COVID-affected customers should receive rate cuts not rate hikes: RateCity

Consumer advocate, RateCity.com.au, believes COVID-affected customers should not have to pay a higher rate if they can only afford to make interest-only repayments on their home loan when their six-month deferral ends.

From September, homeowners on a deferral who can’t resume their repayments can potentially extend the pause by an extra four months or switch to interest-only repayments.

Moving to interest-only can be a good halfway measure, as the repayments are significantly lower than normal. However, Australia’s three largest banks have confirmed these COVID- affected customers are likely to be charged a premium for moving on to this loan type, although they will review on a case-by-case basis.

Sally Tindall, research director at RateCity.com.au said, “The banks have been told by ASIC to be fair and flexible in their negotiations, and to help people stay in their home, if it’s in their best interests.”

“Yet some banks are planning on charging COVID-affected customers a higher rate if they switch to interest-only repayments,” she said.

“These customers should be getting a rate cut, not a rate hike. Asking people to pay more interest when they are in financial distress doesn’t seem fair or reasonable."

“Some of these people, through no fault of their own, have had their livelihood striped from them. They don’t know when they’ll be back on their feet again and they are stressed and scared."

“They need genuine help from the banks, not a bigger interest bill," she concluded.

Potential options if you can’t pay your mortgage: 

• Use money in your offset or redraw, if available.
• Switch to interest-only repayments. While this could increase your rate and the overall interest bill, paying something is better than nothing.
• Ask your bank for a loan deferral, or if you are already on one, an extension.
• Sell or rent the property.