Mortgage holiday extensions help avert $75 billion home loan blowout

The decision by some banks to extend mortgage deferrals will come as a relief to struggling Australians, who were only a few months away from a financial cliff. But it may have also prevented a potentially devastating shock to the economy.

Around 485,000 mortgage customers have paused their repayments due to coronavirus-induced hardship, totalling $175.5 billion in home loans, according to the Australian Banking Association.

Mozo analysis found that were it not for today's decision to extend mortgage holidays for eligible customers by an extra four months, the potential default figure could have reached $75 billion.

While the Government’s JobSeeker and JobKeeper programs have done a lot to keep households and businesses afloat, for many the payments have proven to be woefully insufficient.

A June survey commissioned by Mozo found that 38% of people on JobKeeper admitted it was not enough to meet their current bills, let alone cover home loan repayments.

53% of mortgage holders surveyed were also worried they would have to sell their home if they were still facing financial hardship once the original mortgage holiday ended. 

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With millions out of work or getting by on reduced incomes, the continued flow of stimulus is necessary to ease the burden Australians are facing. The question now is whether JobKeeper and JobSeeker will be preserved in some form.

In an interview with Sunrise this morning, Treasurer Josh Fydenberg said another phase of income support - which will be both “targeted” and “temporary” - will be announced in his economic statement on 23 July. 

The comments from the Treasurer follow a surge of infections in Victoria, which has left the state scrambling to re-enter lockdown.

And given Victoria makes up a quarter of the national economy, the reintroduction of restrictions will be an enormous setback in Australia’s road to economic recovery.

“What we know from Victoria is that these are very serious developments. They affect the nation as a whole, and we are at a pivotal moment in the coronavirus crisis,” Frydenberg said.

For more information about the assistance available to households and businesses, along with tips to keep your finances in good health amid the current crisis, browse our guide to coronavirus and your finances.