SYDNEY, Nov 1 (Reuters) - New Zealand's central bank on Wednesday warned that pockets of financial stress were growing among households struggling with high debt repayments, though rapid immigration had stabilised house prices after a steep fall.
In its semi-annual Financial Stability Report, the Reserve Bank of New Zealand also noted risks to commodity prices from a slowdown in China and added it was closely watching developments in the Middle East.
Interest rates in New Zealand are at 15-year highs of 5.5% as the central bank fights to bring inflation to heel, and the share of mortgages in arrears is on the increase.
"Pockets of stress are likely to grow in the medium term as highly-indebted households continue to be tested by higher debt servicing burdens," the RBNZ said in its 46-page report.
"So far, the vast majority of borrowers have been able to manage these increases, but we know some people are struggling and falling behind."
The farm industry was also under pressure from low global milk prices and a prolonged period of weakness could see a material pickup in loan losses for banks, the RBNZ said.
Sill, banks' liquidity positions were strong and capital ratios rising, the RBNZ said. Asset quality was currently high, but banks were preparing for a likely deterioration over the medium term. (Reporting by Wayne Cole; Editing by Chris Reese and Jonathan Oatis)
