Mortgage repayment cliff still hangs over property market

The Australian Bankers Association (ABA) has released new data revealing that the number of Australians that have deferred repayments on bank mortgages has fallen to 270,000 from a peak of around 500,000 in June:

In late June the number of loans which had been deferred by Australian homeowners and businesses peaked, with around 500,000 mortgages, and more than 200,000 small business loans, having paused repayments.

Based on data collected by the ABA from seven of Australia’s largest banks, as of last week, the number of deferred mortgages had dropped to 270,000, meaning repayments had resumed on at least 224,000 loans. Almost half (45%) of deferred mortgages are back to making regular loan repayments.

In just the past month, as many customers came to the end of their 6-month deferral, more than 130,000 mortgages and 50,000 SME loans had had their repayments resumed.

According to the data from Australia’s seven largest banks, the total number of deferred loans has dropped to 439,000.

The official loan deferral data from APRA, released earlier this month, showed that $160 billion worth of mortgages had been deferred, accounting for 9.0% of outstanding mortgages (by value).

In number terms, 393,467 mortgages remained deferred, accounting for 7% of total mortgage facilities.

Thus, APRA’s figures are significantly higher than the ABA’s, because they extend beyond only the banks to building societies, credit unions, and non-bank lenders.

APRA’s data also suggested that lenders are having difficulty getting customers to recommence making repayments, given the value of mortgages deferred only fell by $7 billion between July and August, from $167 billion to $160 billion. In a similar vein, the number mortgages deferred only declined by around 21,000, from 414,430 in July to 393,467 in August.

In fact, the proportion of loans deferred (9.0%) remained only slightly below the level recorded when the pandemic began:

In any event, a significant number of deferred mortgages hangs over the housing market and economy. And this comes as around $10 billion per month of emergency income support is scheduled to expire over the next half:

Brace for a large number of property forced sales.

Leith van Onselen

Comments

  1. Brace for a large number of property forced sales.

    Unlikely. That might force prices down, collapsing the economy/ponzi.

    Here’s what happens next: The RBA forms a “bad bank” and these non-performing loans move from the Big4 to this bank. The RBA then forgives these loans in part, or in full.
    Presto! More home owners, more equity and money made out of nothing. These people “had a go” and as Scotty promised, they’ll “get a go”. Property prices will never fall.

    Right now this is actually happening under the counter via the RBA’s TFF

    • happy valleyMEMBER

      And next Treasurer Josh Rainbowberg will further rewrite the rules of banking so that not only is totally irresponsible lending kosher, borrowers will never be required to repay principal. Joshie boy is going to be borrowing so much debt for the Strayan people which he likewise has no intention (or hope of) repaying, so all he will be doing is transposing that principle to the banking market.

    • The TFF is letting the banks get as good as free money from the RBA. All that money they borrowed offshore on short-terms will get paid back quite quickly and likely to have a decent effect on the AUD.

      • We should be seeing that in the current account now shouldn’t we? This would have been so much better when the exchange rate was USD 1.10 = AUD 1 Might be a bit more manufacturing left now.

    • Ireland created a Bad bank in the GFC to allow the other banks to survive…put all the dodgy non performing loans into it…however …they did chase peiple for payment and / or tried to repossess the properties…but just too many and practically the houses were worth next to nothing after a year or 2..

  2. Anecdata- as it was foretold- the milking has commenced. For the go havers now stuck coming off deferment but still dealing with lower income, banks are doing the switch to IO and increasing the rate. When the savvy folk spit the dummy the bank has said no worries, sell if you don’t like it…. See article… ‘seems to be profiteering’, um no Dave- is profiteering https://www.abc.net.au/news/2020-10-15/half-of-deferred-australian-home-loans-back-to-payments/12767990

    • There was radio commentary on this issue this morning. The bank spokesperson was saying that they want what is best for the customer (lol) stating this could mean recommending a sale while they still have some equity in the property!

  3. Was wondering whether any of you have come across more granular deferred repayment data. hoping to see at a post code level. might send an email to DFA and see whether they have one.

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