With foreclosure restrictions tightening across New South Wales and extending into Victoria, Australian banks have rolled out additional support for affected customers.
The country’s largest bank, the CBA, has extended its moratorium on foreclosures, meaning the bank will not evict a delinquent customer until at least February 2022.
Assistance offered by Australian banks includes:
- Mortgage deferrals (the size and extent of this assistance differs from bank to bank).
- Small business loan deferrals for up to three months (ANZ offering two months).
- Reimbursement of merchant terminal fees for three months.
- Elimination of notice periods and term deposit fees.
The additional CBA and Westpac relief includes:
- No seizures until February 2022.
- Two-month automatic mortgage deferral for clients in hardest-hit locations and industries and others severely affected by lockdowns.
- Three-month deferrals for small business loans.
- Interest rate cuts on mortgage and credit card debt.
- Mortgage, credit card and personal loan deferrals, determined on a case-by-case basis.
- For business clients, up to $ 15,000 free temporary overdraft for up to 45 days to help with cash flow.
The real cost of a mortgage repayment break
While a mortgage repayment break can offer short-term relief, people who choose this option should be aware of the long-term implications.
Analysis from RateCity.com.au shows that a two-month deferral on a $ 500,000 loan with 25 years remaining could cost an additional $ 1,712 over the life of the loan, paying an additional $ 21 per month after termination of the postponement. If, after the postponement, the person keeps their repayments the same and extends the term of their loan, it could cost an additional $ 4,408 over the term of the loan.
RateCity.com.au’s Research Director Sally Tindall said: “As helpful as it can be in helping you get through a tough time, a mortgage deferral is by no means free.
“Regardless of what your bank offers you, get independent advice from a financial advisor or a free financial advisor through the National Debt Helpline,” she said.
“It’s not just the banks that offer help, most service providers have hardship policies.
“If you’re having trouble, don’t just cross your fingers and hope things get better, ask for help. It’s important to discuss your options before you miss an invoice to potentially avoid additional penalties, ”she said.
The cost of a two-month break on a $ 500,000 loan balance with 25 years remaining:
|Same loan term||Extended loan term|
|Extra paid over the term of the loan||$ 1,712||$ 4,408|
|Increased reimbursement after the break||$ 21 / month||$ 0|
|Increase in loan term||0||4 months|
Notes: Based on an owner-occupier paying principal and interest at an average rate of 2.69%. People who are more advanced on their loan will pay less.
Potential alternatives to suspending mortgage payments:
- Use cash in your clearing or withdrawal facility.
- Request a rate cut: variable rate customers must at least ask their bank for the new customer rate. Some customers may upgrade to a lower fixed rate.
- Switch to partial payments or interest-only repayments: paying for something is almost always better than nothing.
Tips for reducing the impact of a repayment break
- Try to pay off part of your loan during the break.
- After the break is over, see if you can make additional refunds to catch up.
- Negotiate a lower interest rate with your bank.
- Call an independent financial advisor or financial advisor for advice. The national debt hotline is: 1800 007 007.