Westpac has forecast that Australian house prices will fall by 10.9 per cent by March 2027, as the bank reported a $6.8 billion annual profit and warned that interest rates are likely to remain elevated into next year.
The bank said the economy was holding up “relatively well”, supported by strong business investment, but that inflation remained above the Reserve Bank of Australia’s target.
Westpac’s outlook came ahead of the RBA’s next interest rate decision, with the central bank widely expected to raise rates for the fifth time this year.
Westpac house price forecast points to further decline
National house prices were already 5.2 per cent below their March peak in September. Westpac expects the decline to reach 10.9 per cent between March 2026 and March 2027.
It said higher prices were creating difficulties for households and businesses, although the effects were uneven across the economy.
Westpac recorded a $6.8 billion profit for the year to September, a 1 per cent fall on the previous year. Its net interest margin, a key measure of bank profitability, dropped by three percentage points to 1.86 per cent in the second half of 2026.
The bank attributed the pressure to intense competition for lending and a rise in the number of customer accounts qualifying for savings bonus rates. Stronger business and institutional lending partly offset the decline, growing by 12 per cent and 18 per cent respectively.
Mortgage hardship remains low
Westpac said the proportion of mortgage balances in hardship remained low at 0.6 per cent despite cost-of-living pressures and higher interest rates.
It provided more than 42,000 tailored financial hardship and disaster relief packages during the year. More than 60 per cent of those customers needed support for less than three months.
The bank said its credit quality measures continued to indicate customer resilience. Some 86 per cent of accounts were held by customers ahead on their mortgage repayments, including balances in offset accounts.
Nearly four in 10 customers were more than two years ahead on repayments, while about one in 10 were on schedule. Only 1 per cent were behind on their repayments.
However, provisions for potential credit losses rose to $5.2 billion. Westpac cited economic and geopolitical uncertainty affecting energy-intensive industries and discretionary spending.
The bank will pay a final dividend of 77 cents a share, taking its full-year dividend to $1.54, up 1 per cent on the previous year.
