Property investors seem to have an easier time keeping up the mortgage repayments than homeowners.
One way the Morrison Government built a bridge to get us across to the other side of the Coronavirus induced recession was to give mortgage holders a holiday ( a deferral) on their repayments.
This initiative was scheduled to end in September causing some concern about a financial cliff that we were all going to fall off – of course this didn't happen.
While the end date for many of these deferrals has now been extended to March next year, all the big lenders are reporting that loan deferrals are declining and many of the mortgagees are back to repaying the debts.
Non bank lender Firstmac was quoted in the Australian Financial Review as saying that home loans to investors are more robust than those to owner-occupiers and few will need to resort to hardship measures beyond March, but a portion of owner-occupier loans will need support for some time.
More of the non-bank lender's $7.2 billion in owner-occupier loans have sought repayment holidays and reduced payment agreements than loans to investors, which made up its remaining $5 billion worth of mortgages.
Firstmac chief financial officer James Austin told the AFR that while owner-occupier loans have improved faster – those subject to hardship measures fell from 3.5 per cent in May to 2 per cent in October – they were unlikely to go back to normal by March next year when investor loans did.
"Our experience over two decades is investor loans are a better credit risk, which is counter to the generally accepted proposition that owner-occupiers are better," Mr Austin said.
"Even if they go to a point where the [investor] owner themselves has lost their job and income, they always have the option of selling that property. If we were to suffer loses that would be more likely on owner-occupiers than the investor book."
Source: Australian Financial Review
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Figures from banking regulator APRA show there was $1.8 billion worth of loans – 7.4 per cent of the combined $133 billion loan book of the country's banks – subject to payment deferrals as of September 30. Big lenders CBA, Westpac, ANZ and NAB all say deferrals are declining.
Exits from deferral continued to outweigh new entries for the third straight month in September, with $66 billion loans expiring or exiting deferral and $17 billion of entries approved or extended.
The pace of exits increased significantly over the month, with total exits increasing 169 per cent from $24 billion in August.
The majority of these loans have returned to a performing status.
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