Westpac says 4 per cent cash rate will squeeze more borrowers

King dismissed reports of a fixed-rate mortgage “cliff” when a wave of fixed-rate loans reset to higher rates this year, saying all borrowers would ultimately feel the sting of higher rates.

“There’s no cliff,” he said.

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“If you’re a mortgage holder, whether you’re variable or fixed, your rate is going up. It’s just the speed of the change,” he said.

Even so, he said some increase in borrower stress was likely in the second half of this year, but this would not be a sudden change, as people would try to deal with financial challenges before asking their bank for help.

Earlier on Friday, Westpac 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, and King said the rise was “not concerning”.

The more widely watched measure of 90-day mortgage delinquencies fell slightly, from 0.75 per cent to 0.7 per cent.

Citi analyst Brendan Sproules said the overall quality of Westpac’s loan book appeared to be strong, with impaired loans and 90-day arrears falling during the quarter.

“The very benign asset quality picture may be ‘as good as gets’, with some evidence of a slight tick-up in 30-day past-due loans in both mortgages and consumer finance due to cost of living pressures,” Sproules said.

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Westpac’s update on Friday also 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 reached 3.85 per cent, this portion of the loan book would exceed the “serviceability buffers” used by the bank.

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