ANZ keeping close eye on home-buyers

ANZ’S chief executive says the bank is keeping a close eye on borrowers who were stress-tested for their home loans at a rate below current market interest rates.

The country’s largest bank posted its first $2 billion annual profit yesterday.

In the year to September 30, it made a cash net profit after tax of $2.064b and statutory net profit after tax, up 8% compared to the year before, which includes gains and losses from economic hedges of $2.229b, up 20%.

Net interest income was up 10%. Chief executive Antonia Watson said the 8% increase in profit was a result of a combination of pent-up economic activity after the pandemic and a buoyant housing market. She said the bank was aware that rising interest rates and a potential slowdown in the economy could be a risk for its customers.

It had put together a team to monitor customers for signs they might be concerned about their finances or coming under financial pressure. She said the lowest test rate that the bank used for assessing home loan applications during the pandemic was 5.8%.

All the big banks were yesterday advertising rates above that level. ‘‘That’s one of the cohorts we are looking at particularly closely,’’ Watson said.

She said if people who bought over the past couple of years slipped into negative equity – owing more than their houses were worth – it was not necessarily a concern as long as they could still make their home loan repayments.

‘‘What we have tended to see is customers themselves saying ‘I want to protect the equity I’ve got so I’m going to choose to sell my house’. At the moment, the vast majority of customers are in a sound financial position but we know that many will roll off fixed home loans on to higher rates over the coming year. When that happens some will be under financial pressure.’’

She said it wasn’t in anyone’s interests for people to get into financial stress.

‘‘That’s why we’re keen to talk with customers sooner rather than later if there are any signs of problems to see if, for example, we can structure their finances differently to relieve some pressure.’’

Watson said the bank had a social responsibility to help customers who were struggling.

But she said customers seemed so far to have put themselves into a good position, having paid off their loans more quickly and saving well. Across customers for which the bank had the information, pay had risen 6%.