Small Australian businesses fear ending loan deferral periods will kill their operations

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Small business owners like Steven Barbaro fear they will not be able to repay their loans when the COVID deferral period ends.

The owner of the cafe is one of thousands of small business owners across Australia who will resume paying off loans frozen at the end of September due to the economic downturn caused by the coronavirus pandemic.

However, one problem remains for Mr Barbaro and his brothers who run seven CBD cafes – no one comes to town.

Mr Barbaro said that even with the easing of restrictions, the bulk of his income comes from white-collar workers who fill Sydney’s corporate towers, which are currently empty.

“The biggest fear right now is not being able to get back to normal and not being able to afford it,” he said.

“These big companies are staying at home… we’re doing it at cost right now.”

Camera iconThe owner of the cafe, Steven Barbaro, fears “that he will not be able to return to normal”. Credit: News Corp Australia, NCA NewsWire / Gaye Gerard

Since the start of the pandemic, Mr Barbaro has been forced to suspend all of his existing commercial loans while also requesting an additional loan of $ 250,000 for coronavirus support.

Financial uncertainty also prompted him to defer mortgage payments to his family home in Lilyfield.

He is the father of two young children and the main income earner in his household.

“If I don’t earn my normal salary, I won’t be able to pay my mortgage,” he said.

“It’s a very big concern. I don’t want to lose the house where my children live.

Mr. Barbaro’s home loan is with St George, which is part of the Westpac group. He said the bank had not contacted him on whether he would be able to extend the repayment leave beyond the end of September.

Steven and Brigid Barbaro with their children Joseph and Sianna.  Mr Barbaro's business has been significantly affected by the shutdown measures introduced to stop the coronavirus pandemic.
Camera iconSteven and Brigid Barbaro with their children Joseph and Sianna. Mr Barbaro’s business has been significantly affected by the shutdown measures introduced to stop the coronavirus pandemic. Credit: News Corp Australia, NCA NewsWire / Gaye Gerard

The Australian Banking Association has confirmed that an additional four month deferral can be granted upon request. Banks are also able to turn home loans into interest-only payments.

RateCity research director Sally Tindall said mortgage holders should consider all options before deferring their loan, as a six-month extension could cost thousands of dollars more in the long run.

“Your mortgage payments may be on hold, but the interest still accumulates in the background,” she said.

The end of the deferral period also raised concerns that a significant number of homeowners would default on their mortgages, leading to an influx of properties listed on the market.

On September 4, ANZ chief executive Shayne Elliott said the Australian real estate market is expected to fall 10-15% due to the COVID-19 recession.

My Housing Market economist Dr Andrew Wilson said the investor real estate market was under the most financial stress as landlords struggled to cope with declining demand for tenants, pushing down rental prices.

Dr Wilson said this added pressure could cause real estate investors to sell after the deferred repayment periods end.

“There is some stress in the inner suburbs of Melbourne and Sydney apartment markets,” he said. “We are currently experiencing record levels of vacancies. “

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