Have a mortgage deferral? Here's how your lender is expected to help when it ends

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on August 13, 2020
Have a mortgage deferral? Here's how your lender is expected to help when it ends

Photo by J W on Unsplash

Australia's regulatory watchdog has published its expectations for how lenders are expected to help customers whose loan deferrals expire in the coming months.

With the mortgage deferrals introduced at the start of the pandemic set to end in the coming months, the Australian Securities and Investments Commission (ASIC) has set out its list of expectations for a range of situations, including how lenders should approach customers who cannot resume mortgage repayments and the methods they use to communicate. 

These expectations have the potential to affect many people, with roughly one in 10 home loans deferred in the past several months worth $195 billion. 

"Lenders must do all things necessary to ensure that the credit activities authorised by their licence are engaged in efficiently, honestly and fairly," ASIC said. 

"As such, we expect lenders to have processes in place that will allow for an orderly transition and importantly, deliver consumers appropriate and fair outcomes."

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

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • 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%
UNLIMITED REDRAWSSPECIAL 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%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • 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
Variable
More details
ZERO APPLICATION FEESFEE FREE OFFSET
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
ZERO APPLICATION FEESFEE FREE OFFSET

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

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO APPLICATION FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO APPLICATION FEES

Yard Home Loan (Principal and Interest) (Special) (LVR < 80%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO UPFRONT OR ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO UPFRONT OR ONGOING FEES

Owner Occupier Accelerates - Evaporate (LVR 60%-70%) (Principal and Interest)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO UPFRONT OR ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO UPFRONT OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 80%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
UNLIMITED EXTRA REPAYMENTS
UNLIMITED EXTRA REPAYMENTS

Basic Home Loan (Principal and Interest) (LVR < 60%)

    Variable
    More details
    EASY DIGITAL APPLICATION
    EASY DIGITAL APPLICATION

    Neat Variable Home Loan (Principal and Interest) (LVR 70%-80%)

      Variable
      More details
      $0 APPLICATION FEE
      $0 APPLICATION FEE

      Budget Home Loan (Principal and Interest) (LVR < 80%)

        Variable
        More details
        100% FULL OFFSET ACCOUNT
        100% FULL OFFSET ACCOUNT

        Offset Package Home Loan (Principal and Interest) (LVR < 60%)

          Variable
          More details
          LIMITED TIME OFFER
          • Fast turnaround times, can meet 30-day settlement
          • No ongoing or monthly fees, add offset for 0.10%
          • Extra repayments + redraw services
          LIMITED TIME OFFER

          Smart Booster Home Loan Discounted Variable - 1yr

          • Fast turnaround times, can meet 30-day settlement
          • No ongoing or monthly fees, add offset for 0.10%
          • Extra repayments + redraw services

          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 be 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. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of May 24, 2022. View disclaimer.


          ASIC considers that such processes should include the following: 

          When lenders contact the customer about the expiry of their deferral

          1. "Lenders should make reasonable efforts to contact consumers prior to their repayment deferral expiring. This contact should be timely and allow for consumers to have reasonable time to consider their options."

          2. "We continue to expect lenders to provide consumers with information that will assist their decision-making in accordance with our earlier expectations."

          3. "In circumstances where a consumer does not respond to a communication, lenders should try to contact the consumer using a range of communication channels. Lenders should be able to evidence that they have made reasonable efforts to contact consumers."

          If a consumer cannot resume repayments on their mortgage

          4. "If a consumer identifies that they cannot resume full repayments on their mortgage, we expect lenders to make reasonable efforts to interact with the consumer directly (for example, via a phone call)."

          "We consider that a conversation or other direct interaction with a consumer will allow lenders to gather more personalised information about the consumer’s circumstances to make a decision about the consumer’s loan in a fair and appropriate manner."

          5. "In circumstances where a lender determines that it would be appropriate to offer further assistance to a consumer, lenders’ processes should be flexible and empower staff to offer tailored assistance that genuinely addresses the needs of the consumer."

          "Lenders should keep records which set out the assistance options they are providing to each individual consumer."

          6. "In circumstances where a consumer’s repayment deferral expires and they miss a repayment, lenders should make reasonable efforts to contact the consumer and assess the appropriateness of further assistance being offered to them."


          Consumers not being able to resume repayments is a distinct possibility. 

          According to Commonwealth Bank's latest full-year results, a quarter (25%) of customers with a deferral have started making some repayments already, but 12% of deferred loans are held by those in "higher risk" occupations such as retail, food, hospitality and airlines". 

          Additionally, 14% of deferred home loans had at least one borrower that was receiving JobSeeker payments, and 16% of deferred loans are interest-only. 

          According to ASIC, lenders should have in place "processes that are easy for consumers to understand and navigate, and that if a customer is dissatisfied with their lender's response, the lender must inform them of their right to complain to the Australian Financial Complaints Authority (AFCA)." 

          What else needs to be done?

          ASIC says it has been closely monitoring how lenders are assisting customers during COVID-19 across more than just home loans, and it says more can be done by lenders to provide customers with more personalised information and better inform them how assistance packages - like an interest-accruing mortgage holiday - can affect their repayments in the long run. 

          "We think this is important for lenders to consider in the context of providing consumers with further assistance at the expiry of a repayment deferral," ASIC said. 

          "We continue to encourage all lenders to work closely with their customers to develop solutions that not only provide consumers with relief but are sustainable and can assist consumers over the longer-term.

          "It also remains important that lenders continue to ensure that information about assistance is relevant, accessible and available to all consumers."

          ASIC also said lenders should use this experience to "build continuous improvement into their processes as this will likely result in better consumer experiences and outcomes." 

          Customers who are still struggling to repay their loan or expect to struggle when the mortgage deferrals end are encouraged to speak to their lender sooner rather than later. 


          Disclaimers

          The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. 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. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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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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