Major banks will pass on the fifth interest rate hike of the year to struggling mortgage holders from tomorrow, helping sink consumer confidence to lows not seen since the global financial crisis (GFC).
The Commonwealth Bank of Australia (CBA), the country’s biggest lender, this week warned that more of its mortgage customers were falling behind in repayments as interest rates hit an 18-year high.
Friday’s follow-through hike by major lenders comes after the Reserve Bank of Australia (RBA) last week increased the cash rate to 4.85 per cent, a move set to increase average monthly mortgage repayments by at least another $100.
Average mortgage holders, who have already seen their repayments increase by more than $6000 so far this year, could face months of elevated interest rates before the RBA moves to cut lending costs.
The major four banks – CBA, Westpac, ANZ and NAB – along with smaller lenders, say the latest 25-basis-point increase in the cash rate will be incorporated into their variable home loans from November 13. AMP, ME Bank and Bendigo Bank have already passed on the November hike.
Five interest rate hikes in 2026 have taken their toll and sentiment has “plumbed to new lows”, according to Westpac’s Consumer Sentiment Report, released this week.
Westpac says confidence is now at lows seen only during major economic shocks, including the onset of the COVID pandemic, the height of the GFC and the recessions of the early 1980s and 1990s.
And it may not be over yet. Consumers also are bracing for further mortgage pain, with 72 per cent of those surveyed after the RBA decision expecting mortgage rates to rise again over the next 12 months.
Meanwhile, the ANZ-Roy Morgan Consumer Confidence index has found a record 61 per cent of Australians say they are worse off than a year ago and 49 per cent expect to be worse off this time next year.
CBA, in a trading update this week, warned that home loan arrears of 90 days or more rose to a six-year high of 0.8 per cent in the three months ended September 30, reflecting cost-of-living pressures from interest rate increases and inflation.
CBA group executive for retail banking Angus Sullivan says the bank “recognises customers have been navigating an environment of rising interest rates this year”.
“Our focus is on helping them understand the impact on their repayments, making it straightforward to access support if they need it, and providing practical ways to help manage everyday costs,” he says.
Rebecca Jarrett-Dalton, founder of Sydney-based mortgage broker Two Red Shoes, says mortgage holders are “stressed, but so far, they’re still making their payments on time”.
“What we know about Aussies is that they will always pay their debts first, but what we don’t like seeing is that they may not be paying their insurance, or they may not be getting their medical stuff done,” Jarrett-Dalton says.
“The interest rate rises have been impactful, but tie that in with the increasing cost of just about everything. The cost of walking out your door has increased exponentially.
“It’s absolutely obscene because it’s pulling money out of pockets that didn’t have any surplus to begin with.”
The RBA says it has to increase rates to control inflation caused by excess demand in the domestic economy along with soaring global energy prices.
Westpac chief executive, consumer, Carolyn McCann says the bank understands the latest hike may be difficult for many households, particularly those who have already adjusted their budgets this year.
“The majority of our customers are managing well and remain ahead on their repayments,” she says. “For customers who are feeling the pressure, we encourage them to reach out to us early so we discuss the support options available.”
ANZ Group retail executive Pedro Rodeia says home loan customers don’t need to wait until they’re facing a challenge to seek help from the bank.
“Our teams are here to provide guidance and help customers make informed financial decisions with confidence,” Rodeia says.
Finder home loan expert Richard Whitten says about 38 per cent of Australians now say they are struggling in some way to pay their mortgage.
“The average home loan now is about $730,000, so a 25-basis-point rate rise on that is more than $100 a month extra,” Whitten says.
“If you think about where the average borrower was in January versus what they’re going to be paying after this rate hike, it’s maybe $500 a month more.
“It’s a lot of money when everything else is going up too.”
Whitten says people struggling should contact their bank as soon as possible to arrange a repayment plan.
“It’s better to do that before you start missing repayments because once you fall behind, it becomes a default issue,” he says. “It can hurt your credit score, and everything can snowball.
“Banks have hardship assistance, and they’re obligated to try to help customers figure out what to do. They might give you a three-month pause on repayments. Interest will accumulate, so you’ll pay more in the long run, but it gives you a reprieve.
“Or you might switch temporarily to interest-only repayments. The last thing banks want is a wave of defaults, repossessions and forced sales because that drives property prices down further.”
NAB Group executive personal banking Ana Marinkovic says NAB remains focused on helping customers manage higher living costs, including their mortgage repayments.
“We know another rate increase will be tough for some homeowners,” she says.
“For customers with a mortgage, these increases add up. We’re encouraging people to take a fresh look at their repayments and household budget.
“If things are getting tight, please don’t wait until you’re struggling to make a repayment. Talk to us early so we can understand your circumstances and look at how we can help.”
Glen Norris is an experienced journalist and editor with a career spanning four decades across Asia, Australia and Europe. His roles have included stints at Bloomberg News and Asian Wall Street Journal.
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