In this incredibly daunting time, there’s plenty of confusion out there as to what help is available for businesses; we’re fielding so many calls & emails that we thought it best to lay it out (although please note that it may be a challenge to keep this up to date, given how fast this is moving).
We’re unfortunately only at the very beginning of what is already proving to be an incredibly challenging time for the entire nation, as well as the world. Many businesses are going to struggle to stay afloat, many will fail, whilst a very small proportion will do incredibly well, such as grocery stores, road freight transport (oh and toilet paper manufacturers).
For individuals and families, Westpac have forecast an unemployment rate of 11%, matching the peak in 1992; there’s talk by others that it could get to 15%. Scary stuff.
What Banks are doing for Personal Borrowers (Home Loans etc.)
For personal borrowers, the good news is that the “NCCP” has been in for a long time now – in essence, this is the “responsible lending” legislation that is VERY heavily weighted in favour of the consumer borrower, such that the Banks have to go through an incredible process even to foreclose on a borrower that is just choosing to not repay a loan (even if they can afford to). As such, consumers should not feel as though they are at high risk of losing their family home in the short term, in an unprecedented nationwide crisis like this.
What the Banks have agreed to, at a high level (more on that in a second) is:
- Pausing repayments for 3 or 6 months (some are going for 3 with a review at that point, others just doing 6 straight up) (note that this will mean your interest is capitalised, so your loan balance will increase)
- New low fixed rates as low as 2.19% ranging to high 2’s (mostly starting this Friday or next Monday)
It does appear that some banks are telling borrowers that they first must use their entire redraw capacity and own cash, before they will make changes to loan facilities – so be aware of that and plan accordingly.
STEP 1: ABA & Government websites
The ABA’s Financial Hardship website has some very valuable information on it for personal borrowers – including links to many of the banks’ COVID19 support web pages, as well as hints & tips for individuals – so check that out first.
If you’re facing challenges in meeting your repayments (reduced income because you’ve lost your job, or can’t take drawings from your business), then seeking relaxed terms with your existing bank is most likely the best solution.
Then the Federal Government Treasury support website for information as to their options.
If you’re not facing imminent financial distress, this may actually be the perfect time to consider refinancing. Why?
- Fixed rates in the low 2’s
- Get a valuation before your property reduces in value (sorry but there’s a fair chance that’s coming)
- Potentially get access to additional funding
Feel free to get in touch if you want to discuss your situation.