This is the edited version of our live stream event where we discuss our latest scenarios and a range of finance and property questions.
Live recording and chat can be found at: https://youtu.be/BNrTHJ2MWjo
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I note you’ve given a high likelihood of a major bank needing a bail out.
If high LVR mortgages are insured with LMI, what is the mechanism which would cause a bank to fail?
In a nutshell, first liquidity freezes as funding costs rise. Second higher defaults (not all loans are LMI’d). Third, risk of a run on an LMI as claims rise, fourth lack of credit growth puts revenue pressure on the banks, and costs to income ratio gets more adverse. Then repeat…