Australia home loan arrears not yet a threat - RBA
SYDNEY, June 18 (Reuters) - Arrears on Australian housing
loans are likely to keep rising for a while longer, a top
central banker said on Tuesday, but should not pose a risk to
financial stability or the economy as long as unemployment
Speaking in Canberra, the head of the Reserve Bank of
Australia's (RBA) Financial Stability Department Jonathan Kearns
noted arrears rates had been rising slowly for several years and
were now at their highest since 2010.
The gradual increase was driven by several factors including
slow income growth, falling house prices, higher unemployment in
some regions of Australia and tighter lending standards.
"While the economic outlook remains reasonable and household
income growth is expected to pick up, the influence of at least
some other drivers may not reverse course sharply in the near
future, and so the arrears rate could continue to edge higher
for a bit longer," said Kearns.
"But with overall strong lending standards, so long as
unemployment remains low, arrears rates should not rise to
levels that pose a risk to the financial system or cause great
harm to the household sector."
The RBA cut interest rates to a record low of 1.25% earlier
this month in large part to try and push unemployment down from
the current 5.2% toward a long-run goal around 4.5%.
There has been speculation rising levels of arrears combined
with falling house prices, could force owners to sell their
homes at a loss and add to the downward pressure on prices.
Yet, Kearns noted that while loans in arrears or impaired
had crept up to around 1% of banks total outstanding domestic
loans, that meant 99% of mortgages were on, or ahead of,
The arrears rate in Australia was also much lower than in
many other developed nations, including the United States, the
UK, Germany, France and Spain.
"Summing up, housing arrears have risen but by no means to a
level that poses a risk to financial stability," said Kearns.
(Reporting by Wayne Cole
Editing by Shri Navaratnam)
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