Mortgage defaults rise as borrowers struggle to keep up

About 5.8 million Australians have struggled to make loan repayments in the past 12 months.

About 5.8 million Australians have struggled to make loan repayments in the past 12 months. Photo: AAP

The number of mortgage holders defaulting on their loans has ticked higher over the past few months as lenders come under regulatory fire to do more to help financially stricken customers.

The head of the prudential regulation watchdog, John Lonsdale, said high inflation, geopolitical risks and elevated borrowing costs remained a concern.

In an opening statement to a parliamentary hearing, Lonsdale from the Australian Prudential Regulation Authority said borrowers were falling behind on their home loan repayments in higher numbers, but the increase was up from a low base.

“Borrowers experiencing financial hardship are also increasing, however, many borrowers maintain prepayment buffers,” he outlined in the statement.

In the same hearing, the Australian Securities and Investment Commission confirmed it was formally investigating three separate lenders for failing to do enough to help customers in financial hardship.

Lenders have a responsibility to consider options to vary customer repayment obligations if notified of hardship under the national credit code.

ASIC chair Joe Longo said lenders were ignoring hardship notices and “effectively abandoning customers who needed their support in a time of need”.

Speaking at the parliamentary hearing on Tuesday, Longo detailed an “egregious” case study where a customer made five separate calls over six months before the lender responded to a hardship request.

The customer, who was struggling to make mortgage repayments after having to take time off work, was continually “bounced from call centre to a branch and back to the call centre before they were transferred through to the hardship team”.

“This is not good enough,” Longo said.

“Lenders need to do better to help Australians doing it tough.”

Lenders had been given feedback on their hardship assistance processes, Longo said, and been asked to provide an action plan to address any issues.

The anecdote stemmed from a recent investigation by the regulator revealing accessing financial assistance was so challenging, more than one in three Australians had dropped out of the application process.

Rates of financial hardship were high, separate ASIC research released on Monday revealed, reflecting a string of interest rate hikes and cost-of-living pressures.

About half of Australian adults with debt, the equivalent of 5.8 million people, had struggled to make repayments in the past 12 months.

Tough economic conditions has kept consumer confidence in the doldrums and below the neutral level of ANZ and Roy Morgan’s weekly survey for two years running.

Last week, the sentiment index was largely unchanged, though the gauge of inflation expectations rose a little, probably reflecting the stronger-than-expected monthly consumer price index.


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