Mortgage markets: Australia (and NZ) vs the US

Following today’s terrible house price figures (I don’t have to see them to know they would be bad 😛 ) I thought it would be appropriate to go back to the comparison of NZ (and Aussie) to the US – at least for housing.

Greg Mankiw links to an article in the Wall Street Journal.  Read this:

When Australians borrow money to buy a house, they know that if they default and the mortgaged property doesn’t cover the debt, they will be responsible for the shortfall. And the lender will chase them for it. It’s a neat way of reminding Australians to borrow responsibly.

In America, where populist post-Depression laws in many states have mandated loans be nonrecourse, the opposite is true. Americans can take out a mortgage more or less as a one-way bet. If you can’t afford the repayments and can’t refinance, you just send the keys back to the bank. Borrowers wipe their hands of liability.

Surely hearing how moronic lending practices are in the US makes us all feel better about the relative outlook for our banking and housing sectors.  Although I bet to spite me that a major Aussie bank has gone bankrupt while I’ve been out of the country 😉 (again this was written on Sunday Nov 2)