NAB CEO says ‘get out now’
“Get out now.”
That’s the advice the CEO of NAB has given to homeowners who are struggling to make their repayments.
Yes, in his quarterly trading update last week, NAB’s new-ish chief, Ross McEwan, warned:
“There will be some circumstances where people are better off selling out early and taking some equity out of their homes, or keeping some equity, before it disappears.”
While most of the media didn’t give his words much attention, there are two good reasons that you and I should:
First, because in all the years I’ve been doing this column I’ve never heard a bank boss speak so candidly.
Bank bosses are basically politicians: they get parachuted into the top job, stay there for five years, and rocket out with $40 million. Their main job is to stick to the script: “keep lending”. (And we’ve all witnessed how bad things go when bank bosses go off script, like getting into wealth management.)
So why is NAB’s CEO sticking his neck out?
Well, that brings me to my second point: he obviously doesn’t like what he sees on the horizon.
And know this: McEwan isn’t peering into a cloudy crystal ball. Over the years NAB has invested billions into tracking its customers’ every financial move. In fact, all the banks have incredibly detailed customer analytics that tell them what people are doing — or not doing — with their money, in real time.
Now, according to the banking regulator, APRA, roughly 1 in 10 mortgages in Australia are paused.
Which gets me thinking ...On one side, how long can the banks cop 10% of their customers not paying?
On the other, when will customers who are really struggling finally bite the bullet?
It’s a grim situation.
My hunch is that the banks are betting that the overwhelming majority of their customers will get through this. Yet they also know a small number of their customers won’t, and so they (well at least Ross McEwan) are turning up the heat on them.
My advice?
Please don’t misquote me: I am not saying you should sell your home.
What I am saying is don’t be a frog … if you were in hot water before COVID hit, don’t just sit there bubbling away.
We’re still early on in this crisis, and you have more options than you think. And if you want someone independent (and free!) to walk beside you and carefully lay out your options, call the National Debt Helpline on 1800 007 007 and speak to a financial counsellor (like me) immediately.
The last word goes to McEwan:
“We’ve seen in other crises around the world, when people try to hold on they end up walking away with nothing.”
Don’t say you haven’t been warned.
Tread Your Own Path!