RBA concerned over high mortgage debt

The Reserve Bank says growth in lending to Australian households from the mid-1990s to 2001 was strong and desirable but it has since become “less confident” and “more concerned” about the number of households vulnerable to debt.

RBA deputy governor Glenn Stevens has told a Federal Reserve Bank of Kansas seminar said that households' ability to cope with any future housing downturn is being threatened as debt increases. While this probably won't have any significant impact on the financial sector even if house prices fall in the near future, there may be considerable “general economic fallout” because household consumption could contract very quickly.

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