The Australian Banking Association (ABA) has announced that bank customers applying to hold their mortgage repayments as a result of the Covid-19 pandemic will not receive a negative credit rating. This approach also applies to personal loans and credit cards.
Pauses on mortgage repayments
Following the Reserve Bank of Australia’s last interest rate cuts, many Australian banks are giving customers the option to defer or pause their mortgage repayments if they are experiencing financial hardship as a result of the Covid-19 pandemic. Customers are able to pause their mortgages for up to six-months, depending on the bank they’re with.
No credit rating impact
The Australian Banking Association has been working with its member banks to ensure that where mortgage repayment deferrals are granted, credit reporting is conducted in a fair and consistent manner. This means that banks will not notify credit reporting bureaus of a missed repayment during the Covid-19 deferral period to help make the situation less stressful and to avoid a negative credit rating.
Australian Banking Association CEO, Anna Bligh, said Australia’s banks are doing their part to help, “Australia’s banks are here to support customers who have lost their jobs or significantly lost income because of COVID-19, through initiatives such as offering a six-month deferral on mortgage repayments. Customers in these circumstances should not have to worry about their credit rating as well.”
If you’re already behind on your repayments at the time you are granted a deferral due to COVID-19, banks will not report the repayment history information. Instead, they will leave the field blank for the duration of the deferral period. When the COVID-19 repayment deferral period has ended, the bank will determine how to report the repayment history information.
Financial rights groups welcome the decision
Financial Rights Centre CEO, Karen Cox said “People calling our advice services have so much to contend with right now: the stress of not being able to pay their bills, fears for their own health, and fears for loved ones. They should not have to worry about their ability to access credit when this is all over.
“We warmly welcome the ABA’s announcement that their customer’s credit reports will be quarantined from the impact of this crisis and we call on the rest of the finance industry to follow suit.”
Speak to your bank to discuss mortgage repayment solutions for your loan.