Australia’s biggest banks are letting its home loan borrowers and small business customers defer their payments for up to six months as the country struggles with the coronavirus crisis.
Commonwealth Bank, Westpac, ANZ and NAB all said on Friday they would extend a program by the Australian Banking Association to defer loans to small businesses to include their home loan customers.
“These are unprecedented times, and we will continue to take decisive actions to support households and the small business community,” CBA chief executive Matt Comyn said.
The move will provide up to $10 billion in support for the economy, Mr Comyn said.
A digital registration process would be available from Saturday for home loan customers wishing to defer their payments, Mr Comyn said.
ANZ chief executive Shayne Elliott said the move was the “right thing to do for our existing customers,” given the impact of the crisis.
Westpac and NAB said the payment deferral would be for an initial three months, with an extension for a further three months available after review.
“This is a once in a lifetime event and a united response by government, regulators and corporate Australia is exactly what we need,” Westpac acting chief executive Peter King said.
Interest on the mortgages would continue to accumulate during the deferment period.
But for a customer with a typical home loan of $400,000, the deferment would mean access to an additional $11,006 over six months, or $1,834 per month.
Earlier on Friday, the banking association had announced small businesses impacted by the coronavirus crisis would be able to defer their loan repayments for six months under a plan put forward by the banking industry and approved by regulators.
ABA chief executive Anna Bligh said it was “a multi-billion-dollar lifeline for small businesses when they need it most, to help keep the doors open and keep people in jobs.”
The announcements follow the Reserve Bank cutting the interest rate to a record-low of 0.25 per cent in an historic suite of measures to offset a likely loss of jobs and income during the COVID-19 pandemic.
Australia’s small businesses collectively have $100 billion in loans and this bailout could put up to $8 billion back in their pockets, Ms Bligh said.
There’s no set definition in the relief package over which businesses are eligible, Ms Bligh said.
“We won’t be looking to draw arbitrary lines in the sand,” she said. “Banks know who their small businesses are.”
The bailout package was designed in consultation with the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission.
Ms Bligh said for the past decade Australia’s banking system had worked to increase capital buffers in the event of a rainy day.
Regulators were telling them it was appropriate to draw those buffers down now that that rainy day has arrived, she said.