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Did the Reserve Bank recently tell everyone to 'chill out'?


The writer of an article in the Financial Review a few weeks ago posed this question. What Patrick Commins actually said was 'I was a tad surprised when RBA Assistant Governor Michele Bullock told an audience that the risks to financial institutions and financial stability more broadly from household stress are not particularly acute at the moment'.

He carefully worded his reply was 'Not particularly accurate? Isn't this the land where households are the most indebted in the world?' and he might well have been justified in a less graciously worded response as all we seem to be hearing about is mortgage stress with any threat of rising interest rates.

However the article goes on to say that the 'good news from Bullock is that the overall level of stress among mortgaged households remains relatively low'. He also says that Sarah Hunter of Oxford Economics says that 'mortgaged households could comfortably swallow a 1 percentage point rise in borrowing rates' and this would make sense for the average mortgage holding Australian family.

The trouble appears when households are highly indebted and have taken out a loan in the last couple of years. So what does Ms Hunter think is going to happen?

She doesn't see any lifting of interest rates until later in 2019 and she was certainly right for now. Last week the March RBA announcement was to hold again.

That's a bit of a reprieve but it's a great time to sink some money into our house loans. Those of us who fit into the 'average Australian family', and of course there are differing versions of us, should be trying as hard as we can to be paying down our mortgages.

Less debt always means less stress if anything unplanned happens!

Use our free budget planner if you'd like help to work out how your household budget is going.

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