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RBA to continue to monitor speculative lending

The bank wants to make sure that lending continues at an affordable level.
Australia's central bank is to continue to keep an eye on the mortgage market to make sure the speculative lending does not get out of hand, it has been revealed.

Bank leaders said that with 40 per cent of all mortgages now going to investors in states such as New South Wales, it is key to make sure that speculation is not fuelled by inflated house price expectations in the market.

It is this sort of lending that was blamed for the property price crash in the UK in 2008, with the belief that prices could only ever go up criticised roundly.

The central bank is keeping an eye on house price rises, which are currently nearing ten per cent per year on average, to make sure the market does not overheat or become largely unaffordable.

"The share of households favoring real estate has risen to a level approaching that of the early-2000s property boom," the report from the financial body said in reference to a time when it had to raise interest rates sharply as a way to battle the doubling of prices that took place in the space of just five years.

Posted by Craig Francis

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