Half of all households who cut or temporarily halted their mortgage repayments at the height of the Covid-19 economic crisis are back to making full repayments.
During the national lockdown in March and April, banks agreed to let households whose incomes had reduced to either temporarily stop, or reduce repayments on their home loans, a move that was commonly referred to as taking a repayments ‘holiday’.
At its peak in June around 7 per cent of all home loans were on deferred or reduced payment plans with their banks, according to data from credit reporting bureau Centrix.
But Mark Rowley, Centrix chief operating officer, said that by the end of September, the number of mortgages on deferral had halved from its June peak to 3.5 per cent of all home loans.
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The crest of the mortgage deferrals wave peaked at 54,000 home loan borrowers having secured deals to make lower repayments, or defer repayments altogether, Rowley said.
By the end of September, there were around 28,000 home loans on deferred, or reduced repayments, he said.
Some of the worst hit areas had seen big improvements in household finances, Centrix’s data indicated.
In Queenstown, the proportion of home loans on which borrowers had agreed repayment reductions and deferrals peaked at nearly 12 per cent, but had now dropped to just under 7 per cent, Rowley said.
“Queenstown, Rotorua, and Taupo are still out in front, but the fact that the number of mortgages on arrangements has fallen suggests that domestic tourism is benefiting them,” he said.
There had also been a drop in the number of home loans which were in arrears, but were not in the mortgage deferral scheme, Rowley said. At the end of September there were around 13,000 home loans flagged as being in arrears in the Centrix database.
Rowley said some households which had come out of deferral arrangements had slipped into arrears, indicating they may have come off their deferrals too soon.
“The data shows that those mortgages that have been in deferral but have subsequently restarted payments are at a higher risk of being in arrears than those that haven’t taken a deferral,” Rowley said.
“We are seeing arrears of 0.9 per cent in mortgages that haven’t been in deferral, while we are seeing 1.7 per cent of mortgages in arrears after the mortgage holder has resumed payment after being in deferral.
“This is likely an indication that some mortgage holders are coming off the deferral scheme too early, or that there are a group of mortgage holders in financially tenuous circumstances,” Rowley said.
There was an economic incentive for households to begin home loan repayments as soon as possible, because deferred repayments were added to borrowers’ loan balances, which would increase the amount on which interest was charged, Rowley said.
Westpac spokesman Will Hine said nearly four out of 10 customers who were receiving repayment assistance had come off its support programme.
“Most of these customers proactively discontinued their assistance. We expect to see thousands more of our customers restart regular repayments during October,” Hind said.
Ben Kelleher, managing director of retail banking at ANZ, said the six-month loan deferral programme was expiring for customers who took that option in April.
“We are in the process of calling many of these customers to see how they’re going and to discuss options.
“We’re finding that about three-quarters of these customers are finishing their deferral and going back to their regular payments.”
Some of the remaining quarter were either requesting to extend their deferral, or reduce repayments by increasing the term of their loan or moving to interest-only repayments, Kelleher said.
Lower interest rates on home loans have provided some help for borrowers on floating rate loans, or whose fixed periods came to an end in recent months.
At the start of the year, the average advertised two-year home loan rate was 4.4 per cent, according to Reserve Bank data, but by the end of August, it was 3.7 per cent.