Last weekend a senior ANZ banker said struggling borrowers who have deferred repayments during the pandemic may need to sell their homes. “The growth that you might have anticipated might not come, so at some stage you’re going to have to say: ‘If I can’t afford this mortgage, am I better off to rent, put my capital aside and wait until I’m in a better position to buy back into the market?’,” ANZ group executive of retail and commercial banking, Mark Hand, reportedly told the Sydney Morning Herald. It had me recalling two stories embedded in the Robinson family psyche.
The first concerns my grandfather who returned from the first world war affected by wounds and gassing. Like countless others he struggled to hold down a job and service the loan for the family home in suburban Sydney. In the midst of the Great Depression the loan fell into arrears and my grandmother was reduced to tears when a policeman on the doorstep told her that she and her five young children would need to vacate the property.
We must devise a new approach to the predicament of borrowers who find themselves pushed onto financial thin ice
It was only by threatening her father–in-law with a desertion suit that she managed to secure the financial support needed to save the home. Thousands of other Australians had no fallback option and suffered the indignity of losing not just their homes but all the accompanying hopes and dreams of a safe and secure future.
The second tale, a generation later, arose when my parents sought to re-negotiate their home loan to accommodate a growing brood. My mother, attending the local bank with kids in tow, a necessary trial because the comfortable banking hours of the 1960s precluded a working husband’s attendance, was demeaned by the manager. He told her, rather unsubtly, that the bank considered her and my father a credit risk.
Switching banks was unheard of back then so another couple of years of scrimping and saving were required to satisfy the dictates of the pinstriped executive brigade. Mum was ever afterwards convinced that bankers had both flinty hearts and tin ears.
What exactly have we learnt from the past as a pandemic grips the world? After several months of helpful support through loan repayment deferrals, are banks going to revert to type in early 2021 and once again make their customers carry the can? He surely did not intend it but the banker’s reported views give the impression of a softening up for an even greater hardship the pandemic might visit upon Australia. If so, the banking industry’s tin ear lives on.
What senior figures in the banking industry should be saying now is that conventional policy will require banks to call time on a large number of young Australian family home loans unless we can devise a new approach to the predicament of borrowers who find themselves pushed onto financial thin ice through no fault of theirs by a once in a century event.
What they should be saying is that notwithstanding their financial value, banks understand loans are for different purposes and carry different social weight, the most significant arising from loans made in accordance with responsible lending provisions to young families who are juggling the multiple challenges of children, debt and work, every bit as real today as what my parents faced in the 1960s and my grandparents in 1930s. What they should say is that banks are determined to minimise the likelihood of those loans failing because their banks appreciate the fallout will be horrendous. They should say they understand forcing families to sell their homes will destabilise the housing market because sales will be disproportionately located, not in the comfortable leafy suburbs inhabited by senior banking executives but in the recently established outer suburbs of our capital cities where deferring loan repayments eats away the borrower’s equity quickest.
We have to be better than this. Blindly proceeding from here to a point in the near future where families lose homes through no fault of theirs makes us a country in which banks are too big to fail but family homes are too small to save. Otto Niemeyer will smile in his grave to understand that almost a century on bank balance sheets matter more than the dreams and plans of young Australian families.
We have to be better than this.
Don’t get me wrong. Balance sheets do matter and banks cannot be expected to deal with the looming challenge alone. Forcing banks to carry increasing levels of loan book impairment will hinder their ability to assist the post-pandemic recovery when that occurs. By working in collaboration with government and regulators, and by identifying innovative ways to mitigate the escalating risk of negative equity and default, banks can demonstrate that they are better than their previous selves.
It will require an unconventional approach because we are quickly exhausting the utility of conventional policy. But having seen fit to create jobkeeper, the federal government is surely up to the task of formulating homekeeper, a means of allowing families to hold onto their homes whilst stabilising the housing market against a fire sale of tens of thousands of properties in early 2021.
If such a form of intervention and policy invention is beyond us then the dreams and aspirations of far too many young Australian families, a bedrock of this nation, will be destroyed in the same way they were in an earlier economic calamity. And we are surely better than that.
Tony Robinson was a Victorian MP and Brumby government minister and is currently a director of Financial Counselling Australia.