More relief for mortgage holders as CommBank suspends foreclosures

author-avatar By on July 20, 2021
More relief for mortgage holders as CommBank suspends foreclosures

The prudential regulator has declared newly-deferred home loans will not be 'in arrears', while CommBank has extended the moratorium on housing foreclosures.

Australia's largest bank, CBA, announced it would extend the moratorium on housing foreclosures past September, which was initially announced back in November 2020.

Customers who are "significantly impacted" by the latest lockdowns will be able to stay in their homes until February 2022.

"We believe extending our freeze on any foreclosures will give those customers who are again impacted by COVID-19 more time to get back on their feet, and reassurance that they can remain in their home this Christmas and into next year," CBA chief Matt Comyn said.

"This is a critical time for all of us to pull together and support the communities most heavily impacted by the latest COVID-19 outbreak and the resulting lockdowns."

The moratorium on foreclosures applies to owner occupier customers who have made home loan repayments on time for at least 12 months prior to their deferral.

The announcement comes after the big banks announced further mortgage relief in light of New South Wales' and Victoria's latest lockdowns.

When the foreclosure moratorium was first announced, CBA had the greatest share of 'risky' 90%-plus loan-to-value ratio loans deferred among Australia's 20 largest banks.

The big four banks continue to carry the lion's share of high-LVR loan profiles, making up $55 billion of the $70 billion of mortgages with 90-95% LVR, and about $13 billion of the $17 billion in loans over 95% LVR, according to the prudential regulator's banking statistics for the March 2021 quarter.

No 'in arrears' for deferrals: APRA

Meanwhile, the prudential regulator said newly-deferred home loans won't be treated as 'in arrears'.

Loans treated as 'in arrears' can attract additional fees while affecting credit scores and the ability for the borrower to gain credit in future.

It also affects banks' credit quality and their own ability to borrow and lend money on domestic and international markets.

This was the same case in 2020's series of deferrals, and the Australian Prudential Regulation Authority (APRA) says "this will apply to loans that are granted a repayment deferral of up to three months before the end of August 2021."

"The measures apply regardless of whether or not the borrower has previously been granted a repayment deferral due to the impact of the pandemic."

Westpac's credit strategy team said true arrears data won't be clear until after this period.

"The original deferral period for the banks ended in March this year and we had expected arrears rates to increase in the period to 30 June as loans that entered hardship post the exit from deferrals in March moved through the 30/60/90 day arrears buckets," they said.

"Reporting (or trading updates) in August will provide detail on this transition, providing a window of clarity on actual arrears before the new deferrals enter bank books."

From March 2020 through March 2021 there were multiple mortgage deferral arrangements on offer - deferrals peaked at 11% of total mortgage books in July 2020, tapering to less than 1% by March 2021.


Photo by Erik McLean on Unsplash

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Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, 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 breaking down complex financial topics for the everyday consumer.

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