Deferred mortgages peaked at 11% of all home loans in June 2020, before steadily falling ahead of the March 31 deadline
Nearly 97% of all deferred loans had resumed repayments by the end of February, nearly one year from when this customer support was first announced, according to the Australian Banking Association (ABA). Last month it was 91%.
Initially set for a duration of only six months, deferred mortgages peaked at 11% of all home loans in June 2020 (worth $195 billion), before steadily falling ahead of the March 31 deadline.
With just $10 billion in loans now in deferral, ABA CEO Anna Bligh said banks are still ready to take the call of those still struggling.
The latest loan deferral figures show that while the vast majority are back on their feet, some customers are still struggling, Ms Bligh said. These customers should talk to their bank now about the path ahead.
Over the past year, banks have cushioned the blow for their customers. Through 2021, their priority is helping customers rebuild and get ahead, she said.
While most borrowers have now resumed full or partial repayments on their mortgages, those who are still not able to do so are at risk of default.
Credit rating agency Moody’s has warned mortgage delinquency rates will rise in the first half of the year once mortgage relief measures taper off in conjunction with other support measures like JobKeeper and JobSeeker.
However, rising property prices could provide some relief for struggling borrowers.
Rising house prices will curb mortgage delinquencies risks to some extent, because they will make it easier for borrowers in financial difficulty to sell their properties and repay loans, said Moody’s Vice President and Senior Credit Officer Alana Chen.
But the positive influence of rising house prices will not be enough to prevent delinquency rates from increasing in the first half of 2021.
Delinquency rates should improve throughout the year as the economic recovery builds momentum, Moody’s said.
Home lending has reached high levels over the past few months, partly due to ultra-low interest rates.
According to data from the Australian Bureau of Statistics (ABS), new home lending in January rose nearly 45% while first home buyer numbers increased nearly 71% compared with 12 months before.
Despite plans to repeal some responsible lending laws, access to housing credit doesn’t appear to be an issue at the moment, or so it would seem based on this and the latest APRA data as well.
According to the Australian Prudential Regulation Authority, new residential mortgage lending rose 13.1% year on year (YOY) and 20.2% over the three months to December 2020.
While these increases are significant, the spikes were even more in ‘riskier’ lending categories.
Loans with LVRs of 95% or higher increased by 27.4% over the year to the December quarter, and interest-only loan funding increased just over 31%.
Loans to those with debt-to-income ratios of six or higher also surged by 26.3%.
A UBS analyst said it assesses this data as “showing a significant quarter-on-quarter increase in ‘higher risk’ home loans”, but APRA appears less concerned, saying much of this activity could be due to increased first home buyer activity.
According to the available indicators, there is no evidence to suggest a material relaxation in lending standards is accompanying the significant increase in new lending, APRA said. The share of new lending at higher LVRs also remains below levels seen over the past decade.