Credit: MayoFi

Loan deferrals decrease as banks steer customers towards paying ‘as soon as possible’

Data released from the Australian Prudential Regulation Authority shows that loan deferrals have decreased, as exits from deferrals outweigh new entries for five straight months leading up to November 2020. 

A total of $60 billion of loans – around 2.3 per cent of total loans outstanding – were on temporary repayment deferrals as at 30 November 2020.

The rate of deferrals decreased, as $32 billion in loan deferrals expired or were exited from compared to $7 billion that were entered into or extended in November.

The majority of deferred loans were housing loans (2.8 per cent of total loans), followed by an increasing number of SME loans (2.4 per cent of total loans).

However industry leaders have warned that the dropping number of loan deferrals are not a complete representation of Australia’s economic condition. 

Australian Banking Association CEO, Anna Bligh, noted that whilst loan deferrals had dropped dramatically from 900,000 in June to just over 280,000 in November, Australian households and businesses are still under immense financial stress. 

“I don’t think anybody’s trying to look at this through rose coloured glasses,” said Ms Bligh to ABC Radio’s AM.

“Banks have said very publicly and very honestly, that for some of their customers 2021 is going to mean facing some pretty tough decisions. 

“If you are facing long term unemployment because of what’s happened in your industry and circumstances involving you and your family, there are going to be circumstances where it is in the best interest of the customer to put their property on the market, realise the equity they have in it and restore themselves to financial well being.”

Source: ABA, ANZ, Bendigo, CBA, NAB, Suncorp & Westpac 

Banks prompt customers to start paying “as soon as possible”

A spokesperson from ANZ told Dynamic Business: “where they are able to, we have worked with customers to get them back paying as soon as possible or consider options such as moving to interest-only payments.”

APRA’s data showed that as a proportion of total lending, ANZ held the most frozen loans (at 3.1 per cent as of 30 November) among the big four. This was followed by Westpac (3 per cent), Commonwealth Bank (2.3 per cent) and NAB (1.3 per cent). 

Westpac had the highest total value of frozen loans (at $17.6 million), followed by Commonwealth Bank ($15.4 million), ANZ ($12.5 million) and NAB ($6.1 million).

Westpac also had the highest number of frozen loans (65,164), followed by ANZ (45,749), Commonwealth Bank (38,691) and NAB (10,284).

However according to the Australian Financial Review, ANZ and Westpac were “freezing and extending loans at two to three times the rate of their rivals”.

So whilst new and extended deferrals slowed at CBA from October to November and remained constant at NAB, the total value of frozen loans at ANZ and Westpac increased.

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