Many mortgage-holders who put their repayments on hold during the Covid-19 lockdown have struggled to pick them up again, new data shows.
Credit reporting bureau Centrix analysed the data in its credit files to reveal that while the mortgage deferral scheme had been an overall success, many households had not been able to resume repayments successfully.
More than one in four mortgages that participated in the bank mortgage deferral scheme had either been closed, dealt with under bank hardship provisions, or moved on to interest-only repayments.
“The closure of the mortgage accounts indicates that home was likely sold, and the mortgage repaid, or they have closed their account, and have sourced alternative finance,” said Centrix chief executive Keith McLaughlin.
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Centrix compiles credit reports on everyone in New Zealand with data passed to it by the likes of loan companies, banks, insurers and power companies, all of which require people signing up with them to consent to the data-sharing.
The data it collects gives Centrix a helicopter view of the nation’s borrowing habits, and credit ratings.
But it also means Centrix has the data to gauge the success of the mortgage deferral scheme, which was created by the Reserve Bank and the mainstream banks to allow homeowners to reduce or temporarily halt home loan repayments to give them the chance to bounce back from the economic disruption caused by the Covid-19 pandemic.
“Overall, the deferral scheme was successful, with nearly three-quarters of deferred mortgages able to move to principal payments,” said McLaughlin.
Some homeowners who ran into financial trouble during the Covid-19 economic downturn may have sold their homes, data from the Centrix credit reporting bureau suggests.
Though the economy had fared much better than bank economists had initially expected when national lockdown was announced in March 2020, the scheme may not have been enough to save many homes, whether owned by landlords, or owner-occupiers.
McLaughlin said 73 per cent of home loan borrowers who were granted mortgage deferral by their banks had now resumed full principal-and-interest repayments, aided by lower mortgage rates, which followed close on the heels of cuts by the Reserve Bank to its Official Cash Rate.
But 10 per cent of home loans which went into mortgage deferral were still on interest-only repayments at the end of May, he said, a move typically adopted by homeowners only when they could not afford full repayments.
A further 3 per cent of the home loans which were under the mortgage deferral scheme were shifted into “hardship” management by banks, and remained there in May, McLaughlin said.
In addition, 14 per cent of home loans that were once under the mortgage deferral scheme had been closed, he said. That could mean one of two things: that the home had been sold and the home loan paid off, or that the borrower had refinanced their home with another lender, resulting in the closure of their home loan account.
Keith McLaughlin, chief executive of the Centrix, says the number of home loan applications dipped in May.
Government changes to property investing rules designed to “tip the balance” back towards owner-occupiers may have played a part in a slowing the number of home loan applications in May, Centrix data indicated.
“Mortgage applications remained strong in May, but are down from their February peak,” McLaughlin said.
“It is too early to know whether this weakening is reflective of low winter demand, or the impact of Government housing policy,” he said.
“Personal loan volumes are up 7 per cent on the prior month, but are still well below the pre-Covid baseline level,” said McLaughlin.
“New credit card applications also remain weak, at 60 per cent of pre-Covid baseline. This indicates that consumers are exercising greater caution before taking on higher interest credit,” Mclaughlin said.