The International Monetary Fund (IMF) has issued a warning about Australia’s mortgage risk. 

The IMF has identified Australia as having the second-highest level of risk in its housing market, following Canada. 

It warns that households with mortgages in Australia are at a greater risk of defaulting on repayments due to rising interest rates and elevated house prices. 

The IMF has also issued a broader warning that economies with higher house prices and household debt are more vulnerable to stresses in the financial sector. 

Despite some economists suggesting that recent property price declines may have come to an end, the IMF says economies with high levels of household debt and floating rates are exposed to a greater risk of defaults. 

Countries with the highest level of risk in their housing markets were identified by applying five risk indicators to developed economies, with only six countries scoring a "deep red" indicator. Australia was followed by Luxembourg, Norway, Sweden, and the Netherlands.