While the household debt in Australia has increased and wage growth remains slow, according to the RBA it has not caused an increase in financial stress so far.
That’s the opinion given by the RBA’s Assistant Governor Michelle Bullock, in a speech to the Sydney Assistant Governor of the Reserve Bank of Australia (RBA).
Bullock admitted that while pockets of financial stress do exist, they’re small and relatively stable for the early parts of 2018.
Owner-occupier households with mortgages have few signs of stress based on mortgage arrears, mortgage repayment buffers and personal insolvencies. According to the Reserve Bank a significant and growing proportion of owner-occupier borrowers are currently ahead of their loan repayments.
“My overall interpretation of these myriad pieces of information is that, while debt levels are relatively high, and there are owner-occupier households that are experiencing some financial stress, this group is not currently growing rapidly,” she said.
“This suggests that the risks to financial institutions and financial stability more broadly from household mortgage stress are not particularly acute at the moment.”
Housing investors, on the other hand, have a different financial stability risk than those with owner-occupier debt. These investors often have larger deposits so they usually get lower starting LVR.
“They often have other assets, such as an owner-occupied home, and also earn rental income. Higher-income taxpayers are more likely to own investment properties than those on lower incomes, so they may be better at absorbing income or interest rate shocks.”
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