Difficult financial choices lie ahead for mortgage holders despite interest rates likely having reached its peak, banking executives say.
In appearances at a parliamentary review of the big four banks, the heads of Westpac and the Commonwealth Bank said cost-of-living concerns were still affecting the budgets of their customers.
Westpac chief executive Peter King said while interest rates were likely to start falling from February, people were still under financial pressure.
"We recognise many Australian households are making difficult spending choices to balance their budget," he told the committee on Thursday.
"It is a two-speed customer base ... those who have savings are benefiting from higher interest rates.
"Those who have borrowed, particularly new mortgage borrowers, are feeling the brunt of the higher interest rates."
The official cash rate has been kept at 4.35 per cent by the Reserve Bank since November.
Mr King said it was likely interest rates would settle "in the low three per cent range".
"The resilience of the economy is mirrored in our customer base,'' he said.
"As an example, total loan stress has increased to 1.4 per cent but is lower than expected."
Younger people had been most affected by the higher interest rates and stubborn levels of inflation, Commonwealth Bank chief executive Matt Comyn earlier told the hearing.
"Savings are being depleted, particularly by working families. Younger Australians, who tend to have lower incomes and smaller savings buffers, are the most sensitive to these changes in prices," he said.
Mr Comyn said while the broader economy was "fundamentally sound", cost-of-living issues were affecting the bank's customers.
"The effect of monetary policy is unevenly felt across the country with different experiences for borrowers and depositors ... households are spending more on essentials and are cutting back on discretionary spend," he told the inquiry.
"Many of our customers are finding it difficult to deal with the higher cost of living."
The executive criticised claims the Commonwealth Bank's $9.8 billion in profits came at the expense of overcharging customers, saying it was a "fact-free rhetoric".
"Business in Australia are being represented in this false dichotomy that for a company to earn any sort of income or profits, it is therefore inferred often, or directly related ... as some how being unjustly extracted from consumers," he told the committee.
"It is really eroding trust in our institutions, in all of our institutions. I think it's a real cause for concern."
The Greens have called for a 40 per cent tax on companies making large profits, but Mr Comyn said the move was "insidious populism".
Mr Comyn faced questioning on why customers had to often pay surcharges on purchases made by card, but he said it was not a direct comparison with cash.
"The cost of acceptance of electronic payments has fallen by more than 30 per cent," he said.
"We are one of the lowest, if not the lowest, cost of acceptance markets in the world."
The appearances by the executives was the first of two days of hearings into the big four banks, which account for 80 per cent of the market.
NAB chief executive Andrew Irvine and ANZ head Shayne Elliott will face the committee on Friday.
