Westpac's 1H FY26 half-year results, released early May, showed household 90-day arrears across its mortgage book at 1.21 per cent, up 0.27 percentage points half-on-half. The headline move was the largest among the three reporting majors (ANZ moved up 0.18, NAB up 0.15). The Westpac arrears commentary in the investor pack was carefully neutral but flagged "elevated exposure to the WA mining-services value chain" as a contributing factor.
Disaggregating the Westpac book by state, which the bank does not publish directly but which can be inferred from APRA quarterly mortgage statistics and ABS regional employment data, reveals the pattern more clearly. The Westpac book has historically over-indexed in Western Australia relative to its national market share, with particular concentration in the Pilbara and the Perth outer metro postcodes that house FIFO workers. As the iron ore price and mining services activity have softened through H2 2025 and early 2026, the WA exposure has carried disproportionate weight in the national arrears number.
How the WA exposure shows up
Three patterns in the regional data line up with the Westpac commentary. First, ABS regional employment data shows the Pilbara reporting unemployment 0.8 percentage points above the national average in the March 2026 quarter, a meaningful shift from the negative gap that held through 2023-2024. Second, Cotality housing market data shows Perth values still rising on a national basis but with weakness emerging in the FIFO catchment suburbs. Third, the major Pilbara contractors have publicly disclosed staff reduction programmes through Q1 and Q2 2026, which feeds directly into mortgage serviceability for the affected households.
For a Westpac mortgage holder in the affected catchment who has not yet missed a repayment but whose household income has tightened, the practical risk is not immediate default. It is the slower drift through 30 and 60 day late payment listings which themselves restrict the ability to refinance to a sharper rate elsewhere.
What it means for borrowers
For a Westpac (or St.George, Bank of Melbourne, BankSA, all Westpac group brands) variable mortgage holder in WA who is feeling the squeeze, three practical moves remain available:
- Same-lender hardship variation. Westpac group banks are required under the National Consumer Credit Protection Act to consider hardship applications, including temporary repayment relief, interest-only conversion for a defined period, or a small repayment holiday. Make the request before any missed payment, not after.
- Same-lender rate review. The retention discount at Westpac is currently substantial as the bank tries to slow refinance outflows. A 50 to 80 basis-point cut on a $600,000 loan is $230 to $370 a month and may be enough to ease the squeeze without any structural change.
- Refinance to a non-bank that is more comfortable with the WA mining-services exposure. The non-bank specialist lenders (Pepper, Liberty, Bluestone) regularly write WA-exposed files and can be more comfortable with non-standard income patterns than the Big 4.
The refinance window for clean WA files
For Westpac group customers in WA who are not yet in arrears and have a clean repayment record over the past 24 months, the refinance window is unusually open. The Big 4 banks are competing aggressively for refinance volume from prime borrowers, the digital majors (Athena, ING, Macquarie, Tic:Toc) are quoting sharp rates against the Westpac variable, and the streamlined like-for-like APG 223 refinance carve-out applies if the loan size is unchanged.
The key practical observation is that the refinance window is meaningfully harder to access once arrears appear on the file. Late payment listings (30+ days) and especially default listings (60+ days, $150+) materially narrow the lender panel that will write a refinance. For Westpac WA customers who anticipate possible income pressure ahead, the refinance maths is materially better before that pressure arrives than after.
The broader read
Westpac's WA exposure is the specific case. The broader read across the three reporting majors plus CBA's 3Q update is that household arrears are still trending up nationally, though slowly, with the rate of increase varying by state and by sector. WA has the mining services slowdown; outer-metro Sydney has the higher-LVR 2022-2023 cohort coming off fixed; outer-metro Melbourne has the same plus building industry pressure.
For borrowers nationally, the read is not "credit crisis". The absolute arrears levels remain low by historical standards. The read is that pockets of stress are emerging, and being aware of which catchments are softer helps borrowers plan ahead rather than react after the fact. The lenders are pricing aggressively for refinance volume; the buffer review at APRA may move in late 2026; the rate cycle has paused. The practical move for any borrower under pressure is to act early on the levers that exist, not to wait.