Headlines via Reuters:

  • important borrowers are prepared for increase in interest rates
  • important borrowers and lenders are resilient to potential fall in house prices
  • household debt to income ratio is high, increases sensitivity to rising rates
  • important that lending standards do not slip given rising share of high DTI loans
  • some newer home loans could be relatively risky, have high DTI levels
  • financial resilience of households has improved since pandemic due to house prices, savings
  • many households have built substantial buffers on mortgages, equity in their homes
  • Australian banks very well capitalised, have high holdings of liquid assets
  • non-bank lending is still small at 5% of total, not a threat to stability
  • asset markets globally vulnerable to larger-than-expected rate increases

That last bullet point ... seems accurate. It'd be great if global central banks could finnesse their way to lower inflation rates with measured and well-judged rate increases. But ... history is replete with asset price slumps as interest rates get lifted too far and too fast.

Full text from here: Financial Stability Review

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