ANZ allows interest-only loan switch or extension to customers affected by COVID-19

author-avatar By on June 16, 2020
ANZ allows interest-only loan switch or extension to customers affected by COVID-19

ANZ has extended further support measures to customers experiencing financial hardship due to COVID-19.

The big four bank has allowed borrowers to either move from Principal & Interest (P&I) to Interest Only (IO) for six or 12 months, or renew an IO period for six or 12 months.

Announced on Monday and effective immediately, any customers who wish to take advantage of the offer must contact an ANZ broker for approval.

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) owner-occupied 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. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.

Eligibility criteria for the IO switch/extension includes:

  • The customer must not be requesting any additional lending
  • Loans must be either P&I or IO expiring within next 3 months
  • Customers are unable to split their loan under this process
  • The customer must be employed and currently receving income
  • Any reduction in income must be temporary and due to COVID-19
  • The ANZ loan being renewed must be at least 6 months’ old (for 6 months IO), and 12 months old (for 12 months IO).

Borrowers will be required to undergo a credit check to confirm their eligibility. 

In a statement released to brokers, ANZ said the offer was aimed at assisting customers who would like a short-term reduction in their repayment commitments.

"This process aims to assist customers who wish to proactively manage their cash flow during this period as an alternative to putting their repayments on hold under ANZ's COVID-19 Assistance offering," ANZ said. 

ANZ is the third big four bank to announce IO switches and extensions as part of COVID-19 support measures.

Commonwealth Bank (CBA) announced at the start of June it would be allowing customers to apply for a one-year IO extension, or switch if they are currently making P&I repayments, without requiring a serviceability assessment.

CBA Group Executive Angus Sullivan said the move was made to further support customers through the economic fallout from the pandemic. 

"We recognise that as the coronavirus situation evolves and customers start returning to work, they may require alternative temporary assistance measures to help them get back on their feet sooner," Mr Sullivan said. 

"As part of this we are temporarily allowing existing home loan customers to apply for a one-year interest-only extension or switch if they are currently making principal and interest repayments without requiring a serviceability assessment.

Westpac also announced in May it would allow eligible home loan customers to switch from P&I repayments to IO, or extend their current IO home loan term for a further 12 months without a serviceability assessment. 

In addition to IO switches or extensions, all three big four banks have offered support to home loan customers by allowing borrowers to defer repayments for six months.

Recent figures from the Australian Banking Association show lenders have granted home loan deferrals to 480,727 customers, whose total borrowings come to $173.4 billion.


Disclaimers

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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Alex joined Savings.com.au in 2019. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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