More “liar loans” at ANZ than at other banks: UBS survey

“ANZ’s continued deterioration is at odds with the broader improvement in the factual accuracy of loans issued by banks in 2022 at other major regional banks.”

But an ANZ spokesman said although the UBS report and others like it have been out for several years, during that time its delinquency rates have come down.

“Our numbers are as good as, if not better than, our peers, providing a strong indicator of ANZ’s ability to accurately verify loan applications,” a spokesperson said.

The UBS survey showed that the second highest percentage of clients admitting incorrect facts on loan applications was 40% at Westpac, 30% at Commonwealth Bank and just 19% at National Australia Bank.

NAB, which has digitized its lending process and experienced strong growth over the past 12 months, has seen its rate drop sharply from 46% in 2020. ANZ, however, has struggled to grow market share and has suffered heavy blowouts in the time it takes to assess loans, meaning that while the survey is correct, it has suffered the double whammy of being slow and inaccurate.

The ANZ spokesman said home loan applications through the branch network or brokers are always checked and with the introduction of comprehensive credit reports the bank can, with the customer’s consent, access a range of additional data which has “significantly improved the ability to verify claims”. ”.

But with interest rates now set to rise more aggressively than expected in February, when big banks underlined their confidence that defaults would not rise substantially as long as the Reserve Bank gradually raises the cash rate , fears are now growing in parts of the market about the potential for rising mortgage stress.

Mr Storey said there are pockets of the market which would be more sensitive to a rate hike causing problems for customers, with the change in the interest rate cycle likely to expose some of banks’ lending practices .

But he said banks had multiple defenses, citing the fact that 51% of customers are more than three months ahead of mortgage payments (compared to 45% before the pandemic); 25% of respondents have savings reserves and emergency funds to cover repayments for seven to 12 months; and 39% of respondents said their total household income was much higher than their expenses.

“Our general conclusion is that prime borrowers, who are arguably higher risk, have the ability to withstand rising interest rates, although there are pockets where tensions could emerge with hikes. from the RBA exposing some vulnerability,” Storey said.

Another analyst who was not authorized to speak to the media, however, disagreed, warning of banks’ half-full views on mortgage repayments that are ahead on average after the pandemic.

“If 70% of customers are ahead of mortgage payments, that means 30% of people are not, which I think is quite concerning. When you add up the fact that people are distorting their incomes to get loans, we could prepare for a big shock,” he said.

In October, the Australian Prudential Regulatory Authority increased the service cushion for loans by 50 basis points to “at least” 300 basis points above the rate of the loan product, in a move that cooled the real estate market by making it harder to get larger loans.

While some analysts expect the APRA to introduce tighter debt-to-income ratios as an additional measure, Mr Storey said he did not expect further tightening of macroprudential policy.

“The window for further macro-prudential tightening has effectively passed,” Mr Storey said.

With the prospect of house prices falling by around 5% by the end of 2023 and a likely rise in RBA rates from June, which will quickly reduce debt service, M Storey said the share of high-debt loans to income was over six times. had already fallen, although they are still at a high level.

He said New Zealand’s joint macroprudential and monetary tightening policy had already resulted in a bearish property market, something Australian policymakers would like to avoid.

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