National Australia Bank says the strong labour market is shielding mortgage customers from the full effect of rapid interest rate rises, after it contacted more than half a million customers and found only 14 of them needed financial support.
As banks brace for a rise in customers struggling with higher repayments, group executive for personal banking Rachel Slade said households with mortgages were yet to feel the full impact of interest rate rises, and many still had high balances in their offset and saving accounts.
The Reserve Bank has jacked up official interest rates from 0.1 per cent to 4.1 per cent since May last year in response to surging inflation, sparking predictions banks will face higher bad debts in their mortgage and small business portfolios.
Slade said the bank had reached out to 570,000 customers – or about 10 per cent of its total customer base – and found that only 14 home loan holders needed a referral to its financial hardship support service. Other banks have also been checking in with their customers as the economy has weakened, including ANZ, which has contacted about 360,000 home loan customers in the past 18 months.
In an interview, Slade said households were unlikely to feel the full extent of interest rates, which the bank expects to be lifted at least another two times this year – until March or April next year. She also underlined the strength of the labour market and said more people were cutting back on non-essential spending, with about half changing their spending habits.
“Households are definitely feeling rising interest rates and high inflation, but they’re confident in their ability to hold on to their jobs which is quite different to other cycles this country has been though,” Slade said.
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“We’re not seeing a large number of customers in arrears or getting behind on repayments yet and were not seeing spikes in the number of customers in hardship. I think interest rates still have a while to run through and impact mortgage holders.”
Despite the bank’s home lending customers being about three and a half years ahead on their repayments, on average, Slade said she expected more customers would need support in coming months.
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