Home loan defaults could hit $4bn after floods

Wednesday 19 January 2011

Article by Mozo

Thousands of Queensland borrowers are at risk of defaulting on their home loans following the flood disaster, new research has found.

Home loan defaults could hit $4bn after floods

A report by Goldman Sachs, which was obtained by The Australian, predicts there could be defaults on $4.1 billion worth of home loans, or about 16,500 homes, in Queensland's south-east.

In addition, Goldman Sachs said that up to 67 per cent of houses and businesses damaged in the floods had no insurance or flood coverage, according to preliminary research.

"It was estimated that about 20 per cent of the houses that were fully inundated and had no insurance would default on their loans," reported The Australian.

"The banks would lose about ten per cent of the outstanding loan value on those mortgages."

Borrowers concerned by their current financial position could choose to compare home loans in search of the best options. Among Goldman Sachs' other findings, it was estimated that property prices in Brisbane's riverside suburbs could fall by up to 50 per cent in the wake of the crisis.

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