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NAB boss reveals the warning signs that Australian banks are facing huge waves of loan defaults

National Australia Bank’s chief executive has revealed the warning signs pointing to a wave of mortgage defaults as the coronavirus recession worsens – and says those under debt pressure should be prepared to sell soon. 

From this month, Australia’s major banks are auditing 450,000 borrowers to determine if they can service their loans again, following six-month mortgage holidays.

Those can’t resume their repayments can apply for another reprieve extending until March 2021.

National Australia Bank's chief executive has revealed the warning signs pointing to a wave of mortgage defaults as the coronavirus recession worsens

National Australia Bank’s chief executive has revealed the warning signs pointing to a wave of mortgage defaults as the coronavirus recession worsens

National Australia Bank’s chief executive has revealed the warning signs pointing to a wave of mortgage defaults as the coronavirus recession worsens. 

National Australia Bank's chief executive has revealed the warning signs pointing to a wave of mortgage defaults as the coronavirus recession worsens

National Australia Bank’s chief executive has revealed the warning signs pointing to a wave of mortgage defaults as the coronavirus recession worsens

‘The thing that distresses me right now is, when we’re making calls to customers to check in, 20 per cent won’t pick the phone up or call back — even if we text, email and phone,’ he told a parliamentary economics committee hearing on September 11.

A month earlier on August 14, Mr McEwan suggested those who couldn’t repay their loans should sell up before house prices collapsed.

‘Every reasonable step will be taken to keep people at homes,’ he said.

‘But we all know that there will be some circumstances where people are better off selling out early and taking some equity out of their homes or keeping some equity before it disappears.’

Mr McEwan pleaded with struggling borrowers to answer their phones when the bank called.

‘We need to get over that. We can help, but we need somebody to talk to,’ he told MPs a fortnight ago.

From this month, Australia's major banks are auditing 450,000 borrowers to determine if they can service their loans again, following six-month mortgage holidays.  Pictured is a Sydney house up for auction

From this month, Australia’s major banks are auditing 450,000 borrowers to determine if they can service their loans again, following six-month mortgage holidays.  Pictured is a Sydney house up for auction

In May, NAB forecast a 12.8 per cent plunge in Sydney’s median apartment price as Melbourne’s equivalent values fell by 14 per cent.

The Reserve Bank of Australia is even more downbeat than the big banks, last month releasing a paper forecasting that a 40 per cent drop in house prices was ‘an extreme but plausible scenario’.

Australian Banking Association chief executive Anna Bligh announced a fortnight ago the banks would be auditing 450,000 home and business borrowers in September and October to see if they could repay their loans again, following mortgage holidays that came into effect in March.

The federal government’s National Housing Finance and Investment Corporation is forecasting a 0.8 per cent population decline over two years.

In the absence of immigration, Australia’s population was expected to fall by 214,000 between a peak in 2019 and a trough in 2021, as a recession devastated the housing market.

In May, NAB forecast a 12.8 per cent plunge in Sydney's median apartment price as Melbourne's equivalent values fell by 14 per cent

In May, NAB forecast a 12.8 per cent plunge in Sydney’s median apartment price as Melbourne’s equivalent values fell by 14 per cent

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