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Date Published : Friday, February 22, 2008
Australian lender GE Money has pulled its 100 per cent mortgages from the market after concerns were raised over the number homeowners defaulting on their loans.
As the global credit crunch continues to bite the company's mortgage insurer told it to ditch the loans claiming they are too risky, the Herald Sun reports.
The newspaper cites Supreme Court records which show that mortgage defaults reached record levels last year, with commentators blaming high value mortgages for some of the increase.
GE Money, the financial services division of General Electric, has over three million customers across Australia and New Zealand.
Its move is expected to encourage other banks and lenders to stop offering loans worth 100 per cent of a property's value and to become more selective about who they lend to.
Ken Sayer, the chief executive of the Mortgage House of Australia, told the Herald Sun he thought the appetite for such loans had changed and predicted a shift towards more "conservative" lending practices.
An expected rise in Australian interest rates next month could further dampen demand for high risk home loans as buyers would face even higher mortgage repayments.
Higher rates are already having an impact on credit card borrowing, with figures from the Australian Bureau of Statistics revealing a slower pace of lending growth.
Outstanding balances on credit cards increased by just 9.5 per cent in the 12 months to December 2007. This is substantially down in the average 17 per cent increase seen over the previous five years.
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