"He said the loosening of loan underwriting
by the regulator combined with the rate cut is 'a serious attempt to
get consumers to digest greater amounts of credit'.
'It is a bubble and the day of reckoning is coming,' he prophesised. "
The credit fuse has been lit': Australia is heading for an economic crisis after new rules make it much easier for people to get massive mortgages, experts warn
- Lenders can set their own buffer interest rate when assessing ability to repay
- 'Financial stability thrown out the window': economist Stephen Koukoulas
- 'It's too easy for the banks to write bad loans,' says economist Martin North
- Move is unlikely to prop up falling house prices especially for units on the fringe
However, several analysts believe that Australia is not facing a
recession and the housing market will recover from its recent downturn.
Pictured: Sydney's west
Economist Stephen Koukoulas said on Friday
that the Australian Prudential Regulation Authority (APRA) and the
Reserve Bank of Australia were trashing financial stability after APRA
eased loan serviceability requirements.
'Financial stability has been thrown out the window... The credit fuse has been lit,' Koukoulas tweeted.
As
of Friday, APRA no longer requires banks assessing customers for a
mortgage to ensure they could still repay their loan if interest rates
increased to at least 7 per cent.
Instead,
the minimum benchmark rate will move down from 7 per cent to 2.5 per
cent above the current non-discount rate, the rate at which the bank
lends at.
The regulator which had
previously cracked down on loose lending has now allowed banks to set
their own minimum interest rate floor.
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Real Estate Bubble Continues To Burst
