RBA Financial Stability Review: Rates rises could hurt heavily-indebted households

In its 60-page Financial Stability Review (FSR), the Reserve Bank of Australia (RBA) warns that interest rate hikes could hurt the heavily-indebted households. 

Key points from the FSR crossing the wires via Reuters are-

• Main risks come from rising household debt amid low rates and weak income growth
• Higher rates, falls in income could see some highly indebted households struggle to service debt
• Tighter lending rules have curbed investor, interest-only loans
• Australia's financial system remains strong and resilient
• Sees signs of easing conditions in housing markets in sydney and melbourne
• Large pipeline of new apartments pressuring prices in brisbane, parts of melbourne
• Few signs as yet of settlement problems on apartments, but watching carefully
• Banks profitable, well capitalised, bad and doubtful debts around historic lows
• Regulators seeking to strengthen bank accountability, risk controls given recent lapses
• Local banks pulling back on commercial loans, asian bank lending still growing strongly
• Little growth in shadow banking as yet, but an area to watch
• Risk remain elevated in china given high levels of debt, opaque borrowing
• Excessive risk taking in global financial markets risks a "Disruptive correction"