Australia’s c. bank warns of debt risks on falling interest rates

The Reserve Bank of Australia (RBA) issued a warning on Thursday to borrowers, calling them to avoid excessive debt as interest rates fall to prevent a boom/bust cycle.

The central bank’s semi-annual Financial Stability Review noted the overall resilience of households, businesses, and banks despite high interest rates and inflation.

A small but increasing number of mortgage holders were struggling to make payments, leading some to sell their homes to avoid default.

The RBA reported that less than 2 per cent of borrowers were facing severe financial stress, with 0.5 per cent of loans in arrears also in negative equity.

The Australian central bank anticipates that household financial strain will lessen as interest rates decrease, but also highlighted potential risks in this scenario.

Attribution: Reuters

Subediting: Y.Yasser