All signs are that the Australian Prudential Regulation Authority is unlikely to revise its guidance for the minimum serviceability buffer banks must apply when assessing home loan applicants. As a result, we think mortgage stress and defaults will climb higher in the coming months. Meanwhile, GDP data released yesterday confirmed our long-held view that New Zealand's economy would enter into a recession this year. On a more positive note, however, it increasingly looks like the country's deepest ever housing downturn has finally run its course.
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