Banks agree to Swan mortgage-relief deal

Josh Gordon and Amelia Bentley
April 5, 2009 - 12:03AM

HOMEBUYERS who lose their jobs will be eligible for a 12-month reprieve on mortgage repayments and could be granted concessions on car loans and other debt, as part of a new deal between the Federal Government and the major banks.

As unemployment rates soar, Treasurer Wayne Swan has pressured the big four banks into helping families who fall victim to the global recession.

In a speech to an Australian employment forum today, Prime Minister Kevin Rudd will announce the banks have agreed to post pone loan repayments for up to 12 months for the jobless.

Accrued interest will be rolled back into the loan.

The move is designed to stave off rising mortgage default rates and forced home sales with potential for 800,000 people to be out of work by the middle of next year.

Banks have also agreed to consider interest-only repayment options for other types of debt such as car loans.

Fees for borrowers experiencing financial hardship could also be waived.

The unprecedented step follows the Government's October decision to guarantee bank deposits and wholesale funding for the banks to help stabilise the financial system.

The wholesale guarantee, which cut lending costs for the banks by allowing them to raise foreign debt for domestic mortgages, is understood to have given the Government more bargaining power.

The national dole queue is growing at one of the fastest annual rates on record.

New Centrelink figures reveal a bleak picture, particularly in Queensland.

According to the figures, the Sunshine State had the biggest February increase in those looking for work and receiving Newstart or Youth Allowance payments.

The statistics show that during February the total of Queensland job seekers receiving such allowances rose by 9.9 per cent to almost 73,000.

Centrelink says the number of long-term Queensland job seekers receiving Youth and Newstart allowances grew by 3.2 per cent and the total of job seekers receiving Youth and Newstart allowances increased by 9.9 per cent, the biggest rise compared with all other states and territories.

Victoria and the Australian Capital Territory both have the second-highest increase in job seeker rates, at 3.9 per cent.

Across Australia, short-term job seekers - those who have been looking for work for less than 12 months - leapt by 45 per cent in the six months to February.

During February alone, the national number of short-term job seekers on Centrelink's books grew by more than 16,000 or almost 9 per cent, with 203,173 having joined the dole queue in the past 12 months. The Sun-Herald believes the May 12 federal budget is set to reveal a sharp rise in the expected unemployment rate that will wipe hundreds of millions of dollars from the bottom line as the Government not only collects less tax revenue from fewer workers but also forks out more in unemployment benefits.

Treasury's latest official predictions show an unemployment rate of 7 per cent by the June quarter of next year.

This indicates about 800,000 will be out of work by the middle of 2010.

But that prediction is almost certainly too optimistic, following a slew of bad news internationally and warnings by the Reserve Bank that Australia is in recession.

http://www.smh.com.au/national/banks-agree-to-swan-mortgagerelief-deal-20090404-9siw.html