Australia’s major banks are likely to remain resilient in the face of a cooling housing market, according to research from credit rating agency Fitch.

The findings were based on scenario analysis used to stress-test the mortgage books of the big four banks — which account for around 80% of the $1.6 trillion worth of outstanding mortgages in Australia.

The analysts used scenarios ranging from benign to more extreme to assess how the credit ratings of the big banks would be affected if mortgage defaults increased and house prices fell.

At the more extreme end of their calculations, the analysts made reference to an “Ireland scenario”, based on the Irish housing crisis in 2007.

The market collapse in Ireland saw house price declines of 43%, as 13% of borrowers defaulted on their mortgage.

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