Deferrals aren't the first or best option during the latest round of lockdowns, bank says
Mortgage repayment deferrals should be the last resort for borrowers in financial hardship, according to ANZ.
The bank said that while it is prepared to help struggling borrowers, mortgage deferrals are no longer the first or best option, according to a report by Savings.com.au.
At the height of the COVID-19 pandemic list year, lenders deferred impacted borrowers’ mortgage payments for up to six months, with some extending the deferrals even longer. As the current lockdowns continue, however, ANZ group executive for Australia retail and commercial banking Mark Hand said the bank’s current relief program is not a “one-size-fits-all” approach.
“Every customer’s circumstances are different, and a deferral may not be the best option for some of them,” Hand told Savings.com.au. “That’s because the money still has to be repaid, so there could be implications for their credit status down the track.”
Hand highlighted other options, like accessing funds in offset accounts, temporarily reducing payments, or switching to interest-only payments for a time.
“However, this time, instead of the deferral option being like a cover-all insurance policy that everyone takes out, it will be an option customers take out only if they really need it – like an extra lever we can add to our existing financial hardship process,” he said.
ANZ said that about three quarters of its recent applications for home loan assistance had come from New South Wales. However, the level is still well below what was seen last year – when ANZ paused repayments on about $40 billion worth of loans – and the bank said it did not expect requests to reach anywhere near that volume. Residential mortgage deferrals hit a peak of 11% of all mortgages in June 2020, according to the Australian Banking Association.
Hand said last year’s deferrals helped many borrowers through the crisis.
“Many customers who took a deferral last year came out of the initial lockdowns in pretty good shape,” he told Savings.com.au. “At that time, there was so much uncertainty it was wise for customers to take advantage of deferrals because none of us knew what was coming around the corner.”
ANZ said that it expected more calls for assistance in the second half as government support programs expire.
“We have the financial wherewithal to do it, we’ve got the people in place to do it, and, most importantly, we have the will to do it,” Hand told Savings.com.au. “While we’re not out of the woods yet, we are ready to work again with governments and regulators to make sure our customers not only survive this latest upheaval but emerge ready to take advantage of the rebound on the other side.”