Almost half of deferred loans resume payment: ABA

The Australian Banking Association (ABA) has reported that six months after the introduction of deferrals, repayments have resumed on almost half of all deferred loans.

New data from the ABA revealed that in late June, the number of loans which had been deferred by Australian home owners and businesses peaked.

Around 500,000 mortgages and more than 200,000 small-business loans had paused payments during that period.

However, as of last week, the number of deferred mortgages had dropped to 270,000, meaning repayments had resumed on at least 224,000 loans, according to data collected by the ABA from seven of the largest banks in Australia.

This means that 45 per cent of borrowers on deferred mortgages have jumped back to making regular loan repayments.

Two in five, or 45 per cent of small and medium business loans that had been deferred, are now being repaid again, meaning that repayments have resumed on at least 82,000 SME loans.

The data has followed figures by the Reserve Bank of Australia (RBA), which said in its Financial Stability Review that a quarter of SMEs currently on income support would shut down if this support was removed before conditions improve.

In the past month alone, as customers approached the end of their six-month deferral, more than 130,000 mortgages and 50,000 SME loans had their repayments resumed.

Commenting on the increasing number of loans that have resumed repayments, ABA CEO Anna Bligh said: “This is a good sign for the economy. It shows that more Australians are getting back on their feet and resuming their loan repayments.

According to the ABA, banks have provided loan repayment deferrals to around one in 11 Australian mortgage-holders and one in eight small-business owners.

“These loan deferrals have helped hundreds of thousands of Australian families and small businesses survive the pandemic,” Ms Bligh said.

Ms Bligh encouraged borrowers to contact banks to assess their situation and decide the path ahead.

“Banks will work with customers to figure out a tailor-made solution. That might include restructuring a loan, or in some cases, granting an additional four-month deferral,” she said.

According to the data from the seven largest banks, the total number of deferred loans has dropped to 439,000.

ASIC recently issued guidance outlining its expectations of lenders when loan repayment deferrals expire.

It said lenders must make “reasonable efforts” to contact borrowers before their repayment deferral periods are due to expire, to allow them sufficient time to explore their options.

The ABA revealed in September that at least half, or 450,000, of the 900,000 loans on six-month repayment holidays were due to expire shortly, and said they were set to be reviewed in the coming weeks.

AFG home loan figures

Aggregation group Australian Finance Group (AFG) has also provided figures around customers seeking assistance with their mortgage repayments through AFG Home Loans’ securitised product.

CEO David Bailey said he is pleased that the numbers have decreased further.

“As of 8 October, the numbers of customers with deferral arrangements for their principal and interest loans has dropped from 4.34 per cent at the close of last quarter to 0.87 per cent,” Mr Bailey said.

“In addition, 2.22 per cent of AFG Home Loans securitised product customers have switched from principal and interest to interest-only repayment arrangements. This is down from 4.38 per cent at the end of FY20.”

[Related: Lender to pay trail on loans with extended deferrals]

Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.

Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.