The CEO of Westpac has warned that mortgage defaults are increasing as higher interest rates prevent borrowers from making repayments.
Peter King said home borrowers rather than small businesses are the customers who are really struggling now – and many of them are three months behind on their mortgages.
“From a credit quality perspective, we saw a reduction in business stress, while an increase in mortgage delinquencies of more than 90 days reflects the tougher economic environment,” he said.
“We remain focused on helping customers who face high cost-of-living pressures and are making difficult choices to manage household budgets.”
Borrowers who are 90 days or more behind on their mortgage are considered to have defaulted on their mortgage payments, with the bank sending them a notice.
Westpac CEO has warned that mortgage stress levels are rising as higher interest rates prevent borrowers from making repayments (pictured is a stock photo)
Mr King made the observation on Monday as Westpac revealed a six per cent decline in net profit December quarter 2023.
Net income of $1.597 billion was revealed, along with $129 million in quarterly impairment charges, where a bank writes down the value of the loans it has.
Junvum Kim, a senior sales trader at online trading group Saxo Asia Pacific, said Westpac now faces less reliable borrowers.
“While the decline in net profit reflects difficult economic conditions, the reduction in stressed assets signals continued credit quality,” he said.
King’s comment about struggling borrowers was made 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 composition of a slowing economy to look different in different parts of Australia,” he said.
“Certainly, those parts of Australia more exposed to mortgage pressure feel the pain disproportionately when interest rates rise.”
Peter King said home borrowers rather than small businesses are the customers who are really struggling now – and many of them are three months behind on their mortgages
The Reserve Bank left interest rates unchanged in February at a twelve-year high of 4.35 percent.
But November’s increase was the thirteenth in eighteen months and marked the most aggressive pace of monetary policy tightening since 1989.
Monthly mortgage repayments have increased by 69 percent as the variable interest rate started at a ‘two’ from May 2022 to a ‘six’ at the end of last year.