What makes Australia so special?

The USA, Europe and even many parts of Asia have had their economies devastated by the sub-prime mortgage crisis creating havoc with their banks and consequently the funding available to businesses in those countries. While Australia was never immune, these problems have been of a much smaller magnitude and consequently it is business as usual down under.

Australia was fortunate in that the Howard government introduced credit reforms in the mid 1990′s to prevent a slide in credit standards and to ensure that banks and other institutions had an adequate amount of capital to see them through such one off events.

As a result the four major banks have still been able to raise funds offshore thanks to their AA rating and smaller lenders have been able to raise funds thanks to government guaranteed deposit accounts.

How has the face of lending changed in Australia?

Compared to most other countries Australia’s lending rules remain relatively unchanged. Riskier non-conforming lenders that specialise in lending to credit impaired borrowers have been all but wiped out by the crisis due to an inability to raise funds. The major banks and other non-bank lenders have tightened their credit policies to stop high risk no deposit loans & low doc home loans.

There is an increasing reliance on borrowers ability to demonstrate savings as it is well known in Australia that borrowers that can save their own deposit or down payment are far more likely to make their loan payments on time.

Borrowers with no savings and no deposit are still able to borrow 100% with the help of a limited guarantee over their parents home. This is known as a guarantor mortgage and is still available from many Australian lenders.

About the Author