While the news cycle has begun to move on from Covid-19, the Australian economy is still feeling the pressure. And so are a ton of families.
The government’s wage subsidy program ‘Job Keeper’ is scheduled to come to an end in September. Lots of mortgage relief programs offered by the banks will also end around this time.
The Jobkeeper program was aimed to keep people employed throughout quarantine, despite a slowdown in business. Many banks also offered mortgage relief programs to their customers. The programs effectively allowed you to put your mortgage on hold for 6 months. This was all to help families get through the crisis, and avoid mortgage defaults. But did it work?
Do we need Mortgage relief?
Digital Finance Analytics (DFA) has conducted a survey to find out how many Australian families face mortgage stress as a result of Covid-19. Mortgage stress is figured out by looking at household incoming and outgoing cash flow. The data from DFA showed that towards the end of May 2020, 37.5% of households (1.42 million) faced mortgage stress.
Similar data obtained through the Australian Bureau of Statistics (ABS) Household Impact Survey found that on average, 7% of households were receiving at least one form of financial relief due to Covid-19. What’s interesting is that when only households with a mortgage were surveyed, this figure jumped to 12%.
Questions are now being raised as to what could happen if both Job keeper and Bank mortgage relief programs end at the same time. For some families, this may cut off a big chunk of their incoming cash and they will be forced to start making their home loan repayments or risk falling into arrears.
Will struggling families be able to pay their mortgage? This is a question yet to be answered. This week we have seen positive signs on lockdown easing across the country. In some states, gyms are starting to open, pubs and clubs are expanding and local tourism is increasing. If restrictions continue to ease at the current rate, This should generally improve household cash flow.