Fewer homeowners seeking mortgage relief as economy recovers

The number of mortgages on suspended repayments through COVID-19 hardship measures is declining.

ABA chief executive Anna Bligh: ‘Encouragingly, banks are seeing that many deferred customers are choosing to resume making loan repayments.’

The number of mortgages on suspended repayments through COVID-19 hardship measures is declining, with some homeowners opting to begin paying down their debt earlier.

Major banks have told The Australian that the number of customers asking to defer their mortgage repayments has cooled off in the past month, as economic conditions across the nation improve.

The banking sector in March implemented six-month mortgage deferrals to assist borrowers who had been adversely affected by the shutdown caused by the pandemic.

According to the Australian Banking Association, as at June 19, a total of 485,063 home loans had been deferred.

ABA chief executive Anna Bligh said banks were contacting customers who had accessed financial assistance to discuss further options after the initial suspension period.

“Encouragingly, banks are seeing that many deferred customers are choosing to resume making loan repayments,” Ms Bligh said.

“This is important. Returning to paying down your loan as soon as you can is better in the long run for you, your business, and the economy.” Westpac flagged that its initial deferral period is coming to an end, while Commonwealth Bank in June noted it will pull back its COVID-19 home loan support and deal with hardship claims on a case-by-case basis.

Westpac’s acting chief executive of consumer banking Richard Burton said some of the bank’s 120,000 customers who had applied for a payment freeze had asked to resume their loan commitments before the end of the grace period.

“While we received strong demand for mortgage deferrals in March and April, the number of customers seeking assistance has slowed and some customers have requested to resume their regular home loan repayments,” Mr Burton said.

CBA said 20 per cent of customers who had requested deferrals were now making some contributions to their outstanding loans.

According to NAB, 10 to 15 per cent of customers who had claimed hardship had reversed decisions to defer repayments.

Data released by Firstmac shows the total number of loan suspensions lodged with the non-bank lender had dropped from 5.65 per cent in May to 5.37 per cent at the end of June.

Firstmac managing director Kim Cannon said hardship applications had dropped to about one per day.

“As the economy is progressively reopened, we are optimistic that more of our customers in the worst-affected industries like hospitality and retail will be able to pick up work and see their financial position strengthen,” Mr Cannon said.

At the height of the pandemic, the Queensland-based lender, which has a home loan portfolio of about $12.8bn, was receiving 150 hardship requests applications a day.

Firstmac’s chief financial officer James Austin said the tapering of the federal government’s JobKeeper wage subsidy scheme in September could see a spike in fresh hardship claims.

“It is a really key date as to whether to what happens.” Mr Austin said.