Is it too soon to end repayment pauses?

Three brokers weigh in as the majors prepare to stop taking applications for repayment pauses

Is it too soon to end repayment pauses?

While the majority of borrowers who paused mortgage repayments at the start of the pandemic have since got back on track, there are still many who haven’t resumed paying their home loans - which begs the question, is it too early to end the repayment pause program? MPA reached out to three top brokers, Jeremy Fisher of 1st Street Financial, Tony Bice of Finance Made Easy and Sarah Thomson of Loan Market Geelong to get their insights.

For the director of 1st Street Financial, Jeremy Fisher, the question of whether it is too early to end the repayment pause program is truly a case-by-case scenario.

“Certain industries like hospitality, tourism and so forth may need further extensions, so I’m hopeful the banks are a little bit liberal with their thinking,” he said.

All in all, though, it would be good for the economy to go back to “some sense of normality” – as long as those in select industries who are still being impacted by the COVID situation are given consideration, he said.

Finance Made Easy director Tony Bice said he had very few clients take up the option of pausing their repayments through COVID – only three or four out of 1,500 in fact. This is a trend he has noticed with other brokers he has spoken to on the matter. But while he can’t speak for all brokers, he said his numbers at least show that most of his clients have been in a good enough position to be able to get through the worst of the pandemic.

“I think the initial doom and gloom that everyone was predicting six-eight months ago doesn’t appear to be quite as bad as what we first thought,” he said. “Now’s the time we need to start getting things back on track. The jab’s about to come. Look at the market, the settlement figures and the auction rates - confidence has never been higher, volumes have never been higher.

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“That suggests there are a lot of people out there who are still in a strong position to be able to borrow money and the figures suggest that’s exactly what’s happening.”

Once banks end the program, those who are able to make repayments will start doing so, and those who are still struggling will need to negotiate with their bank in the same way they would have done in pre-pandemic times, he said. Given that those loans on hold are still accruing interest, borrowers in a position to make repayments are more likely to want to start doing so sooner rather than later, he added.

“The ones that don’t want to start making repayments sooner rather than later would obviously be those that are still suffering hardship,” he said.

Like Bice, Loan Market Geelong director Sarah Thomson didn’t have many clients pause their repayments in response to COVID-19. She said the team assisted about 10 people to put their loan repayments on hold out of a book of 3,500, with some of her customers choosing to pay interest only rather than pause their repayments entirely.

She said PAYG clients were largely in a good position to make their repayments after having been re-employed or holding on to their jobs throughout COVID, but that self-employed borrowers might be in a different situation.

“Accountants are concerned about their self-employed clients over the next couple of months now that’s Jobkeeper’s finishing,” she said.

While some borrowers may have applied for a repayment holiday at the start of COVID even though they didn’t require it, those who are applying now are surely more aware of their financial situation and whether they truly need assistance, she added.

“Clients that are applying for it now - they’re doing it for a reason,” she said. “We’re not mid COVID, we’re at the tail-end to a point.”