ANZ: Mortgage deferrals a last resort for borrowers in financial hardship

author-avatar By on July 27, 2021
ANZ: Mortgage deferrals a last resort for borrowers in financial hardship

The bank said it stands ready to help struggling borrowers, but mortgage deferrals were no longer the first or best option.

At the height of the pandemic in Australia last year, many lenders rushed to assist households by deferring mortgage repayments for up to six months, with some extending this further. 

But as the COVID-19 outbreak in Sydney and NSW worsens, ANZ Group Executive for Australia Retail and Commercial Banking, Mark Hand, said this time it wasn't a "one-size-fits-all" approach. 

"Every customer’s circumstances are different and a deferral may not be the best option for some of them. That’s because the money still has to be repaid so there could be implications for their credit status down the track," Mr Hand said. 

This comes after the prudential regulator said borrowers who have deferred their mortgages won't be counted as 'in arrears'.

Instead, Mr Hand pointed to other options available like accessing funds in offset accounts, temporarily reducing repayments, or switching to interest-only payments for a short period, rather than opting for a total deferral. 

"However this time, instead of the deferral option being like a cover-all insurance policy that everyone takes out, it will be an option customers take out only if they really need it - like an extra lever we can add to our existing financial hardship process," he said. 

According to ANZ, about three quarters of applications for assistance from home loan customers recently had come from NSW. 

However, while the average number of calls for assistance had risen in July compared to June, they were coming off a relatively low base and were well below what was seen last year, and the lender didn't expect calls to reach anywhere near that volume. 

At the peak of the pandemic last year, ANZ paused repayments on an estimated $40 billion worth of loans, granting them on a 'no-questions-asked' basis. 

Residential mortgage deferrals peaked at 11% of all home loans in June 2020, according to the Australian Banking Association, worth $195 billion. 

Mr Hand said the deferrals helped many households emerge from the worst of the crisis relatively unscathed. 

"Many customers who took a deferral last year came out of the initial lockdowns in pretty good shape," he said.

"At that time, there was so much uncertainty it was wise for customers to take advantage of deferrals because none of us knew what was coming around the corner." 

ANZ noted they had planned for greater calls for assistance in the second half of this year as Government support like JobKeeper and elevated JobSeeker expired.

Mr Hand said teams were well equipped to deal effectively with customers' issues as they required it. 

"We have the financial wherewithal to do it, we’ve got the people in place to do it and, most importantly, we have the will to do it," he said.

"While we’re not out of the woods yet, we are ready to work again with governments and regulators to make sure our customers not only survive this latest upheaval but emerge ready to take advantage of the rebound on the other side."


Picture source: Twitter

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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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