One in ten home loans deferred, amounting to $195bn

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on August 04, 2020
One in ten home loans deferred, amounting to $195bn

Photo by Valdemaras D. on Unsplash

Data from the prudential regulator released today reveals 11% of home loans have been deferred to the value of $195 billion.

The Australian Prudential Regulation Authority (APRA) data shows that up to 30 June, total loans deferred amount to $274 billion.

Home loans make up $195 billion of that figure, while small business loans account for $55 billion, or 17% of the total small business loan book in Australia.

A bulk of the home loans deferred come from investors, at 34% of deferrals.

Additionally, while 95% loan-to-value ratio loans make up just 5% of the overall loan book, they account for 8% of deferrals. 

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
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
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
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
FixedMore details
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.
REFINANCE IN MINUTES, NOT WEEKS

Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.

Rates correct as of January 28, 2022. View disclaimer.

"The housing risk profile shows that housing loans granted repayment deferrals are more likely to be extended to owner-occupier borrowers, subject to principal and interest repayments, and have higher loan to value ratios than all housing loans," APRA's report said.

In June, $40 billion worth of loans were approved for deferral, while $18 billion exited deferral. 

Small business loans experienced a decrease in the deferral rate - down to 17% from 18% from May to June.

Loan deferrals were initially announced by the Australian Banking Association in March, with deferrals set to last for six months, but in early July deferrals were extended for another four months.

The risks of deferring

Although borrowers may not have to pay anything during a deferral, interest is still capitalised, meaning they could be paying more over the life of the loan.

With total loan deferral periods lasting up to ten months, in late March Standard and Poor's said Australian 'prime' mortgage bonds have enough cash reserves to last nine months of falling investment levels.

Falling investment levels could result in mortgage bond rating downgrades, which could tighten credit at the retail level, similar to what was seen during the global financial crisis from 2007 to 2009.

Additionally, research from investment bank Morgan Stanley found 55% of mortgage holders in Australia were receiving some form of income support, with 15% of those surveyed receiving unemployment benefits such as JobSeeker.

Investment commentator Alan Kohler wrote in The Australian that borrowers are heading for a fiscal cliff.

"The average mortgage is $467,700, so those people collectively owe more than $1 trillion," he said.

"Even if this group’s average mortgage is half that, and even if only a third of them don’t get a job and can’t meet their repayments, the loans in default would be equal to the entire capital of the Australian banking system."


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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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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