activities and over time. from this point of view, financial stability can be defined as a situation where the financial system is able to meet these requirements, and thereby enhance economic performance and wealth accumulation a more narrow approach is to define financial stability in terms of what it is not, that is a situation in which financial instability impairs the real economy. this definition is more passive in terms of implying how one should act under normal circumstances, but has the advantage of focusing on the situations we attempt to avoid. the latter definition is related to the high costs of financial instability in the last few decades. costs in terms of loss of gdp can be substantial. a study of the economic costs of banking crises concluded that even though such crises have been less frequent in high - income countries than in low - income see for example schinasi, garry j. ( 2004 ). ” defining financial stability ”. imf working paper no. 04 / 187 countries, they have persisted over a longer period and average total output losses have thus been higher. 2 the preferred definition of financial stability varies across countries. recognising the need for a relevant operational definition regardless of the current situation in the financial system, the central bank of norway has chosen to adopt the broad definition of financial stability. how do the authorities analyse financial stability? given an understanding of what financial stability should imply, the authorities can analyse potential threats to financial stability. there are two complementary approaches : in the first approach, we need to focus on risk factors originating within the financial system. institutions, markets and infrastructures are continuously faced with risk factors such as credit, liquidity and market risks. analyses have become even more challenging in recent years as the financial system has become more complex and interwoven both across industries and borders. the increased complexity of the financial system is illustrated by the rapidly expanding market of credit derivatives. this is a relatively new financial instrument that comes in many and complicated forms. while contributing positively to greater flexibility in risk management, there is also the possibility that risk is more easily concentrated, and that economic agents can take on risks without being fully aware of their ramifications. analysing risk originating inside the financial system, it can be useful to divide the approach into two areas. 3 the microprudential analysis focuses on the developments within individual institutions, and is concerned with limiting the distress of individual institutions, thereby protecting depositors. the macroprudential analysis focuses on the financial system as a whole, and

] the average rate on outstanding mortgages has risen by 335 basis points over the tightening phase to date, to a little over 6 per cent. pass - through has been a bit less than in the past because of the high share of mortgages fixed at low rates during the pandemic. [ 10 ] increased discounting on mortgages by lenders competing for borrowers has also played a role. nevertheless, the increase in mortgage rates has been large and rapid ( graph 3 ). also, most of the remaining low fixed - rate loans from the pandemic era will expire this year, which will add around 20 basis points to the average outstanding mortgage rate. graph 3 housing lending rates % % new variable * all outstanding * * cash rate * * * perpetual data used to 2013 ; advertised package rates to july 2019 ; thereafter, data from the efs collection. perpetual data used to 2015 ; data from the securitisation system to july 2019 ; thereafter, data from the efs collection. sources : apra ; perpetual ; rba ; securitisation system. while mortgage rates are below the peak in 2007, households hold a bit more mortgage debt ( as a share of household disposable income ) than in previous tightening phases. as a result, scheduled mortgage payments – which include mortgage principal and interest – have increased to a record 10 per cent of household disposable income ( shown by the blue bars in graph 4 ). our estimates suggest that total scheduled debt payments ( which include payments on consumer credit ) have also increased sharply ( these are shown by the top of the green bars ). however, total scheduled debt payments by households remain below earlier peaks because the stock of consumer credit has declined significantly since 2008. meanwhile, extra payments into mortgage offset and redraw accounts ( shown in grey ) have held up despite the increase in scheduled debt payments – i will come back to this point soon. r e s e r v e b a n k o f au s t r a l i a graph 4 selected claims on household income quarterly ; share of household disposable income % projection * % historical estimate scheduled mortgage payments extra mortgage payments consumer credit payments * projection for total scheduled payments on household debt at end - 2024, based on the current level of the cash rate. sources : abs ; apra ; rba. the rise in scheduled debt payments has put additional pressure on the budgets of many households and contributed to weakness in consumption growth