CEO of the Australian Banking Association Anna Bligh revealed alarming figures today, showing that around 75 per cent of Australians are still struggling to pay back their loans.
In an interview with Fran Kelly on the ABC, Ms Bligh said that only 9 per cent of customers are exiting the deferral scheme completely, and another 15 per cent are returning to partial or full payments.
But the grim reality of the COVID-19 crisis is that the majority of Australians are struggling to pay back their loans and are in major financial distress.
At the beginning of July, Ms Bligh announced the banks would be extending, to those who are struggling to make any payments, an additional four months of deferrals.
She also said that banks in the coming months would be contacting their customers, to tailor payment options. “There is going to be thousands of solutions, every circumstance is going to be different”.
“There is a lot of distress for hundreds of thousands of households and hundreds of thousands of small businesses.”
Prior to Melbourne’s second lockdown, over 900,000 Australians had been granted loan deferrals amounting to $250 billion.
In regards to customers who are able to make partial payments, Ms Bligh said, “banks will work with them individually to restructure their loans where they can, do things like lengthening the term of the loan, dropping the interest rate, move to interest-only for a period of time or a combination thereof”.
Customers who are able to make payments will be expected to do so.
Ms Bligh said, “it is in their best interest to do that, it is not in their interest to continue to accrue debt and have their loan lengthened”.
After announcing loans would be extended for another 4 months on a case by case basis from September, Ms Bligh recognised the worsening economic situation and said, “banks will be looking to do everything in their power to get customers back into a position where their loans are performing and their financial well-being is as safe and secure as possible”.
Other customers may need to make more serious decisions to avoid foreclosure of their home or business. However, Bligh has said that banks will be working hard to “minimise that prospect and give every customer the best chance of getting back on their feet”.