A Review of the Australian Mortgage Market

During the two decades prior to the global financial crisis, Australian households and investors increased their housing credit demand as a consequence of deregulation (along with competition between lenders, greater access to credit and new products), a stable economic environment (reflected by low inflation and low nominal interest rates, low unemployment, rising incomes and wealth accompanied by rising house prices), attractive taxation arrangements, and, arguably, national housing policies. This scenario changed with the preamble of the global financial turmoil in 2007. Australia was `lucky' in avoiding a recession during the global financial crisis, but banks were exposed to liquidity risk. As a result, credit growth and house price appreciation have decelerated and the financial sector is more concentrated than before the financial turmoil. The trend towards relaxed lending standards reversed. Borrowers, both owner occupier and investors are still cautious under the uncertain environment. This paper gives an overview of these developments in the Australian housing credit market and presents relevant responsive policies. A description of current mortgage products available in Australia is also offered