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Rates hike to cover sub-prime loans

Sub-prime home lenders in Australia will respond to increasing risk by increasing interest rates, but are generally considered safe from the fallout in the US. At the end of December Australian sub-prime loans stood at $6.8 billion outstanding, less than 1 per cent of the overall $827 billion lending market. However, the number of loans to people with risky credit histories has nearly doubled in the past 18 months. Liberty is the largest sub-prime lender in Australia with a $2.64 billion lending book, Bluestone is worth $1.39 billion and Mobius is worth $802 million. The current rates on a sub-prime loan fluctuate between 2 and 2.5 per cent above the official cash rate.



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