Categorized | International

Australian Banks Boost Home Loans in Act of Desperation

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The Australian residential real estate market has certainly seen better times. With a growing number of homeowners stuck with negative equity on their home, many fear that the overall market is headed for very difficult times in the near future.

 

Mortgage growth has slowed tremendously in Australia, leading far fewer potential homeowners to secure home loans that previously seen. With the growth of home loans coming to a near halt, many lenders are feeling the pressure. The decline has caused profits to drop during a time when costs for banks in the region remain high.

 

As such, the banks have taken to experimenting with more extreme measures in hopes of providing a boost to the overall market. Many Australian banks have now opted to increase their loan to value ratios. Some banks are offering first-time buyers loans that are ninety to ninety-five percent of the value of the property. Other banks have even offered one hundred percent of the value of the property.

 

The high percentages are already raising concerns over the potential dangerous impact that they may have on the overall market. The numbers are actually very similar to those seen in the United States just prior to the major real estate crash that continues to plague the economic health of the nation.

 

While economists are not yet pointing to a definite upcoming crash in the Australian market, the overall prospects do not look good. More than six percent of homeowners are already faced with negative equity. With more loans for ninety to one hundred percent surfacing, the market will not be able to sustain itself in the long-term.

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About Nancy Raven

Nancy is the main writer for the International section of the website. Sometimes she also helps Drew out on the Finance/Mortgage section as well.

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