Australia’s major banks have thrown homeowners a much-needed lifeline, offering loan repayment deferrals for up to six months as coronavirus fears weigh on the economy.

Most banks have also lowered rates following the Reserve Bank’s emergency rate cut (from 0.5 per cent to a record low 0.25 per cent), further easing customers’ burden.

The unprecedented action follows Australian Banking Association chief executive Anna Bligh’s announcement small businesses will be eligible for similar deferrals on business loans.

“This package delivers across $100 billion worth of small business loans. It delivers up to $8 billion back into the pockets of small businesses as they battle with this virus and its impacts,” Ms Bligh said.

Ms Bligh would not confirm at the time whether home loan customers would receive the same treatment, but the big four banks were quick to follow with their own relief offers.

How customers will benefit

Speaking to The New Daily, RateCity director of research Sally Tindall welcomed the banks efforts to reduce mortgage stress.

“Giving home loan customers the ability to hit pause on their mortgage repayments for up to six months will make a real difference to people who have been severely impacted by the coronavirus,” she said.

“The mortgage is typically the biggest single expense in the family budget. This will give families some much needed breathing space at a time when they are likely to need it most.”

In addition to deferring repayments, each of the banks have made a number of changes to rates and term deposit conditions.

These vary between the banks, and customers will need to contact their bank

“Banks are making assessments on a case by case basis,” MS Lamont said.

“They will be able to look your accounts immediately to see what’s going on with your finances – they may also ask for extra documents proving you’re in strife.”

Westpac is also offering an 8 month term deposit with a 2 per cent rate to customers over 65.

Meanwhile, Commonwealth Bank has lowered the eligibility criteria for personal overdrafts and reduced repayments to the minimum level to free up cash for those paying more.

Many smaller lenders are “yet to declare their hand” Ms Tindall said, but most are expected to follow suit.

“Now three of the four big banks are offering fixed rates as low as 2.19 per cent, we’re likely to see other lenders chase after them, potentially cutting fixed rates even further,” she said.

More support might be needed

Although a six month pause on repayments will be immensely helpful to countless Australian families, it might not be enough to see everyone through.

“We still don’t know how big or for how long the coronavirus will impact our economy,” Ms Tindall said.

“At this stage, the big banks have said they will review people’s home loan repayment pause at the three month mark.”

Kirsty Lamont, director at consumer comparison site Mozo, similarly told The New Daily banks may need to find more ways to support customers as the pandemic unfolds.

“It’s a significant first step and should alleviate some of the pain customers are experiencing,” she said.

“But banks may need to consider extending it, as some customers may still struggle to find jobs after the six months is up.”

Ms Lamont said home loan customers with genuine concerns about their ability to repay their mortgages need to reach out to their banks as soon as possible to discuss alternative options.

The banks changes come following the announcement of government’s $30 million plus stimulus package and a range of policy changes from the RBA.

The government then announced a second stimulus package on March 22.