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The New Zealand Bankers' Association says there are no plans to resurrect the mortgage deferral scheme, but isn't ruling out doing so

The New Zealand Bankers' Association says there are no plans to resurrect the mortgage deferral scheme, but isn't ruling out doing so

Despite the country battling a community outbreak of the Covid-19 Delta variant, banks don't plan to resurrect the mortgage deferral scheme used after Covid-19 first arrived in New Zealand last year.

Roger Beaumont, chief executive of bank lobby group the New Zealand Bankers’ Association (NZBA), says there's no move to bring back a loan repayment deferral scheme at this stage However, he says this could change depending on how the current outbreak unfolds.

"We will continue to watch this closely," Beaumont says.

“When we introduced the loan deferral scheme in the first lockdown there was much more uncertainty about how Covid would impact the economy. To date we’ve come through better than expected," Beaumont says.

“Anyone experiencing financial difficulty because of the current lockdown should contact their bank to discuss how they can help. Banks can offer a range of options for customers facing hardship, depending on their circumstances. The sooner you contact your bank, the better placed they are to help. It’s worth checking your bank’s website to find out the best way to contact them at this time.”

Finance Minister Grant Robertson also said on Monday the Government wasn't currently proposing a return to the mortgage deferral scheme, nor a replay of the Business Finance Guarantee Scheme, which ended in June.

The mortgage deferral scheme wrapped up on March 31. At that stage NZBA said borrowers whose repayments were deferred due to the Covid-19 pandemic and were still struggling, could get an additional temporary payment deferral, have the term of the loan extended to reduce repayments, or be moved to interest-only repayments for a period.

The loan repayment deferral scheme was introduced in March 2020 to help borrowers hit financially by COVID-19. It was put in place with the agreement of the Reserve Bank, Government and banks initially for six months, and then extended for a further six months last August.

The repayment deferral scheme increased future risks for borrowers, as the missed payments were delayed rather than forgiven and must be repaid. This may lead to a situation where the missed interest payments are added to the loan balance, resulting in a higher debt repayment burden once the payment deferral period ends. The Reserve Bank agreed to not treat deferred loans as non-performing loans in arrears for the bank lenders. If a loan is recorded as being in arrears, normally this significantly increases the amount of capital the bank lender needs to hold against that loan compared to when it's treated as a performing loan.

 According to the NZBA, more than 66,000 household and business loans, with a total value of around $30 billion, were fully deferred. At the end of February NZBA says there were around 3000 household and business loans still deferred, with a total value of about $1.1 billion, against total household and business lending for banks of about $480 billion. 

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25 Comments

Start mortage defferal and see the boom.Matter of time before they start not to support hardship but ponzi.

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It has nothing to do with the boom. They want people to stay at home. Interest rates fueled the boom, not deferrals.

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Good to see sense start prevailing to Bank's (may be for time being), I believe RBNZ decision makers (with substantial wrong decisions) should take quick crash course from Bank officials so that they learn how to maintain balance.
A monkey glances up and sees a banana, and that's as far as he looks. A visionary looks up and sees the moon.

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Good to see sense start prevailing to Bank's (may be for time being)......

Are shameless and will not lose an opportunity to support and promote the ponzi....wait and watch. As it is are backing off from taking measures to control like LVR, DTI and not even talking about interest only loan....

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To continue.
Can't see the banana and starves to death dreaming of the moon.
Happy monkey.

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Suits me! I deferred all my lending last time, rents stayed in my transaction account which happen to offset a floating component (at a higher interest rate) of my lending. Reckon I was about 1K better off for the whole experience. Bring it on...

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Congrats.

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What a great contributor to NZ society you are, thank you.

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Why thank you. Safely say a greater contributor than most.

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Let me guess then promptly upped the rent?

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So long as you're making money off other people's misery, that's the main thing.

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What misery are you talking about? Paying rent? I can't recall feeling miserable about paying rent? FHB? Jun 2021 FHB lending $1,649m Investor lending $1,436m so they are a larger part of the market at the moment than investors. Still, wring your hands if you wish...
https://www.rbnz.govt.nz/statistics/c31

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Jeremy Grantham put Auckland among the world's property bubbles this week, and states it's in a group that has worse metrics that the San Francisco property bubble. Listen in from 9:00.

https://www.youtube.com/watch?v=IOLrX_BrQiA

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Any comparison with overseas property markets, according to any sensible metric, clearly points to Auckland (and now NZ in general too, with few exceptions) as one of the worst property bubbles in the entire world.

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Any comparison with overseas property markets, according to any sensible metric, clearly points to Auckland (and now NZ in general too, with few exceptions) as one of the worst property bubbles in the entire world.

Worth listening to the whole shebang. He puts the Japanese bubble as the worst in history, partly because they had a dual property / equity bubble at the same time. However, what Grantham fails to point out is that Japanese h'hold debt to GDP was never as high as it is in NZ or Australia, even at the peak of their bubble.

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Just another DGM. The Auckland property market is resilient.

Look at these bargains

https://www.oneroof.co.nz/news/weekend-sales-show-auckland-home-buyers-…

Be quick.

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I know. Much of the NZ public wouldn't know Grantham from a bar of soap. But Ashley Church and Granny Herald have high awareness.

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Bargain. "The buyers were a downsizing couple leaving a central city townhouse to be closer to the water." ... because Manukau Harbour is definitely the best body of water in Auckland isthmus. And a wonderful view of industrial Onehunga waterfront. Nice. >/sarc_off

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IMO When the Reserve Bank governor says NZs housing market isn't sustainable, that is not a good sign either.

Houses are still selling in lockdown. People aren't able to look at properties or get inspections done for Due Diligence, yet they are doing auctions and houses are still selling. That doesn't seem to be good for buyers. But there is even more FOMO out there, as people are now scared that we risk a repeat of another house price explosion.

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music to Orr and Jacinda

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Great link. When referring to bullish markets creating a 'bubble' the thing that fascinates me is not the financial nuts and bolts but what is seen in investor behaviour which Grantham touches on i.e extreme over confidence, a 'to big to fail' mentality and a general inability to see any warning signs in a 'too good to be true' scenario.

Certainly no shortage of such attitudes around here at the moment!!!

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Thanks for sharing this, really fascinating.

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$1k better off? Are you sure of the maths? That was either a whopping loan or something is missing - are you sure you have considered that adding this to your principle then added additional cost over the life of the loan? I am not sure anyone is ever better off with deferral, it's about those that cant afford repayments.

Obviously lots of moving parts, but if you deferred say payments of $3k per month for 6 months - and had interest of say 4% on floating, that would save only $210 (cumulative impact)... so to even save $1k via offset that implies you have payments of $15k per month or went a lot longer than 6 months. That's like $90k of deferred payments... all being added to the original loan, incurring interest at say 2.3% depending on when you fixed = $600 in extra interest over the 6 months, but then it got added to the loan so will pay interest on that the rest of the term and/or higher repayments later.

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Seems a sensible call: banks can evaluate each case on the individual’s need.
Good to see it is now being referred to as a “deferment” rather than a “holiday”.
There is no free money here: principal still needs to be paid back and interest component accrues and compounds meaning eventually there is additional cost.

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Nooooo if people are stuck in their homes it is only fair that they should lose those homes!

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