Global ratings agency Moody’s warned this week that the rise in interest-only loans and lending to investors was “credit negative” for the banks in Australia.

Moody’s comments followed calls by the Reserve Bank of Australia (RBA) and the Australian Prudential Regulation Authority (APRA) to the Murray financial system inquiry not to recommend relaxing bank capital rules in order to assist more capital flow into the housing market, given the systemic risk they pose to the economy.

Experts in the field believe that the interest rates will rise next year, creating stress to Australia’s banking system due to an increase in riskier loans.

Source: The Australian