Australian banks are far too exposed to residential mortgages, according to the managing director of Moody’s Analytics, Tony Hughes.
And the thinks local analysts don’t know how serious this is, he wrote in a new report, cited in an article in the Australian Financial Review today.
“Irrespective of the complacency of local analysts, who sound a lot like many US housing cheerleaders circa 2006, this exposure represents a major concentration risk for banks and the Aussie economy. Houses appear to be overvalued. One merely hopes that the looming correction is a smooth one,” he said.
“The high degree of exposure to the domestic mortgage market raises many concerns. Recent experience has shown that house prices can fall significantly and trigger serious banking meltdowns.”
Read more here.
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