With lockdown restrictions announced in South Australia, the tightening across NSW and extending in Victoria, Australia’s home loan lenders have rolled out extra support to affected customers.
The country’s largest bank, CBA, has confirmed a foreclosure moratorium, which means the bank won’t evict a customer in arrears until at least February 2022.
The CBA offers an automatic two-month mortgage deferral for customers in hardest hit locations and industries and others severely impacted by the lockdowns.
“We believe extending our freeze on any foreclosures will give those customers who are again impacted by COVID-19 more time to get back on their feet, and reassurance that they can remain in their home this Christmas and into next year,” CBA chief Matt Comyn said.
“This is a critical time for all of us to pull together and support the communities most heavily impacted by the latest COVID-19 outbreak and the resulting lockdowns.”
Westpac offers up to three months mortgage deferral + credit card and personal loan deferrals, determined on a case-by-case basis.
But borrowers taking out deferral options should be aware of the long-term implications.
RateCity.com.au analysis shows a two-month deferral on a $500,000 loan with 25 years remaining could cost an extra $1,712 over the life of the loan, paying an extra $21 a month after the deferral ends. If, after the deferral, the person instead keeps their repayments the same and extends out their loan term it could cost an extra $4,408 over the life of the loan.
RateCity.com.au research director, Sally Tindall, said “a mortgage deferral is by no means free.”
APRA, the prudential regulator, has advised newly-deferred home loans won’t be treated as ‘in arrears’ meaning it will not affect banks’ credit quality nor the borrowers credit quality.
Deferrals peaked at 11% of total mortgage books in July last year, reducing by March this year to less than 1%.