With lockdown restrictions tightening
across NSW and extending in Victoria, Australia’s banks have rolled out extra
support to affected customers.
This week our largest bank, CBA, has
extended its foreclosure moratorium, which means the bank won’t evict a
customer in arrears until at least February 2022.
Support being offered by Australian
banks
Mortgage deferrals (size and scale of
this assistance differs between banks).
Loan deferrals for small businesses for
up to three months (ANZ offering two months).
Refunds on merchant terminal fees for
three months.
Waiving of term deposit notice periods
and fees.
Additional relief from CBA and Westpac
CBA:
No foreclosures until Feb 2022.
Automatic two-month mortgage deferral
for customers in hardest-hit locations and industries and others severely
impacted by the lockdowns.
Three-month deferrals for small
business loans.
Westpac:
Interest rate reductions on mortgage
and credit card debt.
Mortgage, credit card, and personal
loan deferrals, determined on a case-by-case basis.
For business customers, up to $15,000
free temporary overdraft for a max of 45 days to help with cash flow.
The real cost of a home loan repayment
pause
While a mortgage repayment pause may
offer short-term relief, people taking out this option should be aware of the
long-term implications.
RateCity.com.auanalysis shows a two-month deferral on a $500,000 loan with 25
years remaining could cost an extra $1,712 over the life of the loan, paying an
extra $21 a month after the deferral ends. If, after the deferral, the person
instead keeps their repayments the same and extends out their loan term it
could cost an extra $4,408 over the life of the loan.
RateCity.com.auresearch director,
Sally Tindall, said:
"As helpful as they can be to get you
through a tight spot, a mortgage deferral is by no means free.
"Regardless of what your bank offers
you, get some independent advice from a financial adviser or a free financial
counselor via the National Debt Helpline.
"It’s not just the banks offering help,
most service providers have hardship policies.
"If you’re struggling, don’t just cross
your fingers and hope things improve, ask for help. It’s important to talk
through your options before you miss a bill so you can potentially avoid extra
penalties.”
The cost of a two-month pause on a
$500,000 loan balance with 25 years remaining:
|
Same
loan term |
Loan
term extended |
|
Extra
paid over the life of the loan |
$1,712 |
$4,408 |
|
Increase
to repayment after pause |
$21
/ mth |
$0 |
|
Increase
in the loan term |
0 |
4
months |
Notes: Based on an owner-occupier
paying principal and interest on the average rate of 2.69%.
People who are further into their loans
will pay less.
Potential alternatives to pausing
mortgage repayments
Use the money in your offset or redraw
facility.
Request a rate cut: variable rate
customers should ask their bank for the new customer rate as a minimum.
Some customers might switch to a lower fixed rate.
Switch to part payments or
interest-only repayments: paying something is almost always better than
nothing.
Tips for reducing the impact of a
repayment pause
Try to pay off some of your loans
during the pause.
When the pause finishes, see if you can
make extra repayments to catch up.
Negotiate a lower interest rate with
your bank.
Call an independent financial advisor
or a financial counselor for advice.
The National Debt Hotline is: 1800 007 007.
Article Source: propertyupdate.com.au
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Jason Gwerder
Thursday, 22 July 2021
