Nearly one in five Australians with a mortgage expect to freeze repayments in the next 12 months, revealing the extent to which repayment holidays will help many homeowners avoid the full force of the coronavirus-induced economic slowdown.

CoreData’s latest COVID-19 Pulse Check reveals approximately one in six (14.0 per cent) mortgagors have already frozen repayments to protect their financial situation, while a further one in five (19.3 per cent) anticipate they will need to do so over the next year.

The finding comes as new figures from The Australian Banking Association estimate the total value of loans deferred by Aussie banks as at least $200 billion, including some 392,000 mortgages. CBA has deferred about 240,000 repayments on home, personal and business loans, with a further 70,000 home loans deferred by NAB, 105,000 by Westpac and a similar number of deferral requests received by ANZ.

The amalgamated data offers a glimpse into the potential impact of the virus on property prices and the broader economy once repayment holidays eventually end.

While the percentage of total mortgages deferred appears low on face value, the value of these loans and the future ramifications for Australian real estate could be substantial. NAB, for example, had deferred 70,000 home loans as of April 17, representing a total balance of $26.5 billion. The bank more than doubled its impairment charge, signalling an expectation that a large proportion of deferred mortgages may become bad loans once repayment holidays end.

CBA announced its own provision for future loan losses had increased to $6.4 billion, now reportedly holding three to four times the provisions for total capital losses compared to pre-GFC levels. This suggests that the banks remain wary of the difficult and unprecedent road ahead, recognising the potential for the economic situation to deteriorate further.

According to CoreData’s insights, three in four (76.2 per cent) mortgagors currently rate their financial position as ok or better, but four in five (79.6 per cent) remain fearful of the potential impact of the virus on their finances and the broader economy.

More than two in five (42.7 per cent) homeowners with a mortgage are expecting COVID-19 to impact their financial situation for up to 12 months, or longer, with a similar number (39.5 per cent) anticipating that the worst is still to come regarding the impact on their personal health and finances.

As the country begins to reopen internally, a successful easing of restrictions will be critical for Australian mortgagors, with more than a quarter (27.0 per cent) having lost income because of COVID-19, and one in 10 (9.9 per cent) having lost their job altogether.

As a result, 12.1 per cent are already seeking additional work or jobs, with more than twice as many (25.9 per cent) anticipating that they will need to do so in the next 12 months.

Mortgage repayment holidays have masked some of the impact of COVID-19 on Australia’s real estate market, but reality may hit hard when these concessions eventually end and mortgagors unable to find work or replace lost income struggle to return to making regular repayments.

A spike in defaults would have disastrous implications for housing prices, and already high loan-to-valuation (LVR) ratios would rise for most Australians as a result of distressed sales.

With more than a third (35.6 per cent) of mortgagors living without a financial safety net, the value of their primary residence is of great importance to their ability to stay afloat. A fall in prices would see mortgagors without the means to sufficiently pay down their loan forced to default as their LVR rises above an acceptable level.

This scenario is one of the reasons the big banks have doubled down on their impairment charges in preparation for bad loans, with most predicting a bleak outlook for property prices in the near term. CBA forecasts an 11 per cent fall in prices through to 2022 due to the economic downturn, but admits a more protracted downturn would have a much greater impact and lead to a 32 per cent collapse in prices, with economic growth remaining negative until 2022.