RBA Downplays Risks Around Mortgage Rate Increases

The Reserve Bank of Australia is downplaying risks to the housing market from rising mortgage interest rates, saying that the cost of funding a home loan is still below that a year ago, The Wall Street Journal reported. In minutes of its Sep. 4 policy meeting released Tuesday, the RBA said that at the time of the board gathering, lenders accounting for around 40% of the market had raised mortgage lending rates. “These increases would imply a small rise in the average housing loan rate, unwinding about half of the decline observed in the average housing loan rate over the preceding year,” it said. More banks have increased interest rates on mortgages since the policy meeting, stoking fears of widening mortgage defaults. Economists have argued that increased mortgage interest rates would delay any official interest rate increase by the RBA. The banking sector has justified raising interest rates on the basis of higher wholesale funding costs. Read more. (Subscription required.)