Mortgage stress on the minds of ANZ and CBA head honchos

author-avatar By on September 24, 2021
Mortgage stress on the minds of ANZ and CBA head honchos

At Thursday's House of Representatives Standing Committee on Economics, the heads of ANZ and CommBank expressed some worry about rising debt-to-income levels.

Household debt has been a big talking point, with strong house price rises through the year, and household wealth hitting a new record high.

On the flipside however, debt per capita rose to around $102,000.

Figures would be closer to $130,000 if under-18s were not included in the results, who legally cannot take on debt in a lot of circumstances.

CommBank chief Matt Comyn said the bank was "increasingly concerned" about mortgage stress.

"We are not concerned about where we are now but, given the rate of growth in credit versus the outlook for growth in income, it would be better to act sooner rather than later," Mr Comyn said.

ANZ chief Shayne Elliott echoed similar.

"We have one million home loan customers and the book is in good shape. But there are some emerging signs of stress. It is always time for caution when you see the price rises we have seen," Mr Elliott said.

The commentary comes after prudential regulator data revealed home loans with debt-to-income ratios above six accounted for more than a fifth of all home loans written in the June 2021 quarter.

This was a 5.9 percentage point climb over June 2020 quarter's results.

So, what does this mean for Australians?

Drew Haupt, co-founder of non-bank lender WLTH, said regulators will have to keep an eye out for deteriorating lending standards.

"More and more Australians are taking on debt with lower levels of income but this is balanced by a number of different metrics moving in a more positive direction," Mr Haupt said.

"Borrowers should do their part and be responsible with their loan ... Maintain an emergency fund to cover a few months of all expenses.

"Point is, we shouldn't be scared about taking action - we should be scared of doing nothing when we can."

How are the banks addressing this?

In June, CommBank increased its serviceability buffer from 5.1% to 5.25%.

These are calculations based on a borrower and how a 5.25% home loan would fit into their budget, despite home loan rates being much lower than this.

Until recently, such calculations were usually based on interest rates of 7% or more.

On Thursday Mr Elliott said ANZ was taking more time to assess home loan applications, which could take as long as 32 days.


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Photo by Luis Villasmil on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison is passionate about breaking down complex financial topics for the everyday consumer.

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