Mortgage deferrals drop to record low, March fiscal cliff averted?

author-avatar By on January 05, 2021
Mortgage deferrals drop to record low, March fiscal cliff averted?

New data has revealed loan deferrals have tumbled to new lows.

The Australian Prudential Regulation Authority (APRA) found at the end of November, just over $60 billion worth of loans were on temporary repayment deferrals, 2.3% of all loans. 

Of those deferred, $49.5 billion were housing loans, making up 2.8% of all housing loans, and $7.6 billion were small and medium-sized enterprise (SME) loans, 2.4% of all SME loans.

This is the first time housing loan deferrals have outpaced SME loan deferrals, but the number of housing loans deferred still outnumber SME loans deferred at nearly four-to-one.

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.

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.

The figures are a far cry from the peak seen in late June, where 11% of home loans totalling $195 billion were in deferral.

"Exits from deferral continued to outweigh new entries for the fifth straight month in November, with $32 billion in loans expiring or exiting deferral and $7 billion entering or being extended," APRA said. 

defdec201

Source: APRA

However, Victoria continues to struggle compared to other states and territories, with almost double the proportion of deferred loans compared to the rest of the country. 

"Victoria remains the state with the highest proportion of loans subject to deferral amongst the states and territories, with 3.2% of loans deferred compared with the rest of the country at 1.7%," APRA said. 

November marked the first time housing loans had a higher incidence of repayment deferral compared to SME loans. 

Westpac, ANZ, and Bank of Queensland (BOQ) had the largest share of deferred loans at 3%, and BOQ also had the highest percentage of new or extended deferrals at 16%. 

Conversely, NAB recorded a 60% increase in expired or exited deferrals. 

defdec202

Source: APRA

Lenders announced they would extend mortgage deferrals to borrowers still experiencing financial hardship to March, on a case-by-case basis. 

With JobKeeper set to end in March, and JobSeeker to return to its pre-pandemic $40 a day in March also, economists and politicians feared the end of the month would bring about a fiscal cliff. 

The latest deferral data coincides with better than expected employment figures in recent months.

More to come..


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): Credit Union Australia, 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.

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 in 2019. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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