Australian banks have 'favourable position' in home loans

Wednesday 19 August 2009

Article by Mozo

Throughout the economic downturn, Australia’s banks have outperformed their global counterparts when it comes to home loans.

The news comes from the Reserve Bank of Australian (RBA), which has commented this week on the strength of the country’s financial systems.

Speaking at the seventh Annual Retail Financial Services Forum, assistant governor Malcom Edey reviews the banks’ performances in a variety of sectors from shares and profits to loan approvals.

When it came to home loans, Mr Edey explained that Australia has a "favourable position" compared to other countries, with lower loss rates than the UK and US.

This is because mortgages are full-recourse, adding an incentive to borrowers, including those looking for low interest home loans, to avoid over committing themselves financially.

Also, the Uniform Consumer Credit Code ensures that lenders distribute home loans responsibly, he remarked.

"It’s a great advantage during an economic downturn to have a banking system that remains profitable and is able to continue lending," he said.

Research from Deutsche Bank has suggested that banks have begun to restrict lending to first-time buyers the Sydney Morning Herald reports.

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