From Macquarie:
In this regards, the most indebted 10% of households are at most risk from rate increases. Our analysis below dissects this group by income quintile (i.e., highest 10% of households based on debt-to-income measure split into income quintiles). While a large share of debt (i.e., ~50%) resides within the highest income quintile, when analysed by the number of impacted households, the debt burden appears more evenly split between the top 3 income quintiles and falls to 12-14% of households in the lowest income quintiles.
As the figures below highlights, the interest burden for those households is material. We estimate the interest servicing cost alone accounts for 40-60% of total household disposable income. While we suspect a large share of those households would have interest-only loans, should they start to repay principal the level of repayments increases to 75-120% of disposable income. As a result, recent changes around interest-only loans may have a significant impact on these households and force some of them to reduce their level of debt. As the figure below highlights, we estimate household repayments would increase by ~60% when repayment schedule changes from interest-only to principal and interest.