SME business owners are 46% more likely to have their residential mortgage in deferral than other homeowners, according to new analysis by global data, analytics and technology company Equifax.

Despite many homeowners exiting deferrals and returning to contractual repayments, not all Australians are recovering at an equal pace. SME owners are a standout group of borrowers who remain in deferral.  September 2020 deferral data shows that 10.97% of mortgage accounts held by SME owners were on hold compared with 7.51% of mortgage accounts held by other borrowers.

The impact of COVID-19 is amplified in the hospitality sector. The statistics reveal that SME owners working in the accommodation and food services industry were 77% more likely to defer their mortgage than the general population.

Borrowers from metro areas and tourism-dependent regions across Australia also had a high number of mortgage deferrals compared to the national average. The extended lockdown restrictions in Victoria has seen this state the hardest hit, with SME owners in Victoria 45% more likely to defer their mortgage.

"It's great news that Australian mortgage borrowers are starting to get back on their feet, but we can see that the financial burden small business owners are shouldering is substantial," said Scott Mason, General Manager Commercial, Equifax.

Owners of small and medium-sized businesses often mix personal and business finances. Property secured lending is used alongside personal loans and credit cards to help fill cash flow gaps and access capital. Previously there has been no clear picture of how personal borrowings are affected as small business owners deal with external forces and pressures. Now, recently available Comprehensive Credit Reporting data regularly supplied to Equifax offers an improved lens for understanding this sector.

JobKeeper an important lifeline

As part of the analysis, Equifax looked at the relationship between the JobKeeper wage subsidy and mortgage deferrals. Small business owners registered for JobKeeper were found to be more likely to have deferred a mortgage.
 
"Now that state borders are reopening and restrictions easing, there is finally a chance for these businesses to get back on their feet. However, given how many small businesses are relying on the financial support of both JobKeeper and loan deferrals, it will be a major blow when these relief measures come to an end. SMEs are the backbone of our economy and a significant source of employment and innovation, so their financial health is critical to Australia's economic recovery," Mr Mason said.

Deferral hotspots remain hard hit

During the first wave of lockdowns, the Australian regions to show the greatest number of mortgage deferrals were Queensland tourist destinations, as well as Tullamarine-Broadmeadows on the outskirts of Melbourne. Four months later, these deferral hotspots have recovered slightly but continue to show signs of mortgage stress.

The Australian regions with a higher proportion of deferrals compared to the national average are Surfers Paradise, Noosa, Mudgeeraba-Tallebudgera, Broadbeach-Burleigh, Tullamarine-Broadmeadows, Coolangatta, Litchfield, Nerang, Southport and Gold Coast Hinterland. 

Regions outside of the Greater Brisbane area in Queensland have a high proportion of home loan deferrals compared to the national average due to the number of tourism-dependent homeowners still battling to repay their mortgages.

GRAPH 1: Proportion of Mortgages Deferred by Accounts

GRAPH 2: Mortgage Hotspots Percentage of Exposure Deferred

About the Analysis

This 2nd Equifax deferral analysis was conducted based on credit history and repayment information available for the month of September 2020. The objective of this ongoing analysis is to understand mortgage deferrals and implication for Australia's consumer and commercial credit landscape. 
Note: SME refers to business owners, directors or proprietors of a trading company.

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ABOUT EQUIFAX INC.
At Equifax (NYSE: EFX), we believe knowledge drives progress. As a global data, analytics, and technology company, we play an essential role in the global economy by helping financial institutions, companies, employees, and government agencies make critical decisions with greater confidence. Our unique blend of differentiated data, analytics, and cloud technology drives insights to power decisions to move people forward. Headquartered in Atlanta and supported by more than 11,000 employees worldwide, Equifax operates or has investments in 25 countries in North America, Central and South America, Europe, and the Asia Pacific region. For more information, visit www.equifax.com.au or follow the company's news on LinkedIn.      

DISCLAIMER
Purpose of Equifax media releases:
The information in this release does not constitute legal, accounting or other professional financial advice. The information may change, and Equifax does not guarantee its currency or accuracy. To the extent permitted by law, Equifax specifically excludes all liability or responsibility for any loss or damage arising out of reliance on information in this release and the data in this report, including any consequential or indirect loss, loss of profit, loss of revenue or loss of business opportunity. 

 

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