Customers who came out of fixed rate periods and moved on to higher rates are "just fine," CEO says
ASB chief executive Vittoria Shortt tagged the ultra-low interest rates experienced by homeowners in 2020-21 as “abnormal,” adding that a return to higher home loan rates represented a return to a more normal environment.
“The message is: the low interest rate environment was abnormal,” Shortt said. “What we're seeing now is a return to more normalised interest rates.”
Read more: The biggest user of the Reserve Bank's controversial Funding for Lending Programme
Following an increase of 225 basis points in the OCR by the Reserve Bank between October and July, ASB responded by increasing its servicing rate, or the rate by which it calculates whether new borrowers could afford the loans they were applying for, from 6.45% to 7.85%, Stuff reported.
Shortt said the higher test rates resulted in borrowers coping as their loans came to the end of fixed rate periods and moved on to higher rates.
“About a third of borrowers had moved on to new rates in that time that are around 1% higher,” she said. “What we’re seeing is those customers are just fine.”
Read next: ASB business customers prepared to make changes to stay afloat
According to figures presented to investors on the Australian ASX sharemarket, $144 million of home loans that had been restructured due to the economic impact of the COVID pandemic were moved back on to a normal footing in the 12 months to the end of June.
Shortt said ASB was making sure borrowers coming up to the end of a fixed loan period knew what was ahead of them and was offering them help to prepare in case they needed it, Stuff reported.
