It's a grim sign that rising interest rates are overextending borrowers
In a grim sign that rising interest rates are overextending mortgage borrowers, the number of repossessed homes on Westpac’s books is nearing the level recorded during the Global Financial Crisis, according to the bank’s chief executive.
Westpac CEO Peter King said that the proportion of customers falling behind on their mortgage repayments was still low, but would worsen over the coming months as the Reserve Bank’s multiple rate hikes flowed through to interest payments and borrowers rolled off fixed-rate loans, The Australian reported.
“Interest rates are a blunt tool. What we’re looking at in our portfolio is who might need help,” King said during a business summit on Tuesday, as reported by The Australian. “The part of the portfolio we’re watching very closely [is] high debt to income – that’s people who borrowed to their maximum capacities.”
The recent failures of Credit Suisse and three American banks demonstrated the impact that skyrocketing interest rates are having on the global financial system, The Australian reported.
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Treasurer Jim Chalmers spoke with European Central Bank president Christine Lagarde Monday night and US Treasury secretary Janet Yellen Tuesday morning to discuss the current instability of the American and European banking sectors.
“It’s clear from my conversations that international authorities are prepared to do what’s necessary to reassure markets at a time of uncertainty and volatility,” Chalmers said.
ANZ chief executive Shayne Elliott told a business lunch in Brisbane that more people were likely to feel the impact of global central banks’ battle against inflation, The Australian reported.
“It isn’t over and it is not going to go back to the way it was quickly,” Elliott said. “The world is different when you’re living in a world with rising interest rates. To paraphrase a quote from economist JP Morgan, ‘When the Fed put the brakes on the economy, somebody always goes through the windscreen.’ So we should remain alert, not alarmed. I don’t think we’re heading for another huge crisis, but that doesn’t mean there isn’t turmoil and that won’t impact people.”
Despite the most aggressive series of rate hikes in three decades, consumer spending has yet to collapse, according to The Australian. That could mean an 11th consecutive hike is on the cards for next week’s Reserve Bank board meeting.
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