PHOTO: Australian Banks
- Australian banks have begun reviewing their customers who have deferred their home loan repayments.
- The hardship arrangements were created in response to the COVID-19 pandemic, and allowed customers facing hardship to avoid paying back their debts for up to six months.
- With that grace period set to end in September, Business Insider Australia checked in on how Australians and their banks are getting along.
After COVID-19 bit into the Australian economy, thoughts predictably turned to its property market.
Sky-high prices had helped the country accumulate staggering levels of household debt. Now, seemingly out of nowhere, a recession – Australia’s first in three decades – threatened to properly challenge that status quo.
The country’s big banks quickly went into bat for the government, agreeing on hardship programs that would allow homeowners in need to defer their repayments for three to six months.
With the initial three-month period passing by on Saturday, the economy has only worsened, albeit on a better trajectory than initially feared.
Unemployment is officially at 7.1%, although it is likely above 11% in real terms. The economy is expected to contract by anywhere from 5% and 8% before hopefully staging some kind of recovery next year.
In the midst of all this, the federal government is due to undertake and possibly cut its JobKeeper program, which is subsidising the wages of workers nationwide.
In other words, the ability of Australian workers to continue paying back their debts remains greatly impaired, with no real signs of improvement until 2021.
At the same time, 485,065 mortgages (or $176 billion worth) remain frozen but will eventually need to be paid back. Add in business loans, and the clock is ticking on $237 billion in debt.
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