Commonwealth Bank says loan deferrals declining, APRA data show $229b in loans still paused across all banks
The Commonwealth Bank has revealed the number of home loan repayment deferrals on its lending book declined to 114,000 in August (worth $45 billion), down only slightly from 117,000 in July ($46 billion) and 125,000 in June ($49 billion).
Australia’s largest bank said its loan repayment deferrals for small and medium enterprises (SMEs) also declined to 54,000 (worth $12 billion), down from 57,000 in July ($14 billion) and 69,000 in June ($15 billion).
The total value of all loan deferrals on its books — home loans, business loans, and personal loans — is now $59 billion, down from $62 billion in July and $67 billion in June.
CBA released the data to the stock exchange today after the Australian Prudential Regulation Authority yesterday published its COVID-19 loan deferral data for August.
APRA’s data indicated $229 billion worth of loans in Australia (home loan, business and personal) were still on temporary repayment deferrals, accounting for around 8.5 per cent of total loans outstanding in Australia.
Housing loans comprise the majority, although small business loans have a higher incidence of repayment deferral — 16.2 per cent of small business loans are currently subject to repayment deferral, compared to 9 per cent of housing loans.
Loan deferral period extended until January, with caveats
The temporary loan deferrals were introduced in March as an emergency six-month measure when policymakers were grappling with the unknown threat of COVID-19.
The six-month period was due to end in September, but concerns about the health of the economy as well as the fresh lockdown in Victoria, convinced banks to extend the program by another four months for customers still facing hardship due to COVID-19, taking it through to the end of January 2021.
Anna Bligh, the chief executive of the Australian Banking Association, said customers who can afford to restart paying their loans are required to do so, but those still struggling they should contact their bank to restructure their loans or apply for another hardship program.
She said the ABA had extended its credit rating amnesty until at least March 2021, meaning banks will not report borrowers to credit agencies for missing payments as long as they were up to date with their repayments before their loan deferrals were granted.
Positive signs for the economy
APRA’s data show the total number of loan deferrals have been declining in recent months.
Exits from loan deferrals outweighed new entries for the second straight month in August, with $24 billion worth of loans expiring or exiting deferral, and $14 billion worth of loans entering deferral or having their deferrals extended.
The Commonwealth Bank’s loan book has matched that trend — in August, $5.7 billion worth of CBA’s deferred loans expired or exited, while only $2.3 billion worth of loans entered a new deferral or had their deferrals extended.
Matt Comyn, CBA’s chief executive, said his bank was working with customers to manage the challenges of COVID-19.
“As we approach the end of the initial deferral periods, we have been contacting all customers with deferred loans to talk with them about their options, including returning to full or part payment, or converting their loans to interest only,” he said.
“Many of those contacted will be able to recommence their repayments.
“For customers who are facing financial hardship, we are reaching out to offer solutions tailored to their individual needs.”
Queensland a ‘hotspot’ for loan deferrals
Credit analysis company Equifax yesterday revealed Queensland is home to nine of the top 10 regions in the country where mortgage payments have been put on hold with the big four banks.
“The impact of the downturn on tourist trade is acute for Australians living in tourism-dependent Queensland regions,” Equifax’s general manager, advisory and solutions, Kevin James told the ABC.
The worst-hit regions include the Whitsundays, Noosa, Surfers Paradise, Coolangatta, Broadbeach-Burleigh, Mudgeeraba-Tallebudgera, Southport, Gold Coast Hinterland and Cairns.