The assessment of the finances of each borrower should be based on good practice and take into account whether the borrower would be able to service a 30-year fixed rate loan with amortisation. But if the assessment is based on a fixed longterm rate of 2 per cent, it does not constitute much of a stress test.
While we do not have a report on PCE inflation for April yet, another inflation measure, the core component of the consumer price index (CPI), showed little further improvement in April. Looking more closely at core inflation, I like to divide it into three parts-core goods inflation; housing, which is classified as a service; and nonhousing services.