Mortgages

Feeble house prices and a rise in mortgage arrears are a cause of concern and likely to remain, said ANZ Bank (ASX:ANZ) chief executive officer Philip Chronican on Thursday.

"Household arrears are a concerning trend; yes, you want to watch it, but it is not disaster," Chronican told reporters at a business conference on Thursday.

"It's a problem that's going to stay with us for a while. I don't know if it will get worse or not.”

ANZ Bank's (ASX:ANZ) chief executive officer Mike Smith has cautioned that increased funding costs may result from Europe's debt volatility. New York-based Moody's Investors Service cut ANZ's credit ratings just last week, along with the big four Australian banks' ratings.

National Australia Bank's (ASX:NAB) subsidiary Ubank is now offering internet-based discounted mortgages. Under the offer, standard variable rate mortgages will be sold at 6.59 percent, above a percentage lower than its rivals. This offer will be available until the end of the month.

Troubles in Westpac's (ASX:WBC) mortgages sector were blamed on cost of living pressures and higher interest rates by chief executive Gail Kelly. Kelly quashed the claims that Westpac's aggressive lending was a factor in the mortgage woes.

The subprime mortgage crisis has created a credit squeeze. The credit crisis has led to increased costs of debt and the lack of investor interest to refinance existing debts, which lead to the collapse of RAMS home loans and also the recent end for packaged mortgages (also called securitisation). Higher interest rates are expected as non-bank lenders cannot offer home loans as a result of the credit crisis. Since non-bank lenders are out of the picture, the lack of competition means higher interest rates.