Banks have a range of options to help customers
20 January 2021
Interviewed by the ABC NewsRadio’s Thomas Oriti, ABA CEO Anna Bligh talks about the continued support that banks offer to customers after the drop in loan deferral numbers
TRANSCRIPT SPEAKERS: ABA CEO Anna Bligh, ABC journalist Thomas Oriti
Thomas Oriti: …the economic recovery from the recession continues, banks are looking to wind back mortgage holidays. Now, hundreds of thousands of borrowers hit pause on their home loan repayments when the pandemic shut thousands of businesses and put many people out of work, but the mortgage relief is due to end in March, around the same time as we’ve been discussing on the show as the government’s wage subsidy scheme JobKeeper. So what’s expected to happen when those relief measures run dry?
For more, I’m joined now by Anna Bligh, the CEO of the Australian Banking Association. Good morning, thanks for your time today.
Anna Bligh: Good morning, Thomas. How are you?
Thomas Oriti: Good, thank you. So firstly, just give us a sense, do you know how many people who did have to hold off on mortgage repayments have begun repaying them again?
Anna Bligh: Yes, I’m very pleased to say that we’ve now seen almost 90 per cent of those people, the 900,000 Australians who deferred their loan repayments, are now back making those payments. And I should say that 900,000 figure is both mortgages and small business loans. That really, I think, demonstrates that Australians do want… they’ve bought a house because they want to own a home and as soon as they could start making payments when their workplace got open again, they wanted to get straight back in and get their mortgage payments back into, you know, back in order. There are still some people whose deferrals have not yet reached the end date and banks are working with them individually. But what we are seeing is a much smaller group of people in very difficult circumstances than banks had anticipated we would be seeing at this point in the COVID experience.
Thomas Oriti: That was my next question, really, because, I mean, you’re saying the vast majority are now going back to repaying their mortgages. As the pandemic continued, we’re hearing very dire predictions about the Australian economy. Is it fair to say that this is really not at all what you might have expected by this point in January 2021?
Anna Bligh: I think it would be fair to say Thomas, that everybody in April, May last year was anticipating that there could be some much more catastrophic circumstances being faced by the economy at large and by individual businesses, families and individuals. But that doesn’t mean that there aren’t still some people who are facing those kinds of circumstances. We know that there are some sectors that are more impacted and banks are continuing to work with those people. There are tools that banks have in their toolkit to help people who took a deferral and are still not able to move back to full payments and that they’re working individually with those customers. Because that group of people has now got down to such a manageable number, banks can go back to their normal processes and that is working out what’s right for every single customer, on an individual tailored basis with a proper assessment. That is the best thing for the customer.
Thomas Oriti: What’s going to happen to those remaining people if they still can’t afford to pay their loans come March?
Anna Bligh: Well, as I said, banks have a lot of tools in the toolkit. They can do things such as sit down with the customer to work through and it depends on the individual circumstances of each customer. But options such as restructuring their loan so that, for example, they might move to a period of interest only, with much lower payments on an interest-only basis for a short period of time, they might extend the length of the loan depending on how many years are left on the loan. All of those things have helped bring down the cost of the loan in the short term while the customer gets back on their feet. The best thing for the customer, though, is not to be on deferral for so long that they start to lose equity in their most valuable asset.
“…banks can go back to their normal processes and that is working out what’s right for every single customer, on an individual tailored basis with a proper assessment. That is the best thing for the customer.”ABA CEO Anna Bligh
Thomas Oriti: On that note, though, I mean, JobKeeper is also due to end in March. Are you predicting an influx of people who might end up defaulting on their loans when that wage subsidy scheme comes to an end?
Anna Bligh: Well, we’ll have to wait and see in March. But there are many customers who have been receiving JobKeeper who are disclosing that in the conversations they’re having with their banks right now. So as banks are working through with every customer, the fact that a customer is on JobKeeper and that their income is likely to reduce after March is being taken into account, as loans are being restructured, or in some cases, customers are making their own decisions that they would rather sell the property and downsize, for example, because that will put them in a much better financial position. So some of this is banks working with the tools in their toolkit and some of it’s customers making their own decisions about what’s best for them.
Thomas Oriti: I guess we’ll see how things pan out. Anna Bligh, thank you very much for your time this morning.
Anna Bligh: Thank you very much.
these options do give people you know, a breather, that’s what they’re designed to do, just take the load off for three months, while you get through everything else that you need to get through.”