Mortgage deferral deadline: ASIC lays out expectations as September nears

Australian corporate regulator ASIC has issued advice to mortgage lenders as the clock begins to tick down on the hundreds of thousands of home loans that have been deferred during the COVID-19 pandemic.

According to figures released by the Australian Banking Association (ABA) in July, over 800,000 Australians have had their home loan repayments deferred since March when relief measures started kicking in.

As the severity of the pandemic became clear in mid-March both bank and non-bank lenders began rolling out financial relief - in the form of mortgage repayment deferrals - to customers who had lost their jobs or suffered income reductions. 

But these were always designed to be temporary measures. Most banks have offered impacted mortgage holders a six month deferment period, a timeframe which is steadily ticking down as September nears. 

As a result, ASIC has released its own guidance on how it expects lenders to handle the expiry of many of these loan deferments in the coming months. So based on these expectations, here’s what mortgage customers should expect:

• Lenders should contact customers to notify them well before their deferment period expires

• Customers should be provided with any information that can ‘assist their decision-making’ - so perhaps in relation to their payment obligation going forward, or the financial implications of further deferrals etc.

• If a customer can’t go back to making full repayments, lenders should contact them directly (e.g. via a phone call) to assess the situation and make a ‘fair and appropriate’ decision based on the individual circumstances

• ‘Tailored’ assistance rather than a broad-based solution should be the approach taken by lenders if a customer needs to continue to defer their repayments

• If a customer misses a repayment after the deferral period has expired, lenders should make ‘reasonable efforts’ to contact them and assess whether any further assistance needs to be offered.

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For more information about the assistance measures which have been put in place for individual Australians and small businesses, check out our resources page which details everything you need to know about Coronavirus and your finances.