The Reserve Bank of Australia (RBA) has reported that 5% of mortgage borrowers are spending more than their income, yet the institution does not express concern regarding potential default risks.

Speaking at a banking conference at Sydney University, Andrea Brischetto, the head of financial stability at the Reserve Bank of Australia (RBA), reassured that the bank’s internal research indicates that the majority of borrowers can comfortably manage their mortgages at the current interest rates.

She noted that slightly over 20% of borrowers are presumed to allocate more than 30% of their income to mortgage payments. However, a significantly lower proportion, around 5%, is estimated to face income inadequacy for covering both mortgage payments and essential expenses. This estimation is derived from RBA staff calculations using a dataset of 1.8 million mortgages, representing about a third of all outstanding home loans. The calculations also consider essential spending based on the Household Expenditure Measure.

Ms. Brischetto emphasized that among those spending more on essentials than they earn, the majority have substantial savings to rely on. Drawing on securitization data, she pointed out that most of the 5% of variable-rate owner-occupier borrowers with an estimated income shortfall possess significant savings buffers.

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