There is a lot of media speculation at the moment about the state of the financial markets.
And the big question for APRA and The Reserve Bank is - are our banks and their clients secured if there is another crash?

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Here is a transcript of the podcast:
Hi, thanks for joining me. I thought I'd have a chat to you all about investors and the current media speculation going on in the market at the moment. Property markets are being fueled by this mad rush by investors to get into the market and to buy things.  I'm not sure that's quite the case. I'm not sure that all the data and all the media and the scare mongering are 100% accurate.

Sure, it's a great time to borrow for an investment property at the moment. Rates are at record lows and the cost of money for people to get into the market, if they're in or already in the market, to buy that second, third, fourth, fifth, however many properties it is. Of course, it makes sense when rates are low and property market is strong to be getting into the market. That makes absolute sense but media speculation, what APRA and to lesser degree ASIC, but the Reserve Bank are also flagging.

It's the rise and rise of investor activity in buying, I guess, some substandard stock. I guess, there are worries about that. There are also worries about the massive invasion of our Chinese friends, and things like that, that are coming in and flooding the market with their money. I'm not sure that's quite the case either. The real concerns that APRA has is - are banks secured in the case of another fall? Are clients secured in the case of another fall? And primarily what their targeting is high LVR loans so an LVR is the loan to value ratio that you take onboard.

Traditionally banks in Australia, we like to have an 80% ratio and what that means is if your house is worth $500,000 80% of that is $4000,000 the bank will lend you that quite comfortably today. All Australian lenders will do that, no questions asked. Why they ask for you to have 20% plus your stamp duties and other cost in there is that that is their margin that is their safety net for markets moving because markets do move all the time. They go up, they go down. What we don't always hear is the times when they're going down. We don't track them like a share we track property prices only when they've gone up.  The reality is that every day property prices are being affected; it's just not reported daily. Unlike the share market which you get a report on the news or in the paper every single day.

What are the regulators trying to guard against? They're really trying to guard against the really high LVR loans and that's at 90% and beyond. Again in that same situation, now we're only putting in 10% capital so that $500,000 property has a loan of $450,000 on it. Then you've got your LVR loans at 95% so your loan would be $475,000 against your $500,000 property. Now that has a concern.

If you think about it, there's not much margin for error in there. As the market goes down that's where people end up with what we call negative equity. It doesn't necessarily matter in the short term if clients are in it for a long term proposition. Any investment in properties should really be for the long term. But if you're in for the short term or you go to change or your circumstances change and you need to sell that property and all of a sudden the properties worth $450,000 but you've got a $475,000 loan at 95%, that's what the regulators have a real concern about.

How strict? How prudent are our lenders being and with all the people that are borrowing this money? How prudent are they being? In terms of, making sure that there's not a negative downturn, there's not negative equity, there's not a bad result. That's the first thing.

The second thing is, let's talk about financial buffers.