blitz, The Hothouse, Changing Rooms, Queer Eye - all these sorts of shows have massively influenced the way 20-somethings view their living accommodation. Banks and the previous government happily re-enforced this view.

If I think back over the tv shows that were on when I was growing up, a massive glut of them were aimed at buying and renovating houses. Fortunately, my parents raised me to be pretty sensible about this sort of stuff (and I have no interest in renos and house hunting), but give it a few years, and despite ALL the current warnings and fuss over interest rates and massive debts, way too many of my contemporaries will be up to their necks in debt, but still spending the weekend at Freedom, picking out new living room settings like they're on The Block.

Again, it's partly because people are morons, but I think partly because they have all this cultural influence going 'yeah, buy a huge mansion in the burbs and put in a media centre, four kitchens, triple garage... it's what everyone your age should be doing, it's what you deserve' and nothing to counteract it from schools, the government, lenders or even parents to explain why living outside of your means is no dream lifestyle.

Tighter regulation on banks/lenders, compulsory education in high schools about how to manage finances, and a government willing to publicly say 'don't live outside your means' and provide information could go a long way to helping this country in the long run, I think. Skeptical we'll ever see it, though.

At 20/4/08 8:35 pm, Blogger dysthymiac said...

Everybody seems to want everything and they want it now.
Ruth above, expressed it perfectly.
The bad guys are
Banks and The Media.

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