Borrowers affected by the COVID-19 pandemic should not have to pay a higher rate if they can only afford to make interest-only repayments on their home loan when their six-month deferral ends, according to consumer advocate and comparison site RateCity.com.au.
From September, homeowners on a deferral who cannot resume their repayments can potentially extend the pause by an extra four months, or switch to interest-only repayments.
“Moving to interest-only can be a good halfway measure, as the repayments are significantly lower than normal,” RateCity.com.au said in a statement.
“However, Australia’s three largest banks have confirmed these COVID- affected customers are likely to be charged a premium for moving on to this loan type, although they will review on a case-by-case basis.”
Sally Tindall, research director at RateCity.com.au, said that the banks have been told by Australian Securities and Investments Commission (ASIC) to be “fair and flexible in their negotiations, and to help people stay in their home, if it’s in their best interests.”
“Yet some banks are planning on charging COVID-affected customers a higher rate if they switch to interest-only repayments,” she said. “These customers should be getting a rate cut, not a rate hike. Asking people to pay more interest when they are in financial distress doesn’t seem fair or reasonable.
“Some of these people, through no fault of their own, have had their livelihood striped from them. They don’t know when they’ll be back on their feet again and they are stressed and scared.
Tindall said that these customers need “genuine help from the banks, not a bigger interest bill.”
“When your bank calls, ask them for a rate cut to help relieve the pressure. They’ve said they are here to help – hold them to it,” she said.
