The Reserve Bank will extend the mortgage deferral scheme but is still working through the details with the banking sector.
Finance Minister Grant Robertson announced the scheme on March 24 after an agreement was reached between banks and the banking regulator.
The Government-approved scheme enables banks to allow customers to reduce or suspend mortgage repayments for up to six months, without the Reserve Bank considering those loans to be non-performing when assessing bank solvency.
The interest on the loans continues to accrue.
Banks have always had loan deferral and interest-only options but applicants typically needed to go through a rigorous hardship application process.
The scheme arrangement essentially made it so anyone affected by Covid-19 could apply and be accepted, allowing the banks to handle high volumes of applications.
Nearly 60,000 borrowers (59,885) had agreed to a deferral of payments on $20.2 billion of home loans, personal lending, credit card or overdraft debt as of June 30, figures from the New Zealand Bankers Association show.
A further 79,166 customers had agreed to reduce loan payments to either interest-only or a reduction in principal and/or interest repayments on $24b of debt that was either home loans, personal lending, credit card or overdraft debt.
Weekly application numbers peaked at 28,455 in the week ending April 10 but have fallen to less than 500 a week or less since mid-June.
But there are concerns application numbers could rise again as the extended wage subsidy comes to an end and more people lose their jobs.
An RBNZ spokesman said it had made an in-principle decision to extend the mortgage deferral scheme and was consulting with industry and other government agencies on the details of the regulatory treatment.
"We will issue new guidance in due course. For now – and until the end of September - the scheme is open and existing rules apply."
The spokesman said borrowers do not need to do anything and were asked not to ring their banks about their deferrals at the moment while the details of the scheme were being finalised.
RBNZ governor Adrian Orr yesterday said it hoped to have the details finalised next week.
But he said the extension won't be permanent.
"The banks and their customers will have more time to work through what needs to be done."
Australia's Reserve Bank has extended its mortgage deferral scheme for another four months but mortgage brokers in New Zealand have suggested another six months may be best to get through the Christmas holiday period.