Banks say they are now ready to offer six-month home loan deferrals announced by the Government earlier this week.

On Tuesday finance minister Grant Robertson said he had reached an in-principle agreement with banks to allow mortgage borrowers to defer payments for up to six months.

But that left the banking sector scrambling to work out the details and to ensure any actions taken would still comply with responsible lending laws.

In the meantime banks have been flooded with calls from the public wanting to know about the six-month loan holidays.

Advertisement

New Zealand Bankers Association chief executive Roger Beaumont said retail banks were now offering to defer repayments for all residential mortgages for up to six months for customers financially affected by Covid-19.

"We know that some customers are already being financially impacted by Covid-19 and have an immediate need. That's why the banking industry as a whole is stepping up with this further package," he said.

Mortgage repayment deferrals mean affected customers who apply to their bank will not make principal and interest payments on their loans for up to six months.

But the interest will be added to their loan amount and could mean they end up taking longer to pay down the mortgage.

Roger Beaumont, chief executive of the New Zealand Bankers Association. Photo / Supplied
Roger Beaumont, chief executive of the New Zealand Bankers Association. Photo / Supplied

"Anyone opting into a mortgage deferral needs to be clear about what this means for them. While there are obvious advantages for people in need, repayment deferrals may extend the time it takes to repay the loan and will add interest cost. So it may not be for everyone.

"It's important to know that interest on these loans will still accrue, and deferred interest will be added to the principal amount of the loan."

Beaumont said banks would assess the suitability for each customer who is asking for a deferral.

"Banks will have different approaches to how they manage the process for customers to opt into a mortgage deferral. Those details, including eligibility criteria, will be available on bank websites."

Advertisement

Beaumont said the package was in addition to what banks were already doing individually to provide assistance to affected customers.

The Government has announced a six-month mortgage holiday for those whose incomes have been affected by Covid-19.

A statement from Westpac New Zealand said it would offer the six month deferral on both home loans and personal loans.

Westpac NZ general manager of consumer banking and wealth, Gina Dellabarca, said repayment deferrals would help provide peace of mind for customers.

"Customers who were in stable jobs a month ago are now finding themselves grappling with reduced incomes and an uncertain future.

"We want people to know we're here for them, and have a range of assistance available, including these repayment deferrals."

Dellabarca said its contact centre staff were able to explain to customers how a repayment deferral works, what it will mean for their loan, and the suite of other assistance options we have available.

Advertisement

"Customers who have made extra payments on their loan previously may now find themselves in a position where they can reduce the amount they are paying instead of taking up the deferral option."

Dellabarca said it was still working on creating an online form but expected it to be available next week.

"Customers shouldn't be concerned about missing out if they need this support. If you don't have a payment coming out in the next few days then we encourage you to hold off and wait for the electronic form which will provide a simple, streamlined way to get this done."

Dellabarca said call volumes remained high.

"I want to assure customers that we will continue to support them and waiting until next week when call volumes are likely to reduce and the ability for customers to submit an electronic application will be helpful."

ASB chief executive Vittoria Shortt said the bank was responding to an enormous number of inquiries and asked for patience from customers.

Advertisement

"Our customers can be assured we will help everyone as soon as we can. Please bear with us if it is taking a while to get through to us on the phone. All the information customers need is kept up-to-date on our website.

"We also have an online support request form available to capture the information we need to help you. We are encouraging customers to complete this so we'll be armed with the right information when we contact you."

BNZ chief customer officer Paul Carter said home loan repayment deferment provided another option for customers to manage their finances during lockdown.

But he said it needed to be considered carefully, as interest would continue to accrue during the time payments were not being made.

"When customers fill out the form, a BNZ banker will call them back as soon as possible to discuss their circumstances and ensure it's right for their needs. Once confirmed the deferment will begin immediately," he said.