ANZ retail chief Maile Carnegie says bank sees little sign of interest rates pain

The new head of ANZ’s retail arm says the bank is seeing few signs of trouble among its borrowers, despite the sharp rise in interest rates over the past five months.

ANZ group executive of retail, Maile Carnegie: ‘The data is actually showing very low levels of stress and we’re not seeing any more increases in our lag measures as well, such as calls to hardship teams.’ Picture: Arsineh Houspian

The new head of ANZ’s retail arm says the bank is seeing few signs of trouble among its borrowers, despite the sharp rise in interest rates over the past five months.

Maile Carnegie, recently appointed group executive of retail, told the bank’s environmental, ­social and governance briefing on Monday that the percentage of customers behind on their loan ­repayments had continued to decrease.

About 0.7 per cent of home loans are more than three months behind on repayments, a level that is lower than before the pandemic, even amid the swift increase in the Reserve Bank’s lending rate from 0.1 per cent to 2.25 per cent over the past five months, and the sharp rises in the cost of living.

“The data is actually showing very low levels of stress and we’re not seeing any more increases in our lag measures as well, such as calls to hardship teams,” Ms ­Carnegie said.

“But we are assuming that this may change and we’re focused on proactively identifying and contacting customers who may need help so that we can try to support them early.”

Many of the bank’s one million Australian home loan borrowers had built up a significant savings buffer during the low interest rate period of the pandemic. Ms Carnegie said about 40 per cent of the bank’s customers had a year or more of saving buffers across offset, savings or redraw facilities and about 70 per cent of customers had paid additional funds to reduce their principal debt.

ANZ’s default direct debit setting meant minimum payment amounts did not automatically reduce as interest rates fell, which she said helped ensure borrowers made inroads into reducing their debt. “In effect we put friction in our customers’ ability to step down their payments because we wanted to encourage them to get ahead on their loans,” she said.

“So far, even as rates are rising, more than 50 per cent of our principal-and-interest customers with direct debits are continuing to pay more than their minimum repayment amounts.”

The current environment differed from other eras of rapidly rising interest rates in that the unemployment rate remains at a low level. The loss of employment and income is historically the most common trigger for people to fall into arrears on their loan, but companies around the country are clamouring for staff rather than trying to shed them.

Home loans written by Australian banks in recent years were also generally of a higher quality due to tightened lending rules.

But Ms Carnegie warned that some borrowers would be experiencing their first ever cycle of rising interest rates, which could catch some by surprise.

“Potentially even those customers who are employed with regular wages may experience some stress with meeting their repayments,” she said. “Our job here is to identify those customers and work with them as early as possible to support them through this challenging period.”

ANZ, she said, was using data analytics to help understand customer financial behaviour and model potential future outcomes.

That would help the bank identify early on which customers were likely to experience financial stress in the next 12 months.

Support could be “through text messages, nudges or prompts, courtesy reminders of when next payments are due, or direct phone calls suggesting for example to set up a direct loan payment.”

Ms Carnegie was appointed to the role in March, replacing Mark Hand.