Most mortgagors are still ahead on repayments: Westpac

The Westpac Group has released a financial report update for the first quarter of the financial year (1Q24), showing that the majority of borrowers remain ahead of schedule.

The update, released on Monday (19 February), revealed that the group’s Australian mortgage book grew by around $5.6 billion on the previous quarter, or 1.0x system growth, to $490.9 billion.

The average loan size was recorded at $306,000.

Just over half of its Australian mortgages (50.2 per cent) were written by the proprietary channel, the lowest figure in recent years.

The 1Q24 update showed that while arrears are rising (Westpac Group’s 90-plus days arrears rate increased to 0.95 per cent from 0.86 per cent while loans 30-plus days in arrears rose to 1.7 per cent from 1.54 per cent), the majority of borrowers are still ahead of their repayment schedule.

Westpac Group revealed that 76 per cent of its Australian home loan accounts were ahead on mortgage repayments and 72 per cent of customers were ahead on balances at the end of the quarter ended December 2023.

Indeed, the group revealed that 32 per cent of accounts were ahead of schedule by two years or more and around a quarter (23 per cent) of accounts were on time with their repayments.

Loan balances that were between six months to two years ahead of repayments rose from 12 per cent to 14 per cent over the quarter, while those over two years rose from 21 per cent to 22 per cent.

Offset account balances also rose over the quarter, hitting $59 billion – the largest figure recorded for the past four years.

Peter King, the chief executive of Westpac Group, said that the rise in arrears “reflects the tougher economic environment” that borrowers are facing, but noted that the bank remains “focused on helping those customers facing high cost-of-living pressures and making difficult choices to manage household budgets.”

Owner-occupied mortgages make up 67.5 per cent of its book, with investment properties making up 31.3 per cent.

The major bank reported 81 per cent of mortgage loans at a variable interest rate, a significant increase from 2Q23 that reported 67 per cent of mortgages at variable rates.

Around 11 per cent of Westpac’s mortgages are for first home buyers (FHB).

Mr King said: “We expect the economy to remain resilient, supported by low unemployment and healthy corporate sector balance sheets. The economic slowdown, combined with abating inflationary pressures, should provide scope for monetary policy to become less restrictive within the next year.”

[Related: Consumer sentiment bolstered by rate decisions]