I noted earlier this week how Australia was facing a mortgage repayment cliff in September given 480,700 mortgages have been deferred for six months by Australia’s banks worth $173.5 billion:
That equates to around one in 14 mortgage holders, according to the Australian Bankers Association.
Now, it’s been revealed that the banks will extend relief to struggling mortgage holders by shifting loans to interest-only:
Three of the major banks – Commonwealth, ANZ and Westpac – will now allow more home owners to switch to an interest-only loan for a year, or extend their existing interest-only payments under loosened criteria.
“Banks have said we will relax and give people greater access to interest-only,” Steve Mickenbecker, group executive for Canstar said.
“If you’re already in an interest-only loan we’ll extend it by 12 months without asking too many difficult questions and if you’re looking to transfer into it for a period of 12 months, well we’ll ask a few more questions but we’re making it more accessible”…
According to figures provided by Canstar, a home owner with a $400,000 home loan over 30 years is expected to save about $476 every month for 12 months through interest-only, compared to a tradition principle and interest repayment.
While this move will help at the margin, the bigger problem will arise if the Morrison Government implements a hard stop to income support, including JobKeeper and JobSeeker.