A Senate committee has been told that businesses and households have now deferred around $250 billion worth of loan repayments due to the coronavirus pandemic. However, Australian Prudential Regulation Authority (APRA) chairman Wayne Byres conceded that some customers will not be able to repay their loans when they are required to resume repayments:
Australian Prudential Regulation Authority chairman Wayne Byres told a Senate committee… “we don’t want to put pressure on a large group of customers at the wrong point of the cycle”…
“We often talk of the cliff, which is when everything ends in six months’ time. No one has an interest in going off the cliff, so we have to work out what the next phase is going to be and that will be dependent on the economic situation at the time.”
Indeed, the Australian Bankers Association (ABA) last week revealed that one in 14 mortgage holders have had their repayments deferred, totaling more than $150 billion worth of mortgages.
At the same time, several lenders have begun tightening financial requirements on mortgages:
Lenders say the new conditions are in response to the impact of COVID-19 restrictions on self-employed workers.
Categories facing tougher terms are likely to be widened over coming weeks to include those being hit by job losses, such as construction.
The mortgage repayment “cliff”, alongside tightening credit availability, is a clear downside risk for Australia’s property market.
Easy credit was behind much of the meteoric rise in Australian property values. Therefore, any contraction of credit and/or forced sales will necessarily weigh on the market.