Reserve Bank extends mortgage deferral scheme

by Roxanne Libatique18 Dec 2020

The Reserve Bank of New Zealand (RBNZ) has announced that it will extend regulatory guidance for the mortgage deferral programme to help customers impacted by the COVID-19 pandemic.

The guidance, which was issued in March, helps customers impacted financially by the pandemic by allowing banks to continue offering temporary mortgage deferrals to their customers, without those loans being viewed as being in default.

The original guidance expired on September 27, but the RBNZ extended it until March 31, 2021 – at which point the usual treatment will resume. Banks will still be able to offer deferrals to borrowers after this date, but they will not have the same concessionary regulatory treatment.

“The Reserve Bank expects that lenders will consider borrowers’ best interests when assessing whether to offer a new deferral or to extend an existing one,” said RBNZ deputy governor Geoff Bascand.

“For many borrowers, resuming or continuing payments in some form will be the most suitable approach rather than taking up a deferral of their loan payments. A deferral should not be the default setting, and it will be up to individual lenders to decide whether to offer one to their customers.”

The guidance applies to borrowers seeking an extension to an existing loan deferral and new applicants for deferrals.

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The New Zealand Bankers’ Association (NZBA) clarified that anyone who has deferred their mortgage repayments up to six months due to the financial impact of COVID-19 will not have their credit rating affected as a result of the deferral – provided they were not in arrears before the pandemic.

“Banks have stepped up at this time to offer mortgage deferrals for eligible customers. This agreement means those customers won’t have their credit ratings negatively impacted for the period they’re not making repayments,” said NZBA chief executive Roger Beaumont.

“There may be other factors that can affect a customer’s credit rating, including if the customer was already in arrears before applying for a mortgage deferral, so we encourage customers to talk to their bank early if they’re finding it hard to keep on top of things.”

“We acknowledge the support of the Reserve Bank in facilitating this initiative. They have helpfully agreed that banks can treat deferred loans as performing,” Beaumont concluded.

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