Mortgage deferrals continue to decelerate

by Mark Rosanes07 Jan 2021

Mortgage deferrals triggered by the COVID-19 pandemic have continued to trend down, according to recent figures from the Australian Prudential Regulation Authority (APRA).

The regulator’s November 2020 data revealed that slightly more than $60bn worth of housing and business loans remained on deferral schemes implemented at the height of the COVID-19 outbreak. The amount represents just 2.3% of the overall $2.7trn in loans issued by lenders.

Housing loan deferrals reached $49.5bn, accounting for 2.8% of the total housing loans, while temporary repayment deferrals from small and medium-sized enterprises (SME) amounted to $7.6bn, which was 2.4% of all SME loans.

November was also the first time that there was a higher number of housing loan deferrals than those from small businesses.

APRA’s data showed that the number of mortgage deferrals hit its peak in May and June, taking up 10% of all loans as the coronavirus lockdowns wreaked havoc in the country’s economy.

To soften the impact of the pandemic-fuelled recession, many of Australia’s financial institutions implemented loan deferral schemes, allowing home and business owners who were struggling financially to pause repayments until March this year.

The continued decrease in mortgage deferrals is an indication that the country’s economy is moving on from the downturn.

According to APRA’s figures, deferral exits continued to outweigh new entries for the fifth consecutive month in November, with $32bn in loans expiring or exiting deferral compared to the $7bn entering or being extended.

However, Victoria has continued to reel from the negative effects of COVID-19, reporting mortgage deferrals almost twice the proportion compared to other states and territories.

“Victoria remains the state with the highest proportion of loans subject to deferral amongst the states and territories, with 3.2% of loans deferred compared with the rest of the country at 1.7%,” the report said.