Banks offering options for affected customers that will enable either a new mortgage deferral or extension to an existing deferral; RBNZ says deferral should not be 'default setting'

Banks offering options for affected customers that will enable either a new mortgage deferral or extension to an existing deferral; RBNZ says deferral should not be 'default setting'

The Reserve Bank's expressing the hope that full deferrals of mortgages will not be the "default setting" as banks and customers now set about discussing the official six-month extension of the mortgage deferral scheme.

Details of the extension to the mortgage deferral scheme, to March 31, 2021, were released on Monday.

BNZ Chief Customer Officer, Paul Carter said the BNZ had seen a slowdown in the number of customers taking advantage of support measures over the past few months and some have resumed normal repayments.

"But as this latest situation [with the Auckland Covid outbreak] shows, the outlook remains uncertain and we encourage customers to get in touch with us to discuss their options."

Westpac NZ General Manager of Consumer Banking and Wealth, Gina Dellabarca, says for those customers on deferrals who require continued support, Westpac will have a range of options available including extending the term of their loan and switching to interest-only payments.

“The continued deferral of principal and interest payments will also be available in some cases, but as a responsible lender we should only do this where it is in the customer’s best financial interests, and there is a pathway to resuming repayments."

The New Zealand Bankers Association, the industry body representing the banks, said there are several options available to customers, depending on their circumstances. Options may include customers restarting their loan repayments, moving to interest-only repayments, or extending the term of the loan. Further options include applying for a loan repayment deferral or seeking an extension to an existing loan deferral. New and extended loan deferrals will expire on 31 March 2021.

The NZBA said since 26 March, when New Zealand first went into lockdown, banks have deferred all repayments on consumer loans totalling around $21 billion for over 61,000 customers. That represents 7% of total consumer lending.

Nearly a quarter of those customers have subsequently restarted their loan repayments.

Banks have also deferred business loans totalling over $1.2 billion for over 3000 customers. That represents 0.6% of total business lending.

Over half of those customers have resumed normal loan repayments.

The Reserve Bank, which is overseeing the scheme, as it has been from the start of the original deferral in late March, said it expected that lenders would "consider borrowers’ best interests" when assessing whether to offer a new deferral, or to extend an existing one.

RBNZ Deputy Governor Geoff Bascand said for many borrowers, resuming, or continuing payments in some form would "be the most suitable approach," rather than taking up a deferral of their loan payments.

"A deferral should not be the default setting and it will be up to individual lenders to decide whether to offer one to their customers."

Here's the statement from the New Zealand Bankers Association:

Banks are offering options to customers financially affected by Covid-19. Customers may be eligible for a new loan deferral for up to six months or an extension to their current loan deferral.

There are several options available to customers, depending on their circumstances. Options may include customers restarting their loan repayments, moving to interest-only repayments, or extending the term of the loan. Further options include applying for a loan repayment deferral or seeking an extension to an existing loan deferral. New and extended loan deferrals will expire on 31 March 2021.

“Banks are already having conversations with customers who have deferred their loans to discuss what’s best for them as the six-month deferral period ends,” says New Zealand Bankers’ Association chief executive Roger Beaumont.

“Customers who can resume loan repayments should do so. Many customers have already restarted payments on deferred loans. That shows they understand the benefits of getting back on track if they can.

“Any new or extended loan deferrals will not be automatic. They will be available to customers in genuine need for a period up to 31 March. Affected customers may need less time than that to get back to normal repayments.”

Since 26 March, when New Zealand first went into lockdown, banks have deferred all repayments on consumer loans totalling around $21 billion for over 61,000 customers. That represents 7% of total consumer lending. Nearly a quarter of those customers have restarted their loan repayments. Banks have also deferred business loans totalling over $1.2 billion for over 3000 customers. That represents 0.6% of total business lending. Over half of those customers have resumed normal loan repayments.

The ability to apply for or extend loan deferrals in some cases has been negotiated with the support of the government, the Reserve Bank, and credit reporting agencies.

“We are grateful for government and Reserve Bank assistance to help banks to continue to support customers in need. It’s a stressful time for some customers who have been financially affected by the pandemic.

“This arrangement usefully provides a phased approach to customers entering and coming off loan deferrals, and helps to meet customer needs on a case by case basis.”

In line with the previous arrangement with credit reporting agencies, anyone who enters or extends a loan deferral will not have their credit rating affected because of the deferral. This only applies to customers who were up to date with their repayments before requesting a deferral.

Other ways banks can help include:

  • Reducing or suspending principal payments on loans and temporarily moving to interest-only repayments
  • Helping with restructuring loans, for example extending the term of the loan
  • Consolidating loans to help make repayments more manageable
  • Providing access to short-term funding
  • Referring individual customers to budgeting services.

Due to the high number of calls to contact centres at this time, customers are encouraged check their bank’s website for information on how to access assistance in the first instance. Please be patient if calling your bank.

And here's the statement from the Reserve Bank:

The Reserve Bank - Te Pūtea Matua - is announcing an extension of the regulatory guidance for the mortgage deferrals programme to help customers in need.

Since the original guidance was issued in March, many lenders have been supporting customers affected financially by COVID-19. The regulatory guidance means banks can continue to offer temporary mortgage deferrals to their customers, without those loans being viewed as being in default, Deputy Governor and General Manager of Financial Stability Geoff Bascand says.

The extension takes effect from when the existing guidance expires on 27 September and will apply until 31 March 2021, at which point the usual treatment will resume. Banks will still be able to offer deferrals to borrowers after this date, but they will not have the same concessionary regulatory treatment.

“The Reserve Bank expects that lenders will consider borrowers’ best interests when assessing whether to offer a new deferral, or to extend an existing one,” Mr Bascand says.

“For many borrowers, resuming, or continuing payments in some form will be the most suitable approach, rather than taking up a deferral of their loan payments. A deferral should not be the default setting and it will be up to individual lenders to decide whether to offer one to their customers.”

Where the lender considers there is little reasonable prospect that the borrower will be able to resume payments once the deferral ends, other options should be considered, including hardship arrangements with the bank.

“Borrowers should be aware that interest will continue to accrue on their loan during a deferral, potentially prolonging the repayment period. We recommend that customers considering extending, or applying for a deferral, contact their banks to discuss the best solution for them.”

The updated guidance applies both to borrowers seeking an extension to an existing loan deferral, and to new applicants for deferrals.

“We appreciate the extensive engagement that we have had with the New Zealand Bankers’ Association (NZBA) and individual lenders in considering options for the future of the deferrals scheme,” Mr Bascand says.

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39 Comments

14
up

Why is all this necessary? Because those who owe money, can't pay.....and if unemployment becomes entrenched, they never will be able to. Then what happens, or is that upon us already?

A Liquidity Crisis:
Is a simultaneous increase in demand and a decrease in the supply of liquidity across many financial institutions or other businesses.
At the root of a liquidity crisis are widespread maturity mismatching among banks and other businesses and a resulting lack of cash and other liquid assets when they are needed.
Liquidity crises can be triggered by large, negative economic shocks or by normal cyclical changes in the economy.

Has the can become too heavy to kick??

And yet banks keeping lending, FHB'ers borrowing was well up. I was expecting for banks to be pulling right back on lending by now. I have read that they are scrunitising applications a little more closely, but are we seeing any kind of drop off in lending appetite like there was after the GFC?

I'll let you know when we go to see them in October when our mortgage is up for re-fixing

The removal of the LVRs has unleashed a whole bunch of people that can buy homes now who couldn't before. FHBers now out in force, getting low equity mortgages.

As the LVRs were in place to ensure financial system stability, it's pretty clear what the result is without them. Seems like the RBNZ have decided one last hurrah will fix things (music cranked up in the Titanics dining room to cover over the sound of the iceberg tearing a hole in the hull?)

16
up

These a**holes bend the rules to underpin the ludicrous bank ponzi scheme that's causing our countries dysfunctionality and costing tax payers billions in welfare for a minority of investors, absurd.

Maybe banking on giving older specuvestors a chance to offload and get out, handing the massive debt load on to FHBs.

bw, you've made your position clear for a long time now, well over a year and I don't disagree with you. But the big question is WHEN? When will there be a liquidity crisis? Knowing that the governments and central banks will do everything in their power to avoid the inescapable, WHEN bw?

The main thing is the WHEN has become inevitable. It's all been moving in one direction since 2008 and it's just more of the same expecting a different result. Shits going to hit the fan this year or next.

Best guess: mid Jan to end Jan when tourism hit is starkest

Why is all this necessary? Because those who owe money, can't pay.....

Many are unable to pay so relief to differ and those who can pay now tempting them to borrow more so in time to come, they too can stand in que for defferal.......as we are still not out of panademic.

More Debt. Is it the right attitude to encourage to take more debt despite knowing that many are having problem to service it now and just imagine what will happen when wage subsidies end.

Some accessed the scheme in order to build a savings buffer even though could have afforded their normal mortgage repayments or at least in part.
Can you blame them?

Probably right.
But they aren't 'saving' anything at all. They are trying to create liquidity ( see mine above) but at this late stage of the game, it's probably a futile last throw of the dice.

Yup, people I know doing just that... others have gone out and bought stuff with their new found "wealth".

15
up

More cheating and delaying reality
Which of course is another way of saying “debt”

Expect the gymnastics to continue their ascent to higher realms of complexity as we do everything we can to maintain the dominant paradigm/imagination. No amount of flowery emotive language by the technocrats will stave off the inevitable. In the meantime - the vampires live to suck another day.

So what well see is property supply being drip fed back into the market to falsely maintain shortages and keep prices elevated, no free market here, except when it comes to buying ;)

Sure looks like it. Anything to avoid mass defaults

We should all be irresponsible and take out million dollar debts. If we cannot pay they won't do anything about it anyhow. It is obvious that once you are one of them and are on their team you will be protected at all costs. There will probably be a debt jubilee soon anyhow which will lock in their privilege once and for all.

I agree with your sentiment FB, but the reality is there's still a lot of home owners who even up as with forced mortgagee sales, and it's not just the low end of the market place. Multi million dollar homes too: https://www.trademe.co.nz/a/property/residential/sale/auckland/auckland-...

Sold in 2003 for $760k. Potentially transferred into a trust in 2005. 15 years later Mortgagee Sale o_O

Social welfare in the form of free houses. May as well give them to everyone then.

So no more mortgagee sales. Can we get a rent/lease deferral thing going also?

Can the govt save everyone from everything, they are certainly giving it a good crack!

That's right, nanny state, no one's allowed to go broke, no one's allowed to get sick

Unless they rent

They will save home owners, rentiers and specuvestors, everyone else is on their own.

"The Reserve Bank's expressing the hope that full deferrals of mortgages will not be the "default setting"

That's a joke, if you make it available, then it will be taken advantage of.

Yeah, but it may be a case of someone losing income during the lockdown, and now the bank can see from their salary deposits that it's back to normal. So on that basis they might refuse an extension of the payment holiday, but instead allow interest-only payments.

What Reserve Bank and Governments are doing is creating Hyper Bubble.

Short Term Relief - understand BUT what happens in long term.

Wait and Watch as can delay the inevitable but cannot avoid.

I believe the RBNZ is deliberately setting up one or more banks for an OBR event. In this way there is a debt reset for defaulters and the bank/s continue operating as if nothing happened.

Interesting quote I read in my early morning reading today:

...there was a greater degree of decent, law-abiding behaviour in public life than in our Continental countries, where morality itself had been impaired by the great fraud practised on us by inflation.

The actions of central governments and the Reserve Bank to head down this direction may well have significant moral effects on our society, just as occurred in European society a century ago. The author goes into more detail, but this quote struck me. We cannot defraud generations of New Zealanders to protect speculators without undermining NZ society.

The problem is they've already cash up and gotten away with it. It's too late.

Sounds like young folk will need to get angry enough to do something about it then.

In this environment, you want to be a debtor, not a creditor. The RBNZ is doing its best to make a mockery of the asset side of the bank's balance sheet (loans) - i'd be nervous sitting on the other side as a depositor.

Waiting for Debt Forgiving.

Well I am one of the property investors that has got a principle deferral and am thinking about extending it.
The rent holiday's I gave my commercial tenants helped them but I got no thanks nor help from the government for doing that. Those gifts I gave my tenants cost me $50,000.
The bulk of the loans are fixed but we do have a small bit on floating. Now that my inward cash is flowing fully again the plan is to pay off some of the floating loan principle.
I do not think I am taking an unfair advantage off anyone.
If the government and society worked harmoniously and respectfully together the world would be better.

Will there be any need for deferrals when we hit negative interest rates?

Why the kid's glove treatment for mortgagees? Mollycoddling them to support the housing ponzii???