Australia’s mortgage distress hotspot revealed as end of JobKeeper scheme looms
The financial impact of hard lockdowns on Australian households has been revealed in data provided exclusively to 7.30, with Victoria shown to have more outstanding mortgage deferrals than any other state or territory.
While 81 per cent of overall mortgage deferrals from June last year are now back on track with repayments being made, data from the Australian Banking Association shows 82,000 Australians are still deferring their home loans.
Victoria has 31 per cent of the original deferrals — granted last June — still being deferred in December figures.
By comparison, in New South Wales — which initially had a higher number of overall deferrals — only 21 per cent of June’s deferrals are still on hold, indicating a more rapid recovery in the state, which did not have a hard lockdown.
Australian Banking Association CEO Anna Bligh said the banks had taken this factor into account when negotiating with customers in Victoria.
“I don’t think there’s any surprise that in a state like Victoria, which endured significantly longer lockdowns and therefore a longer closure on their economy, that it is taking them longer to get back on their feet,” Ms Bligh told 7.30.
“It’s about 10 per cent slower so it’s not a massive difference but, yes, you can see that there is obviously an impact.”
The same goes for small business loans, which have returned to regular payments more sharply than home mortgages.
Victoria still has 17 per cent of last June’s deferrals on hold, and all the other states range from 6 to 8 per cent on hold.
However, the upcoming and coinciding deadlines of the remaining loan deferrals and the conclusion of the JobKeeper scheme in its current form means some loan holders will have to make some “hard calls”, according to Ms Bligh.
“There’s no sugar-coating this. Come March [and] April, there are going to be businesses that are going to face some really tough decisions,” she said.
“And there are going to be homeowners, tragically, making some hard calls.”
‘Feeling left behind’
One such homeowner set to make that hard call is Nikki Abercrombie, one of the 82,000 Australians who are still deferring their mortgages.
7.30 first met Ms Abercrombie, a mother and owner of a small international events company, in July last year.
“The reason I deferred my mortgage payments was just to make sure I was managing my cash flow. So immediately I needed to look at day-to-day budgets to help keep the business running and help us keep running as a family,” she said at the time.
Seven months later, her $425,000 mortgage has not received any repayments, and the broader positive economic outlook is yet to reach her and the business events industry.
“I’ve just been reflecting on the last year and all the hustling that we’ve had to do to get new business and just [to] understand that new world,” she said.
“I feel a little bit left behind. I’m finding that other industries have snapped back — some are even doing better than what they were before — but in the events industry, and particularly the business events industry, [you have] to be really dynamic.”
Business events industry slower to recover
The Business Events Council of Australia, representing an industry whose revenue slumped to virtually zero last year, welcomed a $50 million federal government grant last September, but chair Vanessa Findlay said more support was needed.
“Our current position is that the Australian business events industry will need support for a bit longer if we are going to return revenue to what it was pre-COVID,” Dr Findlay said.
Ms Bligh also said the banks would assess any further deferrals based on financial viability.
“It’ll depend on what industries people are in, what reasonable prospects they might have of getting back into work or the business, being able to get back into full turnover,” she said.
“And banks want their customers to succeed. So if they see you’re only at 50 per cent turnover but we can see you’ve increased 20 per cent … we’re confident with another three or four months that you’re going to get back to 100 per cent.”
For the remaining deferrals, the conclusion of JobKeeper in its current form will coincide with the conclusion of the loan deferral.
“I think that we’ll have some stress about, just because of the timing. There’ll be no overlap with the deferral and JobKeeper ending,” Ms Abercrombie said.
Jo Masters, chief economist at EY, said it was time to get off “life support”.
“We have cushioned the blow but we can’t survive on these life-support-type policies like JobKeeper forever,” Ms Masters said.
“Ending JobKeeper — whilst that will be very difficult for many, and it’s really important that we support people through that restructure — is the right policy, partly because it’s hiding those zombie firms.
“It’s keeping alive all Australian businesses from the pre-COVID economy that we had. We’re not seeing the economic scarring that we would typically see in a recession.”
Ms Abercrombie believes she will not be offered any further deferrals from her bank and has sought advice about selling her home, with one agent telling her to “beg, borrow or steal to keep this property”.
“I still feel that failure that I felt 12 months ago when all this happened,” Ms Abercrombie said.
“Adding to the stress would be if we had to lose the house, and adding to that failure.”