RAMS sale agreed, margins squeezed by tight competition in Australian mortgage market
Westpac Australia’s mortgage book (excluding RAMS) grew by 5% to $497 billion in the financial year ending 30 September, per annual results published on Monday.
The results gave an insight into the dragging effects of the RAMS portfolio, which Pepper Money is recently disclosed it was in talks of acquiring off Westpac.
RAMS mortgages declined by 28% over the year due to run off, falling to a value of $21.4 billion. Taking the RAMS portfolio into account, Westpac Australia’s home loan growth was limited to 3%.
It has now been confirmed that a consortium with members including Pepper Money and KKR has agreed to acquire the RAMS home loan portfolio off Westpac.
Westpac retained a 21% share of the Australian housing credit market, but credit growth was just 0.5-times system; in other words, Westpac struggled to keep pace with the wider market throughout the year. Excluding RAMS, mortgage growth was 0.8-times system.
Chief executive Anthony Miller said he was “pleased with the result we are delivering today”.
“With a very strong balance sheet and momentum in our target segments, the opportunity to deliver more for our customers, people and shareholders is exciting.
“We’re focused on relentless execution of our strategy and delivering every day for our customers. We’ve managed margins in a competitive environment and our capital position is strong, providing us with plenty of flexibility as we execute our strategy.”
Group-wide net interest margin (NIM) contracted by one basis point, with net interest income increasing by 3% to $19.47 billion.
“Higher spreads in New Zealand mortgages driven by fixed rate repricing was more than offset by tighter spreads in Australia due to competition and the sale of the auto finance portfolio,” said Westpac.
Westpac targets Investor lending
Westpac highlighted a “targeted strategy” to increase the proportion of investor lending in its portfolio.
Almost all new mortgage flows were in variable rate products, and the proportion of investor loans grew from 36% to 39% over the course of the year.
This strategic emphasis on investor lending aligns with broader market conditions, including ongoing housing undersupply and persistent demand for investment properties.
Westpac’s outlook anticipates continued support for house prices and credit demand, with the bank expecting housing credit to grow by 6.6% in 2025 and 6.5% in 2026.
