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Borrowers use lockdown period to sink more money into mortgages

15 October 2020

The COVID-19 pandemic and associated lockdowns have seen home owners sink more payments into their loans.

Data from non-bank lender Firstmac reveals voluntary payments into mortgages doubled at least in July, August and September from the previous 12 months.

Firstmac’s chief financial officer James Austin spoke to the Australian Financial Review.

“There’s obviously a lot of money flowing through the economy and people are choosing to save that money,” he said.

“Paying down the mortgage is another form of saving.”

“It would have to suggest borrowers were feeling uncertainty about what’s coming, so they’re paying down mortgages.”

The figures throw doubt around whether people will go out and spend any extra money they receive from federal tax cuts announced last week.

AMP Capital chief economist Shane Oliver told AFR that delayed spending caused by lockdowns was still likely to happen.

“A lot of spending delayed was mainly on services,” he said.

“There will come some point in the next six to 12 months when people will say, ‘It looks like I’m going to keep my job after all. We’re starting to get coronavirus under control. I’ve got my mortgage to a lower level, so I might as well go out and buy a car or go on holiday’.”

One sign of improving confidence in the Firstmac figures was the decline in the number of borrowers with fully or partially suspended repayments.

The national percentage at Firstmac of accounts in hardship arrangements fell to 3.78 per cent at the end of September, down from 4.8 per cent the previous month.

Economist Saul Eslake said the end of JobKeeper subsidies and the end of mortgage repayment holidays were factors driving the increase in mortgage repayments.

“People who have deferred repayments know when deferrals end they will have to pay higher payments, or pay for longer,” he told AFR.

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