Deferred loan numbers fall by 70%, now below 300k

author-avatar By on November 18, 2020
Deferred loan numbers fall by 70%, now below 300k

Photo by Louis Marie on Unsplash

New data has revealed the economic recovery from COVID is gathering pace.

The Australian Banking Association (ABA) has found the number of deferred loans has fallen below 300,000 nationwide, a reduction of almost 70% since the peak earlier this year. 

Said peak saw more than 900,000 loans deferred overall, with the majority (803,000) by the seven largest banks. 

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
WIN YOUR HOME LOAN INTEREST FREE

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

  • WIN your home loan interest free and save up to $1.1 million. Refinance by 29 October. T&Cs apply.
  • Refinance Only. Fast online application, refinance in minutes, not weeks.
  • No Nano fees, Free 100% offset sub account. Mobile app. Visa debit card & instant payments.
WIN YOUR HOME LOAN INTEREST FREE

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

  • WIN your home loan interest free and save up to $1.1 million. Refinance by 29 October. T&Cs apply.
  • Refinance Only. Fast online application, refinance in minutes, not weeks.
  • 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.^
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

Rates correct as of September 25, 2021. View disclaimer.

ABA chief executive Anna Bligh said the data revealed borrowers may be through the worst. 

“Australian banks have played a major role in carrying the economic burden of the pandemic for their customers," Ms Bligh said.

"The good news is that the majority are now bouncing back as they restart their loan repayments."

Data up to November 4 revealed home loan deferrals by the seven largest banks, which includes the big four, Bank of Queensland, Suncorp, and Bendigo, are down to fewer than 145,000. 

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Total business loan deferrals have fallen to fewer than 73,000, and small and medium-size business loan deferrals are down to just over 65,000.

The value of deferred loans by the seven largest banks has now fallen below $100 billion – down to $86 billion.

This figure peaked at more than $250 billion in June.

The number of loans on hold is expected to fall further in coming weeks as more reach the end of their six-month deferrals.

Ms Bligh said the data was encouraging, but urged those still struggling to communicate with their lender. 

“It’s great to see a lower than expected number of people needing to extend their deferral period," she said.

“Don’t wait till you are in over your head, talk to your bank, they’ll help you find a way through this. Don’t tough it out on your own."

Heritage Bank borrowers avoid loan deferral extension

Heritage Bank said borrowers have avoided the need to maintain COVID-related hardship measures, with just 5% of loan deferrals continuing past the initial assistance period,

Heritage CEO Peter Lock said the low rate of ongoing deferrals at Heritage was somewhat surprising, with a number of factors at play. 

“We had a total of only 2,150 loans on COVID-related hardship provisions, which in itself is a very small percentage of our book," Mr Lock said.

“It does speak volumes about the quality of our loan book.

"We take our responsible lending obligations very seriously and our arrears rates traditionally sit at around one third of the industry average, so we know the credit quality of our customer base is very strong.”

Mr Lock said many customers who initially sought help when the pandemic hit found they were actually in a much better position than they realised.

“While interest rates dropped markedly in the last 12 months, many of our home loan customers did not reduce their repayments, so they actually got ahead of what was required.

“In fact, more than 70% of our home loan customers were at least one monthly repayment ahead, with many ahead by much more."

Arrears set to marginally rise 

A report from ANZ found mortgage arrears were likely to see a small rise in the next 12 months. 

However, this was likely to be offset by the bulk of mortgage deferrals already expiring, and lenders offering further support to those still deferring, making forced selling unlikely. 

Mortgage arrears are currently at 1.2%, only 0.2% higher than September last year.

ANZ economists said better than expected outcomes for unemployment and lender support would mitigate the risk of a spike in arrears. 

"ANZ 90+ day arrears data show that Victoria and NSW arrears rose modestly between March and September, but arrears rates in other states have declined through the same period," economists Felicity Emmett and Adelaide Timbrell said.

"RBA research suggests that housing arrears could rise to 2% as mortgage deferrals expire and unemployment continues to rise.

"Our view is that accommodative lender measures and a lower peak in the unemployment rate will mitigate this risk." 

Reserve Bank modelling expects unemployment to peak at 8% around the end of the year, declining gradually to be just above 6% by the end of 2022. 

The latest unemployment figures from the Australian Bureau of Statistics are released on Thursday. 


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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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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