Australia’s major banks have agreed to extend a six-month repayment holiday for home loan customers facing the economic impact of the coronavirus pandemic.
Banks will contact customers with reduced incomes and ongoing financial difficulty due to COVID-19 as they approach the end of their deferral period, to ensure that wherever possible they can return to repayments.
However, if this is not possible at the end of a six month period, customers will be eligible for an extension of their repayment holiday for up to four months on a case-by-case basis.
The Australian Banking Association on Wednesday said a deferral extension of up to four months will not be automatic, it will be provided to those who genuinely need some extra time.
“This next phase of bank support will avoid a ‘cliff’ for customers in September and give them the breathing space they need to work with their bank and get back on their feet financially” ABA Chief Executive Anna Bligh said.
Banks will work with customers to find the best options to restructure or vary their loan, including by way of extending the length of the loan, converting to interest-only payments for a period of time or by consolidating debt.
If at the end of this period, customers continue to be severely financially impacted and are unable to make repayments, they will be assisted through their bank’s hardship process to determine the best long-term solution for their individual circumstances, the ABA said.
The Australian Prudential Regulation Authority in March allowed banks offering borrowers impacted by COVID-19 an option to defer repayments for a period of up to six months, and had said they need not treat the repayment holiday period as a period of arrears for capital adequacy and regulatory reporting purposes.
The banking regulator on Wednesday announced it would extend by another four months this temporary capital treatment for bank loans with repayment deferrals, as well as temporarily adjust the capital treatment of loans where terms are renegotiated.
“This will help to avoid unnecessary hardship and foreclosures, and allow the banking sector to work with its customers to find the best solution to manage their debts,” APRA Chair Wayne Byres said.