New Zealand households more exposed to mortgage defaults

Due out tomorrow, an article within the report – An International Perspective on the Financial Stability Implications of Higher Interest Rates – says countries where households have elevated levels of debt-to-disposable income are particularly vulnerable due to higher interest rates.

Borrowers in countries with a large share of mortgages on shorter fixed terms such as New Zealand and Australia are experiencing substantially higher debt servicing costs, putting strain on household budgets, it says.

While the world’s advanced economies’ financial systems have been largely resilient to risks arising from higher interest rates so far,  the full impact is still to be seen and some areas of concern are emerging.

“Globally core inflation remains high and central banks are expected to keep monetary policy tight for some time,” Kerry Watt, Reserve Bank financial stability assessment and strategy director says.