Commonwealth Bank of Australia (ASX: CBA) is reportedly going to give homeowners until September 2021 to get their finances in order before enforcing home sales. Could this be a positive?
What has happened?
According to the reporting by News.com.au, Commonwealth Bank will freeze forced sales for customers who have defaulted on their loan repayments due to COVID-19 impacts and still can’t make repayments.
Borrowers will get a moratorium on forced sales until September 2021, for those borrowers that have accessed COVID-19 loan deferral schemes and are still unable to resume normal payments.
In an email between CBA and Financial Counselling Australia (FCA), CBA head of retail banking, Angus Sullivan reportedly said: “This means any customer making full mortgage repayments in the 12 months prior to entering a home loan deferral will be able to remain in their home until September 2021, even if they are now struggling to get back to making repayments, where they agree to work with us. This will give these customers the opportunity to get back on their feet, confident they can remain in their home this Christmas and well into next year.”
Is this a good thing?
Well, it depends on how you look at it. Australians, including homeowners, are being supported with a variety of packages including jobkeeper (plus jobseeker), cashflow help for businesses and these home loan repayments.
At the recent annual general meeting (AGM), CBA said that it has been contacting borrowers to talk about their options. Total deferrals are down almost 40% from $67 billion in June to $42 billion in September. That’s a good sign that the amount of deferrals is reducing.
However, how many will still be deferred on 31 December when jobkeeper reduces again? What about when jobkeeper completely stops?
I think it’s good that CBA will be lenient with borrowers, as it lessens the risk of fire sales, losses and a scenario resembling the American housing market during/after the GFC a decade ago.
However, it’s not a good sign that CBA’s loan book is still in a position where it feels it needs to do this.
Summary thoughts
CBA is my preferred big ASX bank, I think it has a higher quality loan book and a better balance sheet. However, I’m not a big fan of the banking sector because of the difficult COVID-19 environment, rising arrears and low interest rate. There are other ASX dividend shares I’d rather buy first such as Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).
