Mortgage holidays will soon be over for some homeowners, with tighter eligibility conditions looming at the end of September and distressed sales potentially on the horizon.
But banks have promised to extend repayment deferrals for those still facing coronavirus-driven financial hardship, with Victorians under lockdown expected to need the helping hand.
Advantage Property Consulting director Frank Valentic said borrowers had been on a “free holiday” for six months, but banks would “want to see all your financials for assessment” for an extension.
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Mortgage holiday extensions will be assessed by the banks. Picture: iStock
Buyer’s advocate Frank Valentic said some distressed listings may appear.
“Essentially, the holiday’s over at the end of September. And you’re going to have to prove you can keep (staying) on the holiday, or you may end up in a position where you’re having to sell the property,” Mr Valentic said.
“I’m sure there’ll be a lot of people there who don’t meet the criteria.”
He anticipated a spike in distressed listings, which would be almost impossible to sell while a ban on physical property inspections remained in place.
Many Victorians are still unable to make full mortgage repayments, with non-essential businesses including retail, restaurants and gyms closed under lockdown.
Melbourne restaurants including Andrew McConnell’s are closed. Picture: Jason Edwards
Banks will contact borrowers individually to assess deferrals. Picture: iStock
But Australian Banking Association chief executive Anna Bligh also said it was unlikely customers who had honest conversations with their bank would be forced to sell their home.
“We would strongly encourage any consumers who are on a deferral or hardship arrangement to talk to their bank before it ends,” Ms Bligh said.
“People find it difficult to talk about their financial situation and will often soldier on trying to resolve the situation themselves.
“Your bank can’t assist you if you are not frank with them about your circumstances”.
CEO of the Australia Banking Association, Anna Bligh
Moneycat Finance chief executive Evan Davis said banks would “be very sympathetic to those genuinely in hardship”. But they could also scrutinise salaries, business turnover results, account transactions and JobKeeper payments before making a decision.
He encouraged those on holidays to consider whether they were able to start making full repayments again, to avoid interest adding up.
The Australian Prudential Regulation Authority estimated about $167b worth of home loans — about 9 per cent of all mortgages — were deferred across Australia by the end of July.
ANZ confirmed there were options available for those still needing support.
About 20 per cent of borrowers on holidays had still achieved partial repayments since then.
Mortgage Choice chief executive Susan Mitchell said the pace of borrowers coming off deferrals had also picked up, which was “reassuring, as it shows that borrowers weren’t taking a ‘holiday’.”
“The recent lockdown in Victoria would have had a greater impact on borrowers and small business owners,” Ms Mitchell said.
“Solutions will vary but they may be able to seek an extension to their deferral, or a restructure of their loan.”
Westpac estimated about half of the 135,000 repayment relief packages provided to customers would not need to be extended beyond September.
The bank’s acting chief financial officer Gary Thursby said “more time and breathing space” would be available to customers who “aren’t in a position to return to full payments again from October.”
Westpac provided 135,000 repayment relief packages. Picture: Bianca De Marchi
“However, we anticipate a significant number of customers will be able to resume regular repayments when their deferral term ends,” Mr Thursby said.
“We expect these customers to start their repayments again and we would encourage as many people as possible to do so.”
The ANZ also confirmed borrowers who met eligibility criteria could move on to an interest-only payment scheme or continue deferring repayments for an additional four months.
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