By Byron Kaye

SYDNEY (Reuters) -Two top Australian banks said the number of home loan customers missing repayments remained below pre-COVID levels as a spike in living costs slows their discretionary spending, a sign that concerns of widespread financial distress may not materialise.

After 400 basis points of interest rate hikes in 14 months, the fastest tightening in a generation in the country, economists have warned one million customers with expiring fixed-rate mortgages would struggle as their loans reverted to higher variable rates from 2023, a scenario widely referred to as the "mortgage cliff".

But the CEOs of National Australia Bank (OTC:NABZY) and ANZ Group, the No.3 and No.4 lenders, told a parliamentary hearing on Wednesday that they were seeing only a slight increase in borrower stress in the A$2 trillion ($1.34 trillion) mortgage market.

"We have been pleasantly surprised at the resilience that has been shown to date," NAB CEO Ross McEwan told the House of Representatives economics committee hearing which bank bosses are required to face periodically.

"We are starting to see an uptick ... where customers have not been able to make a payment, but the levels that we're seeing are still below the 10-year average."

NAB had recently telephoned 8,600 mortgage customers it considered most vulnerable to higher borrowing rates and just 14 requested support, McEwan told the committee.

Almost half of NAB's fixed-rate mortgage customers had reverted their loans to variable without incident, and the bank did not expect much change as the rest did the same, he said.

ANZ CEO Shayne Elliott told the inquiry just A$6 of every A$1,000 owed to his bank for a mortgage repayment was more than 90 days late, which was "better than it was before the pandemic".

"Good incomes mean that people absorb bigger expenses," Elliott said.

Borrowers coming off low fixed-rate mortgages were "less stressed than the average customer," he added. "They're prepared for it. They know it's coming, it's not a surprise."

Heads of Commonwealth Bank of Australia (OTC:CMWAY) and Westpac, the nation's top two lenders, will speak at the hearing on Thursday.

ANZ, meanwhile, broke with rivals and said it supported regulator-recommended mortgage buffers to measure a customer's borrowing capacity, citing uncertainty around the direction of interest rates.

After the hefty rate hikes, ANZ's three larger rivals have started considering lending without applying a regulator-recommended 3% buffer, saying it is disadvantaging borrowers.

"Of course we should build in buffers," Elliott said. "I think 3% feels about right. We don't know what the future holds."

($1 = 1.4905 Australian dollars)