High LVR borrowers expect an increase in their mortgage balance
With the COVID-19 pandemic and the country’s alert level 4 lockdown impacting several businesses and workers across the country, many borrowers fear that they would face low equity problems. However, ANZ believes otherwise.
According to Good Returns, more than 800,000 homeowners have already asked for mortgage assistance during the pandemic, with some asking for deferred payments. As a result, high loan-to-value (LVR) borrowers expect an increase in their mortgage balance.
However, ANZ insisted that the current LVR restrictions could help them deal with pandemic concerns.
“As ANZ and other banks have been operating under the RBNZ’s LVR restrictions for some time, the number of customers with current LVRs greater than 90%, for example, is relatively small. Often, these customers will be in a stronger financial position,” a spokesman for ANZ told Good Returns.
“We believe the likelihood of customers going above 95% or even into negative equity is extremely unlikely. The increase to the outstanding balance on an average loan is unlikely to make a material difference to their LVR position.”
Read more: Coronavirus: Consulting company issues advice to banks
Meanwhile, consulting company Bain & Company said banks could thrive in the pandemic by temporarily suspending loan payments and fees on transaction services, scaling up call centres to manage the influx of calls, and providing support to customers with investments impacted by the pandemic.
“Addressing customers’ urgent needs now and meeting the longer-term issues head-on will allow banks to thrive in the months and years to come. During the last financial crisis, banks that took the right steps increased their resilience and improved their competitive position. The same thing will happen this time,” Bain & Company explained.
