COVID_19 Lender Help
The RBA & APRA have worked with lenders to create not just some physical assistance measures, but more importantly, have created an environment where lenders are going to be working with their borrowers to help them through COVID_19 related financial issues without penalising the borrowers for doing so.
Some of these are the basic hardship measures that are currently in play for any client no matter what leads to them entering financial hardship, and some additional measures are also being offered by many lenders.
A very large part of the efforts though are being directed to business customers, both by additional hardship measures lenders are putting in play as well as the stimulus measures being offered by the governments.
Lending Team Update
We are in full operation with some of the team working remotely and some in the office. No matter where we are working from we will remain in full operation to assist you during this time, and for all the clients who require purchase or refinance loans, everything is moving ahead as normal.
We are here to help and we urge you to contact us with any lending-related queries or issues you or your clients might be experiencing, whether that be financial hardship or someone who would like to talk through possible ways they can mitigate their expected financial stress.
We are here to help all of your clients not just the ones who currently have a loan that was organised through us.
Basic
All personal mortgage customers financially affected by the coronavirus will be able to apply for an initial three month repayment holiday with a further three months also able to be applied at the conclusion of the initial three months. While the current maximum period amounts to six months, we believe that this could be extended if the corona impact drags out longer than six months. This will only be determined later in the year though.
Overall we believe that in this environment the above process will be simplified with a lot of the red tape removed, and a repayment holiday should be fairly easy for affected clients to organise.
Notes:
- Interest will accumulate as normal during the repayment holiday period, but this will be the most immediate and effective way for clients to obtain some short term cashflow relief.
- This action will not show on their credit report or impact their credit rating, though a potential future refinance lender will notice the payment holiday when they review loan statements (that won’t mean anything if it is a few months later though).
- As part of the APRA exemption to responsible lending policies, any repayment holiday period will not be treated as an arrears period by a lender and the loan will not be regarded as having been restructured.
- Some lenders will require a form to apply for a repayment holiday and some will just need a phone call. Some might request some financial evidence to support a claim.
- Similar arrangements could also be arranged on motor vehicle and personal loans and credit card debt. These are of a less formal nature though and are not as certain as the above mortgage relief measures.
Additional
Some additional measures are now starting to be released by some lenders. These do not apply to every lender so best bet is we talk to affected clients to ascertain their current lending and personal situations and we will then work out individually what their current lender might be able to offer and how best to restructure things for them.
It is important to also note that many of the below measures will result in paying a larger amount of interest over the long term. Any deferral of payments or extension of loan terms solves a short term cashflow problem but does so by merely deferring the financial problem to a later date. It is hoped that the time deferral will allow things to return to normal financially, but there will be clients whose financial problems are more in-depth and will now be solved with a short term band-aid. We will need to work together with those clients to create a more workable long term solution.
Clients could potentially apply for one or more of the following additional measures:
Break fixed rates without penalty – a lot of lenders have announced that they will waive fees associated with a loan restructure, which could involve the breaking of old above-market fixed rates that clients are currently stuck with. If applied as such, this has the potential to save clients a significant amount of money and reduce their cashflow both now and in the future.
It is unknown at this time whether they will be allowed to move to a variable rate or simply receive a reduction to their current rate without changing the fixed expiry period. Either way, it could save a lot of money for clients and put them in a far more flexible position moving forward.
Waive some fees – those associated with missed payments, arrears, etc will likely be waived by most lenders.
Extend interest-only periods – for clients with an interest-only period maturing, the move to principal and interest payments could be crippling to their cashflow. Some lenders will now allow for a simple extension to their interest-only period.
Extend loan terms – an extension to a loan term could reduce a client’s monthly cash flow significantly.
Credit cards – an emergency increase to their credit card limit could be offered.
Debt negotiation – for the most serious of cases, especially for clients who have been struggling for some time, there exists a debt renegotiation service that clients can engage in relation to unsecured debt (such as personal loans, credit cards, etc). Depending on the circumstances, a financial mediator could potentially arrange for the establishment of an interest-free loan amortisation schedule, or in the most extreme cases potentially arrange for unsecured debt to be partially or wholly written off.
Business
This is where a lot of the new government stimulus support is being directed in an effort to keep business’ afloat and people employed.
All business banking clients can apply for the above-noted relief on their personal debt facilities, and most lenders will now also allow them similar arrangements (ie defer repayments for up to six months) on their business loans (commercial loans, overdraft, car loans, credit cards, etc).
Some lenders have also announced a lot of interest rate cuts for business clients, though this varies more between lenders and will be worked out on a case by case basis.
As you would be aware the government has also announced a range of measures to support businesses through this time, and some brief detail on those measures can be found at https://www.smartcompany.com.au/finance/economy/government-coronavirus-second-stimulus-small-business/.
The main take away from this should be that help is available and we are here to help you and your clients through this very difficult period. Start the process with a conversation and we’ll investigate and personalise solutions from there.
Don’t hesitate to use us and feel free to give me a call I can assist in any way.
Jacob O’Neill
Director/Principal CPS Property
0403 042 525
jacob@cpsproperty.com.au
