Banks warned about housing crash

Banks warned about housing crash

A global ratings agency has reduced its credit rating for 23 lenders due to “an increased risk of a sharp correction in property prices”.

These downgrades by S&P Global Ratings applied to smaller lenders such as AMP Bank, Bendigo & Adelaide Bank and a range of credit unions and non-bank lenders (see table below).

S&P did not change its ratings for Australia’s five largest lenders – ANZ, Commonwealth Bank, NAB, Westpac and Macquarie Bank.

The reason a housing crash is now more likely is because there has been a rise in “economic imbalances” caused by “strong growth in private sector debt and residential property prices in the past four years”, according to S&P.

If a crash did occur, lenders would probably suffer “significantly greater credit losses” than at present.

These losses would be “amplified by the Australian economy’s external weaknesses, in particular its persistent current account deficits and high level of external debt”.

Lenders should be alert but not alarmed


S&P said that although risks have increased, the outlook for Australian banks remains “relatively benign” by global standards – partly because APRA, the banking regulator, has been acting to remove risk from the banking sector.

“We consider that recent and possible further actions by the Australian authorities should aid in an unwinding of the imbalances in an orderly fashion, as has generally been the case in the past several cycles in Australia – and may have already started in Sydney and Melbourne,” S&P said.

“This is most likely to occur through slower growth – or even a mild drop – in property prices over the next two years, without causing any significant increase in credit losses incurred by the Australian banks.”


Lenders with unchanged ratings

Lender Rating Outlook
ANZ AA- Negative
Commonwealth Bank AA- Negative
NAB AA- Negative
Westpac AA- Negative
Macquarie Bank A Negative


Lenders with changed ratings

Lender Old rating New rating
AMP Bank A+ A
Australian Central Credit Union BBB+ BBB
Auswide Bank BBB BBB-
Bank Australia BBB+ BBB
Bank of Queensland A- BBB+
Bendigo & Adelaide Bank A- BBB+
Community CPS Australia BBB+ BBB
Credit Union Australia BBB+ BBB
Defence Bank BBB+ BBB
Fisher & Paykel Finance BB BB-
G&C Mutual Bank BBB BBB-
Greater Bank BBB+ BBB
Liberty Financial BBB BBB-
MyState Bank BBB+ BBB
Newcastle Permanent Building Society BBB+ BBB
Police Bank BBB+ BBB
Qudos Mutual BBB BBB-
Rural Bank A- BBB+
Teachers Mutual Bank BBB+ BBB

S&P ratings range from AAA to D. Click here for an explanation of the system.


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Learn more about home loans

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The increase or decrease in the value of a property due to factors including inflation, demand and political stability.

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These services are handled by the Australian Financial Complaints Authority, a non-profit government organisation that addresses and resolves financial disputes between customers and financial service providers.

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Points are awarded for different features. More important features get more points. The points are then added up and indexed into a score from 0 to 5.

Why is it important to get the most up-to-date information?

The mortgage market changes constantly. Every week, new products get launched and existing products get tweaked. Yet many ratings and awards systems rank products annually or biannually.

We update our product data as soon as possible when lenders make changes, so if a bank hikes its interest rates or changes its product, the system will quickly re-evaluate it.

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The proportion you have already saved to go towards your home. 

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Currently, 40 year home loan lenders in Australia include AlphaBeta Money, BCU, G&C Mutual Bank, Pepper, and Sydney Mutual Bank.

Even though these lengthier loans 35 to 40 year loans do exist on the market, they are not overwhelmingly popular, as the extra interest you pay compared to a 30-year loan can be over $100,000 or more.

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Not everyone can be a guarantor. Lenders will generally only allow immediate family members to act as a guarantor but this can sometimes be stretched to include extended family depending on the circumstances.

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A loan of shorter duration taken to buy a new property before a borrower sells an existing property, usually taken to cover the financial gap that occurs while buying a new property without first selling an older one.

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