Australia’s mortgage lending standards are currently high, but lenders must be vigilant at all times, according to Luci Ellis, Head of Financial Stability at the Reserve Bank of Australia (RBA).
“I am pleased to say that I do not currently see signs of widespread lax lending practices here in Australia,” said Ellis.
“But there will be times – good times, when everything seems rosy – when lenders will find it hard to maintain the necessary prudence.”
“While the regulators can take actions and central bankers like me can warn of the risks, in the end we all have a stake in maintaining financial stability,” she added.
Property prices in Australia have cooled down in recent years, but its housing market has not experienced what took place in the US, following the collapse of Lehman Brothers in 2008.
The RBA explained that strong lending institutions and an aversion to sub-prime mortgage lending, which took place in the US, kept the country’s property sector strong by comparison.
However, many economists consider high debt burden and home prices as a key weakness of Australia’s economy.
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