The Reserve Bank of Australia (RBA) has seen increased risks to financial stability over the past few months following interest rate hikes implemented.
Referring to the semi-annual financial stability review released during the Asian session, the RBA said some households are already feeling pressure from high interest rates and inflation.
The central bank has raised interest rates six times in a row since May, with expectations that it may continue for some time.
According to the RBA, the global economy and financial system are facing significant uncertainties including inflation, interest rates and high energy prices.
This has also been felt in Australia along with significant weakness in the housing market, particularly for a small number of borrowers with higher debt compared to income and low savings particularly vulnerable to the risk of instability.
These factors were one of the reasons for the central bank's unexpected decision to raise rates by only 25 basis points compared to expectations for a 50-point hike on Tuesday.
The implemented rate hike will add about A$800 a month in repayments to the average A$620,000 mortgage, a huge burden for residents holding A$2 trillion (S$1.86 trillion) in home loans.
House prices have also fallen for five consecutive months, led by big falls in Sydney and Melbourne.
