The Reserve Bank of Australia’s just-issued Financial Stability Report expressed worry about some groups of highly-indebted borrowers in the country’s booming residential market. Overall, though, RBA didn’t seem too worried.
It shouldn’t be. Although the ratio of total housing debt to household income has risen from about 120% to 134% since 2010, mortgage rates have come down sharply, so overall debt servicing costs have fallen. As long as the household sector as a whole can carry the cost of housing, distress among some groups of buyers simply offers an opportunity to other groups of buyers.
‘mortgage rates have come down sharply’ rates are about to take a hike … and it could get ugly.
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