Covid-19 update: mortgage holiday for home owners and businesses and loan scheme announced

The Finance Minister announced today (24 March 2020) that the Government, retail banks and the Reserve Bank have put together a major financial support package for home owners and businesses affected by the economic impacts of COVID-19.

The package includes:

• a six-month principal and interest payment holiday for mortgage holders and small and medium-sized customers whose incomes have been affected by the economic disruption from COVID-19.
• a $6.25 billion “business finance guarantee scheme”, providing short-term credit, for small and medium-sized businesses to protect jobs and support the economy.

While specific details of the package are being finalised as a matter of urgency, it will apply to businesses with a turnover of between $250,000 and $80 million per annum. There will be:

• a limit of $500,000 per loan, and
• the loans will be for a maximum of three years.

The Government expects banks to make these details public over the next few days.

The Reserve Bank has agreed to help banks put this in place with appropriate capital rules. In addition, it has decided to reduce banks ‘core funding ratios’ from 75 percent to 50 percent, further helping banks to make credit available. The Government will carry 80% of the credit risk, with the other 20% to be carried by the banks.

Work by the Government, Reserve Bank and Treasury continues in a bid to provide further support for larger, more complex businesses, the Finance Minister said.

Source document: www.beehive.govt.nz

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