CBA lifts hood on its mortgage book

Average loan size down a touch, says bank

CBA lifts hood on its mortgage book

Off the back of strong annual growth in home lending over the 2022 financial year, CBA has revealed further details about its mortgage book.

In the year ending June 30, 2022, Australia’s biggest bank netted a cash profit after tax of $9.6 billion, up 11% year-on-year. Home lending grew by 7.4% over the year, representing a dollar value increase of $36.4 billion and system growth of 0.9 times.

Read next: CBA posts $9.6bn net profit in full-year results

As rising interest rates create a refinance boom and a downturn in housing values softens activity, MPA asked Australia’s biggest bank what it is currently experiencing within its mortgage book.

CBA general manager third party banking Adam Croucher (pictured above) said the bank continues to take a “balanced approach” to home lending, with a focus on portfolio quality.

As of June 30, 70% of all new CBA mortgage loans written (excluding Bankwest) were for owner-occupiers, with first home buyers accounting for 10% of those loans, Croucher said. Investment loans made up the remaining 30%.

“Given the tightening rental market and increased rental yields, we expect to see continued growth in the investor market. As we move [further] into Spring, it is likely there will be an increase in housing stock coming on to the market which has the potential to draw out more demand from both owner occupiers and investors,” Croucher said.

In line with increasing property values over the last few years, Croucher said the average loan size had been “trending higher”. 

But over the last six months, the average loan size has decreased “ever so slightly”, he said.

“As of June 30, 2022, the average loan size was a bit under $400,000,” Croucher said.

Read next:  AMP evaluates changes within its loan book

The current strong refinancing market, instigated by the tightening of monetary policy from May, indicated Australian borrowers were keeping a close eye on their home loan, doing their research, and making sure their loan fit their needs, he said.

“We encourage all mortgage holders to review their home loan on a regular basis and engage with their broker or lender to see what options may be best suited for their financial situation,” Croucher said.

Much has been spoken about the ‘fixed rate cliff’, RBA deputy governor Michelle Bullock telling the Economic Society of Australia in July that almost 40% of households were on fixed mortgage rates in early 2022.  The majority were due to roll off within the next two years, with the highest portion due to expire in the second half of 2023, she said.

In response to how CBA was working with brokers and customers approaching the end of their fixed rate mortgage term, Croucher said brokers played a “critical role” in speaking with their customers about their options.

CBA is working to ensure broker partners receive clear messages and regular communication, with access to tools and insights to enable informed discussions with customers to take place, he said.

“We contact customers to support the conversations they are having with their brokers. We notify customers before the end of their fixed rate that their home loan will switch to a variable rate home loan through a range of digital avenues such as email, NetBank or in the CommBank app, as well as a physical letter,” Croucher said.

In a rising rate environment, when a customer’s fixed term matures, it may mean they roll off into a higher interest variable rate, which could increase their minimum required repayments, he said.

“Customers will have the option to remain in a variable rate, re-fix their home loan by switching to another fixed rate or split their loan to help them manage their repayments,” Croucher said.