COVID loan deferrals down as customers start to repay their home loans

author-avatar By on September 11, 2020
COVID loan deferrals down as customers start to repay their home loans

Photo by Todd Diemer on Unsplash

The number of temporary loan deferrals due to COVID-19 among Australian banks fell slightly in July 2020, as more customers started to make repayments on their loans.

According to data released by the Australian Prudential Regulation Authority's monthly data, $240 billion of loans were subject to deferral at 31 July, representing 9% of total loans.

In terms of housing loans, $167 billion were deferred, which is also 9% of the $1.8 trillion in total home loans. 

This is an improvement on June's figures, which had 11% of mortgages deferred to the value of $195 billion. 

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.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^

Rates correct as of October 17, 2021. View disclaimer.

Also shown in the data is the number of exited or expired loans increasing from $33 billion in June to $40 billion in July.

The number of Australian borrowers resuming mortgage repayments in July fits with the Australian Banking Association's call for borrowers to start resuming repayments if they had the capacity to do so, also in July. 

“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," ABA Chief Executive Anna Bligh said in July. 

"Encouragingly, many customers have already chosen to resume making repayments."

The numbers also support statements made by the likes of ANZ and Commbank CEO's Shayne Elliott and Matt Comyn to the Standing Committee on Economics last week, saying many customers had begun to repay deferred loans. 

"As the deferrals finish, we believe most will resume paying down their loan. And, encouragingly, we’ve already seen a number of customers make some kind of repayment," Mr Elliott said. 

"However, the reality is that some will need further help."

"By the end of September we will have made calls to around 250,000 customers, over a two month period," Mr Comyn said. 

"Many of those we contact will be able to recommence their repayments. Some are facing more difficult circumstances."

The six-month mortgage holiday for customers is almost over, with more than 80,000 loans to be assessed by the end of September and 180,000 by the end of October. 

However banks are offering a further four-month extension on a case-by-case basis for those who need it. 

Westpac and Suncorp see the biggest drops

Westpac and Suncorp Bank saw the biggest monthly drop in loan deferral numbers. 

Westpac's deferred loans fell by 25% to $41 billion, while Suncorp's exposure to deferrals fell by 22% to $3.5 billion. 

ANZ meanwhile had the biggest exposure to housing loan deferrals among the big banks at 12% ($30 billion), and actually increased its exposure by 4%. 

Westpac had the lowest exposure to housing loan deferrals at 6%, worth around $30 billion (ANZ has a smaller loan book than Westpac). 

NAB had a housing deferral exposure of 8% ($30.5 billion). 

Arab Bank Australia had the highest exposure to deferred housing loans at 17% of its overall housing loan book ($65 million).  

Public sector credit unions have lowest exposure to deferred loans

Many of the loans that have been deferred over the COVID-period occurred due to households losing income and jobs, with Commbank full-year data showing that 14% of deferred home loans had at least one borrower that was receiving JobSeeker payments.

Smaller 'public sector' credit unions and mutual banks had some of the lowest levels of loan deferrals as a proportion of total housing loans. 

For example:

  • Police Bank had the lowest exposure at just 1.8% ($29 million);
  • Australian Military Bank only had 2.3% of housing loans deferred ($27 million);
  • Police Financial Services Limited had just 3% of loans deferred ($47 million);
  • Police Credit Union Limited had 4% ($29 million);

Representative mutual banks for other 'recession-proof' job sectors like teaching also experienced relatively few deferrals. 

Victoria Teachers Limited had just 3% of housing loans deferred ($55 million), while Teachers Mutual Bank Limited also had an exposure of just 3% ($195 million). 

However, Teachers Mutual Bank has highest share of 'risky' loans

Teachers Mutual Bank had the highest proportion of high LVR (loan-to-value ratio of 90% or more) housing loans under deferral, at 28% of its total deferrals. 

Victoria Teachers Limited came in second for high LVR loans deferred at 21%, while Auswide bank was third at 18%. 

The big four banks' proportion of high-LVR loans in their housing deferral books were:

  • Commbank: 13% 
  • Westpac: 10%
  • ANZ: 8% 
  • NAB: 4% 

Arab Bank and G&C Mutual Bank had 0% of its deferred loans on a LVR of 90 or higher.

Investment loans with higher deferral rates 

As much as 40% of NAB's housing deferrals were investment loans, worth around $12 billion. 

Westpac's investment loans were deferred at a rate of 36%, while Commbank and ANZ had 33% and 32% respectively. 

Around 16% of all deferred loans among the authorised deposit-taking institutions (ADIs) monitored by APRA were interest-only, the cheapest form of home loan repayment, which might represent a problem once loan deferrals end. 

73% of Australian Mutual Bank's $26 million in deferred loans were interest-only. 

APRAinfo.jpg

Source: APRA. 


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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author-avatar
William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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