Clemence Harvey spent her Tuesday afternoon listening to hours and hours of bad 70s and 80s pop music.
But not by choice – she’s been on hold with ANZ’s Covid-19 mortgage help line for three hours, trying to renegotiate her mortgage.
Harvey is one of thousands of landlords who are contending with Prime Minister Scott Morrison’s six-month ban on evictions to allow recently unemployed tenants keep a roof over their heads.
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While the eviction immunity comes as a huge relief for many, it also means landlords are left to deal with the shortfall.
The Melbourne-based publicist bought an apartment when she was a single mother, a property in Fitzroy she now rents out to an artist. She currently rents a home with her husband and children, and the rental income she receives from her tenant is just used to pay off the mortgage on the apartment.
“He’s been very good with rent payments up until this point in time,” Harvey told Yahoo Finance.
“Just as I was going to bed last night, he sent me a text saying work is drying up, and I totally get it.
“But the thing is from a landlord perspective there’s no such thing as a free lunch with a bank.”
While the eviction ban benefits tenants, the Morrison government hasn’t provided landlords with any relief: landlords will still need to make mortgage repayments one way or another. Prime Minister Scott Morrison has instructed landlords and tenants to make arrangements between themselves.
“My message to tenants, particularly commercial tenants, and commercial landlords, is a very straightforward one – we need you to sit down, talk to each other and work this out,” he said on Sunday.
While 22 of Australia’s biggest banks have thrown out a $100 billion lifeline, including home loan repayment deferrals of up to six months, there’s a crucial detail that leaves landlords out-of-pocket. Interest on these repayments still need to be paid for every month they are deferred – and interest alone can add up to thousands and thousands of dollars to the mortgage.
Banks are expecting landlords to cough up the interest during a time when tenants are either asking for rent reductions or are unable to pay rent at all.
“Even though they are waiving mortgage repayments, they are not really,” said Harvey.
“Either they give you a time extension on the other end of your mortgage agreement, so it’s however long [the loan term] is plus six months, with accumulated interest, or the loan is capitalised at 3 or 6 months.
“Tenants who think it’s a free holiday, we have a free place to live – it’s actually not,” she said. “The banks will certainly make sure they still get the money.”
Harvey has opted to have the repayment interest capitalised at the end of the deferral, and has made arrangements with her tenant that reflects this. So while her tenant will be allowed to pay rent at a reduced rate for a few months, he will have to come up with the shortfall after the period is up.
“So it’s this whole knock-on effect,” Harvey said. “I’m not actually making any money from the property.”
On top of that, Harvey said she received a call on Wednesday morning from her bank manager who told her the bank was no longer offering landlord insurance, which protects landlords in the event of default arrears.
“This is a bank decision that has been made in the last 24 hours and is ominous.”
‘An extremely stressful time as a landlord’
Aldwyn Altuney owns three investment properties across the Gold Coast, and rents out three bedrooms in her own home.
But she’s already had two tenants who rented a room in her home desert her, and she’s left with less than half of the amount of her mortgage repayments. The deadline is rushing up fast.
“The government thinks if you own property then you’re rich. But a lot of people who have property are struggling to meet mortgage repayments,” she said.
“I’ve got $7,000 due in the next week. And I don't even have half that amount in my bank account right now.”
In the worst case scenario, she would be forced to sell her properties – but Altuney worries she won’t be able to sell it, with auctions and open house inspections now banned.
“It’s an extremely stressful time as a landlord,” she told Yahoo Finance.
“For tenants, a lot of people can just go on Centrelink. But benefits for landlords – there’s hardly anything there for the landlords that I’ve seen.”
Across her four properties, Altuney has two mortgages to pay off. The monthly repayments for one is around the $3,000 mark and the other hovers around $3,300 to $3,500 – and all this is just the interest.
Deferring her repayments by just one month would mean adding an extra $6,500 to her mortgage. Deferring it for six months would leave her $40,000 out of pocket.
Yahoo Finance has reached out to the big four banks and Westpac and CBA have confirmed that the banks will be expecting mortgage holders to pay the interest though their repayments have been deferred.
But Altuney said it would be a significant help if banks chose to waive interest during the deferred repayment period.
“If they're gonna ask us to let tenants get away with not paying rent and us to not evict them, I'd like to see the banks not penalise home owners with their loans. And that means freezing interest as well for that period,” she said.
“Not just delaying payments, [but] freezing interests, late fees, all of that, reducing interest rates as well.”
Altuney’s three investment properties are rented by families. Selling her properties would impact all her tenants: one family has been renting her property for 15 years.
“If I had to sell, it would absolutely devastate them,” she said.
Another family includes seven children, but only one primary caregiver.
“The ripple effect will absolutely go all the way with all the people renting.
“It’s very stressful, it’s really stressful.”
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