Everyone Except Australians Believes in Housing Bubble

I came across this interesting article today which indicates why Commonwealth Bank increased their interest rates by 0.45%, almost double the official 0.25% lift in the cash rate yesterday. The problem is that Australian banks get most of the money for your mortgage, from overseas sources. Due to the fallout from the global financial crisis borrowing money from those sources is not as cheap as before. And these sources need to believe that their investment in Australia is safe. Apparently they are not that convinced. 

The Australian Bankers' Association, the industry's main lobby group, today attributed worries about Australian house prices on overseas markets as part of the reason for any extra rate hikes by its members.

“Over the last few weeks, we've had a lot of international investors asking very detailed and probing questions about why it is Australia thinks it doesn't have a housing bubble,” said ABA's chief Steven Munchenberg.

"Bankers were grilled at length as to why investors should not be worried Australia has a housing bubble,” he said. Australia's banks remain “very conscious of the risks of international investors becoming nervous about investing in Australia. “ [via]

Keep that in mind as we enter 2011.