Advisers have feared that customers taking payment holidays would face difficulties accessing finance in the future
Banks have slammed speculations that payment holidays would affect customers’ credit scores and their ability to borrow in the future.
Banks in New Zealand have launched six-month payment holidays for borrowers hit by COVID-19 – allowing them to take a payment holiday on principal and interest payments. However, their loans will accumulate interest over time. As a result, advisers have been pointing out that customers taking payment holidays might find it difficult to access financing in the future.
According to Landlords.co.nz, Westpac customers in arrears before the payment holiday would be marked with a “hardship flag.” Meanwhile, those who are not in arrears would only be marked with a “payment no required” flag, which will be reported to credit agencies but will not affect their ability to borrow again in the future.
Read more: Banks launch mortgage holidays, but they “may not be for everyone”
BNZ and ANZ also clarified that their payment holidays would not affect borrowers’ credit scores.
“Other banks will build their credit models differently so I can’t speak on their behalf, but if a customer does take a deferral, it doesn’t impact their internal credit rating for us,” BNZ said, as reported by Landlords.co.nz.
ANZ explained: “A home loan repayment deferral alone won’t impact a customer’s credit rating. However, if they’ve already missed repayments for any reason, even if we later give them a repayment deferral, this may have impacted their credit rating.”
Meanwhile, a spokeswoman for Kiwibank told Landlords.co.nz that payment holidays would not impact borrowers’ credit scores “if they apply due to COVID-19.”
