Westpac has reported a small rise in the proportion of customers who have missed a payment on their mortgage, credit card or personal loan, in an early sign of rising living costs squeezing household finances.
At the same time, however, the bank also said there had been a decline in the number of borrowers who are more than 90 days behind on repayments. Its total stressed loans also fell slightly.
Westpac reported a small rise in 30-day delinquencies, in part due to the rising cost of living.Credit:The Age
In a market update on Friday, the banking giant said the proportion of mortgages more than 30 days behind on repayments rose to 1.24 per cent of the portfolio at the end of December, up from 1.21 per cent at its full-year results in September.
Consumer finance delinquencies – which include credit cards, car loans, overdraft and personal loans – also rose from 2.79 per cent to 2.92 per cent.
The bank said both increases were due to seasonal factors and cost of living pressures. The more widely-watched measure of 90-day mortgage delinquencies fell slightly, from 0.75 per cent to 0.7 per cent.
The increase in 30-day delinquencies appears to be an early sign of more borrowers feeling the squeeze from rising interest rates and inflation. The rising cost of living and a weaker economy is expected to lead to rising mortgage arrears across the banking sector, though analysts are unsure how long it will take for the stress to appear on the boks of banks.
Westpac’s update on Friday, which did not include figures on the bank’s profits, also provided extra details on mortgage customers’ repayment buffers, and the buffers the bank has used when writing loans.
It said 45 per cent of the bank’s mortgage book was written in the three years to June 22, when the banking industry assessed how prospective borrowers would handle a 2.5 to 3 percentage point increase in interest rates.
It said that if the cash rate gets to 3.85 per cent, as the bank expects, this portion of the loan book would exceed the “serviceability buffers” used by the bank.
UBS analyst John Story said in a note to clients that it was “difficult to read too much current financial performance of the group” because of the limited details provided by Westpac in Friday’s update.
In early trading Westpac shares were down 1c at $22.75.
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