• Loan deferrals continued to fall in February, the Australian Prudential Regulation Authority said, with just 0.5% of lending subject to deferred payments.
• Some $14 billion of mortgages and small business loans were under repayment deferrals through February, down from a peak of $274 billion in June 2020.
• But with those agreements coming to an end on March 31, some at-risk borrowers will soon be facing their first mandatory repayments in a year.
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Fears of a mortgage deferral ‘cliff’ have been allayed by the latest lending data, which shows deferred loans comprised just 0.5% of Australia’s balance sheet in February.

But homeowners were still saddled with $11.7 billion in deferred loans, just weeks before repayment pauses and other COVID-19 grace periods expired on March 31.

Figures from the Australian Prudential Regulation Authority (APRA), released Wednesday, suggest the loan deferral scheme — introduced in March 2020 to provide vulnerable borrowers with breathing room — continued to taper off in February.

Some $14 billion worth of mortgages and small business loans were under deferral agreements in February 2021, down from the $274 billion in deferred loans APRA reported in June 2020.

“As expected, exits from deferral continue to significantly outweigh entries into deferral,” APRA said, “with $22 billion in loans expiring or exiting deferral and less than $500 million entering or being extended.”

The figures will be welcomed by Australian lenders, who say 97% of borrowers who accessed loan deferrals have now resumed repayments.

But not everyone has been so fortunate.

Victoria, which weathered the longest COVID-19 lockdowns of any state, continues to bear the highest proportion of deferred loans, with 0.7% of its borrowing under deferral arrangements through February, followed by New South Wales and Western Australia.

Discussing the possibility of vulnerable homeowners defaulting on their mortgages in February, Australian Banking Association CEO Anna Bligh said, “There will be some people who will have to face the very hard and painful decision of doing the right thing by selling when they still have equity and money that they can take out and keep their head above water.”

The cessation of JobKeeper, the ramping-down of JobSeeker, and the demise of other pandemic-era protections like tweaked insolvent trading laws may further impact borrowers.

With the latest figures, the situation has become somewhat clearer: An industry-wide repayment apocalypse has not come to pass, but that will be small comfort for the at-risk borrowers now facing mortgage repayments for the first time in months.

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