RBA says around 2% of owner occupiers in real danger of defaulting

Reserve Bank of Australia Financial Stability Review, September 2024.

Headlines via Reuters:

• The Australian financial system is resilient, and risks are contained.
• Risks include stress in China's financial sector and a lack of significant response from Beijing.
• Low global risk premia and high leverage increase the danger of a disorderly downturn in global asset prices.
• The financial system is vulnerable to digitalisation and the concentration of AI/cloud providers.
• The growth of superannuation to one quarter of the financial system could amplify shocks.
• The risk of widespread financial stress in Australia remains limited.
• A small but rising share of Australian home borrowers are falling behind on payments.
• Only around 2% of all owner-occupier borrowers are in real danger of defaulting.
• Less than 1% of owner-occupier loans are more than 90 days in arrears.
• Around 0.5% of home loans in arrears are estimated to be in negative equity.
• The vast majority of borrowers are expected to be able to continue servicing their debt.
• The RBA sees a risk that households could take on excessive debt once interest rates fall.
• Australian banks are well-capitalized, profitable, and have low exposure to bad debt.
• Strengthening the operational resilience of banks is a priority for regulators.

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The Financial Stability Review provides the Bank's assessment of the current condition of the financial system and potential risks to financial stability. It contains a number of boxes on topics of special interest, along with occasional articles. The Review is issued half-yearly.