Half of mortgage deferral holders resume repayments

By Nell Matzen  |  29 Oct, 2020

The Australian economy is showing signs of recovery with nearly half of mortgage holders who opted to defer their loans in March, are resuming regular repayments.

The Australian Banking Associations (ABA) latest data showed an estimated 45% of deferred loans were active again.

Since lenders launched the initiative to combat the economic effects of COVID-19 in March, around 500,000 mortgage holders chose to defer their repayments.

Halfway through the 6-month deferment period, the Australian Prudential Regulation Authority (APRA) revealed an estimated 1 in 10 Australian mortgages were on hold, totalling $195 billion worth of home loans, or 11% of total housing loans. 

1. Lenders optimistic about the decline in deferred loans

The initiative aimed to protect lenders, their customers and the economy, by avoiding the economic impacts of mass loan defaults. 

ABA’S CEO Anna Bligh has lauded the initiative as a success, softening the economic fallout for many Australian mortgage holders.

“These loan deferrals have helped hundreds of thousands of Australian families and small businesses survive the pandemic”, Ms Bligh said.

Ms Bligh also expressed her positivity about the number of mortgage holders recommencing their payments as the deferral period comes to an end. 

“This is a good sign for the economy. It shows that more Australians are getting back on their feet and resuming their loan repayments”, she said. 

You might also like: Home Refinancing Hits Record Highs

2. Mortgage holders returning to work

The re-uptake of mortgages is a sign that households are recovering from the economic fall-out of COVID-19, with unemployment rates beginning to ease. 

The end of significant lockdowns in June meant a number of Australians returned to work and became more financial stable, with APRA’s latest data revealing that July saw more mortgage holders recommencing their payments than deferring their loans. 

According to the Australia Bureau of Statistics (ABS), unemployment rates declined sharply from May through to August but saw a rise in September.

Speaking to reporters at BlueScope Steel last month, Prime Minister Scott Morrison predicted that unemployment rates should continue to fall as Victoria begins to open up.

“It was falling before the Victorian wave hit us, and with Victoria opening up again we would expect to see that fall again”, he said. 

You might also like: Five reasons you could consider refinancing this year?

3. Forecast for the Australian economy

Although the GDP is forecast to grow strongly in the coming months, Australia’s economy will still be persistently smaller than outlined by pre-COVID forecasts.

In a September speech Treasurer, Josh Frydenberg outlined the long-term effects that COVID-19 would have on the economy. 

 “By the end of 2020-21, Australia’s real economy is expected to be around 6% smaller than forecast in the 2019-20 MYEFO”, he said. 

You might also like: What is loan portability? Everything you need to know

4. Additional support beyond the deferral period

The banks have assured support for customers who face continued financial difficulties, including the extension of the deferment period to January 2020. 

Speaking with ABC News, Commonwealth Bank’s Chief Executive Matt Comyn said they were finding tailored solutions to support their customers depending on their financial situation. 

“As we approach the end of the initial deferral periods, we have been contacting all customers with deferred loans to talk with them about their options, including returning to full or part payment, or converting their loans to interest only,” he said.

ABA’s CEO Anna Bligh echoed these sentiments but warned that extended deferrals weren’t automatic, meaning mortgage holders would need to contact their lenders to apply. 

“If you are in financial difficulty, please call your bank, they can help you find a way through. Don’t tough it out on your own” she said. 

She also confirmed that the ABA would not be reporting borrowers to credit agencies until at least March 2021, assuring they had a good repayment record before the deferral period. 

You might also like: The cost of breaking a fixed rate home loan

Words by Nell Matzen


Is your current interest rate still competitive? Contact one of our mortgage brokers to compare your options and find a deal that suits you. 

What is the RBA planning for low-interest rates?

Aussies losing thousands by not switching home loans - ACCC says

Thousands of Aussies are refinancing every month - Are you missing out?

Get Your Free

Refinancing Report >