RBA warns home buyers against speculation

Wednesday 19 May 2010

Article by Mozo

An expert at the Reserve Bank of Australia (RBA) has warned prospective home buyers about rising mortgage debt levels and the dangers of speculative market activity.

In a speech at a property conference, Luci Ellis, head of financial stability at the RBA, urged lenders to help avoid a "credit-fuelled speculative bubble" by remaining prudent in their standards.

In addition, she argued that it is equally important for prospective borrowers to have realistic expectations "and not to rely on a hoped-for capital gain in order to service their debts."

Ms Ellis noted that house prices have risen rapidly in recent months, but advised buyers to avoid overstretching their finances in order to secure an investment.

Such advice suggests that prospective Aussie property buyers should instead look to compare home loans before committing to a mortgage. According to new Residex data, Australia’s rising interest rates and house prices also appear to be causing a slowdown in Sydney’s recently buoyant property auction market.

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