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Australia's major mortgage lenders have been advised to increase their capital stocks as a safety measure should the property industry crash.
A stress test conducted by the International Monetary Fund (IMF) on the country’s major banks revealed that a downturn in the property market could be catastrophic for the mortgage providers.
Westpac, ANZ, National Australia Bank and Commonwealth Bank were targeted by IMF’s stress test, as these four institutions hold about 80 percent of the entire country's mortgages.
“Combining residential mortgage shocks with corporate losses expected at the peak of the global financial crisis would put more pressure on Australian banks' capital,” according to the report.
Meanwhile, the government has welcomed the possible entrance of Japanese lenders into the mortgage market in order to spur competition in the industry, as long as the companies are able to meet strict trading standards.
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