1 in 10 mortgages deferred

By Gerv Tacadena

What factors should borrowers consider before deferring?

Around one in 10 mortgages in Australia has been granted temporary repayment deferrals, according to the latest data from the Australian Prudential Regulation Authority (APRA).

As of the end of June, around $195bn worth of mortgages have been deferred. This is equivalent to 11% of the total housing loans from authorised deposit-taking institutions (ADIs). Overall, the total value of deferred loans, including the loans to small business, was $274bn.

According to APRA, one of the most noticeable changes in the month was the increase in the value of loans exiting from repayment deferral, from $2bn in May to $18bn in June.

APRA said repayment deferrals are more likely to be extended to owner-occupier borrowers who are paying on a principal-and-interest-rate basis. Furthermore, these mortgages have higher loan-to-value ratios than all housing loans.

Factors to consider before deferring loans

Homeowners who wish to defer their mortgages should be aware of what happens to their loans when they resume payments. Tim McKibbin, CEO of the Real Estate Institute of New South Wales, said homeowners, particularly landlords, will end up paying more in interest over the life of their loan when they enter a repayment deferral.

"The bank's selfless action, to offer a deferment of the monthly repayment, comes at a substantial cost. Landlords will still pay and pay it all, just a bit later on," he said.

While a repayment holiday allows borrowers to skip paying for a certain period on time, they will still be charged interest. These accumulated interest costs will be spread out on the remaining life of the loan. Check out Your Mortgage's guide to deferring home loans here.

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