These lenders account for over 90% of the country’s mortgage lending market
- 2018 Commercial Lenders Roundtable
- Top 10 Brokerages 2018
- 2018 Brokers on Aggregators
Westpac has announced the launch of a new policy to help mortgage customers in financial difficulty. The policy will give customers entering financial hardship arrangements the option of building a savings buffer.
The policy will mean that some customers in financial difficulty will make smaller repayments on their mortgages, allowing them breathing room to save for unexpected expenses.
Westpac research found that one in two Australians has had to pay unexpected bills in the last 12 months, including for auto repairs (24%), home repairs (20%), medical bills (20%) and pet emergencies (11%). About 40% of survey respondents said they would feel unprepared financially to cover these unexpected expenses.
The savings buffer program is supported by Financial Counselling Australia (FCA), which has been advocating for banks to help customers in hardship.
Westpac said it would work with customers to introduce a short-term savings buffer of at least $100 per month when calculating hardship payments, freeing up some money to pay emergency expenses, pay off higher-interest debt, or put into savings.
“While most customers have resumed mortgage repayments following deferrals at the start of the COVID-19 pandemic, there are around 4,500 accounts where individuals and families require more tailored and flexible support to get back on their feet,” said Catherine Fitzpatrick, director for customer vulnerability and financial resilience at Westpac. “After meeting their monthly expenses, we have found some customers have no income left to prepare for life events like medical emergencies, fixing a household appliance or a car breakdown. The savings buffer is designed to help customers in severe financial stress keep their heads above water.”
Read next: Why Westpac needs to focus more on mortgage brokers
“When creditors expect every single cent of a person’s uncommitted income to go toward repaying debt, all they are doing is setting people up to fail,” said FCA chief executive Fiona Guthrie. “Live always happens. Financial counsellors know that in reality, we should expect ‘unexpected’ expenses. Providing for a savings buffer will mean peace of mind for Westpac customers doing it tough this will be in the interests of most customers as well as the bank. This really is a sensible initiative from Westpac, and we hope other banks will follow suit.”
Westpac’s team of hardship consultants will work with each customer individually to determine the amount they can free up for a savings buffer as part of developing the hardship arrangement, the bank said. The buffer is a short-term strategy to help customers manage their finances, and interest will continue to accrue on the mortgage.
“We hope the savings buffer will help customers avoid turning to higher-interest products or payday lenders to pay off debts,” Fitzpatrick said. “We will take a customer’s financial history into consideration and look to the future to work through multiple options to help them get back on track. We encourage customers who are in financial difficulty to call us as soon as possible so we can consider what options may work for their personal situation.”
The savings buffer is currently a pilot program, and will be rolled out to more customers in the coming months, Westpac said.
Ryan Smith is currently an executive editor at Key Media, where he started as a journalist in 2013. He has since he worked his way up to managing editor and is now an executive editor. He edits content for several B2B publications across the U.S., Canada, Australia, and New Zealand. He also writes feature content for trade publications for the insurance and mortgage industries.
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