There are just 3,170 deferred mortgages remaining with Australia’s largest lenders. Banks say the worst is now over.

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  • The Australian economy appears to have undergone an “impressive recovery” after hundreds of thousands of loan deferrals were finalised.
  • New figures released by the Australian Banking Association (ABA) shows less than 5,000 loan deferrals remain outstanding across Australian businesses and households.
  • With the figures timestamped to before the end of JobKeeper and other support measures, thousands of Australians may not be out of the woods just yet.
  • Visit Business Insider Australia’s homepage for more stories.

The banks are confident Australian borrowers have come through the pandemic relatively unscathed, as the risk of a wave of loans defaults peters out.

At the end of March a total of less than 5,000 loan deferrals remained outstanding with the big four banks and Suncorp, down significantly from a peak of nearly 900,000 in June, according to new figures from the Australian Banking Association (ABA).

“These figures reflect the impressive recovery Australia’s economy is experiencing after facing a one in one hundred year pandemic,” ABA CEO Anna Bligh said. “The fact that unemployment is lower than expected and the economy has rebounded faster than we anticipated is great news for the vast majority of homeowners and small businesses.”

Just 508 small businesses nationwide aren’t lining up to make their repayments, after 99.8% of business loan deferrals expired. On the home loan front, just 3,170 loans are still frozen down from a peak of more than 468,000. It will come as a relief to both Bligh and the banks, which told Business Insider Australia earlier this year they were expecting deferrals to rise around March.

The stats represent a mighty turnaround after the deferral program, devised in conjunction with Treasurer Josh Frydenberg, which formally ended four weeks ago. These most recent figures represent the very last Australians who were unable to come to different arrangements with their banks and have as a last resort remained deferred for the time being.

The amount of deferred debt is still significant. In separate figures provide to Business Insider Australia, those borrowers are behind on more than $1.33 billion worth of mortgages still deferred, for an average debt of $410,000 per loan. Deferred business owners meanwhile are straddled with almost $363,000 in outstanding debt each.

In that respect, there are clearly still thousands of Australians still doing it tough. Victorians remains the most embattled group when it comes to the program following repeated and prolonged lockdowns. The state is carrying a disproportionate amount of deferred debt with the big four banks, holding twice the national average for business loans, and slightly more mortgage debt.

Many who have begun making repayments again are now doing so on loans that look very different to how they did 12 months ago.

For one, their monthly repayments have likely increased as they make up for those they missed in 2020. Others may have restructured their loans to make them practical, be paying less interest or may have switched to interest-only loans altogether to keep on top of their debt.

“Banks will continue to support those households and businesses still doing it tough this year, taking a fair and compassionate approach to get people through the pandemic,” Bligh said.

Nor are Australians or banks totally out of the woods either. The figures are timestamped to a period before JobKeeper ended, with the elimination of the wage subsidy expected to cost jobs. A reduced JobSeeker payment barely stretching to cover living expenses is unlikely to be sufficient to cover mortgage repayments. With new deferrals no longer being issued, these borrowers may simply be forced to default.

Businesses may also struggle. With insolvencies again rising in early 2021 and safe harbour laws retracted, businesses are no longer being provided the buffers they were last year.

“The number of payment defaults has fallen for the past five consecutive months, which gives off conflicting signals. With government stimuli recently ending, we’ll be watching closely as we enter a post-JobKeeper economy to see how this changes,” CreditorWatch CEO Patrick Coghlan said earlier this month.

He won’t be the only one.