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Australian Lending Situation Has Parallels in United States
By john | June 4, 2008
An interesting development in the Australian housing market could be a lesson to lenders and legislators here in the states. Australia’s housing market is in no way in the poor shape that America’s is, as they experience a much lower rate of default and foreclosure than we currently do. However, due to the new introduction of non-bank lenders in the country in the past few years, the banking industry has seen the margin borrowers pay has slipped. While in the past borrowers paid around 4% above the cash rate, only one year ago that figure had fallen drastically to nearly 2.2%.
What this means is that bank lenders are getting less back on the loans the provide, and it is hurting their ability to hand out more loans as well as collect revenue, and now they are asking for government intervention. Without government support for the lenders, banks warn they will be forced to charge even higher interest rate, which are already above average to battle inflation.
This echoes the situation in America, in which legislators are trying to find a way to help homeowners through new regulations on lending and through benefits like moratoriums on mortgage payments while also trying not to impede on the ability of banks to collect debts owed them. Without their ability to collect, banks often tighten up their lending policies, and despite the historically low interest rates that the Fed has slashed repeatedly, it will be very difficult for homeowners to get new mortgages, and therefore buy up surplus houses, which is key to the housing market’s ability to rebound.
Topics: Distressed Homeowners, Foreclosure Investing, Foreclosure Rates |