Westpac says 65% of mortgage customers more than 3 months ahead of repayments

Westpac New Zealand says about 65% of its mortgage customers were more than three months ahead on repayments at March 31, which helps to explain why fewer customers than it had expected are suffering hardship amid higher interest rates.

Tuesday, May 7th 2024, 9:14AM

Chief executive Catherine McGrath told GoodRetruns that only about 22% of Westpac's customers are still on fixed-rate mortgages below 5%.

“That means we're through the bulk of the big interest rate increases,” McGrath said, adding that any increases from now “should be smaller and more manageable.”

Wages inflation in NZ has helped some customers weather the rise in interest rates and the fact that most mortgage customers have been on fixed-rate terms has meant that they've had plenty of warning their costs would increase, McGrath said.

Other details in the results, including that interest-only mortgages fell to 16% of the portfolio, down from 16.5% six months earlier, suggested customers weren't needing the kind of relief Westpac could offer.

McGrath said the interest-only option was just one solution her bank could offer financially stressed customers.

She noted that some KiwiSaver customers had suspended contributions as part of coping with higher interest rates.

Westpac's mortgage lending surged to $1.44 billion in the six months ended March compared with just $333 million in the six months ended September last year and, depending on what measures one uses, accounted for about 28.5% of mortgage lending by registered banks, well ahead of Westpac's market share of a little above 19%.

“We looked at our refinancing process and said, what could we do to make it easier,” McGrath said.

The upshot was that Westpac cut the process from four days to 24 hours, she said.

“We think that played a big role in the growth of our market share,” she said.

McGrath highlighted the 14% growth in Westpac's lending to first-home buyers as “particularly important” in her bank's mortgage lending growth.

She noted Westpac is offering first-home buyers a number of options for owning their first property from shared equity schemes to “leveraging family relationships.”

On Monday, Westpac reported its net profit for the six months ended March 31 rose 20.3% to $562 million while charges against profit for bad debts plummeting to $23 million from $154 million.

McGrath said the year-earlier charges reflected the bank's uncertainty about how much cyclone Gabrielle might cost it but that the year-earlier provisions weren't needed.

While Westpac's mortgage business has grown, its deposits fell 1% to $78.8 billion at March 31 from $79.8 billion at both Sept 30 and March 31 last year.

McGrath said says that reflected a combination of factors, including customers moving from transaction and savings accounts into higher-interest term deposits as well as competition.

Asked whether Westpac's deposit rates had been too low, McGrath said her bank reviewed its deposit rates on a weekly basis and always ensureed it had at least one offer in the market that was competitive.

Tags: Westpac