Data from Australia's largest banks shows a rapid increase in the number of home loan customers who've resumed part or all of their mortgage repayments.
New Australian Banking Association (ABA) data, collected from Australia's seven largest banks, shows that almost half (45%) of deferred mortgages are now being regularly paid down.
As of last week, the number of deferred mortgages had dropped to 270,000, meaning repayments had resumed on at least 224,000 loans.
In June the number of deferred loans peaked at around 500,000, worth around $274 billion.
Australian Prudential Regulation Authority (APRA) data showed up to 30 June, one in 10 mortgages across the country were deferred.
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Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.
"A good sign for the economy"
ABA Chief Executive Anna Bligh said the increasing number of Australians resuming mortgage repayments was a good sign for the economy, saying it shows more Australians are getting back on their feet.
“These loan deferrals have helped hundreds of thousands of Australian families and small businesses survive the pandemic," Ms Bligh said.
According to the ABA data, more than 130,000 mortgages and 50,000 SME loans had their repayments resumed in just the past month alone.
“Right now, it’s really important that people contact their bank to figure out the path ahead. The earlier you speak to your bank, the more options they have to help you find a way through”, Ms Bligh said.
“Banks will work with customers to figure out a tailor-made solution. That might include restructuring a loan, or in some cases, granting an additional four month deferral.”
In July, the ABA announced a further four-month extension to these mortgage holidays for those who need them, taking the maximum allowed mortgage deferral to January 2021.
But it also encouraged those who could afford to do so to start resuming regular repayments.
“Those who are able to repay their loans will resume doing so, which is in the best interests of those customers and allows support to be directed to those who need it," Ms Bligh said at the time.
More support still needed for those struggling
While the number of Australians who are able to meet their mortgage repayments again is reassuring, the housing market isn't out of the woods yet.
Commonwealth Bank CEO Matt Comyn said on Monday ahead of the bank's annual general meeting (AGM) that ongoing support from the banks was still needed.
"Our recent focus has been on contacting customers as they approach the end of their initial deferral periods, to talk with them about their options," Mr Comyn said.
"While these trends are encouraging, we are conscious that many of our customers still require our ongoing support, particularly in regions most affected by COVID-19, such as Victoria, which is reflected in requests for deferral extensions.
"We will continue to offer support and assistance to our customers as the economy recovers.”
The falls in deferred mortgages reflects data shared by Commonwealth Bank, Australia's largest home lender.
Ahead of its AGM, CBA said that the number of its home loans deferred fell from 210,000 in June to 129,000 this week - a fall of 48%.
There has been a monthly net reduction in deferred home loan facilities of 21,000 among Commbank customers, and 93,000 home loans remained in deferral at the end of September.
Of these loans, 52,000 are due to expire and exit in October.
Over 17,000 CBA mortgages have been granted a deferral extension for a period of up to 4 months, with Victoria accounting for the largest proportion of deferral extensions at 43%.
Tellingly, 14.2% of CBA's deferred mortgages have an LVR of 90% or higher, compared to the market average of 9%.
Previous transactional data from Commbank showed 14% of deferred home loans had at least one borrower that was receiving JobSeeker payments.
More than half of these (58%), or roughly 7% of all deferred loans, were joint accounts with only one borrower on JobSeeker.
This could mean a sizable number of home loan customers could still struggle to meet their repayments beyond the four-month extension, with the JobSeeker and JobKeeper rates due to be cut further in the coming months.
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:
- The big four banks are: ANZ, CBA, NAB and Westpac
- The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
- The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.
In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.
*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may inﬂuence the cost of the loan.
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