The Reserve Bank believes less than 2% of borrowers are at risk of defaulting on their mortgages and is not worried about a sharp rise in unemployment triggering mass defaults.
RBA’s Confidence in Mortgage Borrowers
The Reserve Bank of Australia (RBA) remains confident that less than 2% of mortgage borrowers are at risk of defaulting on their loans.
Borrower Ability to Meet Mortgage Payments
Head of financial stability at the RBA, Andrea Brischetto, stated that the bank’s internal research shows that 95% of borrowers can meet their mortgage payments and essential expenses without dipping into savings.
Impact of Unemployment on Mortgage Defaults
RBA research indicates that even a significant increase in unemployment would still leave mortgage defaults at low single-digit levels.
Limited Impact of Unemployment Increase
Even with a potential 2 percentage point increase in unemployment, the share of borrowers at risk of running out of savings buffers in the next year would likely remain at low single-digit levels, according to the RBA.
Housing Prices and Loan Repayment Options
The RBA official highlighted that with current housing prices, the vast majority of struggling borrowers would be able to pay off their loans by selling, with less than 1% of loans currently in negative equity.
Financial Stresses Faced by Households
Ms. Brischetto acknowledged the financial stresses faced by many households due to inflation, tax, and interest rate pressures.