Australia’s central bank is warning home prices may threaten the country’s financial stability. Reserve Bank of Australia assistant governor Michele Bullock gave a housing update this week. She warns the quality of borrowers has been deteriorating, as they take on more leverage. As the share of these borrowers surges, so does the risks they bring with them. The central bank warns this can present a risk to financial stability, and as a result they’ll be watching them closely.
Highly Indebted Mortgage Borrowers Are On The Rise
The Reserve Bank sees two risks forming around banking and households. In regards to banking, housing makes up about 60% of outstanding loans. Concerns had brewed between 2014 and 2017 about a deterioration in borrower quality. However, the country addressed this with various tightening measures. This worked until the pandemic.
Recently Australians have been taking on higher and higher debt loads to buy…