(Bloomberg) -- Australia’s mortgage arrears have climbed back toward 2010 levels, but remain short of posing a risk to the financial system or to households, a senior Reserve Bank Official said.

Jonathan Kearns, head of financial stability at the RBA, said that arrears are still well beneath the levels they reached in the early 1990s recession, as well as those in a number of other developed nations.

“Housing arrears have risen but by no means to a level that poses a risk to financial stability,” Kearns said in the text of a speech to a property summit in Canberra Tuesday.

“Weak income growth, housing price falls and rising unemployment in some areas have all contributed. But they have not acted alone, interacting with earlier weaker lending standards, and the more recent tightening in lending standards.”

Kearns said arrears “could continue to edge higher for a bit longer” as some of those drivers mightn’t reverse in the near-term. Around 1% of household loans, which also include credit card and personal debt, are more than 90 days overdue, according to RBA data.

Property Boom

Australians amassed one of the world’s highest levels of household debt in a five-year property boom amid a combination of low interest rates, lax lending standards and supply shortage. Prices have since tumbled, with the Sydney market down about 15% from the 2017 peak, as regulators tightened standards and banks became gun-shy on lending after an inquiry revealed widespread poor behavior.

However, the nation’s strong labor market has kept a lid on home-loan arrears as households have sufficient income to meet their commitments.

“Around two-thirds of borrowers have accumulated buffers of prepayments of their mortgage, and some others have other assets outside of their property,” he said. “Households with financial buffers can withstand some period of unemployment, but if that extends too long and depletes their savings, they risk falling into arrears.”

“But with overall strong lending standards, so long as unemployment remains low, arrears rates should not rise to levels that pose a risk to the financial system or cause great harm to the household sector,” Kearns said.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Chris Bourke, Peter Vercoe

©2019 Bloomberg L.P.