RBA's Kent: fallout from interest-only loan expiries to be limited

Joshua Gibson FXStreet

The Reserve Bank of Australia's Assistant Christopher Kent gave some talking points about the interest-only loan lending practices in Australia, which the Australian regulator Australian Prudential Regulation Authority (ARPA) restricted to protect household debt levels.

Key highlights

Expects almost half a trillion (in AUD terms) of interest-only loans to expire by 2021.

Majority of borrowers have transitioned out of interest-only loans well.

Small minority of borrowers who cannot afford the step-up into principal plus interest payments.

Kent expects the overall impact of transition on household cash flows and thus consumption to be small.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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