Interest rate rises may be front and centre for most borrowers at the moment, but the RBA says most households are well placed to absorb increases despite higher costs of living.
RBA governor Phillip Lowe says the June increase of 50 basis points to 0.85% will help bring down inflation over time.
He says RBA data shows households are generally well ahead on mortgage repayments, with financial stress “low and declining”.
According to the RBA many households increased their savings during the pandemic while interest rates were low.
Homeowners with variable-rate loans already have a median 21-month buffer on their repayments, compared with 10 months’ worth at the start of the pandemic.
RBA analysis indicates that even if variable rates were to lift by 200 basis points, more than 40% of borrowers are already making monthly repayments which are large enough to cover those increases.
It says many households have ample time to adjust to future hikes.