Australians have frozen almost 15,000 home loans as lockdowns again raise the risk of defaults

Australians have frozen almost 15,000 home loans as lockdowns again raise the risk of defaults
Sydney unsurprisingly is home to the sharpest rise in home and business loan deferrals. (James D. Morgan, Getty Images)
  • Another wave of lockdowns have heaped financial stress onto Australian households.
  • More than 15,000 home and business owners were unable to repay their loans in July.
  • As 16 million people live under stay-at-home orders, the risk of bad loans is once again rising.
  • Visit Business Insider Australia’s homepage for more stories.

With 16 million Australians currently living in lockdown, borrowers are under increasing pressure to make ends meet and service million-dollar debts.

More than 15,000 loans have been frozen in the last month since Australian lenders renewed support measures, amid Greater Sydney’s ongoing lockdown.

The figures from the Australian Banking Association (ABA) show another 5,000 loans have been approved for other hardship measures without deferring their repayments. This could include a restructure, a switch to an interest-only loan, or refinancing.

As Greater Sydney remains under stay-at-home orders, and as Victoria, south-east Queensland and parts of regional New South Wales return to them, the financial pain of home and business owners is becoming apparent.

“Given the lockdown situation in South-East Queensland, banks stand ready to assist customers who need help,” ABA CEO Anna Bligh said. “The sooner you talk to your bank, the sooner they can help you find a solution that is right for you.”

Bligh pointed out that support is available for all borrowers experiencing hardship, “irrespective of geography or industry”.

Unsurprisingly, New South Wales is experiencing the greatest levels of stress. Residents represent more than two-thirds of all mortgage deferrals and more than 75% of all frozen business loans.

It’s followed by Victoria which just commenced its sixth lockdown in less than 18 months. The southern state makes up a little under one-fifth of all deferrals, more than twice those in Queensland and almost four times more than South Australia.

Yet so far, the country appears to be coping better than last year, with ANZ and the RBA agreeing the measures are more likely to slash work hours rather than eliminate jobs themselves.

It seems to be reflected in the ABA data. At the peak of the crisis last year, repayments weren’t being made on almost half a million mortgages and investor loans and almost a quarter of a million business loans.

This time around 14,500 home owners and 600 business owners have had to stop repaying their lenders, since the start of July.

The data shows the number of home buyers under stress began spiking two weeks ago, with numbers still climbing to date.

Strain among the business community seems to have been somewhat delayed, but is now growing quickly. According to the ABA, the number of business loan deferrals doubled last week, rising faster than the one previous.

Again, how high those numbers rise will depend on how quickly authorities can contain further outbreaks. But with banks offering initial three-month deferrals and month-to-month pauses on home loans, and with Sydney cases having not yet peaked, support measures will likely need to be extended for some time yet.