The Coronavirus pandemic has ripped through every facet of life as we know it. The health crisis that it is has caused possibly the biggest economic crisis since the Great Depression of 1929. With many citizens globally having their wealth tied up in property investments and loans to banks – questions immediately turned to what sort of aid people with debt would get in the face of the pandemic. Well, in Australia at least – it has been good news, with banks and lenders agreeing to freeze debt repayments for the next 6 months. 

Rate cuts and stimulus packages can only do so much

The Reserve Bank cut rates soon after news broke of the developing coronavirus outbreak. On its own, that is positive for the housing market (meaning prices stabilise or go up). But the reason the bank is cutting is coronavirus is negatively impacting the economy as a whole – there’s no escaping that fact. Yes, the government has released its stimulus package and there may be more fiscal stimulus on the way, but there are limits to what any government can do. There will be negative effects on employment. It will be a short, sharp shock to the economy.

I fully expect a strong rebound by 2021 but in the short term, it will hurt. There are sectors in the economy where people will lose jobs and it’s fair to say coronavirus is generating uncertainty more broadly in the community and, in turn, in the economy. In the housing market, the bottom line is there will be a pullback by buyers and that will take momentum out of the market, and we could see some price falls. The other element is you can look at what it’s done to other asset prices. Yes, interest rates are lower but other assets, notably equities, are being hit. For a lot of people with wealth tied up in the share market, their wealth has been diminished. So, capacity for many people to use that wealth to buy into the housing market has been reduced.

There have been encouraging signs in Australia though, with a range of banks offering measures for those impacted by the Coronavirus. Of course the big four banks lead the way, but smaller banks like Newcastle Permanent have also offered a reprieve. Take a look at one of their loan options here:

Commonwealth Bank

  • Increasing 12 month term deposit rates by 60 bps to 1.70% p.a. This allows all Australians – and especially older Australians who rely on their savings income – to earn a guaranteed return which is 1.45% above the cash rate. This offer is available for all eligible new and existing CBA personal* customers, available from the 20th March 2020 on balances from $5,000 to $2 million, for a limited time only.
  • Offering a 2.29% p.a. fixed rate home loan for one, two and three years – our lowest advertised rate ever – allowing owner occupier customers on principal and interest repayments with a Wealth Package to lock in certainty of these historically low interest rates, from 30 March.
  • Reducing repayments for all variable principal and interest home loan accounts to the minimum required from 1 May to release up to $3.6bn of additional cash flow for Australian households. Customers who wish to retain their existing repayments will have the ability to opt out from 1 May.
  • Increasing eligibility criteria for personal overdrafts, available online or through the CommBank App, helping customers access emergency funds.

Westpac

  • Reduced Fixed Home Loan Rates: A 2.29% p.a. fixed rate home loan for one, two and three years for owner occupied customers on principal and interest repayments with a Premier Advantage Package, effective Friday 27 March.
  • Repayment relief for home loan customers: Westpac customers who have lost their job or suffered loss of income as a result of COVID-19 should contact the bank for three months deferral on their home loan mortgage repayments with extension for a further three months available after review.

ANZ

  • ANZ is offering financial support to home loan customers impacted by COVID-19. This can include deferring home loan repayments for six months. Under a home loan repayment deferral, customers do not need to make repayments to their home loan for a period of time. Unpaid interest during this period is capitalised, meaning it is added to the customer’s outstanding loan balance to be paid over the remaining loan term.
  • Decrease variable interest home loan rates in Australia by 0.15% pa across all Variable rate indices, effective from 27 March 2020.
  • Introduction of a two-year fixed rate of 2.19%pa for Owner Occupiers paying Principal & Interest; our lowest fixed-rate home loan on-record.
  • Request a deferral of home loan repayments for up to six-months, with a review at three-months, with interest capitalised.

NAB 

  • Defer home loan repayments for up to six months, including a three-month checkpoint with the bank. For a customer with a typical home loan of $400,000, this will mean access to an additional $11,006 over six months, or $1,834 per month.
  • For larger business customers, NAB is committed to finding appropriate support on a case by case basis.