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Deferral customers prematurely resuming repayments: ANZ

by Charbel Kadib5 minute read
ANZ

One in three mortgage deferral customers has opted to recommence paying down their debt ahead of the expiry of their repayment holidays, ANZ has revealed.

ANZ’s group executive, retail and commercial, Mark Hand, has noted a recent shift in behaviour among borrowers that opted to defer their loan repayments in response to the COVID-19 crisis.

As at 24 April, 14 per cent of ANZ’s home loan customers paused repayments for up to six months – equating to approximately $34.5 billion in loans

However, according to Mr Hand, approximately 33 per cent of such borrowers have resumed repayments on their home loan ahead of the expiry of the repayment holiday.

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“Now we’re [seeing] some customers call us to unwind the arrangement because they’ve got some certainty, they’ve got that confidence going forward,” he said.

“So, we’re starting to see a few customers every day, more and more, calling us to see if they can unwind the arrangements.”

He continued: “In rough numbers, about a third of our customers who took a deferral are making some payments – not full payments – although nearly 5 per cent are now back to making full payments.”

The ANZ executive said that many customers fared better than they initially expected.  

“We can see income trends for different cohorts in our data base and we can see a large number of them have not had the income reductions they anticipated,” Mr Hand said.

“Now some of those still went ahead, perhaps saving for a rainy day, taking advantage of the three-month deferral and then potentially the six-month deferral.

“Some want to have money set aside in case of another wave of infection and we go into another lockdown.”

Mr Hand added: “But we are seeing quite a shift in customer outcomes from what was expected. People are being cautious – and it was wise to enter a package until we had some certainty – and now we’re seeing some moving back out.”

However, the bank’s own data revealed that approximately 7 per cent of retail customers are no longer receiving an income as a result of the COVID-19 crisis, with a further 20 per cent experiencing a reduction of income of 20 per cent or more.

The big four banks are preparing to a significant deterioration in credit quality upon the expiry of loan repayment holidays, setting aside over $7.2 billion in credit provisions

According to the latest data from the Australian Banking Association (ABA), approximately 430,000 home loan customers have deferred their home loan repayments in recent months – equating to over $150 billion in mortgages.  

S&P Global Ratings has forecast an 85 bps increase in credit losses across the Australian banking sector’s loan portfolio in the 2020 financial year (FY20).

The 85 bps increase, which is expected to moderate to 50 bps in 2021, amounts to approximately $29 billion in gross loans, nearly six times higher than the record low in FY19.

[Related: ‘Don’t rush in’: Risks of new housing scheme flagged]

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Charbel Kadib

Charbel Kadib

AUTHOR

Charbel Kadib is the news editor on The Adviser and Mortgage Business.

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