The Sage: Bank tells loan customers to sell up and downsize

Welcome to the second edition of The Sage  – the column that cuts through the spin so you can see what’s really going on.

They’ve been “redeemed” after giving us a break on our loans during the pandemic – except, of course, we have to pay it back. Now, the Commonwealth Bank will be encouraging borrowers who have the least likelihood of getting back on their feet to downsize the family home. In case you’re having trouble with what that actually means, the bank is saying: “Sell  – and give us our money back”.

According to The Financial Review, Angus Sullivan, head of CBA’s retail bank, reassured all “struggling borrowers” that it won’t move too quickly to force them into making tough decisions. “There are a range of solutions, it is not one-size-fits-all.”

We reported already that the bank was talking to its 135,000 borrowers with deferred mortgage repayments. It all sounded very cosy really.

Angus, however, says conversations about “alternative solution paths” might be necessary with some of the borrowers.

“If you had a lot of debt from [buying at the peak of the market] and you were in a difficult position from an employment perspective, [downsizing] would be exactly the type of solution that would be worth having a discussion about,” says the ever helpful Angus.

At least he added: “That is a hugely stressful thing for a family to go through. We can empathise with that at a personal level.” That could be because quite a few CBA executives would have large homes on special bank lending rates.

The paper quotes ASIC saying it expects lenders “to make all reasonable efforts to work with consumers to keep them in their homes if that is in their best interests”.

There.  That’s reassuring isn’t it?

The good news is that house prices are staying stable – so if you are in trouble, you can get out without losing money.

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As we mentioned last week, it’s reporting season. This once was a time to work out who was really making it over the next 12 months.  Now, it’s about who will survive the next 12 months.

It’s also a time to chart the changes.

“It appears that the market is no longer concerned about 2020, and is looking into 2021 and the delivery of therapeutics, more stimulus and people returning to work”  says Matthew Sherwood, Perpetual’s head of investment strategy.

Last week, we lauded Coles for showing how basic food retailers were re-ordering the market back to basics.  Their results were strong.

This week, however, Afterpay rocketed 11.8 per cent to a record closing high of $92.48. Its $25.9 billion valuation now tops that of Coles, worth $25.1 billion.

So a company financing the online shopping boom is worth more than one of our two major food suppliers. Go figure.

The company founders are now worth $2 billion each. And you didn’t buy the shares, right?

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The winners and losers of the pandemic are becoming clear.  One of the winners is  mining magnate Andrew ‘Twiggy’ Forrest.

He enjoyed a billion-dollar payday after Fortescue Metals reported profits after tax surged 49 per cent on last year to $6.5 billion. Shareholders are set to get $1 a share dividend.

So Twiggy, who bought 22 million extra shares last year, will receive a nearly $1.2 billion payout in a single day.

It’s not the first time Twiggy, who now owns more than 36 per cent of Fortescue, has had a billion-dollar payday. Last year, the mining magnate received a $1.24 billion boost to his bank account after Fortescue results were buoyed by booming iron ore prices.

But we don’t really mind. Twiggy is one of the good guys giving back through enormous charity contributions.