Heritage Bank customers avoid further COVID loan deferrals

19 November 2020

Heritage Bank customers have overwhelmingly avoided the need to maintain COVID-related hardship measures, with just 5% of loan deferrals continuing past the initial assistance period, CEO Peter Lock said today.

That rate is significantly lower than at the nation’s seven largest banks, with the Australian Banking Association this week reporting that loan deferrals had dropped from 803,000 at the peak of the COVID pandemic to now sit at 280,000. 

That means 35% of loan deferrals at the largest banks remain ongoing. 

Mr Lock said the extremely low rate of ongoing deferrals at Heritage was somewhat surprising, with a number of factors at play. 

“We’re committed to helping those customers who need ongoing hardship assistance,” he said. 

“We had a total of only 2,150 loans on COVID-related hardship provisions, which in itself is a very small percentage of our book.

“To now have just 5% of those loans still on hardship assistance is a little unexpected but very welcome. 

“It does speak volumes about the quality of our loan book. We take our responsible lending obligations very seriously and our arrears rates traditionally sit at around one third of the industry average, so we know the credit quality of our customer base is very strong.”

In fact, Mr Lock said many customers who initially sought help when the pandemic hit found they were actually in a much better position than they realised.

“While interest rates dropped markedly in the last 12 months, many of our home loan customers did not reduce their repayments, so they actually got ahead of what was required.

“In fact, more than 70% of our home loan customers were at least one monthly repayment ahead, with many ahead by much more. That provided some breathing space to absorb the COVID impacts.

“We also believe that many customers sought loan deferrals in anticipation that they would face COVID-related financial impacts, but they have actually been able to meet their commitments.

“They’ve been prudent in seeking help, but have now found they can manage. That’s a great result for everyone.”

Mr Lock said while the outcome was welcomed, it did not mean an end to the watching brief on COVID.

“We’re well aware that the government assistance packages have cushioned many people from the full impacts of the COVID downturn,” he said.

“When that assistance is removed, we will need to closely monitor the repercussions. 

“Having said that, news of COVID vaccines being available sooner than expected is very positive and may help the economy as a whole to bounce back just when the assistance programs are tapering off.”