MNI BRIEF: Regulator Eyes Aussie Home Market For Fallout- APRA

The head of the Australian Prudential Regulation Authority has told a parliamentary committee that it is paying "considerable attention" to the impact on the banking industry from a large and relatively rapid increase in interest rates.

Wayne Byres said Australia's banking industry was "well capitalised" but added that banks and other deposit-takers faced funding cost pressures and heightened risks in credit portfolios from an environment of higher interest rates.

"While developments in this market are unlikely to create stability issues, there will inevitably be pockets of stress from borrowers who find themselves over-extended. This will be exacerbated as property prices fall," he said.

The Reserve Bank of Australia last week warned in its Financial Stability Review that 25% of variable rate mortgages could face a minimum debt servicing ratio of greater than 30% of their income if rates were to rise another 100bp by the end of 2023. (See MNI BRIEF: RBA Warns of Mortgage Debt Servicing Pain in 2023).