The Crystal Ball: Not just a psychic prediction!

Did We Learn Nothing from the 2008 GFC?

As we navigate the murky waters of 2024, it feels eerily reminiscent of the 2008 Global Financial Crisis (GFC). The sense of déjà vu is unsettling as if we’re collectively staring into a crystal ball that reveals a troubling future we should have predicted. Back then, we witnessed the financial world collapse under the weight of its greed and mismanagement, leading to a recession that some believe Australia barely escaped. Others say we were lucky and managed well through it! Even the celebrity psychics gave better practical predictions to their clients who all had the same concern, "Will I be ok ...financially?"

But have we truly escaped? Or are we now on the brink of our Australian Financial Crisis (AFC), brought about by the same reckless behaviours? The banks have once again handed out money like candy to a baby but only this time, the stakes are higher, and the consequences are dire.

Mortgage Debt: A Ticking Time Bomb

Australia's mortgage debt is a looming disaster, and the numbers are staggering. As of May 2024, Australians collectively owe an average of $626,055 per owner-occupier mortgage, with significant variation across the states:

• New South Wales: $767,584
• Victoria: $601,891
• Queensland: $586,627
• Western Australia: $538,860
• South Australia: $541,775
• Tasmania: $462,324
• Northern Territory: $437,427
• Australian Capital Territory: $614,242 (finder.com.au) (Money.com.au) (Mozo) (Australian Bureau of Statistics) (Mozo).

These figures illustrate a critical issue: Australians are borrowing more than ever to secure housing, driven by rising property prices and economic pressures. The average mortgage size has increased dramatically over the past decade, highlighting household financial strain.

The numbers alone are alarming when we consider the National debt. This is not to frighten anyone but a mere observation that we can all see or read about..also to alert people that they can help themselves.

The many 'stories' from parents and grandparents who were caught up as guarantors, or supplementing deposits then repayments while having a fear and concern of their own..."What if I lose everything too?"

Shouldn’t they have considered all the factors when funds were being handed out, especially to those who might not be able to sustain the financial burden if circumstances changed even slightly?

Making certain it was suitable for all involved.

The Repossession Domino Effect - Homelessness

It is like Domino set up and you can be so proud of the achievement of having lined up every piece accurately (debt facility) only to watch it fall away when one element becomes unbalanced. Regardless of what it entails!

When the bubble bursts, as it inevitably will, the impact of repossessions will ripple through the economy and society. Families will lose their homes, not just to the banks, but to an uncaring system that fails to provide adequate safety nets. The residual debt left after a forced sale can be crippling, leaving individuals and families in financial ruin.

If you're the one Domino piece that was slightly better prepared, you might remain standing, but for how long?

This isn’t just about numbers on a balance sheet; it’s about real lives. The mental, emotional, and physical health impact of losing one's home is profound. We do not need a Crystal ball to predict what it can do to people. It generally causes the most volatility between couples and can escalate to homicide or suicide, and that is real.

The loss of a person's fiscal future and stability can reflect on their identity and character which can be devastating. The stress, anxiety, and depression that follow can devastate entire communities. When people are pushed to the brink, the societal costs are immense, from increased healthcare expenses to a rise in homelessness.

This we have witnessed if not in our own lives we've seen it on our screens at some point.

There has to be more accountability and responsibility, surely the moral or ethical compasses in our organisations haven't all malfunctioned.

The RBA’s Dilemma: To Raise or Not to Raise?

In this precarious situation, the Reserve Bank of Australia (RBA) faces a monumental decision. Raising interest rates might seem like a prudent move to curb inflation, but it could also be a catalyst for economic disaster. Higher rates mean higher mortgage repayments, pushing already stretched households over the edge.

The RBA would be foolish to raise rates without a clear plan to navigate the aftermath. Banks and the government need to acknowledge the overload of “candy” they’ve distributed and prepare for the inevitable sugar crash. Ignoring the lessons of the past could lead to a repeat of the 2008 GFC, but this time with potentially even more devastating consequences.

So how will the RBA ween us off the sugar addiction so that there isn't a massive recourse at the one time?

We hear the carefully scripted announcements with the weaving of the potential action knowing far too many are holding onto 'hope' (harnessing optimistic predictions (to) eventuate!

The Way Forward: Accountability and Agency

As we peer into our collective crystal ball, the message is clear: we must learn from the past to avoid repeating it. Transparency from banks and better regulatory oversight are crucial. Safety nets need to be strengthened to protect those most vulnerable to economic shocks. And most importantly, we must balance short-term gains with long-term stability.

This is common sense...right?

The truth is that regardless of the Royal Commission and all the airing of the BS (Behind the Scenes) activities, we cannot monitor human beings, and all the algorithms are tailored specifically to get a certain result. That too is programmed by humans. Not all the recommendations have been enacted so we continue as it was only the process has changed.

However, there is a silver lining. By taking proactive steps, individuals can better navigate these uncertain times:

1. Keep Everyone Accountable: Engage in open discussions with your bank. Don’t allow yourself to become just another number. Ask for copies of your file and make sure all details are accurate. Question it, if you didn't provide it or agree, raise the inquiry.
2. Document Accuracy: Ensure you have copies of loan agreements. Generally, we sign things without reading or having someone point out the bits we may not like to hear. The banks can change their appetite for your risk or decide to move all business accounts to their parent bank without notice. If you find discrepancies, demand an investigation and ask for notes and internal dialogue with you or the authority to share your information with others. Keep everyone accountable and ensure your conversations are noted properly on your file. Make your own detailed notes regardless of the recorded conversation. Do not feel intimidated if you do not understand anything. You have rights too.
3. Consistent Payments: Make an effort to pay any amount you can, whatever you can afford. Avoid ignoring payments and giving up.
4. Advocacy and Support: Keep copies of all your documents. Contact an advocate if you encounter issues. Seek support from a broker or get a second opinion; knowledge is power.
5. Valuation Awareness: Get a copy of your valuation. Understand what the realized valuation is. Mitigate the problem and do not be afraid to ask questions.
6. Finding ways to generate income from your home - renting it out or a home for example. If you pull yourself out of the situation and emotional hold you can see clearly.
7. Deed of Forbearance (DOF): If offered a DOF after a hardship process when the demand/default process begins, get advice. This document is not the only option and is not compulsory. A DOF is an agreement between you and the bank where the bank agrees to delay or reduce your mortgage payments temporarily. It’s crucial to understand the terms and seek advice to explore all available options. Not simply what you are told, find out for yourself!
8. An agreement can be misinterpreted in heightened situations and after the forbearance period you don't really have any rights. Over 150 customers have entered into DOF only to be disheartened and powerless.

By taking these steps, individuals can take agency over their financial journey and mitigate the potential fallout of economic instability. The road ahead is fraught with challenges, but by facing them head-on and making informed, compassionate decisions, we can steer our lives towards a more secure financial future. Let’s ensure that our legacy isn’t one of repeated mistakes, but of resilience and wisdom in the face of adversity. Sometimes it is about focusing on you instead of what is going on around you.

If others are involved your responsibility is to them too... remembering that grandparents and parents went through a lifetime of predictions and deserve to have security in their final chapter of life.

By integrating their experience and preparing accordingly, we can avoid the worst outcomes and build a more robust economic foundation for future generations. Keeping everyone accountable and not falling through the gaps of a system that needs to polish its Crystal Balls.

It isn't that hard to predict our own financial journey, the only thing we need is the accurate documents and knowledge without the 'fluff'

check out the website

?