In those countries, the reduction of the risk premium and perceived policy stability will also encourage credit expansion. While from a macroeconomic point of view all these developments may seem quite  BIS Review 13/2007  3  predictable, there is a fear that both borrowers and lenders in these countries may not have an adequate understanding of the risk they are taking.
Financial institutions may lack the necessary expertise to manage a fast expansion of their housing loans portfolio, and in the rush to gain market share they may extend credit to ever-riskier borrowers.