Covid-19 mortgage 'holiday' scheme ends, with 3700 mortgages still in repayment deferral

Tuesday, 30 March 2021

Up to 4000 homeowners may have sold homes to exit the bank loan deferral scheme, data from credit reporting bureau Centrix shows.

The loan deferral scheme was rushed in by the Reserve Bank in March as fears grew that the country faced a devastating economic crisis, and a wave of homeowners losing jobs and defaulting on their mortgages.

The scheme, which ends on March 31, allowed banks to temporarily let homeowners reduce, or stop repayments, without having to account for their loans as if they were impaired.

Centrix chief executive Keith McLaughlin said the deferrals, which became known as home loan “holidays”, were a resounding success in avoiding forced home sales, and all but 3700​ homeowners granted deferrals were now back to making repayments again.

**READ MORE:

* Covid home loan crisis nearly over as just 8300 borrowers remain on repayment 'holidays'

* Reserve Bank raises spectre of wave of 'managed sales' of homes in March

* Half of households which deferred home loans have restarted repayments

**

Three-quarters of the roughly 54,000 homeowners who were granted some form of repayment deferral by banks had resumed full repayments, said McLaughlin.

A further 10 per cent were now making interest-only repayments, he said.

Both groups had been helped by lower home loan interest rates, as the Reserve Bank cut the official cash rate to stimulate the economy, he said.

“The good news is that only 5 per cent are still in deferral,” McLaughlin said.

“If the Reserve Bank and the trading banks hadn’t put the scheme in place, there would have been a lot of blood on the carpet,” he said.

“The mental strain of people facing those sorts of predicaments without the escape valve of the deferral scheme might have led to quite significant damage to people,” he said.

New Zealand Bankers’ Association chief executive Roger Beaumont said: “Banks are working closely with the few affected customers who still need help to get back on track.”

Options for these customers might include a further temporary payments deferral, extending the term of the loan to reduce repayments, or moving to interest-only repayments for a while, Beaumont said.

Centrix’s figures suggested not every exit from the loan deferral scheme may have been a happy one, however. About 4000 home loans that came off deferral did so as a result of the loans being repaid, McLaughlin said.

”Those mortgages must have been paid off,” he said.

This would have included some people who opted to sell their homes, he said.

“Some may have traded down,” but others may have been investors selling up, or homeowners deciding they had to quit the market.

Auckland mortgage adviser Karen Tatterson said rising house prices had helped people who decided to sell, rather than struggle on and hope for the best.

“Rather than putting themselves in a position where a bank is going to force the sale, they have made a decision to do it earlier in the piece,” she said.

Some may also have refinanced their loans with another bank but that was usually only possible once a borrowers had begun making full repayments again, Tatterson said.

Banks were routinely asking applicants for new home loans how they fared in the Covid-19 lockdowns, and how they would fare if another one happened, Tatterson said.

The loan deferral scheme had reflected the moral duty banks owed to homeowners, she said.

The 3700 home loan borrowers still under a deferral arrangement were not the only homeowners still in trouble.

About 1.2 per cent of all mortgages were in arrears, adding up to about 17,000 mortgages, Centrix data showed.

Audio provided by RNZ.