RBA Sees Australian Borrowers as Resilient Amid Interest Rate Hike

Australia's borrowers and lenders are resilient enough to navigate financial troubles ahead, according to the Reserve Bank of Australia (RBA). The bank released its half-yearly Financial Stability Review on Tuesday, which revealed that most Australians have sufficient cash flow and savings to mitigate downturns.

The report found that less than one per cent of borrowers are estimated to be facing negative equity despite soaring interest rates. Mortgage holders who were hit with a 25 basis point rate hike on Tuesday are realistically capable of absorbing shocks to the market, the bank said.

In fact, housing prices could fall by up to 20% from current levels and only around five per cent of mortgages would fall into negative equity, RBA modelling suggests. This is lower than the deepest downturn predictions made by mainstream economists, which range from 13% peak to trough.