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Borrowers should seek out financial assistance as soon as possible to avoid further issues, brokers have said on the back of new research.
New research released by the Australian Securities and Investments Commission’s (ASIC) Moneysmart has found that almost half of Australian adults (47 per cent) with debt have struggled to make repayments in the last 12 months.
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However, the regulator has voiced its concern over the amount of Australians who stated they would not seek out financial help from a bank or lender (30 per cent), with respondents stating they’d rather sell assets or personal belongings or get a second job (42 per cent and 40 per cent, respectively) before applying for financial hardship assistance.
Speaking to The Adviser, founder of Mel Finance, Lumbini Wekunagoda, said that since mortgage brokers now handle more than 74 per cent of new home lending, he felt it’s a broker’s “responsibility to assist [their] clients in avoiding financial hardship”.
“We [brokers] address this challenge proactively by identifying clients who are borrowing close to their maximum limit and maintaining regular contact to monitor their home loan progress and overall financial management,” Wekunagoda said.
“Brokers should be adept at recognising borrowers at risk of financial hardship and collaborate with them on various strategies. This might include negotiating with their existing lender to alleviate stress.
“In one instance, we identified a client on the brink of financial hardship and actively worked with the lender to achieve a favourable outcome for both the customer and the lender. Proactively engaging with clients can prevent issues and make resolving potential problems much easier before they escalate.”
Additionally, managing director and mortgage broker at Atelier Wealth, Aaron Christie-David, has urged borrowers to reach out at the “very first inkling of financial hardship”.
“You have got to reach out to your broker who can then give you some options that may include looking at potentially refinancing,” Christie-David said.
“The reason why we advocate for this first step is because you don’t want to fall into arrears, which makes it extremely difficult, and sometimes impossible, to refinance your loan.
“The idea of being proactive versus reactive becomes imperative because we can then start to look at options, which get limited when you’re in a reactive mode.
“Put your hand up for help. You shouldn’t feel embarrassed as a borrower going through [financial hardship]. ‘Don’t keep your head in the sand’ is our message to our clients.”
ASIC’s research further indicated that borrowers are sceptical in regard to the actual help they could receive from their bank or lender, with 31 per cent believing this to be the case.
Coincidently, this comes as the regulator found that lenders were not doing enough to help customers who are going through financial hardship in its recently released report Hardship, hard to get help: Lenders fall short in financial hardship support.
Commenting on the Moneysmart survey, ASIC commissioner Alan Kirkland said that these findings should be “top of mind for lenders when supporting Australians in financial hardship”.
“Customers in hardship are entitled under the law to request assistance. These findings should be top of mind for lenders when supporting Australians in financial hardship,” Kirkland said.
“The message for Australians experiencing financial stress is that banks or lenders have a responsibility to support customers. If you are worried about being able to make your repayments, you’re entitled to ask your bank or lender for help.”
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