The recent spate of interest rate hikes implemented by the Reserve Bank of Australia has caused financial turmoil for many. Those with variable-rate mortgages have seen their repayments rocket when the cost of living is soaring. In addition, many first-time buyers have found themselves priced out of the market due to lenders repricing deals at higher rates and rocketing living costs making it more challenging to save a deposit.
Despite this, it has been revealed that the Commonwealth Bank of Australia (CBA) funded mortgages in record numbers this year. However, bank officials have said customers’ mood and confidence are changing, and there will most likely be an increase in the number of borrowers facing financial hardship.
Home lending up by more than 7%
Figures show that home lending from the CBA has increased by 7.4% in the 2022 financial year compared to 2021. This equates to an increase in lending of $356.4 billion.
However, with mortgage rates rising by 250 basis points to 2.6% and inflation continuing to soar, many of the bank’s personal and business borrowers face serious issues. This is something that bank officials claim they are geared up for, and they said they would work with regulators and other industry groups to deal with the expected rise in hardship cases.
The CEO of CBA, Matt Comyn, said that part of the reason behind the cash rate increases was the strength of the Australian economy. CBA officials believe there will be one final rate increase this year in November.
Comyn said: “The overall portfolio and the economy is very strong, and hence the reason why they are continuing to lift the cash rate. We are beyond full employment, but absolutely recognise that concern and anxiety for many customers with the rising cost of living with interest rates.”
It was noted that during the height of the Covid-19 pandemic, when many people were left in financial turmoil, the bank managed to weather the storm with solutions such as extended repayment-free periods. Comyn said the bank would work closely with customers to provide support and assistance.
The CEO also said customers who were nearing the end of their fixed-rate mortgages were in danger of falling over a ‘fixed rate cliff’ due to the amount by which their repayments could rise.
He added: “It’s a very important focus and priority for us … to be engaging proactively with customers well in advance of their fixed rate maturity, so they can best prepare for that.”