The chief executive of Westpac has warned that mortgage default levels are rising as higher interest rates prevent borrowers from making repayments.
Peter King said the customers who were really struggling were home borrowers, rather than small businesses, and that many of them were three months behind on their mortgage payments.
“From a credit quality perspective, we saw a reduction in business stress while an increase in mortgage delinquencies greater than 90 days reflects the more difficult economic environment,” he said.
“We remain focused on helping clients facing high cost-of-living pressures and making difficult decisions to manage family budgets.”
Borrowers who are 90 days or more late on their mortgage payments are considered to have defaulted on their mortgage and are issued a notice by the bank.
Westpac’s chief executive has warned that mortgage stress levels are rising as higher interest rates prevent borrowers from making repayments (file image pictured).
King made the observation on Monday as Westpac revealed a six per cent drop in net profits for the December 2023 quarter.
The result of net profits of $1,597 million was revealed, along with $129 million in quarterly impairment charges, where a bank writes off the value of the loans it has.
Junvum Kim, a senior sales trader at online trading group Saxo Asia Pacific, said Westpac was now dealing with less reliable borrowers.
“While the decline in net profit reflects difficult economic conditions, the reduction in stressed assets indicates continued credit quality,” it said.
King’s observation about distressed borrowers came four days after Treasurer Jim Chalmers warned that mortgage stress levels would be worse in areas with more unaffordable housing.
“Firstly, it is not unusual for the makeup of a slowing economy to look different in different parts of Australia,” he said.
“Certainly those parts of Australia that are most exposed to mortgage pressures disproportionately feel the pain when interest rates rise.”
Peter King said the customers who were really struggling were home borrowers, rather than small businesses, as many of them were three months behind on their mortgage payments.
In February, the Reserve Bank left interest rates unchanged at a 12-year high of 4.35 per cent.
But November’s increase was the 13th in 18 months, marking the most aggressive pace of monetary policy tightening since 1989.
Monthly mortgage payments have increased 69 percent as variable rates went from starting with a “two” in May 2022 to starting with a “six” late last year.