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NAB Customers Can Freeze Home Loan Payments for up to Six Months

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NAB customers can freeze homeloan payments for up to six months

NAB has introduced new support measures for customers. Eligible NAB home loan customers can pause repayments for up to six months. Business customers experiencing financial difficulty can defer for up to six months on a range of floating and variable rate business loans.

NAB has also announced reductions of up to 60bps to fixed rate home loans and a new term deposit rate of 1.75% p.a. We will reduce variable rates on small business loans by 100bps, effective March 30. There are no changes to home loan variable rates.

Home loan rates update

Fixed home loan rates
2.39% p.a. for 1-year
2.29% p.a. for 2- and 3-year
2.79% p.a. for 5-year
Valid for (owner-occupier P&I), effective March 25.

First home buyers will have access to a rate of 2.19% p.a., fixed for two years.

Summary of home loan fixed rate changes here

There are no changes to home loan variable rates

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National Australia Bank Group (NAB)

closed Comments

  • +1 vote

    Businesses or people with mortgages?

    •  
      • Pause home loan repayments for up to six months, including a three-month checkpoint. For a customer with a typical home loan of $400,000, this will mean access to an additional $11,006 over six months, or $1,834 per month.

      • Reduce repayments on variable rate loans. Over the past 12 months, reductions of 84bps to our owner-occupier variable rates have provide a potential benefit of $3,360 per year to customers with a $400,000 loan. Most customers have not yet taken the option to reduce their payments.

    • +1 vote

      All banks are allowing business to defer.

      It makes sense, as interest costs to the banks are so low, and the problem is temporary, though 6 months may be optimistic.
      Commercial rents need to be suspended too, as well as repayments and rates/taxes for landlords on affected premises.

  • +2 votes

    I hate how variable loans are unaffected. Probably jest the banks being greedy.

    • +1 vote

      ANZ passed on 0.15% cut and also deferring payments up to 6 months: https://www.ozbargain.com.au/node/525547

    •  

      Banks are probably fearful that reducing interest paid to customers (as a result of reducing rates on variable loans) might lead to people moving their money out. But yeah, it does suck.

    • +4 votes

      I doubt the amount of interest is a big deal. Small changes in rate don't affect payments much for most. The real problem here is whether you've got an income or not. Which they seem to be addressing, it could be better (eg: interest free in case of job loss) but it is useful.

      On a different note, commercial rents need to drop drastically for certain business types to keep people employed and prevent the economy tanking. Rents have businesses up against the wall when times are good, businesses have no chance of surviving now

      •  

        If banks passed on this 0.25% rate cut, assuming a loan of 1 million, you would save around $200 a month. A real bargain.

        •  

          TLDR: $500k is closer to a median loan size which equates to $1200/yr, sure that's nice, but the game changer remains whether you are employed or not.

          If you have a loan of a million you're either a fool or earning so much that $200/mo is nothing. I would need to make a spreadsheet to test income -> repayability over the usual 30 year term, but extrapolating from my own income/loan spreadsheet I suspect a loan that size requires an income around $180k-200k/yr. That is not a median income therefore a million dollars can't be a median loan. And don't forget the last few years loans are means tested at 7% (IIRC) rather than at the current interest rate.

          EDIT: I suppose I need to keep in mind that you may be from the East Coast, where property does cost alot more than on the West Coast. Maybe $1m is normal for you.

  •  

    Can you lock interest rate with 1 bank then if variable rates go down for say anz you can refinance with anz with variable rate loan?

    • +1 vote

      You could, pending huge fees.

      • -4 votes

        What fees?

        • +2 votes

          Suggest reading up on loan break costs which applies in case of fixed rate loans..
          example - https://www.boq.com.au/content/dam/boq/files/terms-and-condi...

          • +5 votes

            @maverick1: Outside of fixed rate loans having significant (1000s to 10s of thousands) in break fees. The other thing that prevents many people refinancing is LMI - Lenders Mortgage Insurance.

            If you owe more than 80% of the loan then you have to purchase LMI a second time, and the cost for that is typically 1-4% depending on your loan amount and what percentage you owe. If you owe 90-95% (i.e. most people in the first few years of ownership) then even on a $500,000 loan you could easily be up for $15,000. You can sometimes get a refund on the LMI cost in the first 1-2 years but after 2 years you pretty much get nothing. And most people would have only paid off maybe 10% in 5 years except in the last 5 years most peoples houses went down at least that much. So many such home buyers are stuck anywhere from 95-110% of their loan values - in which case they may not be able to refinance at all.

          •  

            @maverick1: Break costs in the US are as rare as hen's teeth. Makes me wonder how banks over there stay in business. Then I remembered bailouts.

        •  

          You will also have state fees like title search, mortgage and mortgage discharge fees, which could range from $100 to $500 depending on which state you're in.

          If you happened to use a mortgage broker, then you could be up for fees there as well. Mortgage brokers will receive commission from the bank both at the start of your loan and on a continuing basis until your loan ends. When you close the loan early, they will stop receiving trailing commission on that loan and in some instances may have to pay back some of the commission they were paid when the loan was established.

          Some brokers will pass this on to you by including a clause in their contract with you which states that if you close the loan within a certain period (e.g. 2 or 3 years) that you will have to pay them a couple of thousand dollars.

        •  

          You are agreeing to pay the bank a set interest rate, if you break your loan in a market where rates are dropping they will not be able to re-lend that money at the higher rate. You will get charged a break fee that includes the difference between your higher rate and the lower market rate at the time, times the remaining duration of your loan. In a rising rate market if you break the loan you may be eligible for money in the hand in the same scenario. *not counting any admin or other fees.

        • +4 votes

          Edit: Removed my comment about your neg. I see you've made plenty of other posts where you provide context to your neg.
          /Edit

          Either way, you're mis-interpreting the BOQ fact sheet.

          "The amount you've already paid" is not what the fact sheet says. Its says the amount "prepaid/repaid". By that it means the debit balance left on the loan at the time you break the contract you have with the bank (i.e. the amount you're paying to the bank before it's due, hence the term 'prepay').

          Say you have a $500k fixed for three years, you pay off, say, $20k principal in the first year then decide to refinance. The break fee would be calculated on $480k over 2 years, not the $20k you've paid the loan down by.

          The break fee really depends on how the wholesale rates have moved (up or down) since the start of your loan and how the bank predicts they will move in the near future. The bank will usually have borrowed money (at wholesale rates) on a contract of its own to give you to buy your house. When you back out of the contract, the bank either has to pay fees to break on its own contract, or find someone else to lend that money to. If the bank thinks it can lend the money it lent to you to someone else for the same or higher interest, it generally won't charge a fee you a break fee.

          It all comes down to the first point in the BOQ fact-sheet…Break fees are "calculated amount of the loss which we suffer if you choose to break your fixed interest rate loan contract…this loss is passed on to you…". If rates are going down and you're chasing a better deal, it generally means that the bank is going to lose money out of you breaking your fixed rate period (because it borrowed at higher wholesale rates and will have to lend that money to someone else at the now lower retail rates)…therefore you will have a (likely large) break fee.

          The fee can also change on a daily basis, depending on whether any of these parameters change. You could obtain a break fee a month before your refinance/settlement date which is $0 and then end up paying $5k at settlement if rates are dropping as they are now.

  • +1 vote

    What about investment properties?

    •  

      Check the linked image in the original post.

      Copied again here

    • +1 vote

      Why the downvotes? I think this is a fair question. I work with someone who has a tenant just stood down at Qantas. What decision should the landlord make? Kick them out to find someone who can pay or be unable to pay the mortgage?

      •  

        The landlord could give the tenant a rent holiday and apply for repayment relief from their bank if necessary, especially if it's a long term tenant. Some of the cost would be recovered at tax time. That would probably earn them some kharma points too.

      •  

        This is the part that will bite. All those investment properties filled with tenants that are about to lose their jobs. Thank Fire Truck my tenant is a doctor, she won't be out of work anytime soon…

  • +6 votes

    If the repayments are deferred by up to 6 months, does the term of the loan get extended by another 6 months? I would think that by not extending the term by the same amount, you will have less time to repay the balance principal owing. Correct me if I'm wrong though lol

    • +24 votes

      the question is does interest charged pause too? or you actually end up with MORE to pay back in 6 months.

      • +7 votes

        I heard you're still paying interest in the meantime - so yes, you would end up paying more.

      • +2 votes

        The announcements I read were interest continues to capitalise. Can't see any details as to whether you continue to cover the interest repayments in the meantime. That won't help many in the situations they're in.

        But as above, if they don't extend loans by 6 months or more then you'll be required to repay at a higher rate moving forward. But loans are very specific in contracts about end dates etc. you can't just extend it that easily.

        Most likely, they'll look to possibly refinance people back in to a loan product at the end with different loan terms, to ease transition back in to repayments. People won't immediately go back to being able to afford full repayments, or even higher than before. But these immediate measures give them time to work out how to address some of these issues.

      • -1 vote

        There no question about it. You’ll end up paying more interest overall. Only the bank wins with this one.

        • +11 votes

          "Only the bank wins?" C'mon, sounds cool but it's wrong. Anyone who keeps their house because they found work within 6 months also wins.

      • +4 votes

        Interest is capitalised over the period.

        It's NAB not the Salvation Army

    • +4 votes

      Exactly what I was wondering. I don't see the banks being that generous and just saying "Hey, don't pay anything for 6 months, we're being generous". I'm betting they will charge the interest at the end, or hide it another way to recoup it

      • +4 votes

        I'm sure the'll be adding the interest to the balance. Otherwise the offer would be too attractive.

      • +1 vote

        either way interest only the banks are offering a short term cashflow injection.
        6 months of interest only on a typical loan of 25-30 years is i would assume minor - especially if they push out the term of your loan.

      • +3 votes

        yeah, I think the interest keeps accruing even during the deferred period. Which effectively could mean you are paying more interest than you were supposed to (for six more months). Which at a 400k loan could be around $1400 per month = $8400 in total roughly.

  • +1 vote

    does financial hardship include being in trouble cause you horded too much toilet paper

  •  

    Hoping the other banks follow through with similar arrangements

  • +5 votes

    this arrangement always been in place
    its called financial hardship
    effectively defaulting on a loan
    if you can make repayments, keep making them.

  •  

    Hope other banks will follow

  • +18 votes

    Helping Australians by getting more people into even more debt. Exactly what we need at this point 😒. The standard "fees, interest and other charges" apply. So do your homework and don't be fooled by the big banks. They are still being run to make as much $$ as possible for shareholders even during times of crisis and there is NOTHING in legislation to counter this.

    • -4 votes

      what happens with people that save their money?
      guess what - NAB has RESTRICTED customers WITHDRAWING their savings to $5k a day in branch.
      guess the people that do the right thing get shafted left, right and center
      Capitalism for the poor
      Socialism for the rich

      •  

        banks have had the 5k a day restriction for years around cash. It prevents leaving them short of cash for the day, ring ahead and you can arrange to withdraw as much as you need. depending on the bank and branch some of them require 1 or 2 days notice, many of the banks in the CBD or large city centres won't enforce the call ahead either. It has nothing to do with restricting you, just ensuring they have cash on hand to service everyone.

    • -1 vote

      I can't believe that companies aren't allowed to make money! Shocking!

      • +1 vote

        Lol. Yeah I agree. I don't understand why ☝️ these guys are complaining. The way I see it- they didn't have to do this if they didn't give a sh!t. It's a small gesture, and won't help with getting out of debt - but helps with the immediate cashflow problems, whether you're an individual customer or a business one. Good one NAB, deal gets an upvote from me.

        • +1 vote

          And also for a lot of Australians we are actually invested in the big banks (whether directly or through our superannuation funds). The big banks making money actually leads to us making money!

          • -1 vote

            @dust: money is worth nothing if they dont let you take it out of your bank account.
            your deposit is a unsecured liability on their balance sheet.
            if the bank goes under, you are one of the last people apart from shareholders that get paid out.

            •  

              @cumova: how many TP rolls do you have at home?

            • +3 votes

              @cumova: Unsecured? Shows how uninformed you are.

              "The Australian Government guarantees deposits up to $250,000 in Authorised Deposit-taking Institutions (ADIs) such as banks, building societies or credit unions. This means that if something happens to the bank, this money is guaranteed by the government to be paid back to you." Source: finder

        •  

          I'm leaning to the same side, but disagree with your statement that if they didn't give a sh!t they wouldn't do anything.

          They don't have a choice… If they kept everyone paying their mortgages and forced bankruptcy/foreclosure. Can you see banks being able to sell properties right now?

          People would foreclose immediately and the banks would be holding on to assets and an unpaid debt and in most cases, not be able to recoup their costs as property prices would plummet well below the outstanding loan balances… subprime mortgage crises anyone?

          This also goes for investment properties, tenants are pleading for rent payment freezes left, right and centre. Most property investors simply don't have the cashflow to cover loan repayments in full, they depend on the rental income to cover most or all of the mortgage payments.

    • +2 votes

      But wouldn't this help people who lost paid employment not to default until the situation improves?

    • +3 votes

      They are giving borrowers a huge repayment holiay and you turn it around as a negative? They are under no obligation to do this you understand?

    • +5 votes

      The interest rates are a gift to the banks, they've pocketed most of the lowered interest rates, the flow on to existing home owners is minuscule.

      Bailing out businesses, whilst most will pocket it and fire staff, cough, Qantas, cough, GE. There was a small company with the apprentice payment, he had 2 staff apprentices, those apprentices have 'safe jobs anyway' he said, so he did just that, pocketed the payment.

      The main aim of a business owner is to sustain the business, not staff, so of course owners will pocket any gifts and hold on for dear life.

      It's a pretty Liberal policy. Because raising new start or giving money to the average Joe is welfare.

      BACK IN THE BLACK!

    •  

      But the alternative is to do nothing and let people default on their loans…

      •  

        Yes - so those who made bad decisions with poor economic knowledge can learn. But nah nah Govt jumps in and saves the least productive by giving out hand outs. Qantas On 22 August 2019 announced an off-market share buy-back of up to 79.7 million shares, if they were doing normal business they should have saved that money for rough times like now. But they wanted to artificially pump their shares and now they are belly up waiting for Govt to bail them out.
        Then next year Govt will introduce jackass tax, so we can lend more of our money to boost up our Govt coffins. Still wondering how the strongest economy of our lifetime went to shits in just weeks. Its all because of COVID-19 but we have less than 1000 cases currently, imagine when the real numbers come out.

    •  

      What is your solution if one who lost his job??

  •  

    WestPac jump on board please

    • +2 votes

      this is in place already at every bank. please. read your banks website. every bank has this. its called a hardship application
      also please note, this isnt free payments for 6months. interest will still accrue and will be added ontop of your loan
      on your credit file it still will be noted you missed payments and effectively defaulted on your loan.

      •  

        oh, this will be a catch
        Didn't aware that taking this offer will actually put a miss payment record to credit history
        This will have pretty bad impact to future loan approval

      • +3 votes

        Provide evidence it is recognised as a missed payment or maybe just stop spouting shite in this thread

      • +3 votes

        I was out of work for 12 months, took hardship on my mortgage when money run out and there are no defaults on my record.

      • +3 votes

        on your credit file it still will be noted you missed payments and effectively defaulted on your loan.

        This is not true.

  •  

    What is considered eligible? How to show you can't make payments?

  • +9 votes

    Pissing down our backs and telling us it’s raining.

  •  

    What defines an Eligible customer? They need to be precise and provide more information regarding this offer. They will be getting alot of postive clout but potentially still charge interest etc

  • +3 votes

    They'll do anything to avoid mass defaults and the house of cards falling over.

    • +2 votes

      They need to otherwise the economy will fall over in a heap, we'll end up in recession and we'll have a situation like the sub-prime mortgage fiasco that happened in the US which kicked off the GFC back in 2007 (although given the size of our economy we won't trigger a GFC).

      • +1 vote

        Australia is actually the 14th largest economy by GDP in the world. We'll be part of a substantial world-wide contraction this time, but you're right, we won't cause it.

  •  

    Does the pause also hit a pause on interest, or does it get accrued till next 6 months?

  • +7 votes

    This is a smokescreen for the fact that they're colluding not to pass on any of the rate cut - i.e no benefit to borrowers from the last RBA cut

    • +2 votes

      You know they dont just set interest rates based on RBA right?

      I did corporate and investment finance so maybe I just know more but the number of people that think like this constantly blows my kind.

      Very simplistically, the bank sets a rate based on rejecting bad debt risks. RBA is only one factor in setting the rate. Frankly it's not even an important factor at low interest rates. There are mechanisms other than the rate that can reject bad debt too.. which is something that has improved alot since the sub prime issue (but they often require significant staffpower to implement).

    •  

      You could take fixed interest for 3 years at 2.29% if you want to benefit from this round of cuts.

    •  

      and to make balance sheets look better with less bad debt

  •  

    wish ANZ follow that up

  •  

    Do they just add the paused interest on top of your loan?

  • +1 vote

    Would this affect your credit rating?

    If the term of your loan doesn’t get extended and interest continues to accrue, would your minimum monthly repayment increase (I’m sure it wouldn’t be by much)

  • +40 votes

    You are about to cast your first negative vote on OzBargain.

    …and I've been a member of Ozb for a few years. This is negative vote is really saying something:

    I used to work at a hardship department of a Big 4 bank. Every bank can offer, and does already offer a 6 month moratorium on repayments. They have to. Banks need to abide by certain laws and regs; one of which is to have a hardship department that offers relief similar to this.

    Too many uninformed people think this is free money, and they don't realise that they have to pay back what they missed after the 6 months lapse. Additionally, they have to pay interest, which will be more than if you had just paid the debt in the first place.

    This is actually beginning to get scary. I'm not old enough to have lived through the GFC. I mean, I was alive, but I wasn't…contributing to society to feel the impacts, nor was I old enough to recall.

    This corona virus coupled with the OPEC price war is a recipe for disaster. As I'm writing this post, it's actually beginning to make sense that this problem is actually quite systematic. I recall a conversation I was having with my GP last week after she finsihed (I was the last appointment of the day), and she told me that she was a practising Dr during Swine Flu, SARs and so on. She reiterated that people aren't taking it seriously enough, then posed the question: What makes this go away? Like, what marked/caused the end of the previous epidemic? My answer: Vaccines? "No", she said "Vaccines don't stop a pandemic. They prevent the magnitude of them the next time they come around". She went on to explain that the only thing that stopped the pandemics in the past, is merely the shelf life of the virus; afterall, they're living things (I think, haha).

    These viruses usually have a lifespan of approx 6-12 months, depending on how widespread (Geographically) they've become. So in max. 12 months time since the virus started, we should reasonably be able to expect that the virus pandemic goes away. But it seems the economy can't handle this buffer zone :/

    A question recently posed on r/ausfinance: Then what happens? Once people stop being able to afford their mortgage repayments because of unemployment, do banks just firesell thousands and thousands of houses? My thoughts…Probably not. They'll probably parcel these up in securities, and sell them off those with higher risk appetitties…ring a bell yet?

    Yeah, Mortgage Backed Securities. One of the most significant securitisation practises during the GFC.

    I don't mean to fear monger, but these are my thoughts, supported with my rationale!

    •  

      It's worded as if they're waiving interest with this one, is that not true?

      Business one clearly says it defers repayments and interest (ie pay interest later), but the home loan one only says pause payments. Doesn't clarify if interest continues in the pause period.

      • +2 votes

        I don't think they'd want to write "but interest will continue to accrue"

        But on the other hand, they WOULD want to write "no interest charged!!!!!! Interest free!!!! Woohoo!!! Look at me no interest!!!". They would've plastered that everywhere.

        So I don't think so. By not writing interest free, I think they've confirmed it isn't interest free.

        • +1 vote

          I would agree but as mentioned they did clarify interest continues for the business one, so it seems odd not to on the home one?

          Seems deceptive to clarify in one and not the other if BOTH are the same.

          •  

            @dyl: Good point. Chances are that the team who wrote the public communications for this announcement is a different team for the business, and different team for the residential, hence slightly different wording.

            Based on my experience, I would be confident in guessing that interest would not be waived.

    • +3 votes

      Too many uninformed people think this is free money, and they don't realise that they have to pay back what they missed after the 6 months lapse.

      They are idiots, its a repayment freeze/holiday, no one ever said it was a principal write off.

      Additionally, they have to pay interest, which will be more than if you had just paid the debt in the first place.

      They openly delcared interest applies, they never hid that fact. And yes….damn you Maths….the principal does go up.

    • +2 votes

      Definitely reach out to the bank and confirm exactly if you have to repay the arrears after the six month period or make up the RMRA (required monthly repayment amount) with extra repayments within a period of time. Or if they are to offer alternative solutions to manage your account once the financial assistance was period is finished.

      •  

        Usually it's a combination of both.

        i.e. make up arrears and increase your repayments, but whatever you missed in payments, add them to the loan (Known as capitalising).

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