Key Points
- Mortgage stress in Australia is at its highest since the global financial crisis, says ASIC.
- ASIC reports 35 per cent of borrowers abandoned hardship applications due to complex bank processes.
- Mortgage hardship notices jumped 54 per cent in Q4 2023, with 1.35 million mortgage holders at risk of stress.
Lenders have made applying for financial assistance so difficult that one in three homeowners struggling with mortgage stress give up on the process, the corporate watchdog says.
A scathing report from the Australian Securities and Investments Commission (ASIC) says bank and non-bank lenders are failing struggling customers.
The number of hardship notices submitted by customers jumped by 54 per cent in the last quarter of 2023, year-on-year.
"In the worst cases, lenders ignored hardship notices, effectively abandoning customers who needed their support," ASIC chair Joe Longo said in a statement.
The report found 35 per cent of borrowers had dropped out of hardship application processes at least once.
Mortgage stress at highest level since global financial crisis
According to Roy Morgan research, an estimated 1.35 million mortgage holders, more than a quarter nationally, were at risk of mortgage stress in the quarter to March 2023.
Mortgage stress for owner-occupiers has been rising since the Reserve Bank began hiking interest rates in May 2022 and is now at its highest level since the global financial crisis.
"Too many Australians in financial hardship are finding it hard to get help from their lenders and it's time for meaningful improvement," Longo said.
The ASIC report took data from 30 lenders and closely reviewed 10 of the biggest lenders along with 80 case studies.
The leading reasons behind customer hardship notices were over-commitment, followed by reduced income, medical reasons, unemployment and separation.
The report also found that two in five customers who secured support fell into arrears at the end of the assistance period.
ASIC commissioner Alan Kirkland said lenders' financial hardship programs were failing to meet borrower needs.
"Many lenders aren't taking their customers' unique situations into account, instead providing a standardised one-size-fits-all approach," he said.
The regulator also noted a lack of adequate arrangements for vulnerable Australians, including those facing domestic or family violence.
"The lack of support and in some cases, failure to respond when customers flagged they were struggling, is unacceptable and greatly adds to the distress of customers already struggling with heightened levels of stress and anxiety," Kirkland said.
"We encourage people worried about making repayments to contact their lender and if not happy with the response, to lodge a complaint with them."
Seven of the 10 big lenders reviewed in the report have launched programs to improve hardship management, and all 10 will be asked to prepare an action plan in response.
"ASIC expects all lenders to act on the findings outlined in this report and prioritise improving their approach to supporting customers experiencing financial hardship," ASIC said in a statement.
