The Government has announced a six-month mortgage holiday for those whose incomes have been affected by Covid-19.
The Government is promising those impacted by Covid-19 that they won't lose their homes due to the economic downturn, offering potentially tens of thousands of Kiwis a six-month mortgage holiday.
The scheme, announced yesterday by Finance Minister Grant Robertson who struck a deal with banks, is designed to reassure homeowners as the country prepares to enter alert level four lockdown for at least four weeks.
The move has been welcomed by banks and businesses – one economist said it would help prevent a "fire sale" in the housing market.
As well as moves to reassure homeowners, the Government has announced a $6.25 billion business finance guarantee scheme aimed at stopping thousands of businesses going into default.
"I know this has been an incredibly stressful and uncertain time for New Zealanders," Robertson said of mortgage holders.
"But this will mean people won't lose their homes as a result of the economic disruption caused by this virus."
The Government's move was designed to soften the financial impact of those worse affected by the pandemic – it would be available to people whose incomes have been affected by Covid-19.
Details of the scheme, such as how much it will cost and eligibility requirements, are still unknown and will be made public within the coming days.
But Robertson said he wanted to announce the move sooner rather than later, given the high level of public interest.
He was unable to say how many people were expected to take up the mortgage holiday scheme but estimated that it would be a "very large" number of mortgage holders across the country.
Westpac chief economist Dominick Stephens said this scheme would prevent disruption in a housing market and fire sales, whereby homes would be sold off quickly at a discounted price.
"We view these measures as necessary, appropriate and proportional," he said.
"The Government cannot prevent a massive decline in economic activity, but it can limit the ongoing financial damage by preventing unnecessary insolvencies and debt defaults."
Robertson said the Reserve Bank was stepping up to the plate as well – it will be reducing banks' core funding ratios from 75 per cent to 50 per cent.
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Auckland Action Against Poverty co-ordinator Ricardo Menendez has called on the Government to introduce a rent freeze as well.
The Government has already implemented a rent increase freeze, but Menendez wants Robertson to take that one step further.
Asked about a rent freeze, Robertson didn't rule it out, saying the Government was always looking at ways the income support scheme could be evolved.
Robertson yesterday also announced a $6.25 billion business finance guarantee scheme for small and medium-sized businesses.
It is designed to protect jobs and support the economy through "this unprecedented time".
The scheme leverages the Crown's balance sheet, allowing banks to lend to businesses safe in the knowledge the Government is acting as a guarantor.
There is a $500,000 per loan limit and the scheme is available to businesses with a turnover of between $250,000 and $80 million a year.
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The Government will carry 80 per cent of the credit risk, with the other 20 per cent to be carried by the banks – the banks will provision the loans, not the Government.
National's Finance spokesman Paul Goldsmith said his party supported this scheme, as did BusinessNZ.
Meanwhile, the Ministry of Business, Innovation and Employment was not able to say today whether people would be allowed to move house during the lockdown.
However, the Real Estate Institute has now put out advice suggesting settlement dates be deferred until after the lockdown.
"Travel will be restricted to essential travel only - for instance, pharmacy and supermarket trips - so settlements and moving house should be deferred until after the Alert Level 4 restriction is lifted," REI chief executive Bindi Norwell said.
