The Australian Financial Review

12 May 2011

Dear Editor,

I refer to your page 1 article this morning under the headline “Rate rises are hurting, says CBA chief” and believe that the following statement regarding first home buyers misrepresents the position of the Commonwealth Bank:

“The biggest mortgage lender said it had experienced a spike in home loan arrears in the first three months of 2011, particularly among first home buyers”.

For your information, I also provide the following extracts from the trading update transcript which clearly indicate that our experience with first home buyers arrears is no different to the remainder of our home loan portfolio.

James FREEMAN:                  Good afternoon gentlemen. I was just wanting to actually get a little bit more colour around those arrears rates in the home lending book, just an idea, is this first home buyers, are you seeing any impact from that? We also saw Westpac call out the 2007/08 and 2009 vintages as being a bit problematic, I think you’ve called the 2008. Just a bit more flavour, and is this 90 days, or are we still on 60 days category?

Alden TOEVS:                         This is Alden Toevs speaking. The first home buyer analysis of our portfolio shows very common, like for like performance of a first home buyer with equal credit quality to a non-first home buyer, so there’s no indication of deterioration because of that.
The vintage in 2008 was a large vintage for us, and it has grown in arrears, as one normally sees arrears grow as the loans season, and so that’s one of the primary drivers of the increase in 30, 60 and 90 day arrears.

Eric JOHNSTON:                    Okay, thanks. And if I could just quickly, just clarify. Some of the problems we are seeing in that 2008 book is that mostly skewed to first home buyers?

Alden TOEVS:                         No, we talked about that a second ago. The first home buyer book continues to behave exactly like the non-first home buyer applicants or closings. So if you have the same credit quality, the same kind of risk rating to begin with, the first home buyer book loan behaves just square on the outcomes of a non-first home buyer loan of comparable quality.

Eric JOHNSTON:                     Okay, thanks.

I would appreciate the correct position being reported to your readers by way of a correction and apology.

Bryan Fitzgerald