Money Moody's warns of high household debt

10:22  12 april  2017
10:22  12 april  2017 Source:

RBA warns on home loans, rates on hold

  RBA warns on home loans, rates on hold The Reserve Bank has called on mortgage lenders to rein in risky loans as it tries to maintain financial stability and growth.The central bank held its benchmark interest rate steady at a record low of 1.5 per cent at its April board meeting on Tuesday, in line with the forecast in an AAP survey of 12 economists.

There is more than a 20 per cent risk of Canada falling into a second recession — and though much of that risk comes from outside our borders, Canadians' sky high debt loads could push the economy over the edge, warns a new report from Moody ' s But this time, household debt is out of control.

to cool the housing market "may have come too late" to prevent a harsh landing for residential real estate, Moody ' s Investors Service is warning . High levels of household debt in Canada have left consumers with little flexibility to adapt to shifting markets, the credit rating agency said.

Australians are at risk of financial stress.© Lukas Coch/ AAP Image Australians are at risk of financial stress. A love affair with property and a lack of access to cash leaves Aussies more at risk of financial stress than people in other advanced economies should house prices take a sudden fall, ratings agency Moody's warns.

Australia's household debt level, relative to liquid household assets excluding superannuation, is similar to that in Ireland in 2007, just before its housing market crashed, Moody's said.

"This suggests that, in the event of a negative income shock, the scope for Australian households to draw down parts of their financial assets to maintain debt service and overall spending is more limited than elsewhere," the agency said in a report.

Australia needs more housing to cool red-hot property prices - central bank governor

  Australia needs more housing to cool red-hot property prices - central bank governor <p>Australian regulators stand ready to take tougher action against runaway home prices although addressing supply-side issues would go a long way in cooling the market, the head of the central bank said on Tuesday.</p>Reserve Bank of Australia (RBA) Governor Philip Lowe said recent measures to curb lending to property investors should help the whole system "pull back to a more sustainable position".

Moody ' s analyst Greg Davies said: " Household debt is high and still growing, leaving consumers vulnerable to an economic downturn, while higher Alex Braxier, the executive director of financial stability at the Bank of England, has warned that high street banks are heading towards a "spiral of

Moody ' s says mortgage- debt growth, not credit cards, is driving the increase in Canadian household debt . How high debt loads are hurting our children. Vulnerability of indebted households to hit ‘historic’ levels as rates rise: PBO.

Moody's found Australia, New Zealand, Canada and Sweden are the advanced nations most vulnerable to a housing downturn, due to strong house price growth in the last three years.

"The degree of exposure to housing risk channels is lower in Australia and Canada, with less stressed housing affordability, resilient banking systems, and fewer signs of transient demand factors exacerbating imbalances in the housing market," Moody's said.

"Canada, however, has become more reliant on residential investment, while Australian households stand out for lower financial buffers and higher leverage."

Reserve Bank warns one-third of Australian borrowers have little to no mortgage buffer .
<p>Despite interest rates sitting at record low levels, one-third of Australian borrowers have either no accrued repayment buffer or are less than one month ahead on their home loan repayments, leaving them very exposed to an economic downturn or rise in interest rates.</p>In its latest Financial Stability Review, the Reserve Bank has today explicitly set out how vulnerable many Australian families are with their mortgage repayments.

—   Share news in the SOC. Networks

Topical videos:

This is interesting!