Banks give customers more time to pay off loans amid economic crisis

D-Day for the housing market was looming in September with the end of key support schemes but a new announcement may soften that blow.

Banks have eased the burden on Australian families struggling amid the coronavirus-induced financial crisis and softened the looming shock to the economy by extending the home loan holiday by another four months.

The property sector was bracing for sharp falls in housing prices in September when the deferrals offered to borrowers was to expire alongside the Morrison Government’s JobKeeper and JobSeeker support schemes.

RELATED: Westpac underpays 8000 workers $8 million

RELATED: Proposal to ditch stamp duty and raise GST

The lifeline from the lenders comes at a critical stage as Victoria is forced back into a six-week lockdown from midnight as coronavirus cases in the heavily populated state continue to soar.

It also follows a grim survey from the ANU which revealed the number of Australians unable to pay their rent or mortgage on time more than doubled as a result of the pandemic.

The banking industry’s peak body described the “next phase” as an opportunity for those whose incomes are still impacted to return to repaying their mortgages through a restructured or varied loan.

If this is insufficient in getting customers back on their feet by the time the initial six-month deferral expires, borrowers will be offered an extra four-month home loan holiday.

“Those who are able to repay their loans will resume doing so, which is in the best interests of those customers and allows support to be directed to those who need it,” the Australian Banking Association chief executive Anna Bligh said.

“Encouragingly, many customers have already chosen to resume making repayments.”

Lines outside Centrelink snaked around blocks when job losses compounded the need for welfare support. Picture: Sam Ruttyn

The deferral extension from September through Christmas won’t be offered automatically. It will be provided to those who genuinely need extra time and further support, the ABA says.

Some may have their mortgages back on track within the four months allocated.

The Commonwealth Bank said it had launched a three-month check-in with its affected customers about their financial positions and found many of its retail and business borrowers have resumed paying loans in full.

But some still need targeted support to help get back on their feet.

“While many customers are doing better than we expected, we know that some customers will require further support and we will contact them over the coming months to discuss the options that might be available to them,” CBA chief executive Matt Comyn said.

“To date, our coronavirus measures since March 2020 have provided about $15 billion in direct financial support to customers and stimulus for the economy.

“Supporting customers who continue to experience financial difficulty is a priority and we are tailoring our support to make sure each customer gets the advice and assistance that suits them.”

The Federal Government has been criticised for not extending the wage support schemes beyond the September cut-off but Treasurer Josh Frydenberg told Channel 7’s Sunrise program this morning that “targeted” income support will be announced in his July 23 economic statement.

He told The Australian that Victoria entering its second lockdown will cost the economy about $1 billion a week.

“When I made a statement to the parliament in May I talked about the economic cost of a lockdown being about $4 billion dollars a week, and given that Victoria is about a quarter of the national economy, then you’re talking about an impact of around a billion dollars a week for the Victorian economy alone, which is very significant,” the Treasurer said.