The Reserve Bank has scoffed at widely aired theories that "the expiry of interest-only loan terms will result in financial stress" as households refinance into principal-and-interest loans that require higher repayments. Michele Bullock, assistant governor for the financial System at the RBA used a speech in Albury to promote a benign view of this risk."This is worth watching, but borrowers have been transitioning loans from interest-only to principal-and-interest for the past couple of years without signs of widespread stress," Bullock said. "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 principal-and-interest 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 principal-and-interest repayments is not having a significant lasting effect on banks' housing loan arrears rates."