It has been almost a year since banks and lenders began rolling out COVID-19 relief for those affected mortgage customers in March 2020, but the fallout from the pandemic still hangs over the heads of many “mortgage vacationers”.

A recent Mozo survey of 1,366 Australians showed that 24% of borrowers whose mortgage payments are currently on hold due to COVID-19 do not expect to be able to continue repaying their loans after this holiday period ends.

According to latest figures from APRA, $ 32 billion in home loans currently remain deferred, which is equivalent to 1.4% of all home loans. These numbers are significantly lower than they were in May and June 2020, when more than $ 250 billion in mortgages were on hiatus.

However, based on the latest figures and taking into account the sentiment expressed by almost a quarter of those surveyed, around $ 7.68 billion in loans may be unusable in the future, once these mortgage holidays begin to expire for borrowers.

The imminent expiration of the JobKeeper payment program on March 28 adds to the concern of some. Mozo’s survey found that 86% of mortgage holders who are currently on JobKeeper depend on the program to stay afloat financially.

“While the federal government and the banks have done a lot to help mortgage customers get through the pandemic this far, it is unfortunate that all major support programs are being canceled at the same time,” said Kirsty Lamont, director of Mozo.

“It’s clear that mortgage vacations and government support payments are still key to helping keep borrowers afloat, but with all major support programs ending largely next month, some people are going to fall into a slump. perfect storm. “

Options on the table

The second date of note for mortgage vacationers is also at the end of March. In July, APRA announced that lenders would be able to extend loan deferrals for “a maximum period of 10 months from the start of a repayment deferral or until March 31, 2021” without doing so. does not affect capital requirements.

So, for borrowers still on repayment leave, time is running out before lenders force them to resume repayments.

“If you are one of the thousands of people with a mortgage who still struggles to make ends meet, it’s important to start talking with your lender now and not wait for support payments to be turned off,” said Lamont.

“Whether it’s discussing the possibility of a new loan with deferral, restructuring your loan, accessing better lower interest rates, or moving to an interest-only loan, a there are a number of options available to you. “

Finding a loan extension may be an option available to borrowers, which could lower their monthly repayments. However, extending your loan from 25 to 30 years, for example, would add an additional $ 42,545 in interest on a loan of $ 400,000.

Alternatively, the shift to interest-only repayments could be another. On a loan of $ 400,000 with the average variable rate in the Mozo database (3.29%), moving from principal and interest repayments to interest-only repayments would reduce monthly repayments due from $ 1,750 to $ 1,097 – a savings of $ 3,918 over six months .

“While switching to an interest-only loan can dramatically reduce your monthly repayments, you need to remember that your total amount owed will stay the same.

RELATED: Mortgage Prisoners Report 2020: Most Australian Homeowners Want To Refinance But Can’t

For a more complete overview of the supports in place for individuals and businesses affected by COVID-19, see our coronavirus financial guide.

* CAUTION: This comparison rate only applies to the example (s) given. Different amounts and terms will result in different comparison rates. Costs such as redemption or prepayment charges, and cost savings such as fee waivers, are not included in the comparison rate but can influence the cost of the loan. The comparison rate displayed is that of a guaranteed loan with monthly repayment of principal and interest of $ 150,000 over 25 years.

** The initial monthly repayment figures are only estimates, based on the advertised rate, loan amount and term entered. The rates, fees and charges and therefore the total cost of the loan can vary depending on the amount of your loan, the length of your loan and your credit history. Actual repayments will depend on your personal circumstances and changes in interest rates.

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