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Half of ANZ customers have contacted the bank to renegotiate their home loan, CEO Shayne Elliott has told a parliamentary committee, using the data to debunk the idea that customers are sitting mutely and paying their loans in the face of higher interest rates.
Key points:
- Mr Elliott said most borrowers were proving resilient under current financial pressures
- He said only $6 of every $1,000 in ANZ's Australian home loans portfolio was overdue by more than 90 days.
- NAB CEO Ross McEwan said customers were still making their loan repayments despite the interest rate pressure
Answering questions about the lack of competition in the banking sector in front of the House of Representatives economics committee in Canberra on Wednesday, Mr Elliott said half of his customers had engaged the bank to improve the mortgage interest rate they're paying (inclusive of new loans that have come to ANZ externally).
"So you're seeing a significant data point that says, actually, people do engage with their bank," he told the committee.
"Let's remember price is only one factor here. Not all lines are the same, not everybody's circumstances are the same, which is their financial strength.
"But clearly, in the last 12 months, a higher proportion picked up the phone or sought to refinance than before the interest rate rises, but even in this environment there's a significant group of people and possibly more than half if you're looking at [it] across the whole sector."
Higher interest rates have been inflating mortgage repayments, with the high cost of living also eating into household budgets.
Mr Elliott said some customers were struggling as rising rates pushed up borrowing costs but most borrowers were proving resilient and "managing their way through" the current financial pressures.
He said only $6 of every $1,000 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 boss 'surprised' at borrower resilience
Later on Wednesday, NAB CEO Ross McEwan told the committee that despite the increasing pressure on borrowers, customers were still making their loans.
"In the Australian mortgage book we have been pleasantly surprised at the resilience that is shown to that … we are starting to see an uptick in what we call '30/60/90 day', where customers have not been able to make the first payment, they missed one in 30 days," he said.
"Do they then make a payment in the second month, which is 60 days? Or do they may miss a payment? And the third, which is the 90 days.
"But the levels that we're seeing are still below the 10-year average and the levels we saw what we still considered to be a normal year of 2019. So still very resilient."
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."
The bosses of Westpac and the Commonwealth Bank will appear at the parliamentary economics committee hearing on Thursday.
ABC/AAP