SYDNEY, Feb 20 (Reuters) - Australian households carry relatively high levels of debt that could lead to financial difficulty in a downturn, but the overall level of stress is currently low and not a threat to the banking system, a top central banker said on Tuesday.
In a speech at a responsible lending summit, Reserve Bank of Australia (RBA) Assistant Governor for the financial system Michele Bullock said the banking system was strong and well capitalised, adding it was supported by prudent lending standards. “The information we have suggests that while there are some pockets of financial stress, the overall level of stress among mortgaged households remains relatively low,” said Bullock. “The risks to financial stability from this source therefore remain low although we will need to keep an eye on developments.” Concerns about rising mortgage debt, particularly for interest only loans, led regulators to tighten lending standards in recent years, which in turn led banks to lift rates on some products. Growth in home lending had since slowed, and with it home price growth. (Reporting by Wayne Cole, editing by G Crosse)