Powered by MOMENTUM MEDIA
subscribe to our newsletter

High household debt risky for banks: Moody’s

Low interest rates and rising household debt are placing pressure on major banks and skewing risk to the downside, according to Moody’s Investors Service.

In a new report, the credit ratings agency warned that the low interest rate environment is leading to increased exposure to housing, and noted that since 2008, major banks had “raised their share of lending to housing” in the face of slackening business lending growth.

“The prospects of a longer period of low interest rates may direct even more bank credit to the housing market, making banks increasingly sensitive to shocks in this segment and at a time when adjustment risks are rising,” Moody’s said.

In the report, Moody’s highlights a “growing disconnect” between housing prices and average household incomes, noting that the higher levels of household leverage pose “increasing tail risks for Australian banks”.

“Australia’s credit conditions and housing risks are starting to pose increasing challenges,” the report said.

Advertisement
Advertisement

PROMOTED CONTENT


Moody’s also pointed to “cyclical challenges” in the labour market, such as part-time employment “outpacing” full-time, putting increased pressure on household debt.

[Related: Fresh fears raised over strength of Aussie banks]

High household debt risky for banks: Moody’s
mortgagebusiness

Latest News

The chief of Australia’s largest bank has said lenders should act pre-emptively and shift their floor rates for mortgage serviceability am...

Total household wealth reached a high of $13.4 trillion in the June quarter, primarily due to rising property prices, according to the Aust...

The property exchange settlement platform has been granted approval to establish an Electronic Lodgement Network in the ACT.  ...

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

How long do you think it should take to discharge a mortgage?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.