Six-month mortgage holiday for borrowers

Tuesday 24 March 2020

Borrowers affected by the coronavirus crisis will be offered a six-month mortgage holiday under new proposals drawn up by the Government.

The Government, retail banks and Reserve Bank announced a finance package for borrowers affected by the fallout from the Covid-19 lockdown. 

The package includes a six month principal and interest mortgage holiday for mortgage holders and SME customers whose incomes have been affected by the “economic disruption”. 

It is unclear whether borrowers have to fit certain criteria to qualify for a mortgage holiday, or whether circumstances will be reviewed on a case-by-case basis.

The government declined to comment on whether only owner-occupiers are eligible for the scheme. More details will emerge during the week, a spokesman said.

“We are acting quickly to get these schemes in place to cushion the impact on New Zealanders and businesses from this global pandemic,” finance minister Grant Robertson said.

“A six-month mortgage holiday for people whose incomes have been affected by Covid-19 will mean people won’t lose their homes as a result of the economic disruption caused by this virus,” Robertson added.

The Government said details of the mortgage holiday plans “are being finalised”. Banks will make them public in the coming days. 

Westpac confirmed both existing investors and owner-occupiers are eligible for mortgage holidays. 

"We have a range of support options for customers, which can include a full payment holiday, for both owner-occupiers and investors," a spokesman said.

To help banks absorb the cost of mortgage holidays, the Reserve Bank will allow banks to reduce their core funding ratios from 75% to 50%.

Advisers expect borrowers to take up mortgage holidays amid the mounting financial crisis.

NZFSG's Bruce Patten said several clients have lost their jobs over the past week. He encourages clients in work to avoid claiming if they are still in work, “as it may be needed further down the track”.

Patten added mortgage holidays would be attractive to workers directly impacted by this week's lockdown.

“We haven't seen the criteria, but I think it's pretty simple if you are out of work, which plenty are. I had two clients where the husband and wife both lost their jobs,” he added.

Alongside the mortgage holiday package, the Government and the banks also launched a $6.25 billion business finance guarantee scheme for small and medium-sized businesses.

The scheme will offer short-term credit for small and medium-sized firms. It has a limit of $500,000 per loan, and applies to firms with a turnover of between $250,000 and $80 million per year. 

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