New data from the Australian Banking Association (ABA) has revealed that nearly all Australian homeowners that were part of a mortgage holiday program have resumed their repayments.
At their peak, the programs had a total of 854,606 loans from the big four banks and Suncorp, 468,786 of which were home loans.
As they officially closed on March 31st, the number is down to just 3,170, which is just 0.5 percent of all paused loans.
With unemployment falling to 5.8 percent and Australia’s overall economy vastly improving, the mortgage holiday programs implemented initially in early 2020 have been deemed to be no longer necessary.
Australian Banking Association chief executive Anna Bligh said that the impressive numbers indicate how well the Australian economy is rebounding from the hardships of 2020.
“The fact that unemployment is lower than expected and the economy has rebounded faster than we anticipated is great news for the vast majority of homeowners and small businesses.”
The option to take a mortgage holiday (also known as a loan deferral) enabled Australian borrowers to pause their standard monthly repayments as a solution to the widespread economic uncertainty of 2020.
For borrowers who took mortgage holidays, their home loan was extended in alignment with how many months their payments were paused.
In most cases, monthly repayment numbers remained the same upon their resumption.
The country’s sharp economic recovery has exceeded the majority of expectations, and total employment is just 1,800 below the levels seen in Australia pre-pandemic at the beginning of 2020.
During her announcement, Bligh also made it clear that Australian homeowners still suffering from economic hardship will not be forgotten.
“Banks will continue to support those households and businesses still doing it tough this year, taking a fair and compassionate approach to get people through the pandemic,” Bligh said.
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Out of the remaining paused loans, Victoria accounts for the highest percentage in size and value, indicating the effects of Melbourne’s 16-week lockdown are still visible.
The figures released by the Australian Banking Association also spelled good news for Australian small businesses. There are just 508 small business loans still on pause around the country, compared to 235,440 at the height of the deferral programs.
While there are still some future uncertainties, the mortgage holiday programs have had a widely successful impact on keeping the Australian economy afloat.
Originally supposed to conclude in September 2020, the programs were extended in July for another four months. This allowed more people to participate in the programs and secure their economic futures without having to sell their own home or investment properties.
Coupled with the JobKeeper and JobSeeker programs, the option to take a mortgage holiday was one of the main driving factors that helped Australia lead the world in economic recovery and grow at its fastest pace since 2007.
This has put the Australian economy in a very healthy position compared to other nations around the world.
By offering mortgage holidays, Australian banks also assisted in preventing a real estate collapse that could have resulted in an influx of investor-owned properties entering the market.
Instead, the Australian residential property market has hit an all-time high, exceeding $8.1 trillion dollars in value thanks to a widely consistent price growth throughout Australia’s major cities.
This includes a staggering 8.5% quarterly increase in Sydney, where the median house price is currently $1.31 million dollars.
Anyone still suffering from financial pressures due to the pandemic has been encouraged to contact their bank to see what arrangements can be made to help.
Words by Rimas Veselis
- Banks loan deferrals drop as pandemic support scheme ends, April 27, Yahoo News
- RBA reluctant to raise interest rates to ease soaring house prices because it could cost jobs, The Guardian, May 6th
- Sydney’s 8.5% quarterly house price rise largest in three decades, The Guardian, April 28th
- Unemployment rate falls to 5.8 per cent, down from 6.3 per cent, ABC News, March 18
- There are just 3,170 deferred mortgages remaining with Australia’s largest lenders. Banks say the worst is now over, Business Insider, April 28th
- Banks’ coronavirus loan assistance falls short, argues Choice, ABC News, 9th September 2020
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