Household credit growth in Asia expected to slow down amid talks of monetary tapering in U.S.

Despite dovish comments on the outlook of monetary policy from the U.S. Federal Reserve Chairman Ben Bernanke on Wednesday,Silicone Wristbands more and more Asian economies are expected to roll out measures to rein in household credit growth, with the latest coming from Malaysia last week.Since Bernanke set out the U.S. central bank's strategy for ending quantitative easing in May,vacuum flask Asian markets have faced higher volatility and higher core interest rates.While Bernanke stressed this week that he would not raise interest rates for "sometime" and that the central bank's accommodative monetary policy is needed for the foreseeable future, Asian central banks are not taking chances in light of possible change in monetary policy in the United States, with some already taking steps to curb credit growth led by property boom.Bank Negara Malaysia last week announced new measures to cap household debt such as reducing maximum tenure for mortgages from 45 years to 35 years. The measure came soon after the Standard Chartered Research had released a report assessing credit risks of Asian economies, which said Malaysia household debt has crept up further to 83 percent of gross domestic product as at end-March 2013 from 80 percent at the end of last year.The Monetary Authority of Singapore (MAS), the de facto central bank of the city state, had also earlier released a framework to cap the total debt servicing ratio of property loans to 60 percent of income, including those on other non-property loans such as car loans.While the MAS said the framework is not intended as a property cooling measure, this latest measure, along with that of Malaysia, has highlighted increasing concerns among the Asian central banks about the household credit risk likely to arise from higher borrowing cost when the United States starts to wind down its monetary stimulus program. 

The concerns are not unwarranted as cheap credit and high asset price have caused household debt in many parts of the region to pile up recently. Warning signals are already flashing as household borrowings relative to income are even higher in some Asian countries than they were in the United States in 2007 at the onset of the consumer credit crisis.According to the Standard Chartered Research, rapid credit growths led by mortgages have led to high leverage in average households of Malaysia, Singapore and Thailand. Although solvency stress indicators signal no immediate crisis,Vintage tubs a continuation of this leverage growth trend could trigger future deterioration of credit quality in these countries.prepregHence, the build-up of household debt led by mortgages merits closer scrutiny as any future spike in credit costs could dampen consumption that in turn could adversely affect these economies.Furthermore, the preemptive moves such as those of Singapore and Malaysia to promote financial prudence at household level are necessary at this juncture, also partly due to anticipation of slower economic growth ahead in the region.HSBC Global Research has recently lowered Asia gross domestic products forecasts for this year from 6 percent about a year ago to about 4.5 percent.Antique faucets As the economy slows and unemployment rises, debt servicing may become difficult for people who are over- leveraged and lose their jobs.With interest rates likely to rise alongside with U.S, tapering of its monetary stimulus program and slower growth expected in Asia ahead, central banks in the region have ample reasons to curb household credit growth as a necessary precaution.