Mortgage deferral total surpasses $150bn

According to the latest data from the Australian Banking Association (ABA), approximately $153.5 billion in home loans have been deferred for up to six months over the past few months in response to the economic fallout from the COVID-19 outbreak.

This equates to approximately 429,000 (one in 14) home loan customers.

When including business loans, personal loans and credit card facilities, the number of loans deferred totals approximately 703,000 or $211 billion in value terms. 

“Banks are here to support customers throughout the crisis and help the economy on the other side as we recover from the devastating effects of this pandemic,” ABA CEO Anna Bligh said.

“Since this crisis started, banks have deferred the mortgage repayments of 429,000 Australian families, or a staggering one in 14 of all home loans.

“Australian families who are financially affected by this crisis have had the breathing space they need with a six-month deferral on their home loan repayment while they chart a path through to the other side of this downturn.”

Banks are bracing for a spike in defaults upon the expiry of the six-month deferral period.

The big four banks have set aside over $7.2 billion in credit provisions in anticipation of a sharp deterioration in credit quality.

Last month, S&P Global Ratings reported that it is forecasting 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: Young mortgagors hit hardest by COVID-19]