The scheme was due to expire on September 27, but it has now been extended by more than six months until March 31.

It will apply to borrowers already on the scheme as well as new applicants. Reserve Bank deputy governor Geoff Bascand confirmed they had given guidance to allow lenders to offer temporary deferrals, “without those loans being viewed in default”.

After the scheme ends, banks will still be allowed to offer deferrals to borrowers, but those loans “will not have the same concessionary regulatory treatment”.

Bascand is calling on lenders to consider borrowers’ long-term interests when reviewing deferral extensions and new requests.

“For many borrowers, resuming, or continuing payments in some form will be the most suitable approach, rather than taking up a deferral of their loan payments.

“A deferral should not be the default setting and it will be up to individual lenders to decide whether to offer one to their customers.” He says lenders should consider “hardship arrangements” with customers, “where the lender considers there is little reasonable prospect that the borrower will be able to resume payments once the deferral ends”.

REINZ chief executive Bindi Norwell welcomes the news as it is a way of supporting people who are struggling to pay their mortgage due to financial difficulties arising from Covid-19. But she says it’s important that it doesn’t place people into even further debt down the track – as the interest accrued during the mortgage “holiday” still needs to be paid back.

“It’s imperative to get a balanced approach between sensible lending, how highly leveraged an individual is and at the same time maintaining a stable property market.”

Since March 26, banks have deferred repayments on consumer loans totalling around $21 billion for over 61,000 customers, according to the New Zealand Bankers’ Association. Nearly a quarter of those customers have now restarted their loan repayments.