Banks offer assistance to small business and mortgage holders

Banks offer assistance to small business and mortgage holders nmprofetimg 1372

The Australian Banking Association has followed the Reserve Bank’s lead in announcing a major relief package for Australian businesses, struggling amid the coronavirus crisis. 

Australian banks will defer the loan repayments of small businesses for six months, to help keep their doors open and keep people in jobs. 

Houses   Banks offer assistance to small business and mortgage holders cq5dam

Mortgage holders could be next in line for a loan repayment lifeline. Picture: Getty.

The package will apply to more than $100 billion of existing small business loans, and could put up to $8bn back into the pockets of small businesses.  

When asked about whether residential mortgage holders can expect to be thrown the same lifeline, ABA CEO Anna Bligh says today’s package is designed to impact the most critical and urgent need.

“At this stage, banks report that they are not seeing any high volume of anyone in distress with mortgages.”

But she notes, things could change in the coming days and weeks amid the rapidly moving set of circumstances.

“As the government is having to evolve their response, if there is a need that emerges in relation to mortgages the banks will of course look at what might need to be done,” says Bligh.

NAB, ANZ and Westpac throw lifeline to struggling mortgage holders

Off the back of the ABA’s announcement, NAB introduced new support measures enabling eligible home loan customers to pause repayments for up to six months amid COVID-19. 

Westpac and ANZ soon followed suit, offering their struggling home loan customers a six-month loan holiday.

ANZ’s package also includes a cut to the standard variable home loan rate of 0.15%pa, as well as a reduction of some fixed-rates of 0.49%pa.

Bligh is encouraging anyone concerned about their mortgage to contact their bank.

The focus is on small and medium businesses for now

The RBA yesterday announced a suite of stimulus measures – including a crisis-cut to the cash rate – primarily focusing on businesses and jobs.

The actions we have seen from the RBA and the ABA clearly show the immediate focus is on trying to keep businesses running and people in jobs, according to realestate.com.au executive manager of economics, Cameron Kusher.

He adds, we know the UK, Italy and Canada have all provided targeted relief to households by pausing mortgage repayments.

“It is probably an option on the table here in Australia. It would be particularly comforting for those that have already been either stood down or let go from their jobs as well as for those working on contracts or casually.”

What about renters?

Kusher says renters also need to be considered during the COVID-19 distress.

“A better approach might be that there is a pause on mortgage repayments for a period of time, as well as the government covering the cost of rental repayments for that same period,” he says.

Rental house   Banks offer assistance to small business and mortgage holders cq5dam

Relief for mortgage holders will not flow through to renters, but Cameron Kusher thinks it should. Picture: Getty.

At a press conference in Canberra today, Prime Minister Scott Morrison flagged that help for tenants is coming.

“Further work will be done on identifying how relief can be provided for tenants in both commercial and residential tenancies to ensure that in hardship conditions, there will be relief available. 

“That work will be done by states and territories, as it is a state and territory matter,” he said. 

ABA package will ultimately help keep homeowners afloat

As long as homeowners can keep drawing an income, they will be able to keep making their mortgage repayments.

Chief economist at realestate.com.au, Nerida Conisbee, says the ABA’s announcement is “great news” with the uncertainty around employment.

“Given that it is going to be a temporary situation, we need to ensure people can pay living expenses, and this will be a great help to many people.”

Some sectors have already been crippled by the coronavirus pandemic. Yesterday, two-thirds of Qantas and Jetstar’s 30,000 employees were temporarily stood down.

Conisbee says, whether or not the ABA throws mortgagees a lifeline depends on how many more people lose their jobs.