Updated: Wednesday, January 6th, 2021
Attempts to control the COVID-19 outbreak through social distancing, including strict lockdown measures, are having a dramatic effect on our everyday lives.
The purpose of this post is to let you know about a range of financial options and practical strategies available to you in this challenging economic environment.
From central banks around the globe to domestic institutions within Australia, rapid action is being taken to ease the financial burden on individuals, families and businesses.
In addition to the government’s coronavirus stimulus packages, lenders have begun announcing assistance packages for borrowers affected by the COVID-19 epidemic.
Banks have assured their branches will remain open for business, and that precautions are being taken at each location to protect the safety of their customers.
They’ve also guaranteed they will continue to process loan applications quickly and efficiently and are encouraging consumer and business customers facing hardship due to the virus to reach out to discuss the options available to them.
Here are some of measures currently being rolled out by lenders;
- Deferral of scheduled loan repayments [including IO loans] for up to 6 months
- 70 bps interest rate reduction to 1 & 3 year fixed home loan rates for owner occupiers paying P&I – now just 2.29% p.a.
- 2 year fixed rate of 2.19% p.a. for owner occupiers paying P&I
- Automatically reduce repayments for all variable P&I home loan to the minimum required within the borrower’s loan contract – borrowers will have the opportunity to opt out if they wish to retain their current principal repayment levels
- Waiving of fees for the restructuring or consolidation of existing loans [ie. switching from P&I to interest only]
- 70 bps increase in 12-month term deposits to 1.70% p.a
- Waiving of early withdrawal fees and interest rate reductions for early withdrawals on term deposits prior to maturity
- Emergency credit card limit increases
- Deferral of business credit card payments
Personal Loans / Overdrafts
- Discounted interest rates on new personal loans taken out by existing customers
- Increase eligibility criteria for personal overdrafts
- Deferral of scheduled loan repayments for up to 6 months
- Rate reductions on business loans of 125 bps
- Overdrafts will be reduced by 200bps for new and existing small business customers
- Make available temporary increases in overdraft facilities for 12 months
- Additional resourcing and extended hours for commercial lending teams to ensure faster decision times
- Working capital assistance – participate in the RBA’s new term funding facility, aimed at providing low-cost credit to businesses
- Deferral of scheduled loan repayments for up to 6 months
Note: The amount and type of assistance available does vary from lender to lender. You will need to contact your lender directly to confirm what options are available to you. We will continue to update this list as new information comes to hand.
IMPORTANT: Keep in mind these measures are designed to assist people suffering financial hardship. If you can continue to meet all of your financial obligations each month then you should because providing evidence of financial hardship to your lender will likely impair your ability to borrow additional funds from them – at least in the short-medium term when you may need it most. [Update – Credit reporting agencies and lenders have outlined that hardship arrangements are typically not reported as defaults, and therefore do not impact a borrower’s credit score, with APRA also stating that banks need not treat repayment holidays as arrears. Also see ABA comments – click here]
Can your finances weather the storm?
In the current environment having access to between 3-6 months’ worth of mortgage repayments and basic living costs could be critical in the case of a job loss, redundancy or significant downturn in your business.
Here are few thoughts on how you might try and safeguard yourself against a short-term financial challenge;
Home Loan Redraw
Since 2011 the cash rate has been cut 16 times, falling from 4.75% to just 0.25%. During this time many customers have opted to put interest savings back into their mortgage, sometimes unintentionally as many banks’ default position is to keep mortgage repayments the same even after an interest rates drop.
As a result many Australians are already ahead on their mortgage, meaning they have funds available in their redraw should they find themselves in a tight financial position.
Should the need arise, it may be possible to refinance and increase the size of your loan to access more of the available equity in your home.
This is good option for people with low LVR loans and those who have seen property values increase since first getting their home loan.
Renegotiate / Refinance
Contact your lender and ask them to lower the interest rate on your home and/or investment loans. Many banks offer better deals to brand new customers so if you have been with your lender for 2 years or more there’s a good chance you could get a better rate.
If your bank won’t or can’t help then you may want to consider refinancing to a new lender with a better rate to lower your monthly repayments.
If you have been making principal and interest payments you may also want to consider switching to an interest only loan to reduce your repayment amount.
As finance brokers we can help you compare all of the available options and make sure you get the best deal. In fact, there has never been a better time to review your loan rates with many lenders providing cashbacks offers of between $2,000-$4,000 to make the switch.
If you find yourself short on funds you may wish to consider a low rate personal loan.
A personal loan can also be used to consolidate any high interest debts [ie. credit cards] into one cheaper and easy-to-manage monthly loan repayment.
Unsecured Business Loans
An unsecured business loan can be used for any business purpose including the payment of wages or suppliers and even BAS and other ATO obligations.
All you need is an ABN and 6 months in business to apply and you can borrow as much as 100% [often more] of your monthly business income/turnover. Applying is quick and easy and you will usually get your funds within 1-2 business days.
Other Funding Options
We also have access to private lenders and short term asset loans whereby you can raise funds against any freehold asset of value.
>> For more details on any of these finance options simply email us your enquiry, contact your Urbantech Finance broker or call us on 08 8451 1500 for assistance.
Many small businesses across the country face economic uncertainty as the global coronavirus pandemic bites.
In response, the Federal Government has moved to help support businesses through major economic stimulus initiatives.
- JobKeeper wage subsidy payments
- Cash flow boost of up to $100K to help with employee wages
- A 50% wage subsidy for apprentices and trainees
- Income support of $550 a fortnight for eligible sole traders and the self-employed
- Temporary relief from insolvency
- Increase to instant asset write-off scheme [now $150K]
For the most current and complete information on what’s available go to www.business.gov.au
We’ve also put together a concise overview of these initiatives here
In order to help small businesses better navigate the tax and super changes made to cushion the economy from the coronavirus, the ATO has updated its website to include some essential information.
The ATO’s coronavirus page provides easy-to-understand and detailed information about giving individuals early access to their superannuation; providing cash-flow assistance for employers; increasing the instant asset write-off, making more businesses eligible; and backing business investment by accelerating depreciation deductions.
Each of the measures have different timings, eligibility and processes. Some will be applied automatically and others will require an application, so we recommend heading to ato.gov.au/coronavirus to understand what is possible.
Here are some of the options available to assist businesses impacted by COVID-19, announced earlier by the Tax Office;
- Deferring by up to six months the payment date of amounts due through the business activity statement [including PAYG instalments], income tax assessments, fringe benefits tax assessments and excise.
- Allowing businesses on a quarterly reporting cycle to opt in to monthly GST reporting in order to get quicker access to GST refunds they may be entitled to.
- Allowing businesses to vary pay-as-you-go [PAYG] instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
- Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities.
- Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low-interest payment plans.
- Employers will still need to meet their ongoing super guarantee obligations for their employees.
Outside of business, the ATO said it will also work with individuals experiencing financial hardship, and their tax agents, and will apply appropriate tax relief measures for serious and exceptional circumstances, such as where people cannot pay for food or accommodation.
If you’re impacted by COVID-19, and require immediate assistance, you can contact the ATO’s Emergency Support Infoline 1800 806 218.
WHERE TO FROM HERE…
We obviously need to follow the latest health advice and take the precautions being suggested – however at times like this, it’s important that we don’t panic and continue to go about our business as best we can.
Things are changing daily and new measures are being implemented to soften the economic impact COVID-19.
For Urbantech it is business as usual with no interruptions to the services that we provide. More than ever we remain committed to assisting you with all of your finance needs.
The key message we would like to convey to you at the moment is – you have options should things become more difficult, and we are here to help you.
To that end please don’t hesitate to contact us any time if you are thinking about making a change to your finances. We’re here to answer your questions and take the necessary action to sure up your finances in these uncertain times.
Australian Bank Association – Financial hardship info and measures for all banks
Australian Government [Treasury] – Economic Response to the Coronavirus
Australian Government [ATO] – COVID-19 support available
Australian Government [Services Australia] – Affected by Coronavirus (COVID-19)
Australian Government [Business] – Coronavirus information and support for business
For an update on all the latest and greatest loan rates – click here
For more articles and updates visit – www.facebook.com/urbantechgroup
For more details feel free to call 08 8451 1500 or email us with your query.
Sam, Matt & Andy
PS. We understand many people in the community are self-isolating, quarantined or practising social distancing. I’d like to reassure you that you do not need to leave your home to get financial help. Please reach out to us and we can find a solution that works for you, whether that be via email, phone or a video app.
PPS. Just a final note, it’s not all doom and gloom – in fact, in times of financial uncertainty new opportunities can present themselves whether you’re a property investor, developer or small business owner. Keep a positive mindset, make smart financial decisions and keep an eye out for any opportunities – who knows, rather than just survive, you might even thrive during these difficult times.