Deferred time is running out

Freezing his mortgage repayments when COVID-19 hit saved Newcastle home-owner John* from “going under”. But the clock is ticking on the deferment period and he fears his finances, and his mental health, are headed over a cliff if he doesn’t find work soon.

Adding significantly to John’s plight was the scaling back of the federal government’s JobKeeper and JobSeeker subsidies at the end of last month. The reduction means it will be even harder for people such as John to stay afloat. (More on the support payments later.)

Australian Banking Association (ABA) chief executive Anna Bligh says more than 800,000 people have deferred loan repayments since the coronavirus pandemic began. Exact numbers in the Hunter are unavailable but given the official unemployment rate in the region has doubled to 9 per cent, according to Australian Bureau of Statistics (ABS) data, and is in fact likely to be far higher as many people have given up and left the jobs market, the area is likely to be well represented in mortgage deferments.

A communications professional and married with three young children, John had only been able to secure rolling short-term contracts in the two years before the pandemic.

“I’d had steady work for a long time, but after COVID-19 hit, all of the non-permanent staff, such as contractors and casuals, were let go immediately,” he says. “The high cost of running a house, cars and raising kids meant we just didn’t have the money to cover everything.”

When banks began offering customers the opportunity to defer their loan repayments, John jumped at it. “It was simple mathematics,” he says. “We needed a break from our mortgage to help us get on top of our bills.”

Financial comparison website research director Sally Tindall says although people may get some short-term financial relief, there is a hidden cost to the deferral scheme because homeowners’ payments end up being higher.

“In the long run, mortgage deferrals come at a huge cost,” says Ms Tindall. “Banks continue to charge their customers interest even when the loan is paused. This is something many people we’ve spoken to were not aware of.”

John says he and his wife were aware from the beginning that the interest bill would continue to grow, and it would cost them more long term, but his main concern is three months’ time when the deferment period ends. Ms Tindall agrees the bigger issue is, what happens at the end of the six-month pause if someone still can’t make their mortgage repayments?

“The clock is ticking for these customers who haven’t been able to regain employment and probably feel like they’re on borrowed time,” Ms Tindall says.

John says the thing he needs most is a job, but he has started to lose hope after dozens of applications he submitted went unanswered. “I’ve heard there are now often hundreds of applicants for even low-level roles,” he says.

ABS regional labour force figures released three months ago corroborate John’s experience. The figures show nearly 10,000 jobs were lost in one month in Newcastle and Lake Macquarie and 8,400 across the remainder of the Hunter Valley. Also of great concern is the rise in youth unemployment, which the ABS data shows now sits at 18.7 per cent in Newcastle and Lake Macquarie and 15.7 per cent in the Hunter Valley.

The numbers paint a worrying picture of unemployment in the Hunter, and the Hunter Business Chamber has warned the real picture is likely to be far worse than the statistics suggest.

John says he’s also trying to deal with the $250 cut the federal government made to the JobSeeker Coronavirus Supplement on 25 September, and the fact the supplement will be stopped completely on 31 December.

 “The JobSeeker cuts mean we now have even less money to survive on,” he says. “The stress of the situation is now keeping me up at night. The pressure and consequences of not being able to find work has had a huge impact on my mental health.”

Last month, mental health organisations Lifeline, Beyond Blue and the Black Dog Institute gave evidence at a Senate inquiry into the federal government’s handling of COVID-19.

All three warned of a looming “mental health pandemic” and called on the federal government to commit to long-term targeted income support for the most vulnerable who may struggle to find a job for years, if at all.

 Lifeline Chairman, John Brogden, says JobKeeper and the JobSeeker Coronavirus Supplement, have been a lifesaver for people but if they are removed too early it could be very dangerous.

“To the government’s credit, JobKeeper and JobSeeker have saved lives, but the flip side of that coin could apply,” Mr Brogden says.

“The government has the capacity to provide targeted support to those who may be left behind and may never work again when the economy starts to pick up. If this is not done there is a real risk the suicide numbers will rise as people will be left without a job and without adequate support.”

Australian Council of Social Service chief executive Cassandra Goldie says the government’s plans to reduce income support will take a serious toll on the wellbeing of millions of people who are without paid work, especially those in regional communities.

“The doubling of Newstart (JobSeeker) at the start of the pandemic came as a huge relief,” Dr Goldie says. “But they now face a deeply uncertain future, with the prospect of these devastating cuts to their already tight budgets and 12 people receiving JobSeeker for every job vacancy, with this being 28 people for every vacancy in regional areas.

“We’re calling on the government to extend the $550 Coronavirus Supplement and move quickly to legislate a permanent, adequate JobSeeker rate that means people can cover the basics.”

 *Name has been changed

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