Most banks set-up to receive mortgage repayment deferral applications online; Customers urged not to swarm call centres

Most banks set-up to receive mortgage repayment deferral applications online; Customers urged not to swarm call centres

Banks now have the necessary regulatory approvals to offer mortgage repayment deferrals for those affected by COVID-19.

Of the main retail banks, ANZ, ASB, BNZ and Kiwibank have online application forms ready to go. 

ANZ said: "Customers can apply for home loan deferrals with the online form and ANZ will contact them from Monday afternoon to discuss their circumstances."

Westpac expects to have an application form available online next week.

It said: “Customers shouldn’t be concerned about missing out if they need this support. If you don’t have a payment coming out in the next few days then we encourage you to hold off and wait for the electronic form which will provide a simple, streamlined way to get this done.”

Banks are giving mortgage holders, whose incomes have been impacted by COVID-19, the option of pushing pause on the repayment of the principal and interest of their loans.

The relief is available to those with loans secured against residential property, including owner-occupiers, investors and businesses.

New Zealand Bankers’ Association CEO, Roger Beaumont, said: “Anyone opting into a mortgage deferral needs to be clear about what this means for them.

“While there are obvious advantages for people in need, repayment deferrals may extend the time it takes to repay the loan and will add interest cost. So it may not be for everyone.

“It’s important to know that interest on these loans will still accrue, and deferred interest will be added to the principal amount of the loan.

“Banks will assess the suitability for each customer who is asking for a deferral.

“Banks will have different approaches to how they manage the process for customers to opt into a mortgage deferral. Those details, including eligibility criteria, will be available on bank websites.”

Kiwibank for example, has said that while the standard offering will be a six-month home loan repayment holiday, customers can request a three-month home loan holiday, or, they can cancel the home loan holiday at any stage.   

Westpac made the point: “Customers who have made extra payments on their loan previously may now find themselves in a position where they can reduce the amount they are paying instead of taking up the deferral option.”

All banks are urging customers not to swamp them with phone calls, unless their queries are urgent.

'Loans should be treated as performing and not in arrears for capital purposes'

A Reserve Bank spokesman said the prudential regulator has issued guidance to banks that for borrowers taking advantage of mortgage deferrals, the loans should be treated as performing and not in arrears for capital purposes.

"If a loan is recorded as being in arrears, this would normally significantly increase the amount of capital that needs to be held against that loan," a Reserve Bank spokesman said.

For example, Kiwibank's most recent general disclosure statement shows a risk weight of 35% on owner-occupier residential mortgages with loan-to-value ratios (LVRs) of up to 90%. This increases to 50% for loans with LVRs between 90% and 100%, while almost all residential mortgages past due by more than 90 days have a risk weight of 100%.

Meanwhile, the spokesman said the Reserve Bank doesn’t have an estimate of how many customers will take up COVID-19 related mortgage repayment deferrals.

"Although we have figures on the total amount of mortgage lending outstanding, the uptake will be determined in due course."

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27 Comments

There is nothing special about this at all. Im sure if i had walked into my bank years ago and said i had just lost my job they would have done the same for me then. Im wondering if the banks suddenly have certain criteria you need if you have to apply as they will now be assessing their risk because now depending on your occupation it may be impossible to get a job.

Carlos
That is also my understanding that they were previously available.
As pointed out in the article and not understood by many on this site, interest will accrue so there is no free-money nor interest free terms. In fact it is additional lending by banks so could be profitable for them.
Yes, "mortgage holidays" were previously available - not that I ever had to use the facility - when someone was in a temporary position and the bank considered it was easier and in their interest to provide such a facility.
Little detail has been provided on the arrangement between the government and the banks. For the government to be involved with some apparent cost, I wonder whether it has been agreed to make such a provision freely available the government is offering some incentive - such as the government providing either funding to banks for this, or some assurance or guarantee in situations where the mortgagee defaulted, or a government subsidised interest to be at a lower rate for the mortgage holder.
Given the banks' recent bad press (e.g. the Australian Royal Commission inquiry) and their considerable profits I hope that they are fronting up somewhat but I am not sure whether this is the case.
I would love interest.co to investigate/report on this.
However, the good news is that it will take a fear factor away for mortgage holders in these tough times, but mortgage holders are not getting something for nothing.

While always available, there were more strings. For example - a loan holiday could not take you over 80% (because it would be a top up and consume speed limit). What has changed here is that that 80% cap no longer applies - this is where the RBNZ has become involved.

The bank is taking on additional risk too, because there is no guarantee it wont go into arrears post 6 months. The government has not said it is providing any underwriting here. The underwriting they promised is on business credit.

People without jobs will have to sell, be that now or in three months time. Most will pray and wait but the issue is they are then trying to sell when supply is peaking and demand is lowest.

Squishy
Why WILL people have to sell now or in three months?
Just another either ill-informed or fear mongering or baseless comment?
For a start the provision is for six months (and possibly longer) by which time most jobs will have been reinstated.

10
up

Looks like people on here are underestimating the recovery time on this big time. Do you seriously think that just a 4 week lockdown is going to be like hitting the emergency stop switch on this ? Sadly people WILL have to sell at some point the government cannot go on paying forever.

What's the point of such defeatist comments?

What's the point of burying our heads in the sand?

We're only a couple of days into the lock-down and we really don't know how it is going to turn out at this stage. It would be better to be a bit more positive about things I think.

We do know. Two days into this and already talk on 3 news tonight of an extension. The country to watch now is the USA its about to hit the fan there.

Why do we need to watch when we know what is going to happen?

Which is precisely why the stronger action was taken here much earlier. You could perk up a little buddy.

Wait, what?

Did they talk about an extension?!
WTAF.

Damn, I guess that sadly means people WILL have to buy

No Carlos
I have already posted that this will be far longer than four weeks. At very best I expect that we will have contained community spread (Level 4) but given the international situation (especially USA and Australia) a Level 2 with closed borders will remain for some time. I see six months at least and most likely a need to extend current provisions. It is serious but the Government has already put considerable resources to ensure economic stability and minimise impacts for businesses and individuals. While there is considerable risk, the PM and Robertson have both stated a commitment that people will not have to sell their homes - to suggest otherwise is contrary to that commitment and is scaremongering.

Squishy
I hope you have noted my comment on scaremongering. The PM and Robertson have given a commitment that they are committed to people not having to lose their homes. Your original comment of selling in three months is simply scaremongering and what is not needed at this time as the government and the country try to work through this. Take a little bit of responsibility.

People will lose their investment properties once thousands of ex-AirBnBs flood the market looking for long term tenants.

probably less tears there. Some would welcome such a rebalancing.

Homes are not investment properties, I guess. They may try to walk a wise path and balance both savers and owner occupiers.

they are also committed to people not dying during this outbreak.. there will be losses in both columns. First NZ coronavirus death will be in less than a week is my guess, and it won't be the last.

"Take a little bit of responsibility."

The irony.
While you praise the Govt for promoting moral hazard.

You really don't get it.

They may not have to sell their homes (which remains to be seen) but they may find it hard to maintain investment properties, especially recently-purchased (last 3 years) AirBNBs. People will have calculated their yield on the basis of short-term holiday lets being the source of income. Tourism has boomed recently, but in the last year that's been reversing and looking like a small recession—at least in markets like Queenstown. Covid19 is a killer blow. Owners will find these investments costing them money to own pretty rapidly, and many will seek to get rid of them (if they can; not always so easy in a negative equity situation). I don't see a Labour government bailing people out for that.

And while a property has been taken out of the residential rental pool for AirBNB purposes, it's no doubt had it's place in the pool replaced by another property through demand.

This event is said to be bigger than anything that the world has ever experienced, hmmm!
The support available after the Christchurch Earthquake was eighteen months interest free (No interest charged) on top of that the principal payment was put on holiday for two and half years. The loan term could always be renegotiated at the end of this period or at the end of the fixed interest term.
A considerably better deal, was it because a claim could be made to recover the losses against the banks insurers?

No.

Sell your assets if you've got cash flow issues.
Stop looking to the Govt to bail you out of risks you willingly took on.

And yes, systemic risk exists (financial crisis, natural disasters, pandemics). The Govt is not an insurance policy.

It seems likely it's the impact on tourism that will kill our property market. Didn't see that one coming, which tends to be the way with these things. Still no crystal ball but I agree with those who are pointing to the destruction of the AirBNB racket to shake this house of cards to the ground. Like the millions of dollars of investment properties dumped by speculators in Arizona during the GFC, a lot of these AirBNBs will be on the market for sure, and some of them will end up as repos.

It's never just one thing in a major market decline. It's always that perfect storm.

From Tourism Ticker:
"Occupancy and RevPAR across the country fell by levels possibly never seen before at a national level following the Government’s closure of the border to non-residents, according to figures from STR.

In comparison to the week of 17 March – 23 March 2019, the New Zealand hotel market for the week ending Saturday 21 March 2020 saw:

• Occupancy fall 44.4% to 49.5%
• Average daily rate down 11.9% to $191.73
• Revenue per available room drop 51% to $94.94"

The main point here is the banks are profiting while the people are hurting. As said this is nothing new they are offering. The government has told people to stay at home to stop this virus, thereby drastically reducing peoples income. The banks answer to this is how can we look like we're helping and keep our Large profits in the process. A lot of people will have to take this offer through necessity. All they have done is offered you a spade to start digging. I hope most people will be able to get out of the hole before it gets to deep. This will definitely go on longer than 4 weeks.
This is a sad situation when the government is playing up the banks, when at the end of the day it is business as usual for them. Protect the hugh profit is their only priority