Over 20,000 Aussies already receiving hardship assistance during lockdown

The latest data released from the Australian Banking Association (ABA) found that over 20,000 customers have had to receive hardship assistance since 8 July 2021, during the latest COVID-related restrictions.

These ABA figures also include over 15,000 homeowners and small business owners who have deferred home and business loan repayments. Comparatively, nearly 500,000 mortgages and over 225,000 business loans were deferred during the peak of the crisis in 2020.

Across the months of April, May and June last year alone, banks and other financial institutions paused mortgage repayments on an estimated $255 billion worth of housing and small business loans, according to APRA data.

Australian banks and lenders are offering a range of support options for customers doing it tough due to the latest lockdowns and COVID-related restrictions. RateCity reported on these offerings, which includes:

• Mortgage deferrals
• Loan deferrals for small business for up to 2-3 months.
• Refunds on merchant terminal fees for three months.
• Waiving of term deposit notice periods and fees.

Unsurprisingly, most hardship assistances and loan deferrals were for NSW residents who have been facing continuous lockdown since the end of June this year. According to the ABA, NSW homeowners made up two thirds of home loan deferral, with a further 80 per cent of deferred business loans also coming from NSW.

Australian Banking Association CEO, Anna Bligh, said: “Support is available to all small businesses and home loan customers significantly impacted by current lockdowns or recovering from recent lockdowns, irrespective of geography or industry”.

There’s been a slight slowdown in hardship assistance this week, with customers receiving hardship support increased by 73 per cent this week, a dip from 153 per cent the week prior. But with further outbreaks occurring across the country, this number may grow again.

“Given the lockdown situation in South-East Queensland, banks stand ready to assist customers who need help,” Ms Bligh said.

“The sooner you talk to your bank, the sooner they can help you find a solution that is right for you."

Are there risks in deferring mortgage repayments?

While deferring a mortgage repayment will offer immediate financial relief for homeowners and can be an essential lifeline for anyone struggling due to COVID-related lockdowns, there are still risks worth keeping in mind for the future.

Recent RateCity analysis found that a two-month deferral on a $500,000 loan with 25 years remaining could cost an extra $1,712 over the life of the loan, paying an extra $21 a month after the deferral ends.

Following the deferral, if the borrower kept their repayments the same and extended out the home loan term, it may cost an additional $4,408 over the life of the loan.

RateCity research director, Sally Tindall, said: “As helpful as they can be to get you through a tight spot, a mortgage deferral is by no means free.”

“Regardless of what your bank offers you, get some independent advice from a financial adviser or a free financial counsellor via the National Debt Helpline,” she said.

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