What lies beyond the September cliff?

  • By Christine St Anne

As government and bank support measures are set to ease, industry data to date suggests that significant challenges remain.

In a recent assessment of how COVID-19 will affect mortgage holders over the next 12 months, RFi Group forecasts that another 290,000 mortgage holders will potentially request a repayment deferral.

This means that heightened levels of severe stress are likely to persist until at least 2021. In March, the data revealed that 24 per cent of borrowers will struggle to meet their mortgage repayments, almost double the long-term trend of 12 to 13 per cent. 

“All of a sudden we had one-in-four people with a mortgage who said, I'm going to struggle to meet my mortgage repayments at some point next month, “RFi Group chief product officer Alan Shields said. 

This trend also needs to be seen within the context of borrowers that are ahead in their mortgage repayments. 

And again the outlook is a little grim. The data to date suggests a drop off in the proportion of borrowers who said they were going to actively put extra into their mortgage repayments. 

“As a nation, Australians tend to overpay on their mortgage. 

“And while the obvious trend is that people will struggle to repay their mortgage, our research shows that those ahead in their mortgage repayments will also hit the pause button,” Shields said. 

The data also revealed some emerging groups who may be vulnerable post the September cliff with the demand for mortgage deferrals driven by those under the age of 35. 

The key here will be around customer advocacy. “The actions banks take now will resonate in the future

“Those who will want to defer their mortgage further are significantly skewed towards the younger demographic. 

“In fact, our data shows that those people under the age of 40 are twice as likely to want to defer their mortgage over the next 12 months.” 

Young families also come under this emerging vulnerable group particularly as “they tend to have a much bigger mortgage compared with other age groups”. 

The RFi Group report also highlighted a number of banks leading in terms of customer satisfaction during COVID-19. 

And this goes beyond just banks helping their customers with the mortgage pause.

The data revealed that reduced banking fees and reassurance of banking stability is most likely to help consumers cope with the pandemic

The key here will be around customer advocacy. “The actions banks take now will resonate in the future.” 

The data to-date suggests disappointing customers now will make banks more susceptible to retention risk in the future.

Furthermore, the data revealed that those who are satisfied with their banks’ response are significantly more likely than average to gravitate to those brands for their future banking needs.

The full report will be featured in the July edition of AB+F.

RFi Group’s report ‘Australia’s Mortgage Deferral Hangover’ provides a detailed assessment of which customer segments are most vulnerable to borrower stress and how banks’ responses are leading to increased consumer advocacy and satisfaction.