Renters are tightening their belts even more than mortgage holders.
Commonwealth Bank data suggests those aged between 25 and 29, who are likely facing sharp rental increases, are pulling back on spending more than any other cohort.
Young renters are also likely to be saving less than normal as high costs for food, energy and rent limit the amount they can squirrel away.
Fronting a parliamentary committee on Thursday, CBA’s leadership team outlined how different cohorts are responding to higher interest rates and cost of living pressures.
CBA chief executive officer Matt Comyn echoed his counterparts from ANZ and NAB who said the number of households failing to make their repayment on time was still very low by historical standards.
But he said it was clear many households were under pressure, pulling back on discretionary spending and dipping into their savings.
While renters are hurting the most, young home owners are also suffering, with a third who bought during the pandemic reducing their spending by more than 30 per cent year-on-year.
Those who own their own homes outright, older Australians, were recording the least financial strain, the bank boss said.
Despite a clear deterioration in financial circumstances for customers, Mr Comyn said the strong labour market meant most people were in a position to meet their mortgage repayments.
“The employment market remains very strong and the vast majority, almost all of our customers, continue to work,” he said.
On stress testing borrowers, Mr Comyn said the bank was offering a lower one per cent serviceability buffer to a small proportion of loans under a “very limited set of circumstances”.
“We’ve recently adopted that and we’re comfortable with that,” he said.
“And we’re not seeing that having a significant effect in terms of impact to customers.”
Easing lending requirements, the three per cent serviceability buffer, has been up for discussion in the context of mortgage holders finding themselves unable to meet stress testing requirements to refinance to a better deal.
Mr Comyn said the three per cent serviceability buffer, in general, remained “entirely reasonable” given the levels of uncertainty across the industry at the moment.
The head of Westpac is also expected to front the inquiry on Thursday after NAB and ANZ appeared on Wednesday.
The big four banks control about 80 per cent of the Australian market.
Treasurer Jim Chalmers said on Wednesday it was important banks passed on interest rate increases to savers as they had been raising rates for borrowers.
He said he had met bank chiefs to ensure they talk to customers facing hardship as interest rates on their loans rose.
Source: AAP
