Westpac’s chief executive has warned it is “inevitable” some borrowers will suffer a massive blow when their fixed rate mortgages expire in the next few months, but says there has not yet been an increase in hardship.
The bank revealed its full-year financial results on Monday, with chief executive Peter King saying it had been a year of significant economic and geopolitical change.
“We are not yet seeing increases in hardship or stressed assets,” he said.
“Many customers built up savings during the past two years and 68 per cent remain ahead on their mortgage repayments.
“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 labour remains hard to find,” he said.
“The biggest challenge for the authorities is to contain the high inflation psychology that is now taking hold in the economy.
“In Australia, consumer spending is resilient, but as higher rates bite, we expect the heat to come out of the economy and inflation pressures to ease.
“Small business is one sector we are watching closely as consumption slows.”
Mr King noted house prices had fallen in recent months and said it would continue into next year.
“Credit growth is expected to ease. GDP growth will slow and unemployment will rise,” he said.
“These will be necessary outcomes if we are to lower inflation.”
Westpac recorded a statutory net profit of $5.69bn, which was up four per cent, with a fully franked final dividend of 64 cents per share.
Cash earnings were at $5.28bn, which was down one per cent.
The RBA this month increased the cash rate target by 25 basis points to 2.85 per cent.
More increases are expected in the coming months as the nation battles high inflation.
Over the year to September, the CPI inflation rate was 7.3 per cent – the highest in more than three decades.
Inflation is forecast to peak at about eight per cent later this year.