May 20, 2011
Both the Commonwealth Bank and Westpac have reported an increase in customers unable to meet their mortgage payments as living costs and utility bills soar. And the problem is likely to get worse before it gets better.
Westpac CEO Gail Kelly revealed that, in spite of low unemployment rates, default rates at the nation’s second biggest bank had reached higher levels than in 2008 at the peak of the GFC. At the end of March, 1.5 percent of Westpac home loan customers were more than one month behind in their payments, and 0.6 percent were more than 90 days late.
It’s no surprise that flood- and cyclone-ravaged Queensland is the most affected state, but Kelly said the rise in defaults is across the board. A significant number of mortgagees struggling to meet their loan obligations are those who took out loans in 2008, particularly first homebuyers.
The Commonwealth Bank (CBA) also reported a sharp increase – believed to be 11 percent – in mortgage delinquencies in the first quarter. CBA Chief Financial Officer David Craig said that all the major banks were seeing mortgage arrears rates at greater levels than during the GFC.
CBA Chief Executive Officer Ralph Norris added that these numbers were likely to swell in the coming months on the back of inevitable interest rate rises. However, Australian Property Monitors economist Andrew Wilson believes the issue will right itself as the economy remains strong and incomes catch up with prices.
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