Increasing numbers of renters taking out loans to cover expenses: MyState Bank CEO

Increasing numbers of Tasmanian renters are borrowing money in order to cover the basics in the cost of living crunch, according to the CEO of the state’s biggest bank.

Cost of living pressures are continuing to bite in Tasmania, according to MyState Bank managing director and CEO Brett Morgan. Picture: NCA NewsWire/Glenn Campbell

Increasing numbers of renters are taking out loans to cover day-to-day expenses amid the cost of living crunch, according to MyState Bank managing director and CEO Brett Morgan.

While MyState itself does not offer consumer lending, Mr Morgan said the bank commissioned a survey which found one in five renters had resorted to borrowing money to make ends meet in 2023 - three times as much as those who owned their own home.

“Economic conditions are tightening across the state with cost of living pressure weighing on spending and savings. Customers are running down savings to deal with the higher cost of living,” he said.

“Savings growth has slowed to the lowest level since the global financial crisis in 2008-09.”

His comments came after MyState announced its latest results to the ASX, declaring an interim dividend of 11.5 cents per share.

MyState CEO Brett Morgan. Picture: Chris Kidd

Mr Morgan said savings growth was at 23 per cent during the pandemic but was now running at just 1 per cent.

“There are good signs the inflation genie has been tamed and for rates to fall by the end of the year. In the meantime customers are also cutting back on spending,” he said.

“We are seeing spending on holidays and experiences remaining strong while Tasmanians are becoming more focused on cutting spending on service providers.”

Customers who had taken out home loans with MyState remained “resilient”, Mr Morgan said, but there had been an increase in the number of customers in arrears.

Seventy per cent of the bank’s mortgage customers were ahead on repayments a year ago but that figure has dropped to 60 per cent today. However, Mr Morgan noted that 30 per cent of mortgage customers were more than six months ahead on their repayments.

Tasmanians are struggling amid cost of living pressures. Picture: NCA NewsWire / Emma Brasier

MyState welcomed 7690 new customers into the fold in the first half of the year, a growth of 4 per cent on the second half of 2022-23, while home lending was up 1 per cent to $7.9bn. The bank’s operating costs were down 1.5 per cent to $49.8m but its core earnings fell 5.3 per cent to $26m.

Mr Morgan said MyState had enjoyed a “solid first half” of the year but acknowledged that “the current operating environment has created short-term challenges”.

“Competition in the home lending and retail deposit markets has driven industry net interest margins lower and high inflation has impacted costs,” he said.

MyState has forecast it will increase its earnings per share from 31.1 cents to 32.8 cents by the end of the financial year, while also increasing its underlying cost-to-income ratio from 64 per cent to 66 per cent.