Banks have responded to the Coronavirus pandemic by offering short-term relief packages, such as a home loan repayment holiday, for those who have suffered a loss of income. But will a repayment holiday cause an issue with your credit report?
Posted in: Insights
As a result of the COVID-19 infection and the resultant effects on business, jobs and the economy, the Banks quickly responded with temporary relief packages for those affected by forced business closure, stand downs or loss of employment.
For those with home loans, one of the primary measures is a temporary relief, for up to six months, from monthly mortgage repayments. During this period, no mortgage repayments are required, however interest will still accrue and be capitalised to the loan.
Many borrowers were understandably concerned that the repayment holiday may have a negative impact on their credit rating and therefore affect their ability to apply for and manage their credit facilities into the future.
However, the Australian Banking Association (ABA) has come out and officially stated that borrowers who are granted a six month deferral on loan repayments will not have their credit rating affected as a result of the holiday, provided they were up to date with repayments prior to the economic impact of COVID-19.
The approach for customers who were already behind on their repayments before being granted a COVID-19 deferral has yet to be decided. The Banks will simply not report the repayment history information for the duration of the repayment deferral holiday through leaving that field blank. Once the deferral period has ended the Bank will determine how to report those customer retroactively.
This is a welcome confirmation from the ABA and their member Banks which will take away a potential stress point for those affected.
We strongly recommend anyone contemplating a request for loan repayment relief or looking for a reduction in monthly repayments, speak with one of our Brokers so that all the potential options and ramifications can be discussed before a decision is made.
A Bernie Lewis Home Loans Mortgage Broker is available to speak with you 7 days a week. Call us on 8300 8300.
*The information provided in this article is general in nature and does not take into account your personal circumstances. Since everyone's personal situation is different, this article should not be taken as advice. We recommend you seek individual advice with a mortgage broker.