Invest
Why the RBA is worried about mortgages
A perfect storm of market conditions is causing concern for the central bank that investors and homeowners may be forced to sell up or default on loan payments.
Why the RBA is worried about mortgages
A perfect storm of market conditions is causing concern for the central bank that investors and homeowners may be forced to sell up or default on loan payments.
In an address earlier this week, RBA assistant governor Michele Bullock flagged the risks associated with high levels of household debt, pointing to Australia’s debt-to-income ratio of 190 per cent, compared with the global median of 130 per cent.
Ms Bullock claimed that the rise in household debt has been “largely driven” by a rise in mortgage debt, partly due to household ownership of rental stock.
Ms Bullock added that continually high levels of household debt could pose “credit quality issues” that could raise vulnerabilities for both banks and borrowers.
“[Mortgage] lending is such an important part of bank balance sheets in Australia, [so] any difficulties in the residential mortgage market could translate to credit quality issues for banks,” Ms Bullock said.
“Australian banks have substantially increased their exposure to housing over this period and housing credit now accounts for over 60 per cent of banks’ loans.
“So, the Australian banking system is potentially very exposed to a decline in credit quality of outstanding mortgages.”
Despite acknowledging that arrears rates on mortgages “remain very low”, Ms Bullock warned that high household exposure to mortgage debt could heighten mortgage serviceability pressures in the event of an economic event.
“If they [households] have little savings, they might need to reduce consumption in order to meet loan repayments or, more extreme, sell their houses or default on their loans,” the RBA governor added.
“This could have adverse effects on the real economy – for example, in the form of lower economic growth, higher unemployment and falling house prices, which could, in turn, amplify the negative shock.”
Ms Bullock noted that mortgage “buffers” created off the back of low interest rates and mortgage offset accounts could help reduce such risk, but claimed that “risks nevertheless remain high”.
Property
Are we nearing another property boom?
There’s a secret to knowing when the property cycle will take its next turn, and it's not as far away as some may think, according to a property expert. ...Read more
Property
Hot Property: Biggest headlines this week
Based off anecdotal accounts, the property industry is gearing up for a strong spring season: Here are the biggest property stories from this week. ...Read more
Property
Ace a rental application in 5 simple steps
In many areas across Australia, the rental market is becoming increasingly competitive, so how do you ensure your application will stand out? ...Read more
Property
Population falls could see Australia with 232,000 vacant dwellings
The shutdown of international borders could cut demand for Australian housing by as much as 232,000 dwellings over the next three years, according to research. ...Read more
Property
How will border closures impact the property market?
Despite falling migration levels, property prices might not be impacted as much as investors think, an industry expert has explained. ...Read more
Property
Sydney, Brisbane, Melbourne tipped to surge: Westpac
One of Australia’s largest banks is forecasting strong growth in the housing market as low interest rates and availability of credit pushes prices up, despite the country being in its first recessio...Read more
Property
Is now the right time to make a tree or sea change?
The experience of isolating in our homes and suburbs has made many people reconsider what they actually value in a home, writes David Hancock. ...Read more
Property
Hot Property: Biggest headlines this week
Victoria’s COVID-19 restrictions have begun to lift as the rest of the country watches on: Here are the biggest property stories from this week. ...Read more
Property
Are we nearing another property boom?
There’s a secret to knowing when the property cycle will take its next turn, and it's not as far away as some may think, according to a property expert. ...Read more
Property
Hot Property: Biggest headlines this week
Based off anecdotal accounts, the property industry is gearing up for a strong spring season: Here are the biggest property stories from this week. ...Read more
Property
Ace a rental application in 5 simple steps
In many areas across Australia, the rental market is becoming increasingly competitive, so how do you ensure your application will stand out? ...Read more
Property
Population falls could see Australia with 232,000 vacant dwellings
The shutdown of international borders could cut demand for Australian housing by as much as 232,000 dwellings over the next three years, according to research. ...Read more
Property
How will border closures impact the property market?
Despite falling migration levels, property prices might not be impacted as much as investors think, an industry expert has explained. ...Read more
Property
Sydney, Brisbane, Melbourne tipped to surge: Westpac
One of Australia’s largest banks is forecasting strong growth in the housing market as low interest rates and availability of credit pushes prices up, despite the country being in its first recessio...Read more
Property
Is now the right time to make a tree or sea change?
The experience of isolating in our homes and suburbs has made many people reconsider what they actually value in a home, writes David Hancock. ...Read more
Property
Hot Property: Biggest headlines this week
Victoria’s COVID-19 restrictions have begun to lift as the rest of the country watches on: Here are the biggest property stories from this week. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
