bankers

Why bankers are so worried about their small business loan books

That means that 57 per cent of people whose home loan deferrals were due to expire in September – some 22,900 borrowers owing a total of $8.7 billion – felt they were now in a position to meet their loan repayments.

As a result, the Commonwealth Bank has seen a gratifying improvement in its home loan book in the past month alone.

At the end of August, 9.8 per cent of its giant home loan portfolio (measured in terms of value) consisted of loans in deferral. By the end of September, this had dropped to 8.0 per cent. (This translates into some 93,000 home loans, with a combined value of some $37 billion.)

What’s more, October is likely to see a further steep fall in deferred home loans, with deferrals due to expire on some 52,000 home loans (worth a combined $20 billion).

If more than half of home loan borrowers are confident enough to resume repayments this month, the Commonwealth Bank should see its basket of deferred home loans shrink by another $11 billion or so.

But investors will also be keenly aware of some worrying trends lurking in the Commonwealth Bank’s latest figures.

According to the country’s largest lender, the borrowers most like to resume loan repayments have been the lower risk borrowers: the owner-occupiers, who are paying principal and interest on their home loans and whose mortgages are below 90 per cent of the value of their home.

The trouble is that pushes up the risk profile of the home loans that are still subject to deferral. According to the bank’s figures, of the home loans deferred as at the end of September, 34.1 per cent are loans for investment properties, 16.3 per cent are interest only, and 14.2 per cent have a loan to valuation ratio

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