There’s been a modest uptick in the number of ANZ customers asking for help but the head of the big four bank says borrowers are proving resilient in the face of higher interest rates.
ANZ chief executive officer Shayne Elliott said some customers were struggling as rising rates pushed up borrowing costs but most were “managing their way through” the current financial pressures.
Higher interest rates have been inflating mortgage repayments, with the high cost of living also eating into household budgets.
Addressing a parliamentary hearing on Wednesday, Mr Elliott said only $6 of every $1000 in its Australian home loans portfolio was overdue by more than 90 days.
“This is better than before the pandemic,” he said.
The bank boss offered three explanations for the display of resilience: strong levels of employment, big savings buffers and robust credit standards that have kept lending responsible.
Around 70 per cent are also ahead on their mortgage repayments, with many customers paying more than they had to when interest rates sunk lower during the pandemic.
“Now that rates are rising, it also means their monthly bills aren’t necessarily going up, they’re just less ahead,” Mr Elliott said.
But he said the resilience was in aggregate and some Australian households were struggling, with the bank observing a “modest increase” in the number of customers asking for help.
“We will continue to watch how our customers are going and support them when we can,” he said.
The bank’s CEO also outlined his position on the three per cent serviceability buffer, saying lowering lending standards would help few customers at the bank.
Stress-testing customers’ ability to make repayments at three per cent above the market interest rate is designed to protect a borrower if economic conditions or their financial circumstances change.
But there has been concern the rules are locking customers in “mortgage prison”, when borrowers cannot meet the stress-testing requirements to refinance to a better deal.
Mr Elliott said there would always be exceptions and some individuals were suitable for lower standards.
The bank’s position is that the Australian Prudential Regulation Authority’s three per cent buffer is appropriate but it is open to the standard being reviewed at a later date.
NAB chief Ross McEwan will also appear at the parliamentary economics committee hearing in Canberra on Wednesday and will be followed by the bosses of Westpac and the Commonwealth Bank on Thursday.
Treasurer Jim Chalmers said his priority was making sure banks were doing the right thing by their customers.
“That’s especially important in the context of interest rates, which have been going up since before the election,” he said.
“(We must ensure) they are swiftly passing on interest rate increases to savers as they have been to borrowers.”
Poppy Johnston
(Australian Associated Press)
