What Does The End Of The Mortgage Freeze Look Like?

When lenders offered a ‘mortgage holiday’ or repayment pause during the initial turbulent months of the pandemic, it came as a welcome relief to many homeowners.

And if you take your bank up on the mortgage freeze offer, you may now be coming to the end of that period, with repayments due to start again. Here’s how Australia’s mortgage freeze might affect you and the market generally.

Why the mortgage freeze was so popular

We all know the havoc Covid-19 had on businesses and the jobs market – so it’s not surprising that a reported 1 in 9 Australians took advantage of a financial hardship program to freeze their mortgage during the pandemic. In fact, APRA figures show that a whopping $195 billion worth of mortgage debt was frozen during the economic fallout.

This may have quite a significant impact on homeowners over time, as lenders still charge interest even during a mortgage freeze. This means your repayments will go up when you do recommence your repayments – which could be an additional $50 a month or more.

Now the six-month deferral periods are coming to an end, some lenders are offering further deferral extensions of up to four months, but usually only for those who are in extreme financial hardship.

But the big question is: what happens after that? No one really knows, but there are predictions that we’ve yet to see the worst of what the recession might have to throw at us.

How the property market is doing right now

In Sydney’s Inner City and Inner West, we’re seeing new listings being snapped up fast due to low supply. We’re also not seeing much evidence, if at all, of distressed property sales.

The latest figures from the Australian Banking Association, reveal that the number of home loans on a holiday or pause has fallen more than 70% since the start of the pandemic, with less than 300,000 mortgages still on pause as of November. The Real Estate Industry of Australia argues that this decrease means that “catastrophic forecasts for Australia’s housing market made at the start of CV19 are simply not coming to fruition so customers should have increasing confidence to buy and sell”.

Despite this good news, we still need to be mindful that if more properties come onto the market in large volumes - including distressed sales where homeowners cannot meet mortgage repayments - there’s a chance that may put pressure on declining property prices.

Two-thirds of businesses have reported revenue or cash flow down due to the pandemic. Plus, many Aussies are on government support packages such as JobKeeper (which has been extended until 28 March 2021) or JobSeeker. So going back to making repayments will still remain tough for many.

What you can do if things are tight

If your mortgage freeze is coming to an end and you’re not able to go back to making part or even full repayments on your mortgage, some options open to you may include:

• See if you can extend your deferral to buy more time to get your finances in order
• Ask if your lender can switch you to the lower interest rate it’s offering new customers
• Look at refinancing if you know that’ll save you money on repayments in the long run.

It can be extremely stressful knowing you’re not in a position to pay your mortgage, so it’s a good idea to get in touch with your lender early to work out alternative repayment options. You could also get in touch with a free financial counsellor at the National Debt Helpline if you need advice on getting your finances back on track.

As always, if you’re looking for advice on buying or selling in our area, please don’t hesitate to get in touch.