As lockdown tightens, what relief are banks offering for home loan customers?
Many banks are offering repayment deferrals and a temporary pause on foreclosures for eligible customers.
Many Australians are locked down again as COVID-19 cases rise in several cities. In response, many banks and lenders have announced support policies to help customers unable to repay their home loans.
The Commonwealth Bank has gone the furthest, extending a temporary pause on foreclosures, meaning borrowers can stay in their homes despite failing to make repayments.
Australia's Big Four banks, who together make up almost 80% of the market, have introduced the following policies:
- Commonwealth Bank. The bank has extended its moratorium on foreclosures. To qualify, you need to be an owner-occupier who has made repayments for the last 12 months. Eligible borrowers, "especially those in local government areas with additional restrictions" may also qualify for a 2-month deferral. Visit this page for more information.
- NAB. Borrowers may be eligible for a temporary repayment break on a month-by-month basis, or reduced payments. Visit this page for more information.
- Westpac. Defer your repayments for up to 3 months. Visit this page for more information.
- ANZ. Temporary repayment reductions or deferrals. Visit this page for more information.
"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, " said Commonwealth Bank CEO Matt Comyn.
Other banks and lenders have also offered COVID-19 support packages, or have existing hardship policies that customers can apply for.
How can borrowers take advantage of financial support?
If you're unfamiliar with how home loans work, the idea of a payment pause or reduction might be confusing. If your lender lets you skip or defer repayments for a month or 2 you will have to pay this money back later. This usually means that later repayments increase slightly, or you take a little longer to pay off the loan.
You need to apply for a repayment pause or deferral too. You can't just stop repaying the loan without your lender's approval.
Learn more about mortgage repayment holidays
But there's more you can do to get your mortgage under control without actually deferring your repayments:
- Switch to interest-only repayments. If you've been repaying your loan plus interest, then you've been making principal-and-interest repayments. Switching to interest-only repayments would see your repayment amounts fall significantly, in the short term. This could make life easier for you while you're struggling, but keep in mind that you're delaying the full repayment.
- Refinance to a lower rate. Home loan rates have never been lower. If you can find a similar loan with a lower rate, refinancing your home loan to a better deal could shrink your repayments.
- Use money from your offset or redraw (if you have any). This is a tip that lenders all suggest to their customers but it's fairly obvious. And it really only works if you have extra cash in your home loan. This can be either in the form of savings in your offset account or extra repayments you've made. Lenders often let you access extra repayments via redraw. Of course, money in an offset account is yours to use as you like.
Remember that there is always help available for people in financial and emotional distress.
- National Debt Help Hotline: 1800 007 007
- The Department of Human Services: Crisis and special help
- Lifeline: 13 11 14
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