Mortgage stress in Australia is at its highest level since the global financial crisis, but many borrowers are struggling to get help from their banks.
A new report from the ASIC shows that mortgage holder reports of mortgage problems increased by 54 per cent in the final quarter of 2023 compared to the same period in 2022.
More than 80 percent involved owner-occupiers, while the average home loan balance for customers seeking assistance from their lender was $312,000.
“In the worst cases, lenders ignored hardship notices, effectively abandoning customers who needed their support,” ASIC chairman Arthur Longo said.
ASIC stated that ‘overcommitment’ was the most common reason for applying for hardship relief.
Other reasons included lower income, medical problems, unemployment and divorce.
Australian borrowers are now paying 59 per cent more on their mortgage than three years ago – with financial markets now expecting even more interest rate rises in 2024
ASIC stated that ‘overcommitment’ was the most common reason for applying for hardship relief
The report states that bank and non-bank lenders are struggling with customers.
The report documents the harrowing case of a mortgage owner who experienced domestic violence.
The woman wanted to move into an apartment with her daughter and called her lender to postpone her repayments.
Even though she was in distress, the woman was put on hold by her lender for an hour before the call was dropped.
She called back, but had a similar experience, and then an online hardship application could not be submitted properly due to an issue with the lender’s portal.
In total, it took five weeks before the deferral of her loan was approved.
ASIC revealed that some lenders were making it so difficult to get financial help that 35 per cent of mortgage holders have abandoned the application process at least once.
The report also found that 40 percent of customers who received assistance in the form of a reduction or deferral of payments immediately fell into arrears again once the assistance period ended.
When mortgage holders needed help and went to their lender for help, ASIC said that in the worst case scenarios, lenders completely ignored hardship notices and abandoned their customers when they raised their hands for help.
‘For people contacting their lender to say they need support, this can be devastating. Too many Australians in financial difficulty are finding it difficult to get help from their lenders and it is time for meaningful improvement,” Mr Longo said.
He said ASIC wrote an open letter to lender CEOs in 2023, imploring them to meet their obligations to struggling customers.
“What we have seen is simply not good enough: customers in difficulty deserve the right support in their time of need.”
Mr. Longo said it’s time to take off the gloves.
‘ASIC has made this a priority area of focus and where necessary we will not hesitate to take enforcement action to protect consumers.’
The ASIC report criticized lenders’ critical failure to identify customers in financial difficulty, their use of ‘cookie-cutter’ approaches in dealing with hardship claims, as well as complicated assessment and approval processes.
By state, NSW had the largest number of borrowers in difficulty, but relative to population size, more Victorians were seeking more help with mortgage problems.
The report did not single out a specific financial institution for criticism, but did say that larger lenders have more resources and better processes to deal with struggling mortgage holders.
Commenting on the report, Australian Banking Association President Anna Bligh said: “There is always room for improvement in any organisation. Banks will consider these findings and work with ASIC on further ways to support customers.”
If consumers are experiencing financial difficulties, ASIC advises that they contact their lender as soon as possible and ask for help.
If they are unhappy with the service received or the decision of their lender, they should contact the Australian Financial Complaints Authority.