Mortgage holders may need to wait until next week before banks make 6-month payment holiday available; Grant Robertson 'actively working' on extending scheme to building societies

Mortgage holders may need to wait until next week before banks make 6-month payment holiday available; Grant Robertson 'actively working' on extending scheme to building societies

Mortgage holders may need to wait until next week before their banks provide further details on the mortgage holiday scheme, announced by Finance Minister Grant Robertson on Tuesday.

Robertson said retail banks had agreed to give their customers, whose incomes have been affected by COVID-19, a six-month holiday from paying both the principal and interest on their mortgages.

While he said banks would provide details in coming days, ANZ on Thursday tweeted it expects the initiative will be in place next week.

ANZ echoed Robertson’s request for customers to avoid flooding it with inquiries until it provides an update. 

Robertson on Thursday said the government and Reserve Bank are “actively working” on ways to provide relief to people who have mortgages with building societies.

He said the authorities are continuing to work closely with non-bank lenders more generally to see how they could be included in the scheme.

Yet he noted the vast majority of New Zealanders’ mortgages are with banks.

While the government has been involved in coordinating the mortgage holiday scheme, banks (and possibly non-bank lenders in the future) will be responsible for determining eligibility. 

Mortgage holders should also be aware interest will continue to accrue on their loans during the time they push pause on their payments.

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BNZ service is up and running, not sure about the other banks. I heard its a big backlog at BNZ which will take days to get through.

Shutting down the realestate market will be a disaster as it will create a very large rush to list and create more downward pressure on prices. If 50 percent of air bnbs list that will put massive pressure on market.
This is why the stockmarkets stay open otherwise you create more fear and will get people dumping shares when it reopens.

Yeah but you are creating a legal mine field if you don't. People aren't allowed to physically view properties and agents aren't allowed in them. The only thing you could do is get existing owners (if they already live there, if not... tenants?) to make a video or do a call about the property.

In reality the market can't function without people being on the property. Shares are digital tokens that can be a lot more easily traded, property purchases are significantly more complex, emotional and fraught with legalities.

I trust that you have noted:
"Mortgage holders should also be aware interest will continue to accrue on their loans during the time they push pause on their payments.'
This is not free money as you have previously vigorously argued.
End of holiday you still owe the same principal plus accrued interest during the period.
No free money, not even interest free money.

At first glance, you are right, interest will accrue. However it IS free risk though. That is what I previously noted and in a banks books, risk = money. That's because if the government didn't tell the banks to offer 6 month loan repayment holidays UNDERWRITTEN by the government (note the government is taking the risk away), then banks may have put their interest rates up as a re-risking exercise. This could have triggered the death spiral of increasing rates, more defaults, so increasing rates etc that occurs in a property downturn.

I also previously noted that if the payments are deferred forever (remember we are in a 4 week quarantine, but have a 26 week holiday), with the government underwriting the schemes, that is an exceedingly long period where those being employed after 4 weeks will be able to game the system. Because those with mortgages may be back to full pay, however with the government taking the risk away from them defaulting on their loans, can use the extra income for 5 months to do whatever they want. You and I may go and start our loans again but you can be damn sure there will be many who will decide to go and spend the money on something else. And why not when the tax payer has just said they will underwrite any risk from not being able to pay the extra charged on the adjusted loan amount.

If enough people game the system, guess what will happen? The government will extend the period for another 6 months... then another year... then... well why not just underwrite everyone's mortgages? Once a distortion is added to a market, it's near impossible to take it away.

Also, with most banks the loan end date won't change, so minimum installment payment will go up, thousands in some cases.

I’d suggest that with standardised disclosures and warranties the market could function fine. I bought a house sight unseen once, price was right. Did great out of it.

The PM has said she is meeting banks to "ensure that nobody loses their home". Does this mean some kind of special guarantee against mortgagee sales, or some large subsidy ?

Also... anyone with an Air BNB is (I think) eligible for this business subsidy. I've heard people getting 5 figures sums paid to them within hours, no questions asked (edit this is for self employed businesses - maybe if you have an Air BNB that counts....)

Great incentive to cut and run. Government just gave me 80k, I will just wind up my business and spend it on my AirBnB.

"Mortgage holders should also be aware interest will continue to accrue on their loans during the time they push pause on their payments"

Then it's not a "mortgage holiday" it's only a mortgage deferral

Must be your interpretation of the term "Mortgage Holiday", maybe a language barrier? Just like when you take a regular holiday, things like rates/power lines charges/internet bills etc keep accruing there's no relief from paying your bit when you leverage up.

The downside, is that during the term of the holiday, interest will keep incurring on the loan, meaning it will likely cost the client more and increase the loan term. may defer the payments but interest keeps compounding and is added on to your mortgage. The cost could be thousands, or tens of thousands.

Come on Yvil, thought you were more savvy than this......

Wrong! - there's a factual relief, when the person is dead. Different settlement process ;-)

In the meantime rental payments/income for many landlords will simply cease – thousands will no longer have the ability to pay – through no fault of their own.

No rental holiday for them – so go ahead, evict them – and replace them with what?

In the business news on Granny Herald today an insolvency specialist was giving businesses this advice:

Grant said he was advising a restaurateur to lay off staff and inform their landlord that rent would no longer be paid: "If you can cut your expenses to zero, IRD is not going to be doing anything with you in the meantime."

Bridgman said: "A the end of the day we will recover, so try and preserve something you can use to recover from."

So, at least to businesses the business community seems to be advising to cease paying your rent if it'll help your chances of recovery afterwards. Perhaps part of why the commercial property funds have taken a dive?

When should tenants take this stance? Insolvency for an individual can be worse than for a company with limited liability

Tenants that don't care about bankruptcy may take this advice. Good luck finding another house to rent once bankrupt.

The wonderful thing about business, eh. You just close the current one, and open another one with a different name.

Glad I am mortgage free. If you can keep paying principal keep paying it off. Remember banks dont do holidays.

Oh but, dude, if you keep paying your mortgage they'll leave you alone even if you're in negative equity.......So I've heard.

"Remember banks dont do holidays."
That's right banks dont give you an interest waiver or that would be a loss to the bank. But what happens to businesses that are closed? The govt expects them to keep paying staff and they are not getting any income from paying customers. Who will compensate those businesses forced to shut

Business interruption insurance. Except where there are exclusions for pandemics...

Still seems to be big confusion on this. Personally I never expected the banks to give you a true holiday. You may think its a holiday as you stop paying a single cent towards you mortgage but the bank in return just bangs the interest on your mortgage so instead of your mortgage going down each month its now going UP each month and guess what it gets worse because its compounding .

And guessing aside, it can get worse still – as the value of the underlying collateral keeps diminishing.

What's important though is can I keep carrying on this facade that i'm a successful investor by ticking it up on the bank?

Akh, I thought it's a complete waiver, until you've read the fine print.. it's just 'holiday' compounded which must be re-paid again eventually - some clever sods, surely can utilise this for their own advantage. But for the rest? - Vaccine or no vaccine for this current breakout - how normal/long will it be? for the world to resume it's business as usual, for people movement to transfer 'wealth' specially the benevolent savior from mainland China, for tourism, for education/student, for hospitality etc. - Who knows? as per December 31st first this virus detection, spread as per peoples movement.. then before you know it? this year December 31st. All just magically stop.. worldwide, the virus I mean. - Woow... kcing!

This has the potential to get ugly the more it gets extended. There is almost a guarantee now that house prices will fall but your mortgage will have increased. The longer this charade carries on the bigger the shock on the other side will be with the new "normal".

Which is why I don't think it will ever end. Adding a distortion such as this to the market (why it wasn't for 2 months instead of 6 I don't know!) means you will never be able to withdraw it.

I have always found most holidays to be expensive.

John Bolton from Squirrel Mortgages sent out a note last night that indicated the "holiday" may only be for owner-occupied dwellings. ("The packages are tailored to owner-occupied lending. If you are having difficulties and want to restructure loans on investment properties it would be best to talk to us first and we can advise you of the best strategy.")
That may mean some over-levered landlords will be in a world of pain (particularly if renters stop paying...)