10,000+ landlords ask CBA to freeze their loan repayments ahead of tenant eviction ban

Desperate landlords are asking CBA to defer their mortgage debts in response to a ban on evicting tenants behind on their rent. It comes as an expert warns against freezing repayments.

• Coronavirus NSW live updates
• 6000 Sydney homes hit with power cuts

More than 10,000 desperate landlords have asked Australia’s largest lender to freeze their mortgage repayments in response to a ban on evicting tenants who fall behind on rent.

It comes as a leading economist warned deferring home loan debts should be a last resort and concerns emerged about the consequences for customer credit scores.

The Commonwealth Bank said 43,000 mortgage customers had opted to defer payments so far. A quarter of these requests were for investor loans – slightly less than the overall share of borrowing.

Freezing repayments should only be considered after all other avenues had been exhausted, said PRDnationwide research manager Diaswati Mardiasmo.

Diaswati Mardiasmo is warning against debt deferral. Picture: Supplied

This was because some lenders – such as CBA – were adding six months to the end of loan terms.

“Interest rates could be double by then,” Dr Mardiasmo warned. “Use the freeze as a last option.”

RateCity analysis for The Daily Telegraph suggest the schemes would add $12,700 to the principal on a $500,000 loan.

Borrowers could also have their credit score cut for deferring.

The Daily Telegraph can reveal some institutions will report “blanks” to credit bureaus when customers ask for a pause, which would lead to a score drop; but others will submit zeros, which won't trigger a reduction.

Landlords face uncertain times with rules preventing them from evicting tenants during the coronavirus crisis.

Australian Retail Credit Association (ARCA) chief executive Mike Laing told The Daily Telegraph he had confirmed there would be an impact where blanks were filed.

“The reduction would be about 30 points,” said Mr Laing, whose association includes the three main credit bureaus, Equifax, Experian and Illion.

Submitting zeros indicates nothing is owing. But if a bank reports blanks it suggests there is a problem. At least one major bank has been preparing to report blanks.

For a person who has a credit score above 700, a cut of 30 points would likely have no material consequence because they would remain in the range considered ‘good’.

That may not be the case for a person whose current score is 625 to 650. A 30-point drop would see them downgraded to the ‘average’ category, for scores below 622.

The Telegraph understands National Cabinet’s eviction ban work is now being led by the Victorian government, which did not respond before deadline.

Prime Minister Scott Morrison is looking at ways to prop up the rental market.

Prime Minister Scott Morrison has flagged rental assistance will be increased, while the NSW government is looking at deferring or reducing land tax on investment properties. Rate relief is a possibility, too.

Meanwhile, Property Club founder Kevin Young said his group’s members would be able to give their 40,000 tenants a three-month rent holiday if borrowing rates in Australia were the same as in the United Kingdom.

A property investor could get a loan at 1.6 per cent in Britain, Mr Young said. “So if UK banks can do it, why can’t Australian banks do it? They get their money from the same well,” he said.

In Australia, banks’ standard variable interest rates on investment loans are about 5 per cent.