Home Loan Carnage Coming

The big banks own risk metrics are signalling an alarming prognosis for the Australian economy.

Home Loan Carnage Coming
Photo by Jon Cellier / Unsplash

Last week I mentioned the mortgage cliff set to hit millions in the country as their low fixed rate terms expire and mortgages reset to much higher variable rates.

Unfortunately, things actually look much worse than I thought they did.

On Friday, one of the big four banks, Westpac, released data that the banking sectors 'serviceability buffers’ are about to be hit.

This is a term that banks use to assess how you can repay a loan if interest rates were much higher. Typically they add 2.5 or 3 per cent to the current rate to see how the borrower's budget would cope.

The results should send shivers through our economic forecasters.

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