ING Sucks … Right?

I was sitting on the tractor when my phone beeped.

“You’re all over my feed!” texted my mate.

He’d sent a Facebook post with a picture of me and Albo and the line: 

“Barefoot blasts Albo! I’ll bet my sheepdog's left testicle it's wrong."

Woof!

There were 1,900 comments. Struth!

So, in the interest of balance, this week I'll answer a question from Tim, who thinks I'm a complete and utter moron.

5% Deposits Are GOOD, You Moron!

Scott,

I've been reading your column for years and I think you've finally lost the plot. You're bagging Albo's 5% deposit scheme like it's some sort of scam, but here's what I don't get: I've got $35k saved for a $700k house. You're telling me I should wait YEARS to save up $140k for a 20% deposit? By then, house prices will have shot up another 20-30% and I'll be completely priced out. Meanwhile, my rent keeps going up and my landlord just sold the place out from under me.

The way I see it, this government scheme is my only shot at getting into the market before it's too late. But, according to the Barefoot Investor sitting in his paid-off mansion, I should just keep renting and “save harder”. Easy for you to say, mate. So why don't you explain to me how waiting years to save more money, while watching house prices run away from me, is somehow the smarter move?

Tim

Hi Tim,

If I'm ever tempted to go into politics, I'll re-read your letter. It'd cure me instantly.

Right now you're on Australia's most depressing treadmill: running flat out while prices (and rents) keep rising faster than you can save. You're absolutely knackered. And then Albo shows up with a way to get you off … right now. 

It's a vote-winner!

My view? 

Albo has helped you off the treadmill … and straight on to the stepper machine. 

And this machine is way harder:

Your house and contents insurance is up 20%. Step. 

The council rates come in. Step. 

Your hot water service carks it. Step.

Now let's crank it. 

A $665k loan at 6% = $3,987 a month, or $47,844 a year. 

At 7%? You'll need to find another $5,244. 

At 8%? Your calves are burning.

And here's the kicker: with only 5% equity, one bad year – job loss, health scare, divorce – and you're wiped out. You can't refinance, can't sell without tipping in cash. You're trapped. Mate, with maximum debt and minimum buffer, you're one bad year away from disaster.

And that is why I'd be such a bad politician.  

There is no way I'd pass a policy that I wouldn't let my own kids do – it sets them up to fail.

Yet it gets worse. 

This does the EXACT OPPOSITE of what the policy promises: Government guarantees don't create more houses, they just pump more borrowed money into the same pool of properties. More buyers with more leverage chasing the same properties equals higher prices.

So what would I do if I were Albo for a day? 

Well, it seems to me that first home buyers are grinding away on the treadmill, while investors are gliding past them on a government-funded escalator – tax breaks on the ride up, tax breaks on the ride down, and immigration keeping the whole thing moving. 

So, I'd do everything I could to reframe housing as something for living in, rather than speculating on. 

Which is why I'll never be a politician. Because I have no easy answers, and no spin, Tim. 

You're right though: it is easy for me as a home owner to say "save up for a bigger deposit".

Regardless, here's the truth: I'd rather cop a spray from you now than cheer you on while you climb onto a step machine that's designed to break you.

Tread Your Own Path!