Percentage behind on repayments is decreasing despite rising rates
ANZ is seeing few signs of distress among its borrowers despite climbing interest rates, according to the head of the bank’s retail arm.
Maile Carnegie, ANZ’s group executive for retail, told the bank’s environmental, social and governance briefing Monday that the percentage of customers behind on their mortgage repayments is decreasing, The Australian reported.
About 0.7% of home loans are more than 90 days behind on repayments – a lower level than before the pandemic – even as the Reserve Bank continues to raise interest rates and the cost-of-living increases.
“The data is actually showing very low levels of stress and we’re not seeing any more increases in our lag measures as well, such as calls to hardship teams,” Carnegie said. “But we’re assuming that this may change, and we’re focused on proactively identifying and contacting customers who may need help so that we can try to support them early.”
Many of ANZ’s home loan customers amassed a significant savings buffer during the pandemic, when interest rates were at a record low of 0.1%, The Australian reported. Carnegie said that about 40% of the bank’s customers had a year or more of savings buffers across offset, savings or redraw facilities. About 70% had paid additional funds to reduce their principal, she said.
The bank’s default direct debit for mortgage borrowers meant that minimum payments did not automatically fall along with interest rates. Carnegie said that helped more borrowers make significant progress in cutting their debt.
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“In effect, we put friction in our customers’ ability to step down their payments because we wanted to encourage them to get ahead on their loans,” she said. “So far, even as rates are rising, more than 50% of our principal-and-interest customers with direct debits are continuing to pay more than their minimum repayment amounts.”
The current rate environment is different from other periods of rapidly rising interest rates in that unemployment remains low, The Australian reported. Low employment is typically a trigger that sees more people fall into arrears on their mortgage.
Mortgages written in recent years are also usually of higher quality due to more stringent lending rules.
However, Carnegie warned that some borrowers were experiencing their first cycle of rising rates, which could catch some unprepared.
“Potentially even those customers who are employed with regular wages may experience some stress with meeting their repayments,” she said. “Our job here is to identify those customers and work with them as early as possible to support them through this challenging period.”
