Some of Australia’s biggest banks will extend the deferral of loan repayments for up to four months as the nation scrambles to contain the threat of a second wave of coronavirus infections.
Customers who can resume paying their loans will be required to do so at the end of their six-month deferral period, the Australian Banking Association (ABA) said in an emailed statement.
Customers with reduced incomes and ongoing financial difficulty due to Covid-19 will be contacted as they approach the end of the deferral period and granted an extension if they genuinely need some extra time. Options will include extending the length of the loan and converting to interest-only payments.
Economists had expressed concern that the nation faced a looming fiscal cliff, with a key wage subsidy package and the loan deferrals scheduled to run out at the end of September. Treasurer Josh Frydenberg has held talks with the banks, and indicated the government will taper support rather than going cold turkey.
Frydenberg said that the government will announce a “new phase” of targeted and time-limited income support when it hands down its economic and fiscal update on July 23. With improving economic prospects albeit tempered by uncertainty about the health situation, many of the more than 800,000 Australians who deferred repayments are showing signs of recovering.
“Encouragingly, many customers have already chosen to resume making repayments,” ABA Chief Executive Officer Anna Bligh said.
Commonwealth Bank of Australia said since the start of the pandemic it has provided repayment deferrals on almost 130,000 home loans and supported 100,000 business customers. These measures have injected about A$15 billion ($10.4 billion) in direct financial support to customers and stimulus for the economy, the bank said.
The Australian Prudential Regulation Authority said it will extend temporary capital treatment for bank loans with repayment deferrals accordingly.