COVID -19 changes: Home loans

The Coronavirus (COVID-19) pandemic is a challenging time for everyone in Australia (and the world). This is a guide about managing your home loan if you have been financially impacted by the pandemic.

This page is about steps you can take to look after yourself and your family financially during the COVID-19 pandemic

Information on this page:
Please click the links below to visit each section

Six changes you need to know about

  1. In March 2020, many lenders announced that they will be flexible about repayment arrangements. Banks provided initial payment deferrals of up to six months, but these are coming to an end.  Customer owned banks have also announced specific assistance measures.
  2. Many lenders will now be contacting customers that have negotiated reduced repayments or taken up a repayment deferral to see if they can return to normal payments.
  3. If you cannot afford to return to normal payments, you can ask your bank for more affordable payment options or request a further four-month deferral. (See “What do the Changes Mean?” below for further details)
  4. Lenders are also more likely to limit or slow debt collection and enforcement action (including repossession) (although this is not guaranteed).
  5. The Government has introduced changes to limit the ability of creditors to force you into bankruptcy before 25 September 2020. See COVID 19 changes: Bankruptcy.
  6. The Australian Financial Complaints Authority (AFCA), which is the free dispute resolution body, has a significant event hotline 1800 337 444 for individuals financially impacted by the COVID-19 pandemic.

What do the changes mean?

It means that if you are struggling financially, you should contact your lender to make a repayment arrangement you can afford.

As your home loan is usually your biggest, most expensive and highest priority debt it is a good idea to try and make some repayments if you can, rather than fully defer them. But depending on your circumstances this may not be possible.

Mortgage repayment deferrals with banks

In March 2020, banks offered people a deferral of home loan repayments. You may already have obtained a six month deferral.

Deferrals (sometimes called forbearance or moratoriums) do not stop interest and fees being charged.

In July 2020, banks announced a second phase of assistance, based on people returning to full payments or restructuring the loans.

Situation 1 – You can return to full repayments

If you can afford to return to normal payments, it is in your best interests to do so as soon as possible, or once your deferral period ends.

Situation 2 – You need further assistance

If you cannot afford to return to regular payments you can ask your bank for further assistance.  Your bank may be able to offer the following assistance:

  • Extending the length of the loan
  • Converting the loan to interest only payments for a period of time
  • Consolidating debt
  • A combination of these and other measures, for example, you could ask your bank to restructure payments for other unsecured loans as well.

If it is not possible to put any of these arrangements in place by the end of the initial six month deferral period, you can ask your bank to consider an extra deferral period of up to four months. During this extra deferral period, your bank will expect you to work with them to find the best way to return to normal repayments.  This extension will not be automatic, and banks may only provide it if they believe you can benefit from the extra time before you return to normal repayments.  Under this scenario, loans can be deferred for a maximum of 10 months in total.

Your credit report will not be affected as long as you stick with the agreed arrangement.

Situation 3 – You are unable to pay

At the end of any period of deferral or if you are unable to afford to pay your mortgage, you can ask that the bank consider providing further financial hardship assistance.

If you are in this situation, it would be a good idea to first speak to one of our financial counsellors to independently explore your options.

For more information on banks COVID-19 support phase two click here.

Mortgages with other lenders

Other non-bank lenders may have also agreed to reduce or defer repayments or to restructure a home loan due to the corona virus pandemic.

If you can afford to return to normal payments, it is in your best interests to do so as soon as possible, or at the end of the deferral period.

If you need further assistance, you have a right to ask your lender to consider a hardship arrangement.  See below for “What to ask for when you negotiate a repayment arrangement” and “If your lender will not agree to a repayment arrangement”.

When negotiating with your lender/creditor

  • Tell them how you have been affected by the pandemic.
  • Tell them if you are receiving the JobSeeker payment or JobKeeper payment.
  • Only make a repayment arrangement you can afford. However it is in your interests to pay as much as you can , so  you don’t fall too far behind.
  • Consider how much time you will need the repayment arrangement to be in place, for example, three months.  Remember these are temporary arrangements so the longer the arrangement, the more information your lender or creditor may need from you. (You can always make higher repayments if your circumstances improve while you are still in a repayment arrangement.)
  • Agree the timing of the repayments, for example, if you are paid fortnightly then you could schedule your repayments to be fortnightly as well.

What to ask for when you negotiate a repayment arrangement

Try to negotiate the following as part of any agreed repayment arrangement:

  • Affordable repayments
  • Late fees and default/legal fees not to be charged
  • If at all possible, make higher repayments when your income recovers to catch up on any missed repayments (and the additional interest that will have been charged)
  • Ask that your credit report is not affected. You can do this by asking that your payment history information is marked as paid and that no default is listed while you keep to any agreed repayment arrangement (Note that your credit report will not be affected if you have deferred your home loan with a bank under the standard six month deferral arrangement or subsequently enter into a new repayment arrangement, as long as you meet the new arrangements).
  • Ask for confirmation of any agreement in writing, particularly if it is for three months or longer.

If your lender will not agree to a repayment arrangement

If your lender will not agree to a repayment arrangement for your home loan, you can have that decision reviewed by the Australian Financial Complaints Authority. This is a free and independent dispute resolution service. You can contact AFCA on 1800 931 678.

Speak to one of our financial counsellors

If your problem still hasn’t been solved, or you’re feeling overwhelmed, call us on 1800 007 007 to speak with one of our financial counsellors.