Westpac mortgage borrower take rate hikes in stride

Bank CEO Peter King says the majority of its home loan borrowers are ahead on repayments as competitive pressures ease.

Westpac CEO Peter King says most of its mortgage owners are ahead on repayments, with just a small cohort in financial strife. Picture: Getty Images

Westpac has given a glimpse into the financial health of its mortgage holders, with the majority ahead on their repayments as a much smaller cohort struggle with the cost-of-living crunch.

Speaking to The Australian after handing down the lender’s first-half result, which showed a 16 per cent slide in profit, Westpac chief executive Peter King also said competitive pressures were easing in the home loan market as lenders look to prioritise returns in the segment.

“Seventy-seven per cent of our mortgage holders are ahead on repayments. And that ratio has actually increased, we’ve seen growth in offset balances,” Mr King said.

“I think, broadly, our portfolio is positioned well. A lot of the people that are doing it tough don’t have bank debt. So we don’t have a big line of sight into that,” he added.

Mr King’s comments come ahead of the Reserve Bank’s monthly rates decision, due on Tuesday, with a growing number of economists warning rates may push higher by the end of the year.

But the Westpac CEO is not convinced rates need to move up, instead forecasting they will be on hold for longer, with relief for homeowners pushed back until 2025.

“The economy is going well at a macro level and there’s certainly demand for infrastructure, housing and the energy transition. .. I’m not in the camp of more interest rate hikes per se. Higher for longer is probably the key point,” he said.

Mr King was speaking after Westpac posted a net profit of $3.34bn for the six months through March, a slide on the prior corresponding period but a 5 per cent lift on the previous half.

The bank currently has 18,000 assistance packages in place for struggling customers, up from the 11,000 it had on the books pre-Covid.

“While households have displayed resilience, we know some customers are doing it tough,” he said.

Competitive pressures in the home loan segment, meanwhile, are easing, with Westpac seeing “solid demand” from borrowers even as pricing firms and prospective homeowners weigh the likelihood of rate pain lasting into next year.

“In terms of the mortgage market, there’s still solid demand to borrow and we see that in our forward pipelines. People are still wanting to upgrade, move, and buy in the market,” Mr King said.

“I think it’s stabilised. It’s still competitive but not as competitive as we saw 12 months ago, which was very, very competitive, ” he added.

“In terms of the price, broadly, three rate rises have been competed away in this raising cycle. So that’s where mortgage borrowers have had the benefit of competition. But that has eased because we’ve probably got to a level where returns are being questioned in that market,” Mr King said.

The lender is still cautious on growth in its consumer division.

“We’ve said we want to (grow) around system but there’s also a big demand on that business to look at options to improve return,” Mr King said.

Westpac grew at 1.1 times system in the six month to the end of March.

The bank on Friday announced it was pulling back from the mortgage wars, signalling a June 30 deadline for its remaining brands to tempt customers with cashbacks.

In a note to brokers, the banking giant said it would move to end cashback offers for borrowers at its RAMS, BankSA, and St George brands.

Borrowers will be required to apply by June 30 and have loans settle by October 31 to be eligible for the cash bonus.

Originally published as Westpac mortgage borrower take rate hikes in stride