MNI BRIEF: RBA Says Mortgage Holders Can Cope With High Rates
Reserve Bank of Australia Deputy Governor Michelle Bullock says that the strong labour market is key to households coping with increased mortgage rates and along with inflation will be a critical factor in determining the size and pace of rate hikes ahead.
In a speech on Tuesday in Brisbane, Bullock said that while some households were vulnerable there had been a $260 billion increase in household savings through the pandemic and the sector had “large liquidity buffers” with most households holding substantial equity. Much of the debt was held by high-income households which had the ability to service their debt.
Bullock said the labour market, where unemployment is at a nearly 50 year low of 3.5%, was key to enabling households to navigate higher mortgages, and that “having a job is the best way of ensuring that you can continue to meet repayments on your loan.”
At its most recent meeting, the RBA raised rates by 50 basis points to 1.35% and identified household spending as “one source of ongoing uncertainty about the economic outlook,” (see: MNI BRIEF: Current Rates "Well Below" Neutral Says RBA).