RBA Cautions Indebted Households Vulnerable to Rate Rises

Australia’s central bank has warned that household borrowing is a key risk to the country’s financial system as higher interest rates could see households struggle to repay their debt, the Financial Times reported. “Higher interest rates, or falls in income, could see some highly indebted households struggle to service their debt and so curtail their spending,” the RBA said in its latest Financial Stability Review. Low interest rates and weak wage growth have seen debt levels relative to income edge higher, the central bank said. The RBA held interest rates at 1.5 per cent at its October meeting. The central bank said recent action by regulators to ensure borrowers could weather higher mortgage rates and limits on interest-only lending had seen “some moderation in housing market conditions”. Housing price growth has slowed in Sydney and Melbourne while apartment prices have recorded weaker growth nationally, the RBA said. Read more. (Subscription required.)