ASB to waive home loan interest, if a borrower dies

Saturday, 30 May 2020

In all 54,166 borrowers with mortgages and other kinds of loans at the big banks have been granted total repayment holidays.

ASB has pledged to waive interest payments for a year on home loans of households in which one of the borrowers dies.

Banks have shown how supportive they can be to households in financial distress during the Covid-19 pandemic.

In all 54,166 borrowers with mortgages and other kinds of loans at the big banks have been granted total repayment holidays after losing incomes as a result of the economic disruption caused by the pandemic, and a further 61,438 have been allowed to make reduced payments.

Now ASB has launched Compassionate Care, a free addition to its home loans which will see the bank waive interest costs for 12 months if one of the borrowers on the home loan passes away.

* Households already coming off home loan 'holidays', banks say

* Kiwibank, ASB drop home loan interest rates below 3 per cent for the first time

* Loan repayment 'holidays' top 100,000, but home loan 'discounts' disappear

Banks like ASB have shown great support for home loan borrowers during the Covid-19 economic crisis.

The bank hoped that would make it easier for households to cope with the death of an income-earner, but stressed the move was not designed to replace the need for life insurance.

Around 160,000 ASB existing home loan customers will automatically be covered by the policy, which did not extend to borrowers aged 65 or over.

“We know that mortgage repayments are one of the biggest financial commitments for most home owners, so in case the unexpected happens, we want to provide our customers with peace of mind and some breathing space during an incredibly difficult time, so they can focus on what’s important,” said Craig Sims, ASB's executive general manager.

While many people with home loans do have life insurance, there's still a significant portion who did not.

In all around 38 per cent of adult New Zealanders had life insurance, Sims said.

The cover for the scheme is provided by insurer AIA.

The bank would proactively identify and pay-out when customers become eligible for interest payments to be waived, Sims said.

“Having to worry about financial stresses when someone you love passes away is the last thing we want people to be doing, so we hope this provides some reassurance and support,” said Sims.

But, he said, the move was not designed to replace household's need for life insurance, and said borrowers should seek appropriate professional advice.

He said the bank had planned the change before Covid-19 struck, but that the pandemic had temporarily delayed the launch.

The impact of Covid-19 had seen banks allow households whose incomes had plunged to temporarily halt, or reduce, loan repayments.

They were not waiving interest, however, and any repayments that were deferred were added to the amount owed, and borrowers would eventually have to pay it back.

That would, in many cases, lead to borrowers paying more interest over the lifetime of their loans.