• Around two-thirds of loan deferrals have been exited or allowed to expire since their peak of 900,000 in April.
• New data from the Australian Banking Association (ABA) shows the number of deferrals left has plunged below 300,000 as initial six-month deferral periods expire.
• “This is an encouraging sign that most Australians are through the worst,” Australian Banking Association (ABA) CEO Anna Bligh said.
• Visit Business Insider Australia’s homepage for more stories.

The Australian banking sector is celebrating a milestone with less than 300,000 Australian customers not currently making their repayments.

It marks the lowest number since the deferrals began skyrocketing in March, peaking at more than 900,000 in April.

“This is an encouraging sign that most Australians are through the worst,” Australian Banking Association (ABA) CEO Anna Bligh said.

“Australian banks have played a major role in carrying the economic burden of the pandemic for their customers. The good news is that the majority are now bouncing back as they restart their loan repayments.”

The ABA’s figures show that the last two months have seen an enormous drop in the number of deferrals, nearly halving since the end of September when there were almost 560,000 outstanding. In terms of value, they have fallen from more than $180 billion to less than $90 billion.

Much of that reduction is simply a matter of mechanics, with the hardship measure automatically extended to borrowers who wanted it for a period of six-months. Many of those either have or are expiring, with Australians evidently less than eager to extend them until January next year.

“It’s great to see a lower than expected number of people needing to extend their deferral period,” Bligh said, noting the ABA expected to see a further reduction in “the coming weeks”.

Mortgage and business loan deferrals account respectively for roughly 50% each off those outstanding.

But while it’s an encouraging sign of the progress that has been made, the reality remains that on average around one third of customers are electing to extend their deferrals. It amounts to 150,000 mortgagees and 150,000 small businesses are struggling or unable to pay back their debts.

Even with another anticipated drop, and a bounce in the economy, there may well be more than 200,000 borrowers out there who are not in a position to service their loans.

Each will be able to extend for another four months into the new year to give them time to find their feet. After that however, there has been no indication any further deferrals will be provided, with borrowers then likely to have to enter normal hardship arrangements, at the cost of their credit rating.

For those people, the ABA says it’s prudent they’re transparent with their lender.

“Don’t wait till you are in over your head, talk to your bank, they’ll help you find a way through this. Don’t tough it out on your own,” Bligh said.

However, while the banking sector is saying all the right things, only the Commonwealth Bank has promised not to turf out those in hardship from their home, at least until September.

It’s clear there’s more than a few Australians however still wondering how they might cope come the new year.

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