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. The COVID-19 loan deferrals, that had been provided by many lenders since March 2020, have now ended.
  2. Many lenders are now contacting customers that had taken up a loan repayment deferral or negotiated reduced repayments to see if they can return to normal payments.
  3. If you continue to be financially impacted by COVID-19 and cannot afford to return to normal payments, you should talk to your lender as soon as possible to discuss your options and ask them to consider providing further hardship assistance.
  4. Debt collection activity has resumed and the temporary measures that were in place to protect people from being forced into bankruptcy ended 1 January 2021. See COVID 19 changes: Bankruptcy.
  5. Some lenders have introduced a freeze on forced sales for example until September 2021, but only for eligible customers that remain in regular contact with them (although this is not guaranteed).
  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 continue to be financially impacted by COVID-19 and cannot afford to return to full repayments, you should talk to your lender or creditor as soon as possible to discuss your options and ask them to consider providing further hardship assistance.  This may include reducing your repayments for a period of time, switching to an interest only loan for a period of time, restructuring your debts or other options that are suitable for your situation.

As your home loan is usually your biggest, most expensive and highest priority debt it is a good idea to adjust your budget and return to normal repayments or make the highest possible repayment you can afford.

If you cannot afford to pay anything, call us on 1800 007 007 for advice.

Mortgage repayment options

In March 2020, banks and some other lenders, offered people a six-month deferral on their home loan repayments.

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

In July 2020, banks announced a second phase of assistance for those who could not return to normal repayments.  This included a further loan repayment deferral of up to four-months, on a case by case basis.

The COVID-19 home loan deferral period ended on 31 March 2021.  Banks are now contacting customers about returning to normal repayments or will be assisted through the bank’s hardship process to consider other options.

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 normal payments you have the right to ask your lender for further assistance.  Your lender may be able to offer options that will help to reduce your repayments for a period of time or to restructure your debts such as:

  • Extending the length of the loan so that your repayments are lower
  • Converting the loan to interest only payments for a period of time
  • Reducing your repayments to the minimum monthly repayment amount
  • Accessing money you may have available in any redraw of your loan
  • Consolidating debt for example: personal loan, credit card and home loan so that your total repayments are lower
  • A combination of these and other measures

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

Situation 3 – You cannot afford to make any repayments

If you are in this situation, call and speak to one of our financial counsellors to independently explore your options.  Call us on 1800 007 007 for advice.

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.
  • Ask them about what hardship assistance options they are offering.
  • If you have multiple forms of credit with the same lender or creditor, one option may be to restructure or consolidate them and switch to interest only repayments.
  • Only make a repayment arrangement you can afford. You can always make higher repayments if your circumstances improve while you are still in a repayment arrangement. 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, 3 months, 6 months, 12 months.  Usually, the longer the arrangement, the more information your lender or creditor may need from you.
  • 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
  • A reduction in the interest rate
  • To deal with any arrears by extending the term of the loan (people usually do not exit financial hardship with money for higher repayments)
  • 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 their significant event hotline 1800 337 444 or on 1800 931 678.

If your creditor will not agree, you can also call us for advice on 1800 007 007.

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.