The National Australia Bank boss has warned variable mortgage rates will "probably" rise later this year, but says his customers are mostly well positioned to cope.
The Commonwealth Bank's economics team recently shifted its forecast for the first official interest rate rise since November 2010 forward to June this year.
However, speaking to the ABC's Close of Business program, NAB chief executive Ross McEwan said his impression was that the Reserve Bank was in no rush.
"Our view is [it will] probably [be] the latter half of this year that the Reserve Bank will start moving," he said.
"I think it's probably going to be about 50 basis points up."
Although he added that the cheapest interest rates that were in the market a year ago, on fixed loans, had already disappeared.
"Interest rates on fixed mortgages have already moved," he said.
"Because for us to put a give somebody a fixed rate, we're not just borrowing off depositors, we're actually borrowing out of wholesale markets, and that money for us has actually increased in price.
"So that's being passed on through fixed rates for customers."
'Most customers have a buffer'
Despite the prospect of rising rates, Mr McEwan was confident that the vast majority of NAB's customers would cope with rising repayments.
"Most customers have a buffer, in that they've been overpaying on their mortgage, i.e. paying more against their principal than then they would have normally, because as interest rates have dropped, we've given them the option to actually just keep paying the same amount that they were before," he said.
"And when I say well in advance, we've got about an average of four years of advance payment across the average of our mortgage book."
While recent home buyers during the current property boom are highly unlikely to have built up any substantial buffer in their repayments, Mr McEwan was nonetheless confident they would manage rising interest rates without financial hardship.
"When we give them a mortgage, we don't take the interest rate that they're actually being paid as the rate we think that they can afford. We add a buffer on top of that, which is an additional 3 per cent," he said.
Economy, housing still solid
Mr McEwan said the current economic environment was also conducive to people being able to keep up their loan repayments.
"The biggest factor of paying down a mortgage is around having a job. And, at the moment, we're seeing in Australia, unemployment levels at the best for decades," he said.
This week's January labour force figures from the ABS showed that unemployment remained steady at 4.2 per cent, even during the peak of the east coast's Omicron wave.
NAB's boss was also more sanguine on the outlook for the housing market than some of his big bank rivals, with Westpac recently forecasting housing prices would drop 14 per cent from a peak later this year until a trough in 2024.
"We can't see another 20 odd per cent [rise] this year," Mr McEwan said.
"You actually run up against customers who can't afford to pay the mortgages on these. So it starts to put a ceiling in place.
However, Mr McEwan added that if any of NAB's mortgage customers do start feeling financial pressure, for whatever reason, they should contact the bank sooner rather than later.
"The first thing if they are […] starting to feel that they may have difficulty, talk to their banker," he advised.
"That's really important. We can do things early with them and help them out as long as we get the notification. But if they leave it too late, it leaves us with limited options."
