Small businesses will be able to defer payments on up to $100 million in loans for six months under COVID-19 measures announced by the Australian Banking Association on Friday.
And, just an hour later, one of the country’s biggest banks said it would extend the same offer to home loan customers who were experiencing financial hardship.
ABA chief executive Anna Bligh said the loan holiday would apply to any small business affected by the coronavirus pandemic.
“This package is not restricted to any sector or any industry,” she said.
“We want to get it out to as many businesses as quickly as possible so they can keep their doors open and keep employing Australians.”
The banks’ announcement followed the Reserve Bank cutting interest rates to a record low 0.25 per cent on Thursday.
The RBA also announced extraordinary measures to help prevent a coronavirus-driven recession. It will buy Australian government bonds as part of its first-ever quantitative easing program, and provide a three-year funding facility to provide cheap loans for Australian banks.
Ms Bligh said banks were yet to see households going into mortgage stress because of COVID-19 but would monitor the situation.
“If we start to see any other critical need … that’s something that [the banks] know they’ll need to look at,” she said.
Despite that, just an hour later, NAB – one of the country’s four big lenders – said eligible home loan customers could seek six-month holidays on mortgage payments.
“This is an extremely difficult time but we will get through this together,” chief executive Ross McEwan said.
“We are well-capitalised and stand ready to play our critical role in this global crisis.”
For a customer with a typical home loan of $400,000, NAB’s move will mean access to an additional $11,006 over six months, or $1834 a month.
NAB, like the Commonwealth Bank, will not pass on Thursday’s rate cut to variable home loan customers. CBA was the first to act after the Reserve Bank’s emergency cut, cutting rates by 0.7 per cent for some borrowers with fixed loans.
Westpac copied CBA on Friday, reducing one, two and three-year fixed home loan rates to 2.29 per cent, and raising rates on 12-month term deposits to 1.7 per cent.
“This is a once in a lifetime event and a unified response by government, regulators and corporate Australia is exactly what we need,” acting chief executive Peter King said.
ANZ said it would reduce rates on variable interest small business loans and pass on 15 basis points of the RBA’s rate cut to its variable interest rate home loan customers.
It will also let home loan customers request a deferral of home loan repayments for up to six months, with interest capitalised.
Ms Bligh said banks would work with small business customers to help them survive the economic fallout from the coronavirus. The ABA expected its aid package to put up to $8 billion back into the pockets of affected companies.
She said Australia’s banks were in a strong position to weather the pandemic.
“The size of this commitment to small businesses demonstrates that banks – regardless of their size – are well able to lean in and lean in hard when it’s needed,” she said.
The Morrison government is also plotting a fresh round of stimulus measures after announcing a $17.6 billion package last week.
Treasurer Josh Frydenberg said the next package would extend support for small business and assist sacked workers.
“This second package we are working on right now is about cushioning the blow for so many of those Australians who may lose their job,” he told Sky News on Friday.