Fitch ratings agency says risks in the Australian banking system have risen
They cite:
- Due to a strong rise in home prices
- Growth in investor and interest-only mortgage loans in 2013 and 2014
- They also say the likelihood of significant losses in the mortgage portfolios of major banks remains low
- “Fitch’s 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”
They add that it is the indirect effect on non-housing loans that pose the greater risks to banks in the event of a significant housing downturn:
- “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
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If Fitch keep dissing on my country I’m gonna have to refer to them as Fiatch
