Mortgage borrowers are starting to show the first signs of strain, as the effect of ten consecutive interest rate rises compounds growing cost of living pressures, forcing banks to proactively call customers who are at risk of getting into trouble on their repayments.on Tuesday, National Australia Bank’s head of retail banking, Rachel Slade, said the number of customers reporting financial difficulties is “just starting to tick up”.
This has raised questions about whether Australian banks might be offered leniency if they need to offset pressures for struggling customers with policies such as repayment deferral – as they did during the COVID-19 pandemic – or whether higher costs will be forced onto shareholders.
The Reserve Bank said earlier this month such customers, who have had less time to retire debt and face equity being squeezed by falling house prices,. Around 90 per cent of the fixed rate loans resetting this year and in 2024 will lead to scheduled payments increasing at least 30 per cent. but if that customer was moved to interest-only repayments, the capital charge increases to $19,000. And if a repayment is more than 90 days overdue, provisions rocket to $100,000.
NAB’s research of customers in financial difficulty confirmed “views that loans written in 2021 and 2022 on ultra-low cheap rates are likely to have a higher loss rate than the rest of their home loan book”.Ms Slade said this is forcing NAB to start to proactively call customers it has concerns about, especially first home buyers with relatively low levels of equity.
that find themselves in financial hardship, including to waiving of fees and charges; early access to term deposits; debt consolidation to help make repayments more manageable; restructuring existing loans; emergency credit limit increases; and deferring upcoming credit card or loan repayments.
Wall to wall labor governments and a deteriorating economy. what could possibly go wrong?