banks slashing maximum loan ratios, page-2

There'll be those within the industry calling for the FHBG to be extended indefinitely. Why? Because they know homes are over valued with the market being on a knife's edge. As long as buyers believe they're getting value for money the requests for big loans will continue, less the total amount lent out by the banks. Then we'll see the prices really show their colours.

It's all in the belief of what a house is worth and what the banks will lend. The latter will put downward pressure on homes as banks downscale the loan to deposit ratio. That will begin impacting on opinions of housing values. Most are still firmly in the belief that homes are worth 10 years the average wage, when in reality wages are now in decline and affordability is seriously low. Any hiccup in our economy could mean disaster to those who have over borrowed.