The end of repayment holidays – are we going to see lots of borrowers forced to sell their homes?

This month, the Australian Banking Association (ABA) released figures showing that the number of mortgages under deferral had dropped to 270,000 meaning that almost half of the households receiving deferrals had started repaying their mortgage and that 82,000 SMEs had also started repaying.

Three months before, 470,000 (1 in 11) Australian households and more than 200,000 (1 in 8) small business owners had received loan deferrals, with a total of $234 billion.

So, it seems that Australians are getting back on top of their loans?

Undoubtedly this is true, but there is probably a sizeable chunk of borrowers who cannot make the repayments – if you work in aviation or theatres, unfortunately you won’t be seeing much work for a while.

And, as the graph below shows, the economy is now entering a period where government hand outs are going to be severely curtailed.

Let’s say, we come to the end of the mortgage repayment holidays in March 2021 and there are around 200,000 Australians who still cannot make their repayments – what happens then?

If you are an owner-occupier, the last thing the banks want is to force you to sell the family home.  The banks’ reputation was severely sullied during the Banking Royal Commission and they will want to be seen to be doing the right thing.  Origin Finance are working with a number of clients and the banks to ensure people can maintain a roof over their head.

For investors, the position is more mixed – the banks are going to want to see that, eventually, borrowers will be able to meet their repayments.  Banks’ hardship teams work with customers, maybe investors will be forced to sell a property, maybe they will be able to find a solution with their lender where they make part payments until the borders re-open and more would-be tenants enter the country.

Either way, avoiding the issue is not going to help.  If you want to discuss your personal circumstances, please contact your Origin broker.