Firstmac analysis shows the number of borrowers on hardship is falling

The latest data from Firstmac’s $12.6b loan book shows that the number of Australians on COVID-19 hardship arrangements is steadily falling despite the second wave of lockdown in Victoria. MPA spoke with chief financial officer James Austin about how Victoria compares with other states and why the ACT is doing the best nationwide.

Borrower hardship is undergoing a slow but steady decline

According to the analysis, about 5.1% of borrowers were on either fully suspended or partially suspended rates on July 31, which was down from 5.37% at June 30 and 5.65% on May 31.

“The height of the COVID hardship assistance was the 10th of June and since then it’s been slowly but surely declining,” says Austin.

He says a good number of borrowers have recently decided to come off hardship arrangements after three months rather than extend them for another quarter.

“Quite a few borrowers are saying we’ve recovered our situation, we don’t need assistance anymore.”

“That’s quite a positive sign.”

How Victoria and the ACT stack up

While the levels of those on hardship aren’t dropping in a massive way, they are showing a slow and steady decline across most states, with Western Australia only showing a very slight increase to 5.06% over the month of July.

The number of Victorians on hardship fell from 5.63% to 5.37% in this same month despite the state moving into a stage three lockdown.

This could indicate that those in adverse situations had already applied for hardship earlier in the pandemic, says Austin.

But even throughout early August, when the state moved into stage four lockdown, the rate of Victorians on hardship remained fairly stable at 5.4%.

“I would have expected that the tide was going out with an approaching tsunami but that hasn’t proven to be the case.”

“The other most noticeable difference across the states is the ACT, which is lowest by a country mile.”

As of July 31, just 2.05% of ACT borrowers were on COVID-19 assistance; less than half the 5.63% of NSW borrowers on hardship arrangements.

Austin says this is probably due to much of Canberra being linked with government related industries where job losses haven’t been as significant as they have been in the private sector.

Brokers are playing a vital role in assisting customers

While 5% of Firstmac borrowers represents about $600m worth of loans, roughly half of the borrowers on hardship packages are still making partial payments, with about one in five of those on COVID-19 assistance deemed to be in a more serious situation than others. 

With the pandemic throwing a vast number of Australians into financial uncertainty through no fault of their own, he says there has probably never been more of a need for good customer service from brokers than there is right now.

“These borrowers are good borrowers in a bad situation.”

“The more that assistance in whatever form it takes can be communicated and managed, then the better that is.”