Guide to lending changes as a result of COVID-19

Back just a few short months ago COVID-19 felt like something that was happening overseas and we continued going about our normal routine. As we come out on the other side of March 2020, there is now no doubt, that this year has brought with it significant challenges for both households and businesses. 

Our financial institutions are now needing to make lending changes and provisions to rapidly deal with the economic issues that Australians are facing. 

With a number of industries effectively shut down due to the federal and state restrictions in place the flow-on effects are being felt. With employment being impacted incomes to service loans are becoming a concern for many Australians.

How has the Government responded?

The good news is that the Government has responded relatively quickly in looking to do all that it can to secure people’s jobs as we ride out this crisis over the next six months or more. 

Many of these solutions that are available could mean that you are still in a position to pay off your home loan, or continue to service your investment loan from the rent received from a tenant. 

While we won’t go into great detail here on the options available to you, as your accountant would be best positioned to provide you advice on this, we’ve provided a summary below of the main support that is being made available to individuals and you should keep up to date via the Treasury website. 

• JobKeeper payment – This will be a payment of $1500 per fortnight paid to employers and self-employed individuals with the idea to help them to be able to retain their staff through the crisis. Your employer will notify you if they intend to claim the fortnightly payment on your behalf.
• JobSeeker payment – For those that lose their job and their employer isn’t opting into the JobKeeper scheme, the Government is temporarily expanding eligibility to income support payments and establishing a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight. This will be paid to both existing and new recipients of JobSeeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit. 
• Early access to Super – Individuals affected by the Coronavirus can access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21. Your future retirement balance will be impacted by this, so seeking advance as to if this is the right approach for your circumstance is recommended. 

Business owners – there is a range of other payments that business owners may be eligible for including a Boosting Cash Flow for Employers measure, support for apprentices and trainees as well as temporary relief for financially distressed businesses to name a few.

Consider restructuring or refinancing your loan

If you have lost your job or had a significant decrease in your income and qualify for the above options, you may still be in a position to service your home loan. 

In this instance, we would suggest you speak to us as your mortgage broker to consider whether restructuring your loans and ensuring you are on the best interest rate for your needs will be of benefit to you. 

This may result in a reduction in your regular repayments and help to give you some level of relief. We are in an incredibly low-interest rate environment at the moment, so you want to ensure you aren’t paying more than you need to be. 

It is also a great time to consider refinancing your loan, as there are a considerable amount of low rate offers available from many financial institutions. By refinancing your loan, you could slash a considerable amount off your repayments and interest rates. 

Contact me today to discover the best refinancing deals currently available in the market.  

Banking assistance in times of hardship

We know, however, for some Australians that with no income they simply won’t be able to keep up with their mortgage repayments. The banks are aware of this too and have always had hardship provisions in place for similar circumstances. 

The COVID-19 impact has seen the banks and other lending institutions share their hardship policies and provisions and most of them are offering deferred home loan repayment options as well as a range of provisions for their business customers. 

Different banks have different conditions upon which they’ll grant an exemption with some being more relaxed with their procedures and others taking things on a case-by-case basis to determine eligibility.

We will cover off in this article how the big 4 banks are responding to the COVID-19 crisis, but If your bank’s details are not listed here and you need some assistance with finding out the hardship provisions for your loan, please do not hesitate to get in touch with me. 

ANZ

• Home loan payment deferrals for up to 6 months (reviewed at 3 months)
• A six-month payment deferral on business loan repayments, with interest capitalised
• Temporary increases in overdraft facilities for 12 months
• 0.25% p.a. decrease in variable interest small business loan rates effective 27 March, resulting in a 0.50% reduction in March
• A 0.80% p.a. reduction to new two and three-year fixed rate of 2.59% for secured small business loans up to $1 million, effective 3 April

More information is available here: https://www.anz.com.au/support/covid-19/

CBA

• Six-month deferral on home loan repayments
• Deferring repayments and fee waivers for various business products 
• Waiving merchant terminal fees for 90 days
• Deferring repayments on vehicle and equipment finance loans, and tailoring restructuring options
• Waiving early redraw fees on business term deposit accounts (including Farm Management Deposit accounts)
• Waiving establishment fees and excess interest on temporary excess products
• Offering unsecured loan of up to $250,000 with no establishment or account fees, and no repayments for six months for business with less than $50m turnover.

More information is available here: https://www.commbank.com.au/latest/coronavirus.html

NAB

• Six-month home loan repayment pause (with check-in at three months)
• The option to reduce repayments or make redraws through offset accounts
• Deferral of business loan repayments and extension of business loan terms (up to 3 months), based on individual circumstances
• Support to restructure existing business loans, including equipment finance
• Business credit card deferred repayments.

More information is available here: https://www.nab.com.au/personal/customer-support/covid19-help/home-owners-support

Westpac

• A three-month deferral on the loan, with the option to extend to another three months on a review-basis after that period.
• Access to an unsecured three-year term loan up to $250,000 to all business customers with a turnover of less than $50 million (with a six-month payment-free option)
• Fee-free redraws on business loans
• Business loan and credit card repayments deferred by up to 3 months
• Options to extend business loan terms by up to 3 months

More information is available here: https://www.westpac.com.au/help/disaster-relief/coronavirus/

With all of these hardship measures, you will need to show you have lost your job or had a reduction in your income. We encourage you to speak with your financial institution in advance before you default on your loan. To work out the best solution for your unique circumstances.  

We can do the hard work for you

As your broker, we can help guide you through your options when it comes to restructuring your loans or discussing if taking advantage of the hardship option from your bank might be the best course of action for you.

Book your free 15-minute discovery session today and let’s get you on track to ride out the crisis and come out stronger on the other side.