Borrowers with smaller deposits more likely to extend their home loan deferral

author-avatar By on December 01, 2020
Borrowers with smaller deposits more likely to extend their home loan deferral

According to the latest data from Australia's prudential regulator, borrowers with deposits smaller than 10% were more likely to extend their home loan deferral.

Bottoming out at less than 5% of total deferrals in September, in October 90%-or-greater LVR borrowers amounted to 10% of the deferred loan book, implying more of them asked for an extension than those with larger deposits.

In the wider market, those with 90%-or-greater LVRs made up just 6% of the total loan book, according to the Australian Prudential Regulation Authority (APRA).

This is at a greater ratio than in June, where 90%-or-greater borrowers made up 5% of the loan book and 8% of deferred loans. 

APRA does not publish data on the proportion of specific risk profiles that re-enter or extend their home loan deferrals.

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, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you.

As of 31 October, $88 billion worth of loans were deferred, representing just 3.3% of the banks' total loan books.

Exits also outweighed new entries for the fourth straight month, totalling $100 billion loans expiring or exiting deferral, and just $12 billion entering or being extended.

This was because as many as half of borrowers came off their six-month deferrals at the start of October.

In August, CommBank's 90%+ LVR borrowers had a 13.5% share of the total loans deferred, a figure which climbed to 15% in October. 

Newcastle Permanent also had a 24% share in 90%+ LVR loans deferred.

Bendigo and Adelaide Bank also had the highest share of interest-only loans deferred at 21%.

For investor loans, 86% of Regional Australia Bank's investor loans were deferred.


Photo by Jonathan Francis on Unsplash

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): Great Southern Bank, 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.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

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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Harrison is a Senior Finance Journalist, and joined Savings in 2020. Prior to joining Savings, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison is passionate about informing readers on the strings being pulled in high-up places and how it affects everyday Australians.

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