24 Mar 2020

Retail banks agree to a mortgage holiday repayment scheme

6:24 pm on 24 March 2020

Retail banks have agreed to a mortgage holiday repayment scheme for those affected by Covid-19, Minister of Finance Grant Robertson has announced.

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The six-month principal and interest payment holiday for mortgage holders and small business customers whose incomes have been affected by the economic disruption from Covid-19.

"As people have been losing their jobs, going down to reduced hours, having reduced incomes, there's a lot of pressure around those mortgage payments," Robertson told Checkpoint.

"We've worked really hard with the banks on this over the last few days and I thank them for their work. They're now having to get the systems set up, so those detailed arrangements for each individual bank will be out within days.

"Please if you're a mortgage holder don't bombard your bank. Wait to see when they come out with the details and contact them then."

The government and the banks will also implement a $6.25 billion business finance guarantee scheme for small and medium-sized businesses to protect jobs and support the economy through this unprecedented time, Robertson said.

The scheme will include a limit of NZ$500,000 per loan and will apply to firms with a turnover of between $250,000 and $80 million per annum.

The government will carry 80 percent of the credit risk, with the other 20 percent to be carried by the banks, Robertson said.

"What we're talking about here are businesses that are solvent, businesses that have been viable up until this point, but are facing the significant headwinds. We want those business and the workers that are within them to make sure they can keep their jobs and keep their incomes.

"If you look around the world you'll see that this is what governments everywhere are doing. This is the rainy day. And the really important thing for New Zealanders… is that we came into this with 19.5 percent debt to GDP ratio - that's one of the lowest in the developed world.

"That means we've got room on our balance sheet to be able to do this. Of course it's not limitless… [But] we're in this position now to be able to do this, and yes we're stretching out the balance sheet but we're doing it for the good of New Zealand."

He added that the Reserve Bank of New Zealand had decided to reduce banks' core funding ratios to 50 percent from 75 percent, further helping banks make credit available.

Robertson said the Budget was still set to be delivered on 14 May, but it would look different to what it was going to say before Covid-19 took over.

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