Mortgage deferrals almost gone, but risky lending is up

author-avatar By on March 17, 2021
Mortgage deferrals almost gone, but risky lending is up

Nearly 100% of deferred loans from the start of the COVID-19 crisis have resumed repayments, but other data shows borrowers are taking on extra risk.

According to the Australian Banking Association (ABA), almost 97% of all deferred loans had resumed repayments by the end of February, almost one year from when this customer support was first announced. 

Last month it was 91%. 

Initially set to last only six months before being extended, deferred mortgages peaked at 11% of all home loans in June 2020 (worth $195 billion), before steadily falling ahead of the March 31 deadline


Buying a home or looking to refinance? The table below features home loans with some of the lowest 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.

With just $10 billion in loans now in deferral, ABA CEO Anna Bligh said banks are still ready to take the call of those still struggling.

“The latest loan deferral figures show that while the vast majority are back on their feet, some customers are still struggling," Ms Bligh said. 

"These customers should talk to their bank now about the path ahead.

“Over the past year, banks have cushioned the blow for their customers. Through 2021, their priority is helping customers rebuild and get ahead."

While most borrowers have now resumed full or partial repayments on their mortgages, those who are still not able to do so are at risk of default. 

Credit rating agency Moody's has warned mortgage delinquency rates will rise in the first half of the year once mortgage relief measures taper off in conjunction with other support measures like JobKeeper and JobSeeker.

However, rising property prices could provide some relief for struggling borrowers. 

"Rising house prices will curb mortgage delinquencies risks to some extent, because they will make it easier for borrowers in financial difficulty to sell their properties and repay loans," said Moody's Vice President and Senior Credit Officer Alana Chen. 

"But the positive influence of rising house prices will not be enough to prevent delinquency rates from increasing in the first half of 2021."

Delinquency rates should improve throughout the year as the economic recovery builds momentum, Moody's said. 

Related: What happens when you default on a mortgage?

Low deposit and interest-only mortgages are up 

Home lending has enjoyed a stellar few months, thanks in part to ultra-low interest rates. 

Data from the Australian Bureau of Statistics (ABS) showed new home lending in January was up almost 45% while first home buyer numbers were up almost 71% from 12 months ago. 

Despite plans to repeal some responsible lending laws, access to housing credit doesn't appear to be an issue at the moment, or so it would seem based on this and the latest APRA data as well. 

According to the Australian Prudential Regulation Authority, new residential mortgage lending was up 13.1% year on year and 20.2% over the three months to December 2020. 

While these increases are sizeable, even bigger numbers were recorded in 'riskier' lending categories. 

Loans with LVRs of 95% or higher (that is, loans with deposits of 5% or less) increased by 27.4% over the year to the December quarter, and interest-only loan funding rose by just over 31%. 

Loans to those with debt-to-income ratios of six or higher also surged by 26.3%. 

A UBS analyst said it assesses this data as "showing a significant quarter-on-quarter increase in ‘higher risk’ home loans", but APRA appears less concerned, saying much of this activity could be due to increased first home buyer activity

"According to the available indicators, there is no evidence to suggest a material relaxation in lending standards is accompanying the significant increase in new lending," APRA said. 

"The share of new lending at higher LVRs also remains below levels seen over the past decade."

Reserve Bank (RBA) Governor Phillip Lowe recently said the bank was "closely monitoring" recent developments in the housing market. 


Below is a snapshot of some of the lowest interest-only home loan rates available for owner-occupiers.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
WIN YOUR HOME LOAN INTEREST FREE

Nano Home Loans Variable Owner Occupied, Interest Only (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, Interest Only (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

Smart Home Loan (Interest Only) (LVR < 80%)

VariableMore details

Budget Home Loan (Interest Only) (NSW and ACT only) (LVR < 80%)

VariableMore details

Ultimate Variable Home Loan (Interest Only) (New Customer)

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


Mick Haupt 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.

*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.

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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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