Mortgage stress declines: Households paying back 80% of COVID loan deferrals

author-avatar By on January 29, 2021
Mortgage stress declines: Households paying back 80% of COVID loan deferrals

New data shows a significant drop in home loan deferrals as Australians resume their mortgage repayments.

Data from the Australian Prudential Regulation Authority (APRA) found that at the end of December, the value of deferred home loans fell by $7 billion to $43 billion.

That's a significant drop from May, when home loan deferrals peaked at $192 billion.

It was a similar story for small business loans, with loan deferrals plunging from a peak of $56 billion to $6 billion in December, and down by $2 billion since November.

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.

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.

According to Treasurer Josh Frydenberg, the current value of deferred housing loans is over 80% down from the peak in May.

Similarly, the value of deferred small business loans has plummeted by more than 90% since May.

“As more households and ­businesses resume loan repayments, banks are in an even stronger position to continue lending in support of the economic recovery by helping those wanting to buy a home, invest or grow their business," Mr Frydenberg said.

apra22

Source: APRA

By state, Victoria has the highest number of loans subject to deferral eligible for capital concession, with 2.8% of loans deferred compared with the rest of the country at 1.4%.

According to APRA analysis, more than 10% of home loans were deferred at the peak of the pandemic - that number has now fallen to 2%

It comes as the March deadline for loan deferrals fast approaches, though some of Australia's major banks have said they've stopped accepting new applications for mortgage deferrals.

Household lending strong

Home loan lending continues to surge as borrowers seek to take advantage of ultra low interest rates.

APRA's monthly authorised deposit-taking institution (ADI) statistics released today showed both owner occupied and investment loans increased.

apra

Source: APRA

"This is consistent with the continued broad-based increase in national house prices and market activity, driven by strong demand for detached dwellings," APRA said.

Commonwealth Bank data released today also shows that lending for housing continued to surge over the final months of 2020, with lending for renovations growing at an "extraordinary pace" largely thanks to the government's controversial HomeBuilder scheme.


Photo by Ian Branch 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.

*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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Emma Duffy joined Savings.com.au as a Finance Journalist in 2019 after spending a year as the editor of The Real Estate Conversation. She's passionate about empowering people to make smart financial decisions and improve the financial literacy of Australians by translating complex finance topics into understandable, relatable content.

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