Repayments Resume on Deferred Mortgages

Almost half of Covid-related loan deferrals are now being repaid as Australian banks’ loan repayment holidays come to an end.

Australian Banking Association data shows that the number of deferred mortgages had dropped to 270,000 as of last week, and repayments on 82,000 small and medium business loans are now being made.

These figures had peaked in June, with more than 500,000 Australians deferring their home loan repayments and around 200,000 small businesses doing the same.

Australian Banking Association chief executive Anna Bligh said about 45 per cent of those loans are now back into repayments.

“This is a good sign for the economy.

“It shows that more Australians are getting back on their feet and resuming their loan repayments,” Bligh said in a statement.

Of course, this also means that around half of the total loans deferred across Australia are still not being repaid.

As the six-month period comes to an end, customers are now being contacted by their banks.

“Right now, it’s really important that people contact their bank to figure out the path ahead.

“The earlier you speak to your bank, the more options they have to help you find a way through,” Bligh said.

In March, banks began offering loan deferrals to customers impacted by the pandemic, resulting in around one in 11 Australian mortgage holders and one in eight small businesses taking up the offer.

In a research note on Friday, credit rating agency Moody’s said it expects loan losses for global banks in Australia, the US and the UK to rise as the economy further contracts this year.

Moody’s anticipates the expiry of the JobKeeper Payment and other bank support programs in late March 2021 to drive an increase in “non-performing loans”.

Despite higher exposure to at-risk sectors, Australian banks reported lower provisions in the first half of 2020 than their UK and US peers.

Associate managing director at Moody’s Investors Service Laurie Mayers said this reflects Australian banks’ greater focus on collateralised residential mortgages, “which account for around 63 per cent of their loan book”.

The latest data, collected by the Australian Banking Association from seven of Australia’s largest banks, shows the total number of deferred loans is now around 439,000.

September figures from financial regulator APRA show that 9 per cent of housing loans worth a value of $160 billion were still being deferred.