You can refix to a lower interest rate while on mortgage 'holiday'

Tuesday, 7 April 2020

People who bought homes in recent years at high prices using large home loans are especially vulnerable to losses of incomes.

Mortgage 'holiday' applications continue to surge, but grateful homeowners who qualify for one must keep an eye on the rate they are paying.

By midday Monday BNZ had had around 9000 applications for mortgage relief from borrowers, and had granted around 4500, while Kiwibank passed 5000 requests for mortgage holidays on Monday. Westpac passed 15,000 inquiries, and had granted 6500.

But being on mortgage holiday did not prevent households from refixing at a lower interest rate once their current fixed term came to an end, said BNZ spokesman Michael Burgess.

Worried Stuff readers had interpreted mortgage holiday documentation as locking them into their current interest rate for the duration of their mortgage holiday, even if they were due to come off their current fixed rate in the near future.

BNZ is working through around 600 applications for emergency loans from businesses.

* Coronavirus mortgage 'holidays' can save homes

* Thousands of households granted Covid-19 mortgage 'holidays' by ASB

* Kiwibank, Westpac, ANZ and BNZ report high demand for mortgage 'holidays'**

'I've taken a 20 per cent pay cut,' one BNZ customer, who asked not to be named, said.

'I'm lucky, I still have a job and it's likely the line of work I'm in will bounce-back quickly, so we're hoping to go back to paying mortgage principle and interest fairly quickly.'

Kiwibank has had over 10,000 contacts from customers in need of relief after seeing their incomes drop during the coronavirus lockdown.

Whether that happened by June, when his current fixed rate home loan was due to be refixed, he did not know.

Currently, he was paying 4.89 per cent interest, when BNZ's current one year fixed rate was 3.09 per cent, and its two year fixed rate was 3.35 per cent.

'If the banks don't allow people in our situation access to these lower rates maybe the Government should step in and make them,' he said.

But Burgess confirmed being on mortgage holiday, or making interest-only payments, did not prevent borrowers from switching onto the current lower fixed rates when their home loans' current fixed periods ended.

'A customer can roll onto a new interest rate during a mortgage deferral,' he said.

Total number of Covid-19 related enquires for Kiwibank is now 10,000.

The big five banks have seen a flood of inquiry from households whose incomes have dropped as a result of the coronavirus lockdown, and they are expecting that to continue as people and businesses increasingly find themselves facing personal financial crisis.

'Incomes have been hit. Firm closures and job losses are inevitable,' ASB chief economist Mark Tuffley said on Monday.

'For personal banking, we've now received 5000 requests from customers requiring home loan assistance ,' said Kiwibank spokeswoman Kara Tait.

'We're now providing assistance to approximately 850 business customers impacted by Covid-19, in the form of loan payment deferrals, interest only terms, and temporary overdraft facilities.

Loans under the Business Finance Guarantee Scheme, under which losses on loans were shared 80 per cent/20 per cent by the taxpayer and banks respectively, were taking longer to process.

'We are still in the application phase for the Business Finance Guarantee Scheme. Customers can check eligibility criteria and register their interest via our website,' Tait said.

BNZ said it was working through around 600 emergency loan applications from small and medium-sized businesses.