SYDNEY, April 24 (Reuters) - Around A$120 billion of interest only loans in Australia are due to expire every year between 2018 and 2021 which will pressure the finances of some borrowers, though a top central banker said the overall impact on households will be modest.
Reserve Bank of Australia (RBA) Governor Christopher Kent said some interest-only (IO) borrowers will be willing and able to refinance their loans. Also, many others have built up a sufficient pool of savings to afford higher repayments.
“For the household sector as a whole, the cash flow effect of the transition is likely to be moderate,” said Kent, who heads the central bank’s financial markets unit.
“The effect on household consumption is likely to be even less,” he added. “Indeed, the substantial transition away from interest-only loans over the past year has been relatively smooth overall, and is likely to remain so.”
“Nevertheless, it is something that we will continue to monitor closely.” (Reporting by Wayne Cole; Editing by Lisa Shumaker)