Aussies hang tough on mortgage payments

Despite average mortgage costs rising by 62 per cent on the back of skyrocketing rates, the number of Aussie households falling behind on their mortgage payments is below historical averages.

The recent bank profit updates gave an interesting insight into the current state of home loan arrears.

Arrears are rising with family household budgets under pressure, but the mortgage cliff just hasn’t happened.

Handing down the lender’s latest profit, Commonwealth Bank chief executive Matt Comyn noted the bank’s home loan arrears have increased, but still remained below historical averages.

Home loan arrears increased to 0.61 per cent as higher interest rates impacted some borrowers. It was up from 0.52 per cent over the quarter, but below the nation’s largest lender’s historical average of 0.65 per cent.

Comyn said he expects to see further increases in arrears in the months ahead, “given continued pressure” on household disposable incomes.

“We know that many Australians are feeling under pressure due to a higher cost of living,” he said.

CBA's CEO Matt Comyn says the bank’s home loan arrears are below historical averages. Source: Commonwealth Bank

But he added that the fundamentals of the economy remain sound.

“Unemployment remains low, supported by business and government investment and elevated terms of trade,” Comyn said.

“We recognise that all households are feeling the impact of higher inflation and higher rates, however immigration is providing a structural tailwind for the economy,” Comyn said.

Westpac, which has $485bn in home loans, has just 190 properties in possession, with The Australian reporting most were properties under construction where builders had gone bust.

Westpac reported its stressed loans as a proportion of the total portfolio at 1.36 per cent, up from 1.26 per cent six months ago and 1.1 per cent a year earlier.

The bank advised its stressed status included impaired loans, those in arrears, or on a watch list.

The ANZ reported its past 90-day loans sat at 0.79 per cent, rising now for three quarters, but well down on the 2020 pandemic peak of 1.25 per cent.

National Australia Bank had around 140 mortgagee in possession properties across the country. Its loans sitting 90 days past due edged up 13 basis points to 0.79 per cent of the overall bank book.

But calls to its NAB Assist hotline have jumped 7 per cent recently, with customers often offered reduced repayments on their loans, payment breaks or long-term extensions.

Morningstar analyst Nathan Zaia predicted that home equity buffers, the labour market strength and strong house prices will see arrears remain manageable for the big four banks even as household stress rises.

Alarmingly, Canstar suggested almost half of Australian mortgage holders have thought about selling their home, personal items, valuables, investments, car or business to offset the strain.

“Even though the banks report only a relatively modest increase in home loan arrears, the strain of higher rates is taking its toll,” Canstar finance spokesman Steve Mickenbecker said, after typical mortgage repayments have risen by 62 per cent.

Originally published as Aussies hang tough on mortgage payments