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Payment holidays for borrowers

5/4/2020

 
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Banks rolled out six-month payment holidays for borrowers affected covid-19 this week. Owner-occupiers, investors, and business owners can take a payment holiday on principal and interest payments, but their loans will accrue interest over the period.

The payment deferrals are part of a huge intervention by the Reserve Bank to prevent a financial catastrophe, as covid-19 takes a stranglehold on the New Zealand economy.

However, One concern i have expressed is that taking a payment holidays might work against clients obtaining financing in the future.

Banks have moved to allay those concerns.

Westpac says customers who are not in arrears will be marked with a 'payment not required' flag, which will be reported to credit agencies, but will not impact borrowers' ability to get new credit in the future.

Only borrowers who are in arrears before their payment holiday will be marked with a 'hardship' flag, a Westpac spokesman said.

BNZ also confirmed its payment holidays won't affect credit scores: "Other banks will build their credit models differently so I cant speak on their behalf, but if a customer does take a deferral, it doesn’t impact their internal credit rating for us."

ANZ echoed the same line: "A home loan repayment deferral alone won’t impact a customer’s credit rating. However, if they’ve already missed repayments for any reason, even if we later give them a repayment deferral, this may have impacted their credit rating."

A Kiwibank spokeswoman said payment holidays would not affect credit scores "if they apply due to covid-19".

Even though Mortgage holidays are a lost resort at least we can have some comfort that the banks are working hard to ensure that clients will not be negatively affected in the future.

If you are unsure or want to talk to me, please do get in touch.
​
Ryan
021 242 3136

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