Grim reality of home loans during COVID crisis

EXCLUSIVE: Only one in ten cash-strapped borrowers who took out a mortgage holiday with the nation's big four banks have exited the payment relief program, alarming new figures show.

New data released by the Australian Banking Association showed many Australians are unable to make any repayments on their loans despite just two months remaining on many of these repayment breaks.

About 485,000 mortgages have been deferred in Australia with the nation's largest seven banks including the Commonwealth Bank, National Australia Bank, Westpac, ANZ, Bendigo and Adelaide Bank, Suncorp and Bank of Queensland.

But new data from the big four banks found in May and June:

* About 75,800 customers on mortgage deferrals had exited the repayment holiday program (9 per cent).

* About 50,000 are making partial repayments and 62,500 are making full repayments (15 per cent). 

The ABA's chief executive officer Anna Bligh said there was still a long way to go for customers experiencing financial hardship during the pandemic, but it was pleasing to see some customers slowly getting back on their feet.

"There's a very long road and plenty of hurdles to clear but it's encouraging to see homeowners returning to paying down their mortgages," she said.

"These figures show there are some green shoots emerging in our economy and that's a positive sign."

The Australian Banking Association’s chief executive officer Anna Bligh said it’s still a tough time for many borrowers who have taken out home loan repayment ‘holidays’.
The Australian Banking Association’s chief executive officer Anna Bligh said it’s still a tough time for many borrowers who have taken out home loan repayment ‘holidays’.


When the COVID-19 pandemic hit customers were initially given repayment holidays of up to six months which would see breaks given through until late September.

At the end of the six months customers are required to start making repayments again.

If they are unable to meet repayments a further four month break might be available to be given to these customers still experiencing financial hardship.

Treasurer Josh Frydenberg said last week loan deferral programs had given hundreds of thousands of Australians much-needed financial relief.

"Since March of this year banks have provided repayment deferrals on over 900,000 loans covering in excess of $250 billion in borrowings," he said.

HSBC chief economist Paul Bloxham said he expected house prices - particularly in Sydney and Melbourne - to fall through until 2021.

"It's all been moving in slow motion including low interest rates, the support measures from the government and also the fact that banks have been delivering repayment holidays," he said.

"In Sydney and Melbourne they have been more internationally exposed, so the closing of the borders has slowed down the migrant flows who often go to the two major cities."

Mr Bloxham said he has forecasted house prices to fall "somewhere between two and 12 per cent" next year.

Customers who took out repayment holidays still have interest accruing on their debts.

Home loan interest rates remain at record lows - some variable rate deals are now at just 1.99 per cent.

sophie.elsworth@news.com.au

@sophieelsworth

Originally published as Grim reality of home loans during COVID crisis


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