Lockdown bank relief: what’s on offer for you?

With lockdown restrictions now in place across NSW, Victoria and South Australia, the country's banks have rolled out extra support to affected customers. 

The country’s largest bank, CBA, has extended its foreclosure moratorium, which means the bank won’t evict a customer in arrears until at least February 2022.

Support being offered by Australian banks includes:

• Mortgage deferrals (size and scale of this assistance differs between banks).
• Loan deferrals for small business for up to three months (ANZ offering two months).
• Refunds on merchant terminal fees for three months.
• Waiving of term deposit notice periods and fees.

Additional relief from CBA and Westpac includes:

CBA:

• No foreclosures until Feb 2022.
• Automatic two-month mortgage deferral for customers in hardest hit locations and industries and others severely impacted by the lockdowns.
• Three-month deferrals for small business loans.

Westpac:

• Up to three months mortgage deferral + credit card and personal loan deferrals, determined on a case-by-case basis.
• Interest rate reductions on mortgage and credit card debt.
• For business customers, up to $15,000 free temporary overdraft for max 45 days to help with cashflow.

The real cost of a home loan repayment pause

While a mortgage repayment pause may offer short term relief, people taking out this option should be aware of the long-term implications.

RateCity.com.au analysis shows 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. If, after the deferral, the person instead keeps their repayments the same and extends out their loan term it could cost an extra $4,408 over the life of the loan.

RateCity.com.au 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.

“It’s not just the banks offering help, most service providers have hardship policies.

“If you’re struggling, don’t just cross your fingers and hope things improve, ask for help. It’s important to talk through your options before you miss a bill so you can potentially avoid extra penalties,” she said.

The cost of a two month pause on a $500,000 loan balance with 25 years remaining:

Notes: Based on an owner occupier paying principal and interest on the average rate of 2.69%. People who are further into their loan will pay less.

Potential alternatives to pausing mortgage repayments:

• Use money in your offset or redraw facility.
• Request a rate cut: variable rate customers should ask their bank for the new customer rate as a minimum. Some customers might switch to a lower fixed rate.
• Switch to part payments or interest-only repayments: paying something is almost always better than nothing.

Tips for reducing the impact of a repayment pause

• Try to pay off some of your loan during the pause.
• When the pause finishes, see if you can make extra repayments to catch up.
• Negotiate a lower interest rate with your bank.
• Get free financial advice: The National Debt Hotline is: 1800 007 007.

Compare home loans in Australia