Which banks are freezing mortgages for COVID-19?

Which banks are freezing mortgages for COVID-19?

Following the RBA’s emergency cut to the national cash rate last week, many Australian banks have announced relief packages to help manage the economic impact of the COVID-19 crisis.

As well as offering support for Australian small business, several of these banks have offered home loan customers being affected by coronavirus the chance to take a mortgage holiday. This allows these affected mortgage holders to pause their loan repayments for a limited time to help relieve pressure on household budgets.

So which banks are offering to temporarily freeze mortgage payments for affected customers? Here are all the banks that have made specific announcements so far (terms and conditions apply, contact the individual banks for details):

What is interest capitalisation?

In many cases, while you're taking a mortgage holiday, your interest charges will be capitalised, meaning they'll be added onto the outstanding balance that you owe. At the end of your repayment holiday, your lender may increase your monthly mortgage repayments or extend your loan term by the same length as your mortgage holiday to make up for the extra money you now owe. This means that while taking a mortgage holiday could relieve pressure on your budget in the short term, you could end up paying more in total interest charges over the long term. Consider contacting a financial adviser before making a decision. 

  • AMP: Offering to pause home loan repayments for three months, with the option to extend for a further three months, for clients experiencing ongoing financial challenges as a result of COVID-19.
  • ANZ: Customers can request a deferral of home loan repayments for up to six-months, with a review at three-months, with interest capitalised, meaning it is added to the customer’s outstanding loan balance to be paid over the remaining loan term.
  • Auswide Bank: Home loan, personal loan and business loan customers requiring financial assistance as a result of COVID-19 may be able to defer repayments, with interest capitalised, for up to six months. 
  • Bank Australia: Offering a deferral of scheduled home loan repayments for up to 3 months, with further 3 month extension possible following a review.
  • Bank of Melbourne: Customers who have lost their job or suffered loss of income as a result of COVID-19 can contact BoM for three months deferral on their home loan mortgage repayments with extension for a further three months available after review.
  • Bank of us: If you are experiencing financial difficulty due to COVID-19 you can apply for an up to six-month payment deferral on loan repayments, with interest capitalised. 
  • BankSA: Customers who have lost their job or suffered loss of income as a result of COVID-19 can contact BankSA for three months deferral on their home loan mortgage repayments with extension for a further three months available after review. 
  • Bankstown City Unity Bank: If you need financial assistance during this time, BCUB will be able to defer your loan repayments, with interest capitalised, for up to six months. 
  • Bankwest: To provide additional support to home loan customers who may need assistance at this time, Bankwest is offering an option to defer home loan repayments for six months. Customers will be able to apply for a deferral of home loan repayments through an online registration process, which is currently under development and will be made available as soon as possible. In the meantime, customers wanting to request a deferral of their home loan repayment can do so via secure messaging through Online Banking, or the Bankwest Mobile App, or by calling Bankwest.
  • BCU: Members who have been affected by the current COVID19 situation, are unable to repay their home loan as a result, and are in advance of their scheduled loan repayments or are able to access their offset account, can draw these funds at no cost. If no redraw or offset funds are available, all eligible members can apply for a repayment holiday on their home loan, for up to 6 months. This applies to both owner-occupied and investment loans for principal & interest or interest only repayment terms. Interest will be capitalised during the payment holiday. 
  • Bendigo and Adelaide Bank: Extending its existing COVID-19 assistance package for home loan customers, so affected customers can now apply for six months relief on loans, up from the three months previously announced on 16 March 2020.
  • Beyond Bank: Offering eligible customers the chance to defer loan repayments for up to 6 months. Interest will be capitalised to the loan amount.
  • Commonwealth Bank: All home loan and small business customers are now eligible to defer loan repayments by up to 6 months.
  • Coastline Credit Union: Offering repayment relief by way of a pause (deferral) of principal and interest repayments for selected loans for 3 months (interest will be capitalised). Where your loan is on a fixed rate, the current fixed rate period will be extended by the deferred payment period at the current fixed rate. If a fixed rate is terminated during the deferral period then break fees and applicable loan charges will be payable. Following 3 months the member’s financial position will be reviewed for possible extension of the hardship requirement for by way of a further 3 months loan repayment deferral period. 
  • Delphi Bank: Home loan and business loan customers can apply for relief on loans for up to six months.
  • G&C Mutual Bank: Recent borrowers who have no advance payments, or those who are otherwise facing financial hardship due to loss of their ordinary source of income, G&C will allow scheduled loan repayments to be deferred (with any interest capitalised and with the underlying loan term extended as required) for an initial 3 month period and with the potential for a further 3 month deferral upon a financial review by G&C. 
  • Gateway Bank: The type of assistance Gateway can offer will depend on individual circumstances, and may include deferring repayments of up to three months on loans.
  • HSBC: Offering to defer home loan, personal loan and credit card repayments by up to six months.
  • Hume Bank: Owner-occupied, investment and personal loan customers can request to have their loan repayments deferred for up to 6 months.
  • ING: To support customers who have suffered a loss of income or employment due to COVID-19, you can contact ING for a three month payment pause on your ING home or personal loan repayments. An extension for a further three months (total 6 months) may also be available on request and is subject to financial assessment. 
  • Macquarie Bank: All Macquarie Business and Personal Banking clients who are experiencing financial difficulty can immediately defer their repayments for six months.
  • ME Bank: Borrowers experiencing financial difficulty will be able to pause their home loan repayments for up to six months, with a review at three months.
  • Move Bank: Financial relief for impacted members with loans includes deferment of home loan payments up to 6 months, including a 3 month checkpoint, and deferment of all other loan payments for 3 months. The deferred interest on your loans will be capitalised. 
  • NAB: Pause home loan repayments for up to six months, including a three-month checkpoint.
  • Newcastle Permanent: Home loan and small business customers who are impacted can request a pause in their repayments for up to six months if necessary, with interest capitalised.
  • P&N Bank: If you have been affected by the current COVID-19 situation, and you are unable to repay your home loan as a result, P&N Bank members who are in advance of their scheduled loan repayments or have the ability to access their offset account can draw these funds at no cost. If no redraw or offset funds are available, all eligible members can apply for a repayment holiday on their home loan for up to 6 months. This applies to both owner-occupied and investment loans for principal & interest or interest only repayment terms; interest will be capitalised during the payment holiday. 
  • People’s Choice Credit Union: Will pause repayments for up to 6 months, with a review at 3 months, for home loans and personal loans.
  • QUDOS Bank: Will be offering vulnerable customers the ability to pause home loan repayments for up to 6 months, along with a number of other relief measures until circumstances improve.
  • Queensland Country Bank: Offering a relief package that includes deferred repayments on loans for up to six months.
  • RAMS: Customers who have lost their job or suffered loss of income as a result of COVID-19 can contact RAMS for three months deferral on their home loan mortgage repayments, with extension for a further three months available after review. Interest capitalised.
  • Service One Alliance Bank: As part of its financial assistance package, personal and business borrowers can apply for relief on loans for up to six months.
  • St.George: Customers who have lost their job or suffered loss of income as a result of COVID-19 can contact St.George for three months deferral on their home loan mortgage repayments with extension for a further three months available after review.
  • TicToc: Home loan customers can apply for relief on loans for up to six months.
  • Well Home Loans: Home loan and business loan customers can apply for relief on loans for up to six months.
  • Westpac: Customers who have lost their job or suffered loss of income as a result of COVID-19 can contact Westpac for three months deferral on their home loan mortgage repayments, with extension for a further three months available after review.

If your bank doesn’t appear on this list, don’t panic. Even if your bank has not yet announced it is offering repayment holidays for home loan customers, almost all banks offer financial hardship programs, intended to help customers experiencing difficulties manage their finances. Contact your bank, explain your situation, and work with one another to look for a suitable solution.

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Learn more about home loans

What is an interest-only loan? How do I work out interest-only loan repayments?

An ‘interest-only’ loan is a loan where the borrower is only required to pay back the interest on the loan. Typically, banks will only let lenders do this for a fixed period of time – often five years – however some lenders will be happy to extend this.

Interest-only loans are popular with investors who aren’t keen on putting a lot of capital into their investment property. It is also a handy feature for people who need to reduce their mortgage repayments for a short period of time while they are travelling overseas, or taking time off to look after a new family member, for example.

While moving on to interest-only will make your monthly repayments cheaper, ultimately, you will end up paying your bank thousands of dollars extra in interest to make up for the time where you weren’t paying off the principal.

Who has the best home loan?

Determining who has the ‘best’ home loan really does depend on your own personal circumstances and requirements. It may be tempting to judge a loan merely on the interest rate but there can be added value in the extras on offer, such as offset and redraw facilities, that aren’t available with all low rate loans.

To determine which loan is the best for you, think about whether you would prefer the consistency of a fixed loan or the flexibility and potential benefits of a variable loan. Then determine which features will be necessary throughout the life of your loan. Thirdly, consider how much you are willing to pay in fees for the loan you want. Once you find the perfect combination of these three elements you are on your way to determining the best loan for you. 

How do I calculate monthly mortgage repayments?

Work out your mortgage repayments using a home loan calculator that takes into account your deposit size, property value and interest rate. This is divided by the loan term you choose (for example, there are 360 months in a 30-year mortgage) to determine the monthly repayments over this time frame.

Over the course of your loan, your monthly repayment amount will be affected by changes to your interest rate, plus any circumstances where you opt to pay interest-only for a period of time, instead of principal and interest.

What are extra repayments?

Additional payments to your home loan above the minimum monthly instalments, which can help to reduce the loan’s term and remaining payable interest.

How do I refinance my home loan?

Refinancing your home loan can involve a bit of paperwork but if you are moving on to a lower rate, it can save you thousands of dollars in the long-run. The first step is finding another loan on the market that you think will save you money over time or offer features that your current loan does not have. Once you have selected a couple of loans you are interested in, compare them with your current loan to see if you will save money in the long term on interest rates and fees. Remember to factor in any break fees and set up fees when assessing the cost of switching.

Once you have decided on a new loan it is simply a matter of contacting your existing and future lender to get the new loan set up. Beware that some lenders will revert your loan back to a 25 or 30 year term when you refinance which may mean initial lower repayments but may cost you more in the long run.

What is a fixed home loan?

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Can I change jobs while I am applying for a home loan?

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out. 

What are the responsibilities of a mortgage broker?

Mortgage brokers act as the go-between for borrowers looking for a home loan and the lenders offering the loan. They offer personalised advice to help borrowers choose the right home loan for their needs.

In Australia, mortgage brokers are required by law to carry an Australian Credit License (ACL) if they offer credit assistance services. Which is the legal term for guidance regarding the different kinds of credit offered by lenders, including home loan mortgages. They may not need this license if they are working for an aggregator, for instance, as a franchisee. In both these situations, they need to comply with the regulations laid down by the Australian Securities and Investments Commission (ASIC).

These regulations, which are stipulated by Australian legislation, require mortgage brokers to comply with what are called “responsible lending” and “best interest” obligations. Responsible lending obligations mean brokers have to suggest “suitable” home loans. This means loans that you can easily qualify for,  actually meet your needs, and don’t prove unnecessarily challenging for you.

Starting 1 January 2021, mortgage brokers must comply with best interest obligations in addition to responsible lending obligations. These require mortgage brokers to act in the best interest of their customers and also requires them to prioritise their customers’ interests over their own. For instance, a mortgage broker may not recommend a lender who gives them a commission if that lender’s home loan offer does not benefit that particular customer.

How can I calculate interest on my home loan?

You can calculate the total interest you will pay over the life of your loan by using a mortgage calculator. The calculator will estimate your repayments based on the amount you want to borrow, the interest rate, the length of your loan, whether you are an owner-occupier or an investor and whether you plan to pay ‘principal and interest’ or ‘interest-only’.

If you are buying a new home, the calculator will also help you work out how much you’ll need to pay in stamp duty and other related costs.

What is a debt service ratio?

A method of gauging a borrower’s home loan serviceability (ability to afford home loan repayments), the debt service ratio (DSR) is the fraction of an applicant’s income that will need to go towards paying back a loan. The DSR is typically expressed as a percentage, and lenders may decline loans to borrowers with too high a DSR (often over 30 per cent).

What happens to my home loan when interest rates rise?

If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

Do mortgage brokers need a consumer credit license?

In Australia, mortgage brokers are defined by law as being credit service or assistance providers, meaning that they help borrowers connect with lenders. Mortgage brokers may not always need a consumer credit license however if they’re operating solo they will need an Australian Credit License (ACL). Further, they may also need to comply with requirements asking them to mention their license number in full.

Some mortgage brokers can be “credit representatives”, or franchisees of a mortgage aggregator. In this case, if the aggregator has a license, the mortgage broker need not have one. The reasoning for this is that the franchise agreement usually requires mortgage brokers to comply with the laws applicable to the aggregator. If you’re speaking to a mortgage broker, you can ask them if they receive commissions from lenders, which is a good indicator that they need to be licensed. Consider requesting their license details if they don’t give you the details beforehand. 

You should remember that such a license protects you if you’re given incorrect or misleading advice that results in a home loan application rejection or any financial loss. Brokers are regulated by the Australian Securities & Investment Commission (ASIC), as per the National Consumer Credit Protection (NCCP) Act. 

How to break up with your mortgage broker

If you find a mortgage broker giving you generic advice or trying to sell you a competitive offer from an unsuitable lender, you might be better off  breaking up with the mortgage broker and consulting someone else. Breaking up with a mortgage broker can be done over the phone, or via email. You can also raise a complaint, either with the broker’s aggregator or with the Australian Financial Complaints Authority as necessary.

As licensed industry professionals, mortgage brokers have the responsibility of giving you accurate advice so that you know what to expect when you apply for a home loan. You may have approached the mortgage broker, for instance, because you have questions about the terms of a home loan a lender offered you. 

You should remember that mortgage brokers are obliged by law to act in your best interests and as part of complying with The Australian Securities and Investments Commission’s (ASIC) regulations. If you feel you didn’t get the right advice from the mortgage broker, or that you lost money as a result of accepting the broker’s suggestions regarding a lender or home loan offer, you can file a complaint with the ASIC and seek compensation. 

When you first speak to a mortgage broker, consider asking them about their Lender Panel, which is the list of lenders they usually recommend and who may pay them a commission. This information can help you decide if the advice they give you has anything to do with the remuneration they may receive from one or more lenders.

How do I take out a low-deposit home loan?

If you want to take out a low-deposit home loan, it might be a good idea to consult a mortgage broker who can give you professional financial advice and organise the mortgage for you.

Another way to take out a low-deposit home loan is to do your own research with a comparison website like RateCity. Once you’ve identified your preferred mortgage, you can apply through RateCity or go direct to the lender.