Commonwealth Bank will allow borrowers who temporarily deferred repayments during the Covid-19 lockdown to switch to interest-only loans in the short term without the usual credit checks. Some people who deferred repayments are now in a better position than they expected they would during the pandemic, with Westpac and ANZ Bank saying thousands had decided to voluntarily resume making repayments.
Banks will soon start contacting the 450,000 mortgage customers who paused repayments on their mortgages for up to six months. With the banks facing a rise in bad debts when the repayment holiday ends, the simplified process of allowing customers to pay interest-only for a year would circumvent the need to classify the loans as troubled, which would attract higher interest rates. CBA’s group executive for retail banking Angus Sullivan says: “We recognise that as the coronavirus situation evolves and customers start returning to work, they may require alternative temporary assistance measures to help them get back on their feet sooner.