RBA Financial Stability Review: Higher interest rates could hurt heavily-indebted households

In its 60-page Financial Stability Review (FSR), the Reserve Bank of Australia (RBA) warns that interest rate hikes could hurt the heavily-indebted households. 

Key points from the FSR crossing the wires via Reuters are-

  • Main risks come from rising household debt amid low rates and weak income growth
  • Higher rates, falls in income could see some highly indebted households struggle to service debt
  • Tighter lending rules have curbed investor, interest-only loans
  • Australia's financial system remains strong and resilient
  • Sees signs of easing conditions in housing markets in sydney and melbourne
  • Large pipeline of new apartments pressuring prices in brisbane, parts of melbourne
  • Banks profitable, well capitalised, bad and doubtful debts around historic lows
  • In liaison, banks have expressed concern over the outlook for the retail sector due to increased competition as well as changing consumer preferences and the failures of some well-known retailers
  • Regulators seeking to strengthen bank accountability, risk controls given recent lapses
  • Local banks pulling back on commercial loans, asian bank lending still growing strongly
  • Little growth in shadow banking as yet, but an area to watch
  • Risk remain elevated in china given high levels of debt, opaque borrowing
  • Excessive risk taking in global financial markets risks a "Disruptive correction"
  • There are a number of policy uncertainties which if escalate could trigger a "reappraisal of asset valuations and a spike in volatility, while also weighing on the economic outlook"

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.