Loan deferrals are falling and that’s good news

There has been a lot of concern about the number of loans that have been deferred because of Coronavirus and what's going to happen if the banks pull out the rug from lenders.

As usual, the property pessimist say this is one of the reasons property values are going to crash?

APRA recently released details on the major banks’ home loan deferral scheme.

At its peak use in May 11% of all home loans were being deferred. That figure has now fallen back to 9% with some of those customers also restarting repayments.

That is an encouraging sign and aligns with the recovery seen in payrolls data with around 50% of the jobs lost in the initial phase of the pandemic having been regained.

These charts from NAB show that fewer people were seeking home loan deferrals while those already deferred started to repay their loans.

CBA recently reported a similar trend.

Of the initial batch of deferrals it granted, around 95% of started making full repayments.

While the latest lockdowns in Victoria have slowed the process, if activity bounces back as quickly as it did in the other states following the easing of lockdown, deferrals may well continue to trend lower.

Importantly there is no new term cliff in terms of assistance being provided.

For loan deferrals provided prior to September 30, 2020, these can be extended up to the end of March 2021 on a case-by-case basis.

Jobs rebounding

Part of the reason for the ability for borrowers to repay their loans could include the fact that employment has bounced back with the latest payroll data showing that Australia has recovered around 50% of the jobs lost associated with the pandemic.

The States that have controlled the virus the most have experienced the greatest recovery with W.A. and the Northern Territory recovering around 85% to 90% of the jobs lost associated with coronavirus.

New South Wales and Queensland have recovered around 60% of the jobs lost, while Victoria has lagged considerably with only 10% of the jobs recovered from the initial lockdown with the gains from initial recovery lost amongst the second wave of infections.

Home Lending Surges Again Over July as Housing Markets Bounce Back Hard

Dr. Andrew Wilson, chief economist of My Housing Market reports that home lending has surged again over July recording consecutive months of record growth.

The ABS reports that home buyer lending seasonally adjusted increased by a record 7.9% over July following the previous record increase of 5.3% set over June - the month before.

The value of national home loans recorded over July at $21.9bn is the highest monthly total reported since January and 11.5% higher than that recorded over July last year.

The sharp increase in home buyer lending over recent months reflects resurgent housing markets since the April and May coronavirus lockdown policies were eased.

Current severe Victorian coronavirus lockdown policies reintroduced in August will naturally have a significant impact on national home lending levels over the coming months.

Other states however will likely continue to experience solid and rising spring housing market activity notwithstanding any negative change to existing local coronavirus policy settings.

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

If you're wondering what will happen to property in 2020–2021 you are not alone.

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About Michael Yardney Michael is the founder of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.