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Times are tough for borrowers, but not as bad as the GFC

More than half ASB's home loan customers are sitting on rates below 6% will need to refinance at higher rates.

Thursday, August 10th 2023, 10:57AM

The bank reported a 6% increase in net profit to $1.56 billion in the June year, but chief executive Vittoria Shortt said it was a year of two halves with the second half being hit hard by rising inflation, higher interest rates, weather events and falling house prices.

She said in the second half of the financial year the bank saw an 11% decline in profit and a 16 basis point drop in margins.

Shortt says around half of the bank's home loan customers are still on rates below 6% because there is a big lag in the transmission of monetary policy.

"It takes a longer time for customers to go onto higher rates."

Around 30% of customers had sub 5% home loan rates.

Shortt says the bank has found it needs to focus on customers based on the quantum of increases they face. Customers who have had an absolute dollar increase of $1000 or more a month are the ones it is focused on.

ASB has been active in contacting customers and says it 70,000 financial wellbeing checks have been done, which take account of customers' "over arching financial circumstances."

It has proactively contacted 12,000 customers to help them through refixing their loans.

She says people have had "time to prepare."

"We've been preparing for higher interest rates ever since we had record low interest rates."

Often she is asked how does this period of time compare to other economic downturns? The current environment, she says, is not as tough as the Global Financial Crisis (GFC).

ASB estimates debt servicing costs are around 8% of disposable income at the moment, compared to 16% during the GFC.

"It's not as bad (as the GFC), but every cycle is different."

ASB refuses to disclose how much business it gets via mortgage advisers, although the other three big banks disclose these numbers.

Shortt says 50% adviser origination is the waterline and "sometimes it's above and sometimes it's below."

She says "share of flows shift around but not on purpose from our end."

When asked what the shifts had been she responded "minor not even worth talking about." 

"We always want to a great job for brokers. They are important to us."

One of the changes made during the year was to bring its business and personal banking teams together into one unit, under new leadership.

"We think that has been quite successful," Shortt said.

Currently, ASB has work underway to make top ups easier.

The bank reported a 6% increase in net profit to $1.56 billion in the June year, with wider margins underpinning that growth. Its residential mortgage lending grew 2.8% to $75.65 billion. She said there is stiff competiton in the market with 16 licensed banks and growing unlicensed rivals in the credit space.

Tags: ASB

« ASB annual profit up 6% in a year of two halvesReserve Bank stress tests banks on climate risk »

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.74 7.09 6.95
SBS Bank Special - 7.14 6.49 6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.84 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.24 6.75 6.39
Median 8.64 7.19 7.17 6.65

Last updated: 20 June 2024 10:39am

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