While rising rates and falling property prices will play on the macro-economy – as indeed the RBA intends – Campbell is comfortable most borrowers are well shielded against economic hardship.
He notes while there is concern around those whose ultra-low fixed rates are about to roll off, buffers have been built in by lenders.
“We don't just look at the fixed rate plus the buffer, we actually look at the rate that they will roll off onto - plus a buffer,” Campbell says. Moreover, during the pandemic with discretionary spending restricted and interest rates at record lows, a very high proportion of borrowers have built up higher savings and paid off loans or lifted offset balances.
“There could be a segment or a portion who have borrowed recently and borrowed to maximum. We will have to watch that very closely. But nothing to date yet.”
The current cycle has also seen a rise in rental yields and Owen expects that to persist.
“What's really unique … is that while property values have fallen, rent values have continued to rise and they've continued to rise quite strongly,” she says.
Rising rents have a feedback impact as the cost of renting feeds into inflation – and hence interest rates.
“That unique trend in the rental market really comes from several factors, the first of which is people spreading out through COVID,” Owen explains.
“The average number of people per household fell quite notably with the onset of COVID - so basically people wanting a home office instead of a housemate in the second bedroom.
“That increases domestic demand for rentals. We're seeing now wage increases, more bonuses being given out as companies try to attract and retain talent, so that income growth is supporting growth in the rental market as well.
“And now we're also seeing the return of overseas migrants to Australia, gradually as we open up our borders and loosen our COVID travel restrictions. And when overseas arrivals first come to Australia, their housing demand tends to be skewed to rentals in big capital cities.”
Listen to the podcasts to learn more about this extraordinary period in the Australian mortgage market and what the outlook is.
Andrew Cornell is the Managing Editor at bluenotes