CBA sets new mortgage record

But headwinds are growing

CBA sets new mortgage record

The Commonwealth Bank of Australia funded record home loan volumes in 2022 but acknowledges the mood among its customers is changing and it is gearing up for a rise in hardship cases.

The home lending business of Australia’s biggest bank grew by 7.4% in FY22 compared to FY21 – an increase of $356.4bn. But after 250-basis points of interest rate rises, as well as higher inflation, which the RBA expects to peak around 7.75% over 2022, concerns among its personal and business customers are starting to mount.

CBA chairman Paul O’Malley acknowledged the rising interest rate environment, and told the Australian Financial Review the bank expected hardship cases to rise. The bank would work with regulators and across the industry to deal with the increase, he said.

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The COVID-19 pandemic demonstrated how CBA was able to support its customers and not require repayments for an extended period, with regulators adjusting their settings to facilitate that.

CBA CEO Matt Comyn (pictured above) said the strength in the Australian economy was leading to further cash rate rises. The bank forecasted a seventh interest rate rise in November, the “last for the year”, the AFR reported.

“The overall portfolio and the economy is very strong, and hence the reason why they [the RBA] are continuing to lift the cash rate,” Comyn said.

“We are beyond full employment, but absolutely recognise that concern and anxiety for many customers with rising cost of living with interest rates.”

While CBA was confident about the overall outlook for the Australian economy, it recognised that each customer’s circumstances were different. Banks were gearing up to deal with rising hardship claims as customers approach the “fixed rate cliff”, rolling off record-low interest rates onto higher standard variable rates.

“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,” Comyn said.

After the RBA’s rapid 2.5 percentage points increase in the cash rate since May and as inflation continues to climb, O’Malley said more customers were seeking support.

“Many people are experiencing a sharp rise in the cost of living,” O’Malley said.

“We know from our interaction with customers that households and small businesses are looking to us to provide support when they need it most.”

After 250-basis points of cash rate rises since May, O’Malley said more customers were seeking support, acknowledging the coinciding “sharp rise in the cost of living”.

“We know from our interaction with customers that households and small businesses are looking to us to provide support when they need it most,” O’Malley said.

Despite record home loan volumes in 2022 and the bank’s sound credit portfolio, Comyn acknowledged that the mood among customers is changing.

“We are also very conscious that a number of our personal and business customers are feeling very concerned about rising inflation and rising interest rates,” Comyn said.

AFR reports that the latest CBA household spending index fell half a percent in September, as higher interest rates begin to flow through to households.

This was reportedly the first decline since the RBA began hiking interest rates in May. Further declines in household spending intentions are expected in the months ahead.

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Following the Optus breach, amid growing fears scams were impacting the economy, Comyn said CBA shared the community’s concern about the rise in scams and frauds, and the increase in cyber threats across Australia.

“To help, we’ve increased our efforts to keep customers’ accounts and personal information safe and secure. We have a range of services and security features in place to help protect customers, including real-time monitoring and fraud prevention technology,” Comyn said.