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The Reserve Bank has raised the specter of a wave of “managed sales” of homes early next year, belonging to borrowers who can no longer pay their repayments.
In total, 1.5 percent of home loans at the beginning of November went to borrowers who were unable to make any repayment of their loans, the Reserve Bank said in its November Financial Stability Report.
Under the bank’s home loan deferral scheme, borrowers who accounted for about 18 percent of home loans were temporarily allowed to make lower repayments, or temporarily stop repayments, if they had lost income during the Covid-19 pandemic. 19.
Most have resumed full payments again, helped by lower home loan rates, but the home loan deferral plan was due to end in March, the Reserve Bank said.
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“At that stage, the proportion of loans that will require extended assistance or managed property sales, and the appropriate levels of loss provisions by banks, will be clearer,” said the Reserve Bank.
KEVIN STENT / Stuff
The Reserve Bank did not appear to be planning to extend the national mortgage deferral scheme until March 31.
The Reserve Bank said that as unemployment rose, several clients would not have a realistic prospect of resuming payments.
It did not appear that the Reserve Bank intended to extend the deferral scheme, under which banks could account for unpaid home loans as if they were ordinary loans without problems.
But banks could choose to extend help to troubled customers anyway, the Reserve Bank said.
“Beyond March 2021, banks will still have a variety of options to help struggling customers. This could include extending the terms of the loan or offering more interest only periods or full payment deferrals, ”he said in a written statement.
“However, the implication of the expiration of our regulatory guidance is that, in some cases, these loans would have to be recorded as delinquent. This will have implications for the amount of capital that banks require for these loans and could also affect the credit ratings of clients. “
Christine Liggins of Debtfix, who helps families get over their debts, said banks should choose to extend aid without approval from the Reserve Bank.
“Banks have the power to expand it themselves. They don’t need the government to tell them. Banks can decide to do that, and why shouldn’t they?
Peter Meecham / Things
Christine Liggins, a budgeter who helps people get out of debt, says banks can choose to extend aid to borrowers regardless of what the Reserve Bank does in late March.
“It is a reddish pandemic. You don’t need the government to tell you what’s right, “Liggins said.
Roger Beaumont, executive director of the New Zealand Bankers Association, said banks would continue to work with customers struggling to make payments on their home loans.
“Since March, banks have been working proactively with customers who were financially affected by Covid-19,” he said.
“Banks will continue to work with affected clients, including the relatively few who still have fully deferred loans.”
Beaumont said: “Options for these clients may include moving to interest-only loan repayments or restructuring the loan, for example by extending the term of the loan.”
The banks had dedicated distress teams and routinely worked with clients facing financial difficulties due to a change in their situation, he said.
“The mortgage deferral scheme has been important in supporting good results for clients and preventing a large-scale disorderly exit of borrowers from the housing market,” said the Reserve Bank.
In total, about 9 percent of home loans were deferred, and another 9 percent are temporarily restructured to interest only.
As of early November, about 4 percent of home loan borrowers were still making interest payments, data from the Reserve Bank showed.
