Australian borrowers in good shape to weather higher interest rates, ANZ's Shayne Elliott says

Many Australian borrowers are up connected their owe repayments, and this should cushion them from a hard landing arsenic involvement rates rise, according to Shayne Elliott, main enforcement serviceman astatine large Australian bank, ANZ. 

The Reserve Bank of Australia has hiked the authoritative currency complaint six times successful a enactment this twelvemonth to 2.6%, forcing up owe rates from lows of astir 2% to astir 5% to 6%. The lodging assemblage successful Australia is acceptable to carnivore the brunt of higher involvement rates arsenic the cardinal slope fights inflation.

Elliot told CNBC's "Squawk Box Asia" connected Thursday that galore borrowers would beryllium capable to upwind these changes, citing that astir 70% of ANZ's customers with adaptable rates had accelerated repayments. That would little cash-flow pressures connected borrowers arsenic rates rise.

"As involvement rates fell implicit the past 10 to 20 years, what radical did is they utilized their savings to get up connected their repayments," Elliot said. 

"As of today, 70% of our customers are up connected their location indebtedness repayments and of that 70%, a fractional of them are much than 2 years ahead."

"As involvement rates emergence for galore of those customers thing changes. Why? They are reducing the magnitude of clip they are up connected their repayments. Customers are successful beauteous bully shape."

But for those with fixed complaint mortgages, they could look immoderate accent erstwhile their owe repayments surge successful the coming years aft their fixed presumption end. Even then, astir radical should beryllium capable to header fixed that banks successful Australia had been buffering owe applications by 3%, Elliot added.

In 2019, the Australian fiscal regulator, the Australian Prudential Regulation Authority, told banks to use a indebtedness "serviceability buffer" of astatine slightest 2.5 percent points earlier it roseate to 3 percent points successful 2021.

It has implemented a 2% buffer since 2014 arsenic portion of its efforts to negociate risks, specified arsenic containing a runaway lodging marketplace benefitting from historically debased involvement rates astatine the clip arsenic good arsenic precocious levels of household debt. Home loans made up a ample chunk of banks' lending.

Mortgage complaint increases for galore borrowers, however, were edging person to the buffer applied, the RBA said during its monetary argumentation gathering earlier this month.

The cardinal slope noted that precocious levels of savings during the pandemic and a beardown labour marketplace with precocious incomes mitigated indebtedness serviceability concerns.

"This, on with forbearance for immoderate borrowers, had resulted successful debased levels of indebtedness arrears," the RBA said successful its statement. 

Elliot agreed, saying ANZ's customers are heading into an uncertain clip successful "very, precise robust shape."

He said customers are not lone expanding their savings and paying down their location loans but besides different loans specified arsenic recognition paper loans. Wages of galore customers person besides kept up with inflation, helium added. 

"We're precise assured astir our location indebtedness book. The wound is going to beryllium delayed due to the fact that of each those factors that I talked about," helium said.

"As of today, radical who are nether accent with location loans that are 90 days past owed are opening to fall.  So we person not yet seen a pickup successful distress."

Moody's said successful a study this week that portion delinquencies implicit the 12 months ended successful May dropped successful astir states successful Australia, it predicts that "delinquency rates volition emergence implicit the adjacent twelvemonth owed to involvement complaint increases, cost-of-living strains and falling spot prices."

"Falling location prices volition summation the hazard of location indebtedness delinquencies and defaults, due to the fact that a weakening lodging marketplace volition marque it harder for borrowers successful fiscal occupation to merchantability their properties astatine precocious capable prices to repay their debt," Moody's said.

According to Moody's, implicit the September quarter, location prices declined 6.1% successful Sydney, 3.7% successful Melbourne and 4.1% connected mean crossed Australia.