Big banks prepare to wrap up mortgage holidays in March

A neighbourhood in Adelaide.

Not long after the pandemic hit, hundreds of thousands of Australians took up their bank’s offer to suspend mortgage repayments. But new deferral applicants will soon be turned down as banks prepare for the program’s end in March 2021.

In a note to mortgage brokers, NAB said it will no longer be accepting deferral applications as of 20 January. Similar guidance has been issued by the other major banks, though an exact date has not yet been provided.

The option to pause mortgage repayments was one of the major lifelines offered to borrowers last year as the coronavirus pandemic and ensuing lockdowns threatened to topple the nation’s housing market. 

Uptake peaked in May, when around 10 per cent of all loans on issue in Australia had been deferred. By November, that number had dropped to 2.3 per cent, with deferral exits outweighing new entries and extensions for the fifth straight month.

According to the latest data from APRA, the total value of deferred home loans sits at $49.5 billion.

As banks begin transitioning customers out of the deferral arrangements, borrowers still experiencing financial difficulty will be able to request support through their bank’s hardship program.

But it remains to be seen how the more vulnerable of this cohort will fare in the long-run, with one tenth of all housing deferrals in November recorded as having a loan-to-value ratio above 90 per cent.

RELATED: Home values continue to rise, regional markets more likely to return a profit

While there was plenty of concern about the property market bottoming out last year, distressed sales have been kept to a minimum and housing prices have so far remained resilient in the face of multiple economic shocks.

New loan commitments rose 5.6 per cent in November to a record high $24 billion, and growth in the first home buyer market was the highest since October 2009, when the government temporarily tripled the first home owner grant.

As the economic recovery picks up pace, the majority of Australians maintain a positive outlook for the future, with the latest ANZ-Roy Morgan consumer confidence report showing sentiment lifting to a 15-month high.

For more information about mortgage and lending trends, visit our home loan statistics page. And for a rundown of the support measures available to Australians, along with handy tips to keep your finances in good health, browse our coronavirus financial guide.

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