Borrowers rush to repay their mortgages early

MORE than one in four National Australia Bank mortgage customers are paying down debt ahead of schedule.

MORE than one in four National Australia Bank mortgage customers are paying down debt ahead of schedule, according to internal research from the bank.

Some 85 per cent of NAB’s home loan accounts are now ahead on mortgage repayments — by an average of 13 months versus an average of 12 months in 2012 — as customers buoyed by low interest rates pay down debt faster.

The speed at which customers pay off debt is significant for NAB as it helps release tied-up capital from the bank’s $241 billion mortgage book.

Of the home loan accounts that are ahead on mortgage repayments, 70 per cent are owner-occupiers, 16 per cent are investors and 14 per cent are first-homebuyers. The majority are aged between 40 and 49 (31 per cent), with the bulk of the remainder evenly split between the 30-39 and 50-59 age groups (25 per cent each).

“Home loan accounts are actually ahead on the scheduled mortgage repayments as customers continue to pay down their debt faster than they are required contractually,” said NAB’s executive general manager for lending and deposits, Antony Cahill.

“Across Australia we are continuing to see Australians acting prudently and paying down that debt.”

The new research shows that it not just home loans are being paid off quicker. Credit card customers are also getting rid of debt at a faster rate. The bank’s analysis showed a 6 per cent increase in the number of credit card accounts paid in full.

“We are definitely seeing an acceleration in terms of a shift from credit into debit and how customers are managing their day-to-day spending,” Mr Cahill said.

He said the increasing speed at which customers were paying off loans was being spurred by technological shifts in how consumers managed their financial affairs.

NAB is now experiencing more than a million “logons” through its internet banking applications every day, with some 56 per cent of those coming through mobile devices.

“It’s getting easier and easier to access information. And I think it can only be a good thing that customers are becoming better educated and more knowledgeable about both their overall financial position and how they can better manage their finances,” Mr Cahill said.

The technological trends that are leading more customers to manage their finances online or with smartphones are a double-edged sword for the banking industry.

As more people manage their finances online, banks are increasingly being opened up to new avenues of competition where smaller and more nimble IT companies are using disruptive technology to offer new payment and lending services.

But Mr Cahill said competition could only be a good thing: “We absolutely welcome competition in the tech space and we’ve taken it head-on in the last five years.”