Four Banks and an out of control mortgage market

The link between high house prices, a bubble and banks.

Lindsay David – Author Print: The Central Bankers Bubble

Whilst Australians continue to bicker whether Australia builds enough housing (which Australia does), the case could not be clearer that Australia is experiencing what could only be described as a credit-fuelled housing bubble where banks balloon their loan books at such a rapid rate over an extended period of time whilst APRA and the RBA do nothing.

Westpac (WBC), Commonwealth Bank (CBA), ANZ and the National Australia Bank (NAB) have all seen their mortgage books balloon way out of whack relative to all other economic fundamentals…except house prices. Don’t believe me? The devil is in the details. And Australia’s mainstream economists avoid discussing this matter at all costs. Why? Because they all have skin in the game.

Mortgage book growth

And as for Westpac, it’s property investor mortgage book is now 81% the size of its owner-occupier mortgage book. This is in stark contrast to 2002. And today this bank is an undercapitalised sitting duck to any economic instability that would depreciate the value of dwellings in our major cities.  Westpac Investor Loans

Lindsay David is the author of Australia: Boom to Bust and  Print: The Central Bankers Bubble. David recently founded LF Economics and holds an MBA from IMD Business School

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