ANZ Bank has confirmed that it has suspended redraw access for home borrowers deferring loan repayments under Covid-19 relief packages.
Mortgage brokers alerted Banking Day to the issue on Monday, saying that ANZ borrowers were unable to request access to redraw facilities while they were deferring loan repayments.
This means that potentially thousands of borrowers who suffered financial setbacks since the pandemic hit will have no redraw rights on their ANZ mortgage accounts even though they remain ahead on their loan repayments.
Brokers confirmed that the restrictions on redraw access also apply at other major banks for borrowers receiving repayment relief.
Many borrowers already ahead on loan repayments were still eligible for a Covid-19 relief package and availed themselves of the opportunity to defer servicing their mortgages to the end of September.
An ANZ source told Banking Day that the bank had been unable to amend its mortgage administration systems to recognise the deferral of loan repayments as a “normal event”, which meant that no redraws were possible for borrowers already receiving Covid-19 relief.
It appears that access to redraw has been suspended for borrowers who did not divert cash from their redraw facilities to an ANZ account before they began deferring loan repayments.
An ANZ spokesperson yesterday confirmed the freeze on redraws for borrowers receiving assistance, but insisted that the bank had provided options for borrowers to access surplus funds in their redraw facilities before they accepted a relief package.
“ When we call our customers who have asked to take up the COVID-19 assistance we talk to them about their redraw and explain that when their repayments are deferred, they won’t be able to access their redraw funds at that date,” the ANZ spokesman said.
“They can retain access to their redraw funds by transferring them to their ANZ transaction account before they apply for assistance.
“We talk our customers through these options when we contact them about deferring their home loan repayments.”
The recent sharp rise in unemployment across Australia means that the financial circumstances of many home borrowers would have changed since they took loan repayment holidays in April and May.
Some of those borrowers might now be looking to redraw on their home loans to meet living expenses until they are able to secure new employment.
The problem, however, is that they have no access to redraw facilities for as long as they are not making repayments.
Access to redraw has emerged as a sensitive issue during the Covid-19 crisis following the savage public backlash against ME Bank’s attempt in April to slash the redraw limits of 20,000 borrowers.
The ferocious customer reaction to ME’s move forced a backdown from bank, which is now acceding to customer requests to restore the original redraw limits.
While the issue affecting ANZ borrowers is distinguishable from the ME controversy, the likelihood of ANZ and other major banks suffering reputational fallout will depend on how thoroughly they communicated the redraw restrictions to borrowers before they took assistance packages.
As the economic crisis intensifies, ANZ could come under public pressure to reopen redraw facilities for borrowers already receiving Covid-related support.
According to an ANZ notification issued to brokers last Thursday, the bank has begun consulting with borrowers about resuming loan repayments.
Under a so-called “Covid-19 assistance roll-off strategy”, ANZ will send regular emails to borrowers in the months leading up to the expiry of the loan repayment relief measures.
The emails will explain the changes to redraw arrangements and give details on the how deferred interest will be capitalised to loans.
Borrowers receiving Covid-19 support will also be notified of the date when they are required to resume servicing their home loans.