Banks and APRA kick can off mortgage freeze cliff

In noted yesterday how Australia was facing a mortgage time bomb given 485,063 mortgages valued at $175.6 billion have been deferred for six month by Australia’s banks, representing around one in fourteen borrowers:

I also noted how the expiry of these mortgage deferrals would coincide with the expiry of the Morrison Government’s emergency income support in late September.

Today, it has been revealed that the Australian Prudential Regulatory Authority (APRA) and Australia’s banks are working together to guide borrowers past the mortgage repayment cliff:

The prudential regulator and the banking industry are in deep discussions about cushioning the impact of the nation’s looming financial “cliff” by trading a longer period of loan deferrals for extended capital relief…

Negotiations are considered likely to bear fruit before the end of July, after the Australian Prudential Regulation Authority gathers more data from the banks conducting check-ins with customers three months after loan deferrals began in mid-March…

“Other solutions will be examined, like lengthening the term of the loan, using redraw facilities, refinancing at a lower rate, or interest-only repayments”…

APRA chairman Wayne Byres told a Senate committee last month that some bank customers would clearly be unable to repay their loans once their repayment deferrals expired.

“But equally we don’t want to put pressure on a large group of customers at the wrong point of the cycle,” Mr Byres said.

“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.”

APRA and the banks are justifiably concerned. A mortgage repayment cliff coinciding with a welfare cliff is a dire prospect for the Australian economy and the property market, which are currently living in an artificial bubble.

The situation needs to be managed very carefully to avoid a hard landing.

Leith van Onselen


    • Strange EconomicsMEMBER

      But it should be carefully targeted at multiple property investors only for maximum benefit!

  1. Goldstandard1MEMBER

    -Just give every home owner who borrowed more than they should have 10,000 bank shares. That should help.
    -Renters get reminders in the mail to pay rent.
    -Youth get to live with their parents again, and Boomers get their kids and grand kids living with them!
    -No household gatherings larger than 5 ppl beyond those in the household, so make the household a community!

  2. Display NameMEMBER

    We want lemming mode. Lets go off the cliff. Rip the bandaid off and take our medicine. I will get the pop corn.

    • Reus's largeMEMBER

      The 1% would never risk that, they would much rather look to see how they can make the other 99% mega mortgage slaves for as long as possible to preserve their riches, expect 50 year mortgages and other extend and pretend measures. The problem being we are over the cliff but the dust has not cleared for us to see where we are going to fall too, APRA and the banks are just creating more dust ….

  3. Are they ppor or investment props? Anyway they should burn either way. As these home owners are the same ones who look down on anyone that is a “renter”.

  4. What ever happened to accountability for ones actions ? Decades of ‘easy credit’ fueled by RBA & our FIs -> speculative boom in Property -> Extreme overleveraging into Housing … yet now with reckoning upon us (aka cliff & high unemployment) Gov & FIs look for ways to avoid returning ‘bubble market’ to equilibrium (aka lower prices) even if its at the affordability of future generations…. As TBag says let them burn & take responsibility for thinking property (like any asset class) is a one way bet

  5. happy valleyMEMBER

    “The situation needs to be managed very carefully to avoid a hard landing.”

    Just retail depositors to fix it – the banks (ably supported by the RBA happy clappies) having been doing it for years to great effect. Why change when you’re on to a winning strategy?

  6. A hard landing is exactly what’s needed. Reusa has one every night and he’s still doing OK.

    • Jumping jack flash

      NIRP is almost a certainty before the end of the year.

      I also think that despite what the government says, more QE will be performed to generate more money to spend as wage subsidies. Rebranded of course by the chief marketing officer.

      Opening the gates may not be on the cards, at least not in the immediate future.

  7. Dean MorrisMEMBER

    Akin to the Captain of the Titanic exploring the option of moving the Deck Chairs to upper levels ….That will fix it?

  8. Jumping jack flash

    “Other solutions will be examined, like lengthening the term of the loan, using redraw facilities, refinancing at a lower rate, or interest-only repayments”

    Nice. Especially the lengthening and IO options. Banks are excited and keen to help!

      • Yes! 50 and 60yr loans, bring it on Straya. How good is debt slavery?

        I posted a list last week, multigenerational loans and IO for all were on it. Didn’t take long…

  9. “..APRA and the banks are justifiably concerned….”

    As to why anyone else should give a dry bit of fig is harder to explain.

    Fix the broken monetary system by draining the private bank debt as money swamp.

  10. Gov’t will start buying up a securitisation of these dud loans to move them off the bank books.

    They’ll then appoint and fund manager related to Tim Wilson to look after them.

    Borrowers will never repay and Wilson’s relatives will get rich.

    Taylor will be working out how to get his nose into that trough as well.