Borrowers affected by the recent lockdowns have reached out to their lenders for support, with New South Wales and Victoria reporting close to 24,000 borrowers putting a pause on their mortgage repayments.
According to the latest data from the Australian Banking Association (ABA), outstanding deferrals across Australia have grown to more than 27,000 as of 5 September.
Combined with business loans, the number of outstanding deferrals has reached over 30,000.
During the height of the pandemic last year, the Australian Prudential Regulation Authority (APRA) reported that around one in 10 mortgage loans were deferred.
While Victoria registered a huge uptick in deferrals over the recent lockdowns, it was NSW that drove the increase in home loan deferrals.
In fact, around seven in 10 outstanding mortgage deferrals across Australia are from NSW.
A similar trend can be observed for business loan deferrals.
NSW also took the biggest slice of hardship approvals, which includes deferring credit card payments and waiving fees and charges.
ABA CEO Anna Bligh said COVID restrictions and lockdowns have put many Australian borrowers and businesses in a challenging financial position but despite deferrals being concentrated in lockdown-stricken states, it’s important that borrowers don’t try and tough it out.
"As lockdowns continue to be extended across cities and states, it is no surprise more strain is being put on people and businesses, but it is important to remember that banks are here to help," Ms Bligh said.
What to do when deferral periods end
Borrowers who find themselves still unable to resume their payments have several options to consider when repayment holidays are about to end.
According to ABA, banks are willing to work with borrowers to find a personalised solution.
Aside from extending the repayment holiday period, banks can offer to extend the length of the loan to minimise the monthly payments and provide borrowers more time to finish paying their loans.
Borrowers can also request to have their payments be turned into interest-only for a certain period. Banks are willing to accommodate requests like this to ease the situation of their clients.
Another option is consolidating all debts into a single large repayment. This will enable borrowers to save on interest rates and simplify their repayment schedules, especially if they have multiple loans.
Collections: Mortgage News