ASB says it already offers 'holidays'

ASB Bank says it has already been able to offer lengthy repayment holidays of six months or more to mortgage borrowers similar to those announced this week by its parent, Commonwealth Bank of Australia.

CBA chief executive Ralph Norris, who was previously ASB's boss, said his bank would offer mortgage repayment holidays of up to 12 months to workers laid off as a result of the global recession to help keep them and their families in their homes until they found new jobs.

It was not in the bank's interest to see people "get into trouble", he said.

"In the case of those unfortunate enough to be unemployed, we will provide repayment holidays for six months, and in some circumstances up to 12 months, with interest being capitalised."

In New Zealand, where bank data on impaired loans show home buyers are under far more pressure, ASB head of retail banking Ian Parker yesterday said Norris' statement "pretty much" brought CBA into line with his bank's policies on relief for distressed borrowers.

Earlier an ASB spokeswoman said a temporary suspension of principal and/or interest repayments was one of several solutions offered to customers facing "difficult times".

"While this option is usually for a maximum of six months, a longer period of payment suspension may be appropriate depending on the customer's particular situation."

Parker said this had been the case "for some time" and was not a specific response to the economic conditions.

New Zealand's banks, like their Australian parents, already have some capacity to grant borrowers mortgage holidays, but that has generally been for periods far shorter than those announced by Norris this week.

A source at one major local bank said it did not like to publicise its ability to grant repayment holidays for fear of "opening up the floodgates".

As it was, inquiries about such holidays had risen, including from borrowers still in work but struggling with big credit card bills.

A Westpac spokesman said his bank "will always review other initiatives to see how they could be applied in New Zealand but it is too early to comment specifically on what has been proposed [by CBA]".

"We do advise caution, however, as such an approach can simply result in an accumulation of debt and... where house prices remain weak this can be even more risky."

Massey University head of banking studies David Tripe said the last time mortgage repayment holidays were granted in any number, in the late-1990s, a flood of complaints to the banking ombudsman followed.

"People didn't understand what they were being offered and thought they were getting waivers of interest."