The Reserve Bank has extended the mortgage deferral scheme – but it comes with a warning to borrowers.
The extension means banks can continue to offer temporary mortgage deferrals to their customers, without those loans being viewed as being in default.
However, Reserve Bank Deputy Governor and General Manager of Financial Stability Geoff Bascand urges customers to consider their long-term interests when considering taking up the scheme.
“Borrowers should be aware that interest will continue to accrue on their loan during a deferral, potentially prolonging the repayment period,” he says.
“We recommend that customers considering extending, or applying for a deferral, contact their banks to discuss the best solution for them.”
Banks too are asked to take their customers’ situations into account when deciding whether to offer an extension.
Bascand says if a lender thinks it unlikely a borrower will be able to begin their repayments once the deferral ends, other options should be considered, including hardship arrangements with the bank.
“The Reserve Bank expects that lenders will consider borrowers’ best interests when assessing whether to offer a new deferral, or to extend an existing one,” he says.
“For many borrowers, resuming, or continuing payments in some form will be the most suitable approach, rather than taking up a deferral of their loan payments. A deferral should not be the default setting and it will be up to individual lenders to decide whether to offer one to their customers.”
The six-month mortgage holiday scheme was due to expire September 27. It will now run until March 31, 2021.