Loan deferrals decline, but low income earners still face hardship post-Covid

Person at home looking at documents, facing financial hardship due to Covid impacts.

The Australian Banking Association (ABA) has recorded a decline in the number of Australians requesting assistance from their banks on the basis of financial hardship. 

Almost 69,000 people have received hardship assistance since July this year when the banking industry announced a second Covid assistance package. This included more than 27,000 home loan deferrals and 4,000 business loan deferrals.

While around 12,000 hardship approvals were made over the last month, this marks the smallest increase in requests. ABA chief executive Anna Bligh said it shows people are slowly getting back on track financially.

“Banks have been on-hand to assist their customers throughout the pandemic, however it’s heartening to see the need for assistance declining as many states and territories come out of lockdown and as borders begin to open,” Bligh said.

But as Mozo research from earlier this year shows, some of these support measures could actually leave you worse off in the long-run. Deferring something like a home loan (aka taking a ‘mortgage holiday’) could add to your repayments down the line or require you to extend your home loan timeline, since you weren’t paying down the loan and potentially not covering interest repayments to the set schedule.

Low income earners doing it tough

It’s no surprise that people with insecure income streams are still facing significant financial challenges in the face of Covid. 

Granted, a portion of the economy did see some recovery in between the 2020 and 2021 lockdowns. However, research from the Brotherhood of St. Laurence found there wasn’t the same respite for low-income earners who faced ongoing reduced working hours and diminished employment opportunities.

Looking at the period between October 2020 and March 2021, the report found those earning in the bottom 20% of salaries remained 19% less able to meet their everyday financial commitments compared to pre-Covid levels. Their increasing debt and reduced superannuation funds also signal longer-term impacts for this group of Australians.

In light of this, the report authors recommend government assistance programs remain in place to better support this vulnerable group as we once again emerge from lockdowns around the country. But it seems state and territory governments are already enacting change in the opposite direction, with Covid disaster payments now being phased out in Victoria, NSW and the ACT as vaccination targets are met.

So, if you’re still facing financial hardship, get in touch with your banking provider to see what options are available – and double check how these support schemes could affect your finances long-term. If you’re looking for insight into managing your money right now, read our advice for saving money on a smaller income.

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