Despite recent mortgage interest rate rises,Australian banks are more exposed to the risk of a housing market shock than ever beforeIn Australia, the broad four banks are joining the mortgage interest rate hike bandwagon to boost additional capital in what is truly a high-risk banking and financial system.
Simply put, and when it comes to lending,banks are facilitators. On the front end, banks’ assets are generated by providing credit (debt) to homebuyers and charging a specific rate of interest. On the back end, and banks enjoy liabilities derived from depositors and wholesale lenders,fetching an interest rate which is lower than that charged to homebuyers. The banks earn the inequity in revenue.
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Source: theguardian.com