Welcome to the Fear and Greed daily interview, I'm Sean Aylmer. With the reserve bank increasing interest rates three times in the last three months, the cost of living pressures are growing. But we're also coming off a period of record low rates, and a time when Australians have saved an extraordinary amount of money. Household savings have risen by about $ 281 billion since the pandemic. I wanted to look today at what this all means for the big banks. The trends they're seeing, how mortgage holders are dealing with the increases and what it means for savers as well. Rachel Slate is the group executive of personal banking at National Australia Bank. Rachel, so you sort of look after the retail banking at National Australia bank, is that right?

Welcome to the Fear and Greed daily interview, I'm Sean Aylmer. With the reserve bank increasing interest rates three times in the last three months, the cost of living pressures are growing. But we're also coming off a period of record low rates, and a time when Australians have saved an extraordinary amount of money. Household savings have risen by about $ 281 billion since the pandemic. I wanted to look today at what this all means for the big banks. The trends they're seeing, how mortgage holders are dealing with the increases and what it means for savers as well. Rachel Slate is the group executive of personal banking at National Australia Bank. Rachel, so you sort of look after the retail banking at National Australia bank, is that right?

That's right, Sean. So everything to do with our personal customers. So all of our branches, our contact centers, home lending, everyday banking, credit cards, digital experiences. That's us.

That's right, Sean. So everything to do with our personal customers. So all of our branches, our contact centers, home lending, everyday banking, credit cards, digital experiences. That's us.

Okay, well, thank you for joining us this morning. I want to jump into some of those areas, but first off we have had falling interest rates for so long and in the last little bit... Certainly this year interest rates have started to rise again. Now we expected that to happen for a bit longer than the last three months. How have consumers at face value changed their behavior recently as a result of the rate rises?

Okay, well, thank you for joining us this morning. I want to jump into some of those areas, but first off we have had falling interest rates for so long and in the last little bit... Certainly this year interest rates have started to rise again. Now we expected that to happen for a bit longer than the last three months. How have consumers at face value changed their behavior recently as a result of the rate rises?

Yeah, it's a great question, and one we are looking at. Customers, how they're spending, how they're saving and also how they're thinking about their home loans. And as you say, a long time... 11 years is a long time. Lots of us who work in banking have feel like we've been waiting half our careers for that to happen.

Yeah, it's a great question, and one we are looking at. Customers, how they're spending, how they're saving and also how they're thinking about their home loans. And as you say, a long time... 11 years is a long time. Lots of us who work in banking have feel like we've been waiting half our careers for that to happen.

Yeah.

Yeah.

And I think the important point is for lots of customers, this is their very first experience of rising rates. As you say, lots of savings over the last couple of years. And so for the majority of customers, they're in a good spot. So lots of customers are ahead on their repayments. More than 70% of our customers are ahead on repayments. And the average, and average is a dangerous... And we should talk a little bit about that. The average pay ahead in our portfolio it's there or thereabouts right across the industry as customers are 48 months ahead on their home lending repayments. Now the other thing we are seeing of course going on is you talk about cost of living and those pressures are real for a lot of customers. So energy prices, fuel prices. We are seeing and only just starting to see customers change the mix of how they're spending. So we're certainly seeing some customers start to pull back on some of those more discretionary expenses like your classic, Uber eats, you're streaming services. Probably some of those things that got a little bit more familiar during lockdowns. We're starting to see that. I wouldn't say we are seeing wholesale changes yet into how customers are behaving, but lots of curiosity would be... That's probably the word I would use to describe how people are feeling at the moment.

And I think the important point is for lots of customers, this is their very first experience of rising rates. As you say, lots of savings over the last couple of years. And so for the majority of customers, they're in a good spot. So lots of customers are ahead on their repayments. More than 70% of our customers are ahead on repayments. And the average, and average is a dangerous... And we should talk a little bit about that. The average pay ahead in our portfolio it's there or thereabouts right across the industry as customers are 48 months ahead on their home lending repayments. Now the other thing we are seeing of course going on is you talk about cost of living and those pressures are real for a lot of customers. So energy prices, fuel prices. We are seeing and only just starting to see customers change the mix of how they're spending. So we're certainly seeing some customers start to pull back on some of those more discretionary expenses like your classic, Uber eats, you're streaming services. Probably some of those things that got a little bit more familiar during lockdowns. We're starting to see that. I wouldn't say we are seeing wholesale changes yet into how customers are behaving, but lots of curiosity would be... That's probably the word I would use to describe how people are feeling at the moment.

And the data from this is coming through debit cards, credit cards, that type of thing?

And the data from this is coming through debit cards, credit cards, that type of thing?

Yeah, that's right. So we and our economics team look at spend data right across the market and the industry, as well as across states, across categories. We've seen some good recoveries in areas like retail and hospitality, clearly, they had a long way to come back from.

Yeah, that's right. So we and our economics team look at spend data right across the market and the industry, as well as across states, across categories. We've seen some good recoveries in areas like retail and hospitality, clearly, they had a long way to come back from.

Yeah. It's interesting we've had interest rates rise by a hundred... Well, 1. 3%, 130 basis points in the last three months. Personally, I get a letter from my bank and saying, you have to pay more. And it worries me though. I probably haven't stopped my spending patterns yet, but I'm thinking about it. And it's kind of what you've just described. Sounds a bit like for a lot of people... But over the next six months, particularly rates keep rising, personally, I will have to actually cut back on my spending and probably lots of people will.

Yeah. It's interesting we've had interest rates rise by a hundred... Well, 1. 3%, 130 basis points in the last three months. Personally, I get a letter from my bank and saying, you have to pay more. And it worries me though. I probably haven't stopped my spending patterns yet, but I'm thinking about it. And it's kind of what you've just described. Sounds a bit like for a lot of people... But over the next six months, particularly rates keep rising, personally, I will have to actually cut back on my spending and probably lots of people will.

Yeah. And that's what we're hearing from customers. I mean the other thing... And why I use the word curiosity, we do have a lot of customers, you might be one of them, Sean, who over the last few years haven't adjusted your repayments actually as rates have come down. Yeah. So we're also helping some customers understand that they're paying ahead. A lot of customers kept paying ahead. They do have some capacity there as well. They have choices to make about changing their spending or indeed adjusting their repayments. We're seeing lots of visits to where we've got all the information on NAB. com, about how customers... How to think about how far ahead you are, whether you've got redraw, whether you're paying ahead, how to adjust your repayments. As well as clearly looking at budgeting and spending. And that's obviously becoming more interesting to a lot of customers as well.

Yeah. And that's what we're hearing from customers. I mean the other thing... And why I use the word curiosity, we do have a lot of customers, you might be one of them, Sean, who over the last few years haven't adjusted your repayments actually as rates have come down. Yeah. So we're also helping some customers understand that they're paying ahead. A lot of customers kept paying ahead. They do have some capacity there as well. They have choices to make about changing their spending or indeed adjusting their repayments. We're seeing lots of visits to where we've got all the information on NAB. com, about how customers... How to think about how far ahead you are, whether you've got redraw, whether you're paying ahead, how to adjust your repayments. As well as clearly looking at budgeting and spending. And that's obviously becoming more interesting to a lot of customers as well.

Okay, Rachel. So I appreciate that people have a buffer in their home loans, they've built up savings, but at some point it kind of must hit homes that draws down and people start changing their behavior.

Okay, Rachel. So I appreciate that people have a buffer in their home loans, they've built up savings, but at some point it kind of must hit homes that draws down and people start changing their behavior.

Absolutely. And as I said earlier, talking about averages is always dangerous because there are customers in different situations. I think the other dynamic that's clearly going on and it's started slowly. It's going to go on over the next 18 months. A lot of customers who are coming to the end of very low fixed rate loans.

Absolutely. And as I said earlier, talking about averages is always dangerous because there are customers in different situations. I think the other dynamic that's clearly going on and it's started slowly. It's going to go on over the next 18 months. A lot of customers who are coming to the end of very low fixed rate loans.

Yeah.

Yeah.

And then making a decision about what to do next. Interestingly, we've done some research about how customers are thinking about that change and thinking about whether it's the right time to refinance. And we've got a large number of customers in the market considering refinance. But interestingly, it's sort of split between re- fixing or moving onto a variable loan. And of course that depends, what's important to you. So is it certainty or flexibility? I think you've got rising rates, which clearly is going to impact through two repayments. And then you've got this shock for a lot of customers who are going to be coming off fixed rates. So I think the combination of those two things over the next, probably 6 to 12 months, we'll start to see customers change their behavior a little bit more.

And then making a decision about what to do next. Interestingly, we've done some research about how customers are thinking about that change and thinking about whether it's the right time to refinance. And we've got a large number of customers in the market considering refinance. But interestingly, it's sort of split between re- fixing or moving onto a variable loan. And of course that depends, what's important to you. So is it certainty or flexibility? I think you've got rising rates, which clearly is going to impact through two repayments. And then you've got this shock for a lot of customers who are going to be coming off fixed rates. So I think the combination of those two things over the next, probably 6 to 12 months, we'll start to see customers change their behavior a little bit more.

Stay with me. Rachel, we'll be back in a minute. My guest this morning is Rachel Slay, group executive of personal banking at National Australia Bank. Did you see much customer behavior change during COVID?

Stay with me. Rachel, we'll be back in a minute. My guest this morning is Rachel Slay, group executive of personal banking at National Australia Bank. Did you see much customer behavior change during COVID?

Well, during COVID we saw clearly offset balances really increase. And you mentioned that high amount of savings in the system, a lot of that went into offsets. And clearly people were spending their money on different things when they were spending. So no travel, no restaurants and lifts, and other kinds of spending. We've seen customers really start... And maybe not during COVID, but certainly in the last six months, lots more interest in spend tracking, budgeting tools. So I think customers are starting to prepare really for this thing that's happening at the same time. This emergence from COVID. Starting to see some pressure and cost of living. And obviously now, what was talked about is the rate rises that were going come in the future here right now.

Well, during COVID we saw clearly offset balances really increase. And you mentioned that high amount of savings in the system, a lot of that went into offsets. And clearly people were spending their money on different things when they were spending. So no travel, no restaurants and lifts, and other kinds of spending. We've seen customers really start... And maybe not during COVID, but certainly in the last six months, lots more interest in spend tracking, budgeting tools. So I think customers are starting to prepare really for this thing that's happening at the same time. This emergence from COVID. Starting to see some pressure and cost of living. And obviously now, what was talked about is the rate rises that were going come in the future here right now.

Yeah. Just moving on to the rate rises, we've talked about home loans obviously, but what about term deposits? There has been very low returns for term deposits because interest rates have been so low. They are rising now. Is there more interest in term deposits yet? Or is it too early?

Yeah. Just moving on to the rate rises, we've talked about home loans obviously, but what about term deposits? There has been very low returns for term deposits because interest rates have been so low. They are rising now. Is there more interest in term deposits yet? Or is it too early?

Yeah, I think again, a mix... And you can see right across the market in any customer that's looking for a term deposit at a term that suits them, obviously. Because the term can be anything from three months out to as long as you want to fix for. So, there is some availability in the market. We haven't seen a big shift yet at the consumer end of the market. And I think that's because customers are... There's a little bit of wait and see, because there's a really clear expectation. You only need to open the paper. Particularly as it gets towards the beginning of every month at the moment, that rates are going to keep rising. I think there's a little bit of caution. And of course, if you're a homeowner you're offset still a much better bet.

Yeah, I think again, a mix... And you can see right across the market in any customer that's looking for a term deposit at a term that suits them, obviously. Because the term can be anything from three months out to as long as you want to fix for. So, there is some availability in the market. We haven't seen a big shift yet at the consumer end of the market. And I think that's because customers are... There's a little bit of wait and see, because there's a really clear expectation. You only need to open the paper. Particularly as it gets towards the beginning of every month at the moment, that rates are going to keep rising. I think there's a little bit of caution. And of course, if you're a homeowner you're offset still a much better bet.

Yeah, because you're paying a higher interest rate on the loan than you're getting in a term deposit. Credit cards. I haven't used a credit card for years. I lived on credit cards and then I kind of moved onto a debit card. And that was that. Do what's happening in credit? Do people still use credit cards like they used to, and I'm going to ask the same question about ATMs and things post COVID.

Yeah, because you're paying a higher interest rate on the loan than you're getting in a term deposit. Credit cards. I haven't used a credit card for years. I lived on credit cards and then I kind of moved onto a debit card. And that was that. Do what's happening in credit? Do people still use credit cards like they used to, and I'm going to ask the same question about ATMs and things post COVID.

Sure, so credit cards. Yeah. Do they use them like they used to? No, but do they use them? Absolutely. So there are 16 million credit cards in the hands of Australians. It's still a very popular way to pay and for different cohorts of customers. And of course there are new propositions emerging in the market as well. Our most popular credit card actually is a no interest card that we launched about 18 months ago. Low limits, no interest with a monthly fee. So it's solving that spot, particularly for young customers that want transparency and certainty that's really popular. But equally the more premium cards in the market... Rewards... Still very popular way to pay. But as you say, the growth in debit, huge over the last 10 to 15 years and really powered by that convenience of contactless payments.

Sure, so credit cards. Yeah. Do they use them like they used to? No, but do they use them? Absolutely. So there are 16 million credit cards in the hands of Australians. It's still a very popular way to pay and for different cohorts of customers. And of course there are new propositions emerging in the market as well. Our most popular credit card actually is a no interest card that we launched about 18 months ago. Low limits, no interest with a monthly fee. So it's solving that spot, particularly for young customers that want transparency and certainty that's really popular. But equally the more premium cards in the market... Rewards... Still very popular way to pay. But as you say, the growth in debit, huge over the last 10 to 15 years and really powered by that convenience of contactless payments.

And Rachel, what about ATMs? What's the usage are you seeing in those?

And Rachel, what about ATMs? What's the usage are you seeing in those?

It's a bit of a mix. One of the things we are seeing a little bit more is customers embracing ATMs to do more than just withdrawing cash. So could be depositing cash, depositing checks and things like that. And aside from ATMs, we're seeing customers use other services like bank at post. So we support that. It's really important for customers, particularly in regional and rural Australia, as well as. Three and a half thousand post offices across the country that provide a lot of the same things that you might have typically gone to an ATM for. There's definitely less ATMs around the country than there would've been a few years ago and that's really in responding to how customers are behaving.

It's a bit of a mix. One of the things we are seeing a little bit more is customers embracing ATMs to do more than just withdrawing cash. So could be depositing cash, depositing checks and things like that. And aside from ATMs, we're seeing customers use other services like bank at post. So we support that. It's really important for customers, particularly in regional and rural Australia, as well as. Three and a half thousand post offices across the country that provide a lot of the same things that you might have typically gone to an ATM for. There's definitely less ATMs around the country than there would've been a few years ago and that's really in responding to how customers are behaving.

And finally on Fear and Greed, we've spoken a lot about the buying and pay later sector. Previously and installment pay. And Commonwealth bank has gotten into that area. Apple pay has gotten into that area. Plus there's the outer pay says all, et cetera, zip code, et cetera. Where's national Australia bank on that.

And finally on Fear and Greed, we've spoken a lot about the buying and pay later sector. Previously and installment pay. And Commonwealth bank has gotten into that area. Apple pay has gotten into that area. Plus there's the outer pay says all, et cetera, zip code, et cetera. Where's national Australia bank on that.

Yeah. Great question. I mean, what we definitely know is that way to pay... Forget about the brand for a minute. That way to pay is really popular with customers. That pay in four, or using installment payments to manage cash flows. So we've got NAB now pay later coming into the market very soon. We've got, pre- registration open for customers at the moment. It's a little bit different to some of the other offers in the market, in that firstly, you need to be a NAB customer because we want to know who you are.

Yeah. Great question. I mean, what we definitely know is that way to pay... Forget about the brand for a minute. That way to pay is really popular with customers. That pay in four, or using installment payments to manage cash flows. So we've got NAB now pay later coming into the market very soon. We've got, pre- registration open for customers at the moment. It's a little bit different to some of the other offers in the market, in that firstly, you need to be a NAB customer because we want to know who you are.

Yep.

Yep.

Secondly, we're doing a full credit check and then thirdly, we don't have any fees, no late fees and clearly, no interest. For us, it's really responding to that need from customers. They want to pay that way. We'd rather them do it with us. We think it's safer and more secure for them. So coming soon.

Secondly, we're doing a full credit check and then thirdly, we don't have any fees, no late fees and clearly, no interest. For us, it's really responding to that need from customers. They want to pay that way. We'd rather them do it with us. We think it's safer and more secure for them. So coming soon.

Fantastic. Rachel, thank you for talking to Fear and Greed.

Fantastic. Rachel, thank you for talking to Fear and Greed.

Thanks Sean. Have a great day.

Thanks Sean. Have a great day.

That was Rachel Slate group executive of personal banking at National Australia bank. This is the Fear and Greed daily interview. Remember you should get professional advice before making any investment decisions. Join us every morning for the full episode of fear and greed. Australia's most popular business podcast. I'm Sean Aylmer, enjoy your day.

That was Rachel Slate group executive of personal banking at National Australia bank. This is the Fear and Greed daily interview. Remember you should get professional advice before making any investment decisions. Join us every morning for the full episode of fear and greed. Australia's most popular business podcast. I'm Sean Aylmer, enjoy your day.