Kiril,Agree, in part, regarding property investors, except that...

Kiril,

Agree, in part, regarding property investors, except that many go to multiple lenders in order to bypass the serviceability restrictions. What the Banks can't lend to you directly, their finance arms (such as AGC, etc) can. And then there's RESI, RAMS, Aussie and WIZARD, all happy to lend to people on a fully extended basis.

However, of greater concern are the homelenders who have overleveraged themselves into the family home, paying top dollar for their homes and borrowing anything up to 90 -95% of value. Less, according to Bank valuation (ie: typically, asking price less 20 -25% of value, then lending up to 80%+ on that figure), but more once you go out to the RAMS, and WIZARDS' of the world (etc).

True enough, the Big 4 in Banks still require buffers in place, etc, to ensure that serviceability is kept intact, even in a rising interest rate environment. But, for many of us out there, the buffers in place come either in terms of:
1)
income (which can only be stretched so far, and what if 2 incomes quickly become one income, etc); or
2)
asset values (which are often tied up in fixed assets which must either be sold as a whole, rather than in parts, or which take time to sell).

It is, therefore, entirely possible that in a rising insterest rate environment, there will be an entire class of asset rich, debt burdened, income strapped people out there who cannot service their debt levels without trading down their lifestyles, or selling out of some of their asset holdings.

For this, and other reasons, both householders and businesses alike are very cashflow sensitive this time round. It will, therefore, not take too much to spook these people into doing things (such as selling out of asset positions, etc).