Australians are getting on top of their mortgages, says Westpac boss

Westpac boss Anthony Miller says the worst is probably over for the banking giant’s mortgage delinquencies, as a strong jobs market helps more customers stay on top of their home loan repayments, despite cost-of-living pressures.

The country’s second-largest mortgage lender on Monday said the number of people who were more than 90 days behind on their home loan fell in the March half, as the bank also reported fewer customers receiving hardship assistance.

Westpac’s Anthony Miller said customers had shown “impressive” resilience to cost-of-living pressures.Credit: Dominic Lorrimer

It came as Westpac reported a 1 per cent slide in its half-year profits to a weaker-than-expected $3.3 billion. The results showed stiff competition in the mortgage market was putting the squeeze on Westpac’s returns, sending the bank’s shares down 3 per cent to $32.45.

Miller, delivering his first result as chief executive, said the decline in mortgage delinquencies suggested “the worst of it is behind us”, even though many customers were still finding conditions tough, including people without home loans.

He said the low level of unemployment – which was 4.1 per cent in March – was probably the most important reason for the slide in mortgage arrears.

“We do feel with the growth outlook for Australia, and the fact that unemployment will continue to stay low, that that would suggest it won’t get worse from here,” Miller said.

Despite the decline in bad debts, Westpac’s profitability is being squeezed by greater competition.Credit: Getty Images

Across its lending to consumers and businesses, Westpac’s credit impairment charge fell to only six basis points of average loans, down from nine basis points a year earlier.

Miller said customers had shown “impressive” resilience to cost-of-living pressures, and that a reduction in interest rates was also providing welcome relief.

In February, the Reserve Bank cut the cash rate for the first time in four years, and financial markets believe another cut of 0.25 percentage points in a fortnight is a sure thing. Westpac economists forecast the cash rate will decline to 3.35 per cent by the end of this year, from 4.1 per cent today.

Westpac is the first in a series of banks to report its profits this week, and a key question for investors will be whether other banks also report historically low levels of bad debts. Another key focus for the market is how bank profits are being affected by stiff competition in home lending, and on this front Westpac’s result was weaker than analysts had expected.

Geopolitical uncertainty is a key risk that’s as high as it has been for a very long time.

Westpac chief executive Anthony Miller

Westpac’s net interest margin – which compares funding costs with what it charges for loans – dipped by two basis points to 1.92 per cent in the half, and the bank said this was because of tighter spreads on loans and deposits. The bank’s net interest income rose 2 per cent to $9.6 billion.

After the weekend’s election, Miller welcomed the certainty provided by Labor’s emphatic win but said a key challenge for the nation would be to significantly boost the number of affordable homes being built.

Labor has vowed to expand a scheme to support bank lending to first home buyers with deposits of 5 per cent, and Miller said Westpac was happy to back the initiative. But he said that on its own this scheme would increase demand, while the key priority had to be boosting the supply of affordable homes.

“We’re very happy to participate in that, and support that, but what that will do is increase demand,” he said.

“Unless it’s matched by an appropriate increase in supply, I think what you’ll see is, unfortunately, some pressure on house prices, which will only be amplified by potential rate cuts coming from the Reserve Bank.”

Westpac is forecasting growth of 3 per cent in national house prices this year, and 7 per cent in 2026.

Following recent turmoil caused by US President Donald Trump’s trade war, Westpac said escalating trade and ongoing geopolitical tensions had created a “volatile and uncertain outlook”, which could affect consumer confidence and lead to funding market volatility.

“Geopolitical uncertainty is a key risk that’s as high as it has been for a very long time,” Miller said. ”Changes to global trade policies have impacted markets and funding for the bank. Despite the volatility, it’s important that we look through the noise and avoid reacting to the headlines. Australia is well placed to handle the instability.”

Westpac will pay a dividend of 76¢ a share, the same as the second half of last year. The dividend will be fully franked and paid on June 27.

Amid stiff competition in the home loan market, Westpac reported 5 per cent growth in its housing loans, which was slightly below the market average, alongside 4 per cent growth in lending to businesses, and 15 per cent growth in lending to institutional clients such as major corporations.

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