We don't know what the future holds. It's completely unknown.
In the wake of one of Australia's most aggressive monetary tightening cycles in recent memory, ANZ Group has chosen to hold firm on a lending safeguard that its larger rivals are quietly setting aside. The bank's CEO, appearing before parliament, defended the 3% mortgage rate buffer not as bureaucratic rigidity, but as a humble acknowledgment that the future remains unwritten. In doing so, ANZ has placed itself at the intersection of two enduring tensions in modern finance: the duty to protect borrowers from themselves, and the pressure to keep credit flowing in a system that depends on it.
- Australia's four major banks are fracturing over a core lending rule, with ANZ standing alone in fully upholding the 3% mortgage stress-test buffer that rivals are quietly dismantling.
- Thousands of homeowners are trapped — unable to refinance existing loans because rising rates have pushed them past the buffer threshold, turning a protective measure into a barrier.
- ANZ CEO Shayne Elliott warned parliament that with economists forecasting another 50 basis points or more in rate hikes, abandoning the buffer now would be a gamble on a future no one can reliably predict.
- Despite the strain, ANZ's own arrears data tells a surprisingly stable story — just A$6 in every A$1,000 of mortgage debt is more than 90 days overdue, outperforming even pre-pandemic levels.
- Subtle warning signs are emerging nonetheless: discretionary spending is contracting, gym memberships and streaming subscriptions are being cut, and call center distress inquiries are beginning to tick upward.
Australia's fourth-largest mortgage lender is holding firm on a lending rule its bigger competitors are quietly abandoning. ANZ Group announced it will continue requiring borrowers to prove they could withstand a 3 percentage point rise in interest rates before approving a home loan — a standard set by banking regulator APRA to stress-test financial resilience. The stance puts ANZ at direct odds with its three larger rivals, who have begun carving out exceptions, arguing the rule now harms the very borrowers it was designed to protect.
The Reserve Bank of Australia has raised rates by 4 percentage points since May 2022, and that tightening has left thousands of homeowners unable to refinance under the buffer test. Yet ANZ CEO Shayne Elliott, testifying before parliament, defended the measure as a reasonable hedge against uncertainty. Few forecasters anticipated the pace of rate rises already seen, he noted, and with another 50 basis points or more potentially ahead, he argued the buffer remains justified.
ANZ's own data lends some weight to that position. Only A$6 of every A$1,000 in mortgage debt held by the bank was more than 90 days in arrears — a figure that actually betters the bank's pre-pandemic performance. Elliott credited elevated household savings, tighter overall lending standards, and strong borrower incomes for the resilience. Chief Risk Officer Kevin Corbally told parliament the buffer itself has played a meaningful role in that stability.
Still, the cracks are visible. Discretionary spending has slowed noticeably — fewer gym memberships, streaming subscriptions, and restaurant meals. Call center inquiries from struggling borrowers are edging upward. ANZ's decision to hold the line reflects a calculated judgment: that the risk of future rate volatility outweighs the cost of turning some borrowers away today, even as homeowners caught in the middle face a lending environment that has grown both more expensive and more restrictive.
Australia's fourth-largest mortgage lender is holding firm on a lending rule that its bigger competitors are quietly abandoning. ANZ Group announced this week that it will continue requiring borrowers to prove they could handle a 3 percentage point jump in interest rates before approving a home loan—a safeguard put in place by the country's banking regulator, APRA, to stress-test borrowers' ability to weather future rate increases.
The stance puts ANZ at odds with its three larger rivals, who have begun carving out exceptions to the buffer requirement, arguing that the rule has become too restrictive in the current environment. The Reserve Bank of Australia has lifted rates by 4 percentage points since May 2022 in an effort to tame inflation, and that aggressive tightening has left thousands of homeowners unable to refinance their mortgages under the 3% buffer test. The bigger banks say the rule is now working against borrowers rather than protecting them.
But ANZ's CEO Shayne Elliott sees it differently. Speaking before parliament in a regular hearing where Australia's major bank leaders are required to testify, Elliott defended the buffer as a reasonable hedge against an unknowable future. "I think 3% feels about right," he said. "We don't know what the future holds." He noted that few forecasters anticipated the speed and scale of the rate increases that have already occurred, and that economists are now predicting another 50 basis points or more could be on the way. In that context, he argued, maintaining the buffer makes sense.
The human cost of the current lending environment is real. Thousands of Australians have found themselves unable to refinance existing loans because they cannot meet the 3% buffer test under the new rate regime. Yet ANZ's own data suggests that borrowers are, so far, managing the strain. The bank reported that only A$6 of every A$1,000 in mortgage debt owed to ANZ was more than 90 days in arrears—a figure Elliott noted was actually better than the bank's pre-pandemic performance. He attributed this resilience to several factors: household savings remain elevated compared to before COVID-19, lending standards have tightened overall, and most borrowers still have solid incomes that allow them to absorb larger expenses.
ANZ has observed some warning signs in consumer behavior. Discretionary spending has slowed noticeably, with fewer people signing up for gym memberships, streaming services, and restaurant meals. The bank's call centers have recorded only a modest uptick in borrowers struggling with repayments, but the trend is worth watching. Kevin Corbally, ANZ's Chief Risk Officer, told parliament that the 3% buffer has played a meaningful role in maintaining this stability.
The disagreement between ANZ and its larger competitors reflects a deeper tension in Australian banking. Regulators want to ensure that borrowers can survive future rate shocks. Lenders want to expand credit and remain competitive. And homeowners caught in the middle are facing a lending environment that has become simultaneously more expensive and more restrictive. ANZ's decision to hold the line on the buffer suggests the bank believes the risk of future rate volatility outweighs the cost of turning away some borrowers today.
Notable Quotes
I think 3% feels about right. We don't know what the future holds.— Shayne Elliott, ANZ CEO
That buffer has played a role in maintaining stability.— Kevin Corbally, ANZ Chief Risk Officer
The Hearth Conversation Another angle on the story
Why is ANZ alone in this? What do the bigger banks know that ANZ doesn't?
They're not necessarily smarter—they're responding to competitive pressure. When you're the fourth-largest player, you can afford to be the cautious one. The big three need volume. ANZ is saying: we'd rather be right than big.
But if rates don't go up another 50 basis points, ANZ is just blocking people from refinancing for nothing.
That's the gamble, yes. But Elliott's point is that nobody predicted the last four percentage points either. You can't plan for what you can't see coming.
The data shows borrowers are actually fine—only A$6 per thousand in arrears. Doesn't that suggest the buffer is working too hard?
It could mean the buffer is working exactly as intended. The people who can't pass the test don't get the loan, so they don't end up in arrears. You're not seeing the problem because the rule prevented it.
So ANZ is taking a reputational hit to protect people from themselves?
More like protecting them from a future they can't imagine. The bank is saying: we've seen what happens when rates move fast. We're not going to be the lender who approved someone at 3% and watched them drown at 6%.
What happens to the people who can't refinance right now?
That's the real cost. They're stuck. They can't move to a better rate, can't consolidate debt, can't access equity. ANZ is betting that's a smaller harm than the alternative.