According to Westpac Banking Corp, Australia's third-largest mortgage lender, bad debt fell to a multi-year low in the June quarter, creating a financial buffer as the housing market begins to slow.
Against a 0.5% rise in the broader market, Westpac shares fell 0.8% this morning.
People may not be able to service loans for several months following aggressive interest rate rises since May, according to analysts and banks.
As a result, total "stressed exposures" for Westpac - including non-residential consumer loans - fell to 1.06%, the lowest level since 2017.
The metric includes "substandard", 90-day overdue loans, and impaired loans.