Economists have backed plans by the big banks to let home owners impacted by the coronavirus crisis defer mortgage repayments for up to six months.
National Australia Bank, Westpac and ANZ said on Friday that affected home owners could pause repayments for up to six months, pending a three-month review, as part of new support packages for home owners and businesses.
Banks had been offering support to those affected — including up to a three-month deferral of mortgage repayments — under existing financial hardship policies. In addition to extending repayment holidays, the banks announced new fixed-home loan and term deposit rates, among other measures.
Pausing repayments would give a home owner with a $400,000 mortgage access to an additional $11,006 over six months, or $1834 per month, according to NAB.
“These measures will provide significant relief to businesses and home buyers over the next six months as we all deal with this unprecedented situation,” said NAB chief executive Ross McEwan.
ANZ will also cut variable interest rates for mortgages by 0.15 percentage points.
“[It’s] the right thing to do for our existing customers, particularly the significant number of our home loan customers who are self-employed and managing the effects of the COVID-19 crisis on their own businesses,” said ANZ chief executive Shayne Elliott.
Meanwhile Westpac also announced a $10 billion home lending fund to assist more Australians into home ownership.
“This is a once-in-a-lifetime event and a united response by government, regulators and corporate Australia is exactly what we need,” said Westpac Group’s acting chief executive Peter King.
The Commonwealth Bank has not announced new measures at time of writing but is encouraging affected customers to contact the bank to discuss their options.
BIS Oxford Economics chief economist Sarah Hunter said the support measures would help people get through “a big sharp, negative drop that’s not like anything we’ve ever seen”.
“For individuals that were affected, that might have lost their jobs or seen their incomes severely reduced, this is definitely going to help them meet their everyday expenditure … and it means they can spend more [to help the broader economy].”
The support packages follow another rate cut by the Reserve Bank, and come ahead of a second stimulus package by the federal government.
“The banks are stepping in to help as well … as they don’t necessarily want to see people defaulting,” Ms Hunter said.
Domain economist Trent Wiltshire said the measures would help the many people facing tough times in the coming months, but were also important for the banks.
“If unemployment does rise and a lot of people struggle to pay their mortgage … the banks will be putting a lot of property on the market and pushing down prices, they won’t recoup their money … and it won’t help anyone,” he said. “They don’t want to make any economic downturn worse.”
Mr Wiltshire said this combined with further government support would hopefully be enough to enable people to keep paying their mortgage.
“Renters hopefully won’t be forgotten in any support package either,” he added. “General household assistance will be good, but state tenancy laws could be adjusted for a short period of time.
“Landlords may have to be willing to accept reduced or deferred rent. Even if they do decide to evict a tenant, it’s not going to be easy to find a new one.”
Prime Minister Scott Morrison said on Friday that the states and territories had agreed to work on providing relief for tenants, with Western Australia – together with NSW – to create model rules to protect those facing hardship.
Mr Morrison said all Australians, including landlords, had a role to play and would need to make sacrifices in the months ahead to help those enduring real hardship.