Cashed up and employed: RBA says households can withstand higher rates | swrighteconomy rachelclun
The Reserve Bank believes highly indebted households will withstand a substantial increase in interest rates, saying a build-up of cash through COVID and tighter lending standards has put them in a good financial position.
This has prompted fears in some quarters that the aggressive tightening of monetary policy will hit house prices and the broader economy. “While the current strong growth in employment means that people will have jobs to service their mortgages, the way the risks play out will be influenced by the future path of employment growth,” she said.
“These payment buffers help to protect against the risk that, as interest rates rise, households will find themselves unable to meet debt repayments.” There has been concern about those people who took out fixed rate mortgages through 2020 and 2021. They are likely to roll over to much higher repayments from late 2023.
Bullock’s speech followed the decision by the ANZ to change its forecasts for monetary policy, with bank now expecting the RBA to take the official cash rate to 3 per cent by the end of this year.
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