As interest rates remain high and living costs continue to climb, a growing number of Australians are finding themselves struggling to keep up with their mortgage repayments. In a desperate bid to avoid defaulting on their loans, many are turning to their banks for hardship assistance – but according to consumer advocates, the help on offer is often woefully inadequate.
The Mortgage Stress Epidemic
New data from the major banks paints a disturbing picture of the nation’s mortgage stress epidemic. ANZ recently disclosed that its “past due” loans – those where customers have fallen more than 90 days behind on repayments – have skyrocketed by 47% to a staggering $4.17 billion. This figure is not only a dramatic increase from the previous year but also significantly higher than pre-pandemic levels.
ANZ is not alone in this trend. All of the major lenders are reporting heightened levels of hardship variations, which can include temporary pauses on repayments or loan restructuring. But while these measures are intended to provide relief for struggling borrowers, critics argue that they often do more harm than good.
A “Cookie-Cutter” Approach
According to Claire Tacon, the assistant director of financial counselling at the Consumer Action Law Centre in Melbourne, banks are failing their customers at the exact moment they need help the most. “So often it’s just a cookie-cutter approach,” she says. “They’re not offering tailored assistance to their customers.”
Tacon explains that most lenders offer a three-month moratorium on repayments when a hardship variation is requested. But once that reprieve ends, the accumulated debt plunges the mortgage holder right back into financial stress. “It’s just setting people up to fail,” she argues. “The people we’re talking to are facing the very real chance of becoming homeless as they can’t keep their mortgage repayments going.”
“It’s just a cookie-cutter approach. They’re not offering tailored assistance to their customers. Too often people come through the period of their hardship variation, and then they’ve got this increased pressure to suddenly pay more, which defeats the whole purpose of a variation.”
– Claire Tacon, Consumer Action Law Centre
Falling Through the Cracks
A report from the corporate regulator in May found that a staggering 40% of customers who received hardship assistance through a reduction or deferral of payments fell into arrears immediately after the assistance period ended. This suggests that for many borrowers, the temporary measures are merely delaying the inevitable.
Consumer advocates are calling for more tailored responses from banks, such as capitalizing deferred payments onto the loan balance rather than requiring prompt repayment, or extending loan durations to reduce monthly installments. But so far, the major lenders have defended their existing approaches.
In a statement, Westpac said that while most customers were showing resilience, it was “well positioned to provide support to those who need it”. NAB and ANZ made similar comments, emphasizing their readiness to offer “tailored solutions” and “an expanded range of hardship support options”. But for many struggling homeowners, these assurances ring hollow.
“They just want me to sell the house and go and live in a unit or retirement village or something, but I don’t want to do that. I don’t have much left to sell.”
– Patricia, 68-year-old struggling to meet mortgage repayments
Fighting to Keep a Home
Patricia, a 68-year-old living in regional Victoria, is one of the many Australians who have found their bank’s hardship assistance to be sorely lacking. Despite having more than 80% equity in her house, she says her lender is pressuring her to sell and downsize.
“I’m scrimping as much as I can, and I’ve sold a few household items to try to meet my mortgage repayments,” Patricia explains. “I don’t go shopping for clothes, and I don’t go shopping for shoes, and I don’t buy makeup.”
Patricia was given a short repayment holiday by her bank but had to pay back the accumulated debt shortly after the reprieve ended. She has now requested an extension of her loan term to reduce the monthly repayments but has been rejected. “I can’t make this month’s repayment,” she says. “I’ve got four kitty cats, and they won’t get a job.”
The Path Forward
As interest rates look set to remain high for the foreseeable future, and with cost-of-living pressures showing no signs of abating, it’s clear that Australia’s mortgage stress crisis is far from over. For struggling homeowners like Patricia, the path forward is uncertain.
Consumer advocates argue that banks need to take a more empathetic and personalized approach to hardship assistance, offering sustainable solutions that give borrowers a genuine chance of getting back on their feet. This could include measures like debt consolidation, interest rate reductions, or even partial debt forgiveness in extreme cases.
But for any meaningful change to occur, there will need to be a significant shift in the way banks view their obligations to customers in financial distress. As Tacon puts it, “Banks need to remember that behind every mortgage is a human being – a person with a family, with dreams and aspirations. It’s not just numbers on a spreadsheet.”
Until that mindset shift happens, countless Australians will continue to fall through the cracks of a system that seems more focused on protecting profits than helping people. And for those caught in the relentless cycle of mortgage stress and inadequate assistance, the dream of home ownership may ultimately prove to be little more than a mirage.
