The regulatory mechanisms in cryptocurrency environment were once again at play in Australia, as the Bank of Queensland banned the use of Housing Equity to fund cryptocurrency investments. The ban was issued over fears of high risks investors would experience due to volatility in conditions of trading.
High risk investment are often not encouraged by the lender community as they fear the return of capital they have lent to the borrower. This is exactly the case with national banks in Australia, and the world over as well.
These institutional lenders face the fear of investors make high value commitments in the hope of making profits from the highly volatile trading of alternate coins.
In fact, the Bank of Queensland has issued the notification not just to the borrowers but to the bigger audience and third parties involved in these high risk instruments, especially where the funds are real estate appreciation funds.
The bank has been objecting to such investments as it fears the unregulated environment in which it operates. The lenders are discouraging borrowers, mortgage brokers who operate as connectors between the borrowers and the lender entities.
Why home equity loans are so favoured?
There is higher affinity in using home equity by investor community as the gains are magnified when using leveraged currency. However, the gains are magnified while losses are also of abnormally high.
Hence, lenders are offering a word of caution to such investors in an attempt to alert them of the consequences of offshore trading, funds movement and purchases.
Specific to Australian real estate situation, brokers of cryptocurrency opine that institutional investors – Treasury, Australian Taxation Office and the Reserve Bank of Australia – will be impacted by any fluctuation in this industry.
The other risks which borrowers and prudential regulators foresee are the worsening of household debt, considered to be the highest in the industry. The banks are also negating the use of mortgage funds and have imposed regulatory fines and penalties from refinancing payday lenders. While most lenders monitor the use of their funds by borrowers under the hoods, the bank of Queensland has been an exception.
The bank which is listed at the country’s bourses decries that long contracts by “borrowers any loan purpose that involves the acquisition of or usage of cryptocurrency is unacceptable”.
Bank has removed the ability of borrowers to access loan money to invest in property or to purchase cryptocurrencies, as the vendor will receive all funds directly.
The bank has also explored the features that are offered by mortgage to gain additional payments into in their loan accounts beyond the needed limited repayments. The lender charge different rates, with the exception of self-managed super fund loans. These funds are not available as fixed loan accounts and can be used only after the term of the loan ends. Redraw when done online does not involve a further fee not does it require approvals.
The other options which are used by borrowers are the line of credit or a loan which allows borrowers to use predetermined lines of credit and using them as property equity and for all purposes as an ATM.