Customers may be eligible for a new loan deferral for up to six months or an extension to their current loan deferral, said Bankers’ Association chief executive Roger Beaumont. But, he said: “Any new or extended loan deferrals will not be automatic.
“Customers who can resume loan repayments should do so. Many customers have already restarted payments on deferred loans. That shows they understand the benefits of getting back on track if they can.”
Banks are offering options to customers financially affected by Covid-19. Customers may be eligible for a new loan deferral for up to six months or an extension to their current loan deferral.
There are several options available to customers, depending on their circumstances. Options may include customers restarting their loan repayments, moving to interest-only repayments, or extending the term of the loan. Further options include applying for a loan repayment deferral or seeking an extension to an existing loan deferral. New and extended loan deferrals will expire on 31 March 2021.
“Banks are already having conversations with customers who have deferred their loans to discuss what’s best for them as the six-month deferral period ends,” says New Zealand Bankers’ Association chief executive Roger Beaumont.
“Customers who can resume loan repayments should do so. Many customers have already restarted payments on deferred loans. That shows they understand the benefits of getting back on track if they can.
“Any new or extended loan deferrals will not be automatic. They will be available to customers in genuine need for a period up to 31 March. Affected customers may need less time than that to get back to normal repayments.”
Since 26 March, when New Zealand first went into lockdown, banks have deferred all repayments on consumer loans totalling around $21 billion for over 61,000 customers. That represents 7% of total consumer lending. Nearly a quarter of those customers have restarted their loan repayments. Banks have also deferred business loans totalling over $1.2 billion for over 3000 customers. That represents 0.6% of total business lending. Over half of those customers have resumed normal loan repayments.
The ability to apply for or extend loan deferrals in some cases has been negotiated with the support of the government, the Reserve Bank, and credit reporting agencies.
“We are grateful for government and Reserve Bank assistance to help banks to continue to support customers in need. It’s a stressful time for some customers who have been financially affected by the pandemic.
“This arrangement usefully provides a phased approach to customers entering and coming off loan deferrals, and helps to meet customer needs on a case by case basis.”
In line with the previous arrangement with credit reporting agencies, anyone who enters or extends a loan deferral will not have their credit rating affected because of the deferral. This only applies to customers who were up to date with their repayments before requesting a deferral.
Other ways banks can help include:
- Reducing or suspending principal payments on loans and temporarily moving to interest-only repayments
- Helping with restructuring loans, for example extending the term of the loan
- Consolidating loans to help make repayments more manageable
- Providing access to short-term funding
- Referring individual customers to budgeting services.
Due to the high number of calls to contact centres at this time, customers are encouraged check their bank’s website for information on how to access assistance in the first instance. Please be patient if calling your bank.
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“But my sense would be that banks are being really pragmatic about this, that the advice is for health reasons so banks will be comfortable with people coming into a branch wearing a face mask.”
Nearly 60,000 borrowers (59,885) had agreed to a deferral of payments on $20.2 billion of home loans, personal lending, credit card or overdraft debt as of June 30, figures from the New Zealand Bankers Association show.
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“As one of the largest industries in the country, we are showing leadership by committing to paying the living wage,” says New Zealand Bankers’ Association chief executive Roger Beaumont.
According to the New Zealand Bankers’ Association (NZBA), the move will lead to nearly 1800 employees and contractors moving onto the living wage and gaining greater economic independence for them and their families.
“Before making any decisions to extend mortgage deferrals banks will need to assess the customer need. It would also involve discussions with regulators and credit reporting agencies on any impact to responsible lending obligations and how the deferred loans are treated.”
Banking has become New Zealand’s first fully living wage accredited industry, leading to nearly 1800 employees and contractors moving onto the living wage and gaining greater economic independence for them and their families.
As of today, all 17 members of the New Zealand Bankers’ Association, and the association itself, have been fully accredited.
“As one of the largest industries in the country, we are showing leadership by committing to paying the living wage,” says New Zealand Bankers’ Association chief executive Roger Beaumont. “I encourage all industries to, where possible, pay the living wage to their employees and contractors.”
NZBA research shows that almost 80% of New Zealanders think the banking industry paying the living wage is a good idea and that it is important.
“New Zealanders clearly want their businesses to step up and pay a fair and decent wage. It’s the right thing to do,” says Beaumont.
“This is the first time we have had a whole sector showing leadership around a Living Wage and that is really something to celebrate,” says Annie Newman, Living Wage National Convenor.
“Banks are leading the way for many other sectors that could afford to follow suit and that’s important at a time when across the country so many workers are struggling during this COVID crisis. The message is, if you work in a bank you will be paid a decent wage whether you are a bank employee, a security guard or a cleaner. That’s fantastic.”
The 17 banks represented by NZBA range significantly in their size and scale, from employers of over 4000 people to small branches of global bank brands.
“There was no simple solution to accrediting every bank,” says Beaumont. “Large banks had huge numbers of contractors to work with while others had to get approval from international head offices. Navigating and, in some cases, seriously challenging those policies showed the effort everyone in the industry was willing to go through.”
Banks employ more than 25,000 people in New Zealand. Last year banks spent $5.73 billion running their businesses here, which includes purchasing local goods and services. The five major banks paid $2.7 billion to employees nationwide.
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