That scraping, chalky sound you can is hear is the Doom ’n’ Gloom brigade grinding their teeth over the Reserve Bank again hosing down forecasts of imminent housing crash and disaster. 

Contrary to various claims, the sky isn’t falling because banks have increased mortgage rates a fraction, the “out-of-cycle” increases pretty much equal earlier “out-of-cycle” cuts and are less than what the banks are offering new customers as discounts.

Yes, three of the Big Four banks have increased mortgage rates by a little more than the increase in what they have to pay for money overseas, trying to protect their profit margins. With banks on the nose, that’s attracted plenty of attention. 

What slipped by without much notice was the banks steadily trimming owner-occupier rates over the past couple of years although the RBA has kept its cash rate steady since August 2016.

There’s a big difference between the banks’ headline “indicator” rates and what they actually charge. 

Australians have been getting steadily smarter about shopping around and asking for lower rates. Their success – and banks competing more for owner-occupiers’ business – is in the accompanying graph from the Reserve Bank.

The average interest rate for owner-occupier principal and interest (P&I) loans shows that after dropping for the RBA “official” rate cuts, the rate of outstanding variable loans continued to drift down. 

That average includes the many Australians who pay the “lazy tax” for never reviewing their finances and looking for better rates. Another RBA paper last year showed that new customers were paying about 30 points less for loans than the outstanding average – on or close to 4 per cent. Yep, 30 points is about how much existing customers are being stiffed by their bank for being loyal. 

Thus, in the real world, the banks now increasing rates a bit is hardly earth shattering. 

On the broader question of household debt, RBA assistant governor Michele Bullock on Monday came to the unsurprising conclusion that while our household debt level is high and that is a risk, “there are a number of factors that suggest widespread financial stress among households is not imminent”. 

In a speech to the Ai Group in Albury, Ms Bullock rounded up the usual suspects and dealt with them in turn. 

Most importantly, while our household debt-to-income ratio is very high, our payment-to-income ratio has been falling from the mid-2000s, as this graph shows.

(It’s pleasing to see the graph provide a debt-to-income estimate that nets off all the money we hold in offset accounts – indicating a real mortgage debt ratio of about 130 per cent, compared with the headline-grabbing 200 per cent total debt ratio preferred by the likes of UBS.)

As Ms Bullock noted, bad loan rates remain very low. While the ratio is high and that poses risks, she neatly summarised why the Chicken Littles are amiss: “First, the economy is growing above trend and unemployment is coming down. While incomes are still growing slowly, good employment prospects will continue to support households meeting their repayment obligations.

“Second, as noted earlier, households have taken the opportunity over the past decade to build prepayments in offset accounts and redraw facilities. In fact, despite the continuing rise in scheduled repayments, actual repayments relative to income have remained quite steady as the level of unscheduled repayments of principal has declined and offset the rise in scheduled repayments. 

“Third, as noted earlier, lending standards have improved over the past few years, resulting in an improvement in the average quality of both banks’ and households’ balance sheets. Much slower growth in investor lending, and declining shares of interest-only and high-loan-to-valuation lending have also helped to reduce the riskiness of new lending. And at the insistence of the regulator, banks have been tightening their serviceability assessments. In addition, strong housing price growth in many regions over recent years will have lowered loan-to-valuation ratios for many borrowers. As noted earlier, arrears rates remain very low.”

Another regular headline-grabber has been the claim that the regulator has been pushing people (mainly investors) off interest-only loans onto P&I with higher repayments would cause chaos.

Not so fast, says the RBA: “Again, this is worth watching, but borrowers have been transitioning loans from interest-only to P&I for the past couple of years without signs of widespread stress. Our data suggest that most borrowers will either be able to meet these higher repayments, refinance their loans with a new lender, or extend their interest-only terms for long enough to enable to them to resolve their situation. 

“There appears to be only a relatively small share of borrowers that are finding it hard to service a P&I loan, which is to be expected given that over recent years, serviceability assessments for these loans have been based on the borrower’s ability to make principal-and-interest repayments.

“So far, the evidence suggests that the transition of loans from interest-only to P&I repayments is not having a significant lasting effect on banks’ housing loan arrears rates.”

There are other calming factors that have been raised by the RBA previously, such as the high proportion of housing debt held by the relatively well-off who can afford it.

The full story – as opposed to the usual scare stories – is that there are reasons to be alert, but not alarmed.