Back in May I noted that Fitch had this to say on their future strategy for dealing with Australian bank’s housing credit issuance.
… Australian banks could have their credit ratings cut if they lower standards to boost mortgage sales as demand for home loans slumps.
“If we do start to see signs of erosion in those lending standards, there may be some negative pressure on ratings coming through,” Tim Roche, director of Fitch’s financial institutions group in Sydney, told a credit forum today.
Which makes me wonder if they noticed this from news.com.au today.
Fresh evidence is emerging of a “race to the bottom” among banks and other lenders as demand for mortgages slides and competition boils over.
Lenders are increasingly cutting standards by enabling home buyers to make smaller deposits, new research indicates.
About three in every five mortgage products now enable home buyers to borrow up to 97 per cent of the value of their property, according to financial research group RateCity.
RateCity chief Damian Smith said the rise in loan-to-value ratios (LVR) indicated that lenders wanted to kick-start growth in the sluggish home loan market.
“We haven’t seen this level of money offered to mortgage borrowers since the start of 2009,” Mr Smith said.
He warned that change in lending criteria was putting borrowers at risk.
In the post-GFC world where rating agencies are striving to gather back their creditability and given that it now seems that the rating agencies are the defacto guardians of macro-prudential quality, one has to ask the question…. Will Fitch pull the trigger ?