World Economy

Australia Faces Massive Economic Crash

Australia  Faces Massive Economic CrashAustralia  Faces Massive Economic Crash

Australia is facing an economic shock akin the global financial crisis, an expert has warned. Some $500 billion worth of interest-only mortgages expire in the next four years, raising fears that thousands will default when their repayment sums increase, Dailymail online reported. High mortgage default rates in the US sparked the 2007 global crash by leaving banks short of cash. “My view is we’re in somewhat similar territory to where the US was in 2006,” said Martin North, the principal at consultancy Digital Finance Analytics.  North said this was not a sub-prime crisis because, unlike in the US, loans have not been given to people without jobs or on very low income. But he said too many Australians have been given loans they should not have been able to get. “This is absolutely not sub-prime in the US definition but there were people in Australia who were being encouraged to get very big loans because they could service interest-only,” he told The Age. “We also know that some interest-only loans were not investors but they are actually first-home buyers encouraged to go in at the top of the market.”


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