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Mortgage holders preparing for the end of COVID-19 induced repayment holidays should not cave into pressure or bullying from banks if they cannot currently afford to resume paying off their home loans, according to Queensland broker and CGIO Finance owner Cara Giovinazzo.
Along with the federal government’s JobKeeper scheme, the six-month mortgage holidays, which have frozen almost $200 billion of debt, have been crucial to helping Australians navigate the economic fallout from the coronavirus.
With repayment holidays coming to an end, thousands of households now face the choice of whether to restart paying off their home loan or securing a four-month extension of the deferral.
According to Ms Giovinazzo: “Mortgage holders facing the dilemma over whether to resume repayments or seek a further deferral should not feel under any extra pressure over this decision.”
“The main thing these borrowers need to keep in mind is they do have a range of options. This includes negotiating a solution with their lender such as switching to interest-only repayments for a year or reducing payments.”
Further, she said that the Australian Securities and Investment Commission (ASIC) has warned lenders that they need to be flexible and provide help which genuinely addresses the needs of consumers.
“If borrowers are still facing financial hardship, they should have confidence from ASIC’s assurances that they will be treated sympathetically by their bank and not bullied,” she said.
Ms Giovinazzo reminded mortgage holders, particularly those on deferral, that it is not up them to contact the bank as the repayment deadline approaches.
According to ASIC, the lender should be contacting the home loan customer prior to their repayment deferral expiring, along with clearly setting out available options and providing information to help them make a decision.
“Many thousands of borrowers may have already advised lenders they can resume payments, but those in doubt should know how much their future repayments will be, how much extra interest they will have to pay and whether this is affordable,” she said.
At the end of the day, ASIC’s guiding principle for banks is to avoid defaults, evictions and forced sales where possible.
“Banks should work with customers facing difficulty to find the best options to restructure or vary their loan. This includes extending the length of the loan, converting to interest-only payments for a period of time, consolidating debt or a combination of these and other measures,” Ms Giovinazzo concluded.
“If you are not confident about these negotiations, please seek assistance from an experienced mortgage broker or financial [adviser].”