Home owners resuming payments on paused mortgages
Australians are cutting short mortgage holidays granted amid the coronavirus pandemic and resuming their loan repayments sooner than expected.
About a third of ANZ customers who deferred loan repayments have recommenced paying down their debt, according to Mark Hand, ANZ’s group executive of Australia retail and commercial.
Customers were increasingly looking to unwind loan deferrals, which were offered for up to six months, as social distancing measures were eased, Mr Hand recently revealed.
“[We’re] seeing some customers call us to unwind the arrangement because they’ve got some certainty, they’ve got that confidence going forward,” he said.
“In rough numbers, about a third of our [business and home loan] customers who took a deferral are making some payments – not full payments – although nearly 5 per cent are now back to making full payment.”
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More than 476,720 mortgages worth more than $172 billion had been deferred as of last week, according to the latest figures from the Australian Banking Association. Photo: iStock
At Westpac, more than 4000 home loan customers have cancelled their mortgage support package which included a three-month repayment deferral, with a further three months available on review.
This equates to about 3.3 per cent of the 120,000 home loan customers who have had their repayments paused.
“More than 4000 of these customers … will be resuming their mortgage repayments earlier,” a spokesperson said. “We are proactively contacting customers ahead of the three-month mark for a review and to offer support.”
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Domain economist Trent Wiltshire said the early return to repayments reflected rising consumer sentiment and was a promising sign for the housing market.
“Consumer confidence is rising and some of the job advertisement numbers are starting to pick up, which is a sign that the labour market is looking a bit stronger than expected,” he said.
“People were offered these deferrals and they took them as they were fearful because they had lost their job or thought they would … but the economy has opened quicker than expected, it’s ramping up quite quickly and that may have left some people in a better position than they expected to be.”
The early end of mortgage deferrals suggested there could be even fewer distressed sales than expected when mortgage holidays and JobKeeper support payments came to an end in September, Mr Wiltshire added.
More than 4000 Westpac home loan customers have cancelled their mortgage package relief. Photo: James Alcock
More than 476,720 mortgages worth more than $172 billion had been deferred as of last week, according to the latest data from the Australian Banking Association.
BIS Oxford Economics economist Maree Kilroy said it was natural that more households would resume their repayments as social distancing restrictions eased.
“With restrictions easing and people going back to work in some instances, you’re going to see more households returning to income and actually able to pay off their mortgage,” she said.
“Not everybody is going to defer for the whole period, so it makes sense that some people will do it ahead of time,” she added.
While it was a positive sign, Ms Kilroy said it difficult to predict what impact the end of mortgage holidays could have on the market, as JobKeeper and JobSeeker payments were disguising the real picture and people’s ability to meet repayments.
At ANZ, requests to vary arrangements – in most cases to come off support packages – have increased from about six to 30 per day since April 22, Mr Hand said.
“There’s a range of options we’re looking at, for each cohort of customers,” he said. “But clearly the conversation with people whose income hasn’t been impacted after three months will be very different to someone who we can see has lost their income.”
ANZ figures revealed about 7 per cent of their retail customers were no longer receiving an income, about a quarter of which were receiving JobSeeker benefits. A further 20 per cent of customers had seen their income fall by 20 per cent or more.
However, many were better off than expected. While more than one in seven home loan customers applied for a deferral, Mr Hand said many had decided against a repayment holiday from the get-go.
“About 20 per cent of customers who called us … decided that wasn’t the right thing for them to do,” he said. “Once we talked to them about other options – and a lot of customers had other options, many had savings in place or saw their income hold up – they realised their income was a little more certain than they expected.”
Mr Hand noted income trends for different cohorts in the ANZ database revealed a large number of customers had, in fact, not had the income reductions they anticipated.
“Now some of those still went ahead, perhaps saving for a rainy day, taking advantage of the three-month deferral and then potentially the six-month deferral,” he said. “Some want to have money set aside in case of another wave of infection and we go into another lockdown.
“But we are seeing quite a shift in customer outcomes from what was expected. People are being cautious – and it was wise to enter a package until we had some certainty – and now we’re seeing some moving back out.”
A NAB spokesperson said the bank, which granted around 80,000 home loan repayment pauses, was in the process of checking in with customers.
“Some of the customers we’ve spoken to so far have told us they are ready to start repaying their loans and the rest are still keen to continue their deferral for the time being. We’re determined to find the right level of support for each customer,” the spokesperson said.
The Commonwealth Bank was also contacted for comment.