Westpac’s chief executive has warned it’s ‘inevitable’ some borrowers will take a big hit when their fixed-rate mortgages expire in the coming months, but says there hasn’t been an increase in hardship yet .
The bank released its financial results for the full year on Monday, with chief executive Peter King saying it was a year of significant economic and geopolitical change.
“We’re not seeing an increase in hardship or stressed assets yet,” he said.
“Many customers have accumulated savings over the past two years and 68% are staying ahead of their mortgage payments.
“However, it is inevitable that the impact of higher rates will be felt, including when borrowers’ low fixed rate loans are rolled over.”
Mr King said there was “increased economic uncertainty and volatility in financial markets” heading into 2023.
“Although supply chain constraints are easing, skilled labor remains hard to find,” he said.
“The biggest challenge for the authorities is to contain the psychology of high inflation that is now taking hold in the economy.
“In Australia, consumer spending is resilient, but as rates rise we expect the heat to emerge from the economy and inflationary pressures to ease.
“Small business is an area we are watching closely as consumption slows.”
Mr King noted that property prices had fallen in recent months and said this would continue into next year.
“Credit growth is expected to slow. GDP growth will slow and unemployment will rise,” he said.
“These will be necessary results if we are to reduce inflation.”
Westpac posted statutory net income of $5.69 billion, up 4%, with a fully franked final dividend of 64 cents per share.
Cash revenue was $5.28 billion, down 1%.
The RBA this month raised the cash rate target by 25 basis points to 2.85%.
Further increases are expected in the coming months as the country battles high inflation.
In the year to September, the CPI inflation rate was 7.3%, the highest in more than three decades.
Inflation is expected to peak at around 8% later this year.