While many economists believed the money markets had overshot and pricing was well beyond reality there are some now redoing their sums on the back of an increasingly strong job market which could help fuel high inflation.

RBA deputy governor Michele Bullock said that on aggregate Australian households were in good financial shape. While there were high levels of debt there were also “sizeable holdings of assets” after strong growth in house prices.

Australians had also squirrelled away about $260 billion into savings and were well ahead on mortgage repayments. There was also very little negative equity, which is when the debt owed on a house exceeds its value.

Bullock said that if the variable interest rate for home loans rose by 300 basis points (3 per cent), then data collected by the RBA indicated that about a third of borrowers would feel a very limited impact because they were already well ahead of their repayment schedule.

“On the other hand, just under 30 per cent of borrowers would face relatively large repayment increases of more than 40 per cent of the current repayments,” Bullock said.

She said a large number of borrowers were also due to come off their fixed rate loan terms in the next two years with the biggest concentration occurring in the second half of 2023.

“Assuming all fixed-rate loans roll onto variable mortgage rates and new variable rates are broadly informed by current market pricing, estimates suggest that around half of fixed-rate loans (by number) would face an increase in repayments of at least 40 per cent.

“Borrowers with fixed-rate loans that are due to expire by the end of 2023 would experience a median increase of around $650 (or 45 per cent) in their monthly repayments. This is slightly more than the rise in payments that variable-rate borrowers would experience over this time.”

However, she said it was likely these borrowers would have saved enough to deal with potential repayments.

Bullock also stressed how much the RBA increases rates would depend on developments in the economy, including how borrowers respond to rate increases.

“On balance though, I would conclude that as a whole, households are in a fairly good position. The sector as a whole has large liquidity buffers, most households have substantial equity in their housing assets and lending standards in recent years have been more prudent and have built in larger buffers for interest rate increases.”