800,000 deferred home loan recipients get extra 4 month relief

800,000 deferred home loan recipients get extra 4 month relief
Staff reporterDecember 8, 2020

Banks will provide more breathing space to those hit by COVID-19, with as many as 779,000 lenders to get a further four months repayment deferrals.

The paused accounts amount to $236 billion. 

The 10-month total deferral of repayments for households and businesses unable to restructure their debt or restart paying was facilitated by the federal government and the banking regulator.

The Federal Treasurer Josh Frydenberg has welcomed the extension. 

"If somebody's lost their job and they've got a residential mortgage or indeed if their business has been closed and they've got a commercial loan, then they would be cases where the customer would need to talk to their bank, and I understand it that the bank is going to be very supportive of their customers," he said.

He said the Australian Prudential Regulation Authority would continue to ease regulations on the banks, to encourage them to support customers.

The new measure follows the Reserve Bank of Australia commentary that while the economic hit from the pandemic was not as severe as initially feared, the domestic economy was experiencing the biggest contraction since the 1930s.

“Since March, an unprecedented 800,000 people have lost their jobs, with many others retaining their job only because of government and other support programs,” the RBA statement said.

The initial repayment pause period was for up to six months as the pandemic took hold in March.

Some have restarted repayments already.

About 20 per cent of CBA customers on loan deferral arrangements have made repayments.

ANZ CEO Shayne Elliott said customers who had not yet asked for a six-month deferral could still do so.

The Australian Banking Association advised customers who could start repaying at the end of the initial six month would be required to.

It noted the other options during the second phase of assistance included extending the loan term, converting to interest-only payments for a period, consolidating debt or opting for the additional four-month deferral.

RateCity.com.au research shows a mortgage holder who extends their deferral could end up paying $9,769 extra over the remainder of their loan, if they pause their home loan for 10-months and don’t make extra repayments to catch up. This assumes the person is five years into a 30-year loan with a balance of $400,000.

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