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15 Oct 2014
Fitch: Australian bank risks have risen due to house prices
FXStreet (Bali) - Fitch rating agency has announced that risks in the Australian banking system have risen with high house prices, Reuters reported, although they add that major losses in the mortgage portfolios of major banks remains low probability.
Additional key points from Fitch report
"Analysis indicates that the risk for investment mortgages is higher in the case of owner-occupied mortgages, and suggests a speculative element to recent house-price appreciation. The rise in interest-only loans also raises the susceptibility of borrowers to a weakening in market conditions owing to the slower accumulation of borrowers’ equity relative to more traditional principal-and-interest loans”
“The negative impact on consumer confidence, consumption and investment from such a downturn would almost certainly feed into weakening commercial credit quality. In such an event, commercial loan losses would be likely to dwarf those from the mortgage portfolio."
Additional key points from Fitch report
"Analysis indicates that the risk for investment mortgages is higher in the case of owner-occupied mortgages, and suggests a speculative element to recent house-price appreciation. The rise in interest-only loans also raises the susceptibility of borrowers to a weakening in market conditions owing to the slower accumulation of borrowers’ equity relative to more traditional principal-and-interest loans”
“The negative impact on consumer confidence, consumption and investment from such a downturn would almost certainly feed into weakening commercial credit quality. In such an event, commercial loan losses would be likely to dwarf those from the mortgage portfolio."