- The Commonwealth Bank has become the first and only Australian bank to implement a moratorium on forced sales.
- Mortgage holders who struggle to make their repayments will be able to remain in their homes until September.
- To be eligible, they must be an owner-occupier who hadn’t fallen behind on their repayments for at least 12 months before they began deferring repayments.
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Australia’s largest mortgage holder has gone out on its own to offer customers an unexpected reprieve.
The Commonwealth Bank, which holds around $450 billion worth of home loans, has pledged to not force Australians to sell their homes if they cannot make their repayments.
It comes amid public lobbying from Financial Counselling Australia (FCA) CEO Fiona Gutherie who has urged the banks to do better to help customers in hardship.
In a letter sent to Gutherie this week and obtained by Business Insider Australia, CBA has come to the table, acknowledging its customers are “worried about losing their home through no fault of their own”.
“I’m pleased to confirm that we will be putting in place a freeze on forced sales for COVID home loan deferral customers who are unable to return to full repayments,” head of retail banking Angus Sullivan wrote.
“This means that any customer making full mortgage repayments in the 12 months prior to entering a home loan deferral will be able to remain in their home until September 2021, even if they are now struggling to get back to making repayments, where they agree to work with us.”
It makes the Commonwealth Bank the first to do so, postponing forced sales for another ten months.
To be eligible, a customer must be an owner-occupiers who have already entered a COVID-19 repayment deferral and not been in arrears in the 12-months prior to it.
“This will give these customers the opportunity to get back on their feet, confident they can remain in their home this Christmas and well into next year,” Sullivan wrote.
“It will also help deliver some confidence as the economy recovers and restrictions are lifted.”
Will the other big four banks step up?
Gutherie told Business Insider Australia it was “a very welcome move” but that more banks now needed to lift their game.
“It means that customers who are struggling purely because of the pandemic will get some breathing space, which is what they need at the moment. It gives people who have lost their jobs time to regroup,” she said.
“Financial counsellors are urging other banks to follow suit. Customers need as much assistance as possible at the moment, especially those who have lost their job and may not get another one in the near future.”
Business Insider Australia contacted the other three big banks, but it’s unclear as to whether they are considering making a similar offer to customers.
NAB personal banking group executive Rachel Slade acknowledged some customers “would need our support for longer” but appeared to suggest this would happen more on a case by case basis.
“We encourage any customer who is experiencing financial difficulty to contact us as soon as possible so we can work through it together,” Slade told Business Insider Australia.
She noted that NAB’s assistance team had tripled and that its customers were eligible for a range of different kinds of support.
ANZ and Westpac had not responded by the time of publication.
Hundreds of thousands of Australians still aren’t paying their mortgage
Australia’s entire banking sector committed to freeze home loans earlier this year, electing to defer home repayments for customers in hardship until January next year.
As of last month, more than 324,000 Australian mortgages were frozen, according to the latest APRA figures. More than 92,000 of those, or roughly one in four, are with the Commonwealth Bank.
Between them, the big four collectively hold more than 273,000 deferrals or almost 85% of the national total.
While deferrals have dropped since their peak earlier this year, there is genuine concern surrounding how many will require further help come next year.
Banks meanwhile have put aside billions to offset bad or doubtful loans. While they are eager to prevent unnecessary foreclosures, there will likely be instances where they can’t be avoided.
If you’re experiencing financial hardship, you can find a financial counsellor in your state by visiting ndh.org.au or calling 1800 007 007.