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As the Big Four banks prepare to halt new applications for mortgage deferrals, consumer groups say that some homeowners are being pressured to make unrealistic repayments on their loans.
Banks have indicated that they will stop granting automatic mortgage holidays to COVID-19-affected homeowners in preparation for the end of the program in March. And while many homeowners have resumed payments, ABC News reported that some banks have been asking customers to make large “bulk payments” to cover the deferral period.
Read more: Australian mortgage deferrals tumble
Katherine Temple, director of policy at the Consumer Action Law Centre, told ABC News that her organisation has been “getting calls from people at the end of their mortgage ‘holiday’ reporting that their bank is pushing them to make significant extra repayments to clear their arrears, rather than simply extending the length of the loan.”
“This kind of response does nothing to build trust with the community,” said Temple. “In our experience, there are some people who are being pressured to repay their arrears in bulk amounts that are not affordable. This has caused significant stress and can result in people taking out other loans to cover the mortgage, leading to a debt spiral.”
Meanwhile, Kane Johnson, a financial counsellor at the National Debt Helpline, told ABC News that the demands from banks were causing “a lot of distress” for homeowners.
“One client who was told he had to pay his arrears in full had been in contact with his bank every month during the deferral period and was never told that would happen,” he said.
And Alexandra Kelly, director of casework at the Financial Rights Legal Centre, told ABC News that banks needed to take a “nuanced approach” to repayments to maintain trust with their clients.
“There shouldn’t be hard-and-fast rules, because that leads to panic, and when people panic they borrow more money and it leads to a bigger problem,” she said. “It needs to be done carefully. Everyone wants to get back to paying their loan. People don’t want to give up their homes.”
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