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These are good customers in a bad situation, says Firstmac

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    Given the slow and steady roadmap out of COVID-19 restrictions outlined by the State Government, Firstmac anticipates more Victorians will seek loan hardship during September, says chief financial officer James Austin. However, this deterioration is only expected to be slight given that numbers have stayed fairly stable over the past month. MPA spoke with Austin about the latest hardship figures in the non-bank’s $12b loan book and how the lender is taking a tailored approach to assisting its customers.

    Victoria bucks national trend following lockdown

    Throughout the past three months, Firstmac’s monthly loan data has shown encouraging signs of recovery in the number of Australians on COVID-19 hardship arrangements. Nationwide, the number of borrowers on fully or partially deferred loans has entered into a continual decline from 5.65% on 31 May down to 4.48% at the end of August.

    During August, Firstmac received $11 million of new COVID-19 hardship assistance requests while $46 million of loans moved out of COVID-19 status.

    In contrast, the number of Victorian homeowners requiring hardship arrangements increased slightly over the month from 5.37% on July 31 to 5.6% on August 31, but has remained below its May peak of 5.82%.

    Austin says he anticipates a further slight deterioration in these numbers for the month of September.

    “Our Victorian COVID-19 assistance numbers have been fairly stable, albeit against a backdrop of other states recovering. The longer a loan deferral, the longer the subsequent recovery period will be.”

    A tailored response

    He says, Firstmac is taking a tailored approach in response to the increase in Victorian borrowers seeking hardship as opposed to the “mass deferrals” approach adopted by many of the large banks.

    “Firstmac is treating these borrowers as ‘good customers in a bad situation’.”

    “We are providing assistance to borrowers based on their case by case situations. Ours is a more tailored response to each borrower and not a one size fits all.”

    APRA guidance a “sensible approach”

    The figures show that self-employed Victorians have been the hardest hit in the state, with 9.33% of such borrowers needing COVID-19 hardship arrangements.

    Austin says lenders can act to assist the increasing number of Victorians seeking hardship by following recent regulatory guidance.

    “APRA has provided advice to regulated lenders that deferrals of the lesser of 10 months or until 31 March next year may be appropriate.”

    “This appears to be a sensible approach.”

    He adds that there are also other options worth considering depending on each customer’s situation.

    “For many borrowers with reduced working hours or income, making a partial payment rather than no payment at all, may be a better solution for them in the long run.”

    “For investors with multiple properties, it may be in their interests to consider selling now while the property markets remain in good shape.”

    He adds that brokers can continue to play a vital role in assisting customers who have been impacted by the pandemic.

    “True to the theme that these are good borrowers in a bad situation, brokers are in a unique position to assist borrowers and make them aware of the different options open to them.”

    “This is a time of extreme stress for many borrowers and brokers can act to ease their worries and help borrowers see a pathway out.”

    Related stories:

    • Firstmac analysis shows the number of borrowers on hardship is falling
    • Connective offers tips on how to educate clients about mortgage deferrals

    Original Article