Australians Failing Make Mortgage Payments: CBA Arrears Reach 0.80%
Commonwealth Bank said home loans more than 90 days overdue rose seven basis points to 0.80% in the quarter ended September 30. The bank reported $2.8 billion in profit, while its chief executive said higher inflation and interest rates continue to pressure households and businesses.
Commonwealth Bank reported a seven-basis-point rise in home loans more than 90 days overdue, lifting the rate to 0.80% in the quarter ended September 30, as Australians failing make mortgage payments faced pressure from higher interest rates and inflation.
The bank posted $2.8 billion in profit in a trading update issued Wednesday. Operating income rose 3%, while expenses increased by the same amount.
Profit was flat compared with preceding quarters but up 8% from the same period in the previous financial year. CBA shares rose about 0.8% to $170 at 10:15 a.m. Wednesday, while the ASX 200 index was down.
Higher rates add pressure on households
CBA attributed the rise in overdue home loans to cost-of-living pressure from higher interest rates and inflation. It set aside $105 million to cover potential loan-book problems.
Actual losses from failed loans remain below pre-pandemic levels, the bank said. Its total provisions for bad loans held flat at $6.5 billion as other types of lending performed well.
CBA said those provisions provided “strong” coverage for potential issues. Chief Executive Matt Comyn said the bank was committed to helping customers manage the higher cost of living.
“Higher inflation and interest rates continue to place uneven pressure on household incomes and business activity,” Comyn said. “While economic growth is slowing, the Australian economy remains resilient, supported by low unemployment and a strong public infrastructure and private investment pipeline.”
The Reserve Bank of Australia raised its cash rate on November 3 to an 18-year high, its fifth increase this year. The rate rises are intended to curb inflation and have added hundreds of dollars a month in interest payments to an average Australian mortgage.
“It is going to make people feel like it’s a recession because they feel poorer,” Reserve Bank Governor Michele Bullock said.
Loan growth and arrears diverge
CBA’s business-loan volume increased 13.6% during the quarter, while home loans grew 6.6%. Applications for new home loans remained 16% below the same quarter in the previous financial year.
ANZ also reported a rise in customers struggling to repay home loans earlier in the week. Loans more than 90 days overdue reached 0.95% of its home-loan book.
Australian capital-city house prices fell 8.1% over the last seven months, according to property analysis company Cotality. The decline was just short of the largest fall in 40 years.
CBA said household incomes and business activity faced uneven pressure as inflation and interest rates remained high.
