Seniors’ calls for help increase as lenders tighten purse strings

By Tas Bindi

October 18 2018
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This year, there has been a substantial increase in calls to debt assistance services by seniors, including those struggling to make their loan repayments.

According to recent statistics from the National Debt Helpline, a free independent service launched in 2011 for Australians experiencing financial difficulty, the helpline received more than 120,000 calls from January to August this year, up from 115,000 calls during the same eight-month period in 2017 and the highest ever for this period historically.

A representative from the National Debt Helpline, operated by a network of community organisations across the nation including the Financial Rights Legal Centre in NSW, confirmed that the helpline has been particularly busy this year, with an increasing number of senior Australians reaching out for assistance.

The Salvation Army’s financial counselling service, Moneycare, also revealed seeing an 18 per cent increase in Australians requesting help, particularly those over the age of 55 and in “severe debt” (where the total sum of their loans are more than six times their annual disposable income).

Against the backdrop of an ongoing royal commission and increased scrutiny by regulatory bodies such as the Australian Prudential Regulation Authority, lenders in recent months started introducing limits on the proportion of new lending at very high debt-to-income (DTI) levels and policy limits on maximum DTI levels for individual borrowers.

The helpline representative also confirmed that mortgagors had started to express concern about being switched from interest-only (IO) to principal and interest (P&I) contracts, which the Reserve Bank of Australia (RBA) earlier this year warned could mean that IO borrowers are required to pay an extra 30 per cent to 40 per cent in annual mortgage repayments (or an additional “non-trivial” sum of $7,000 a year) upon contract expiry.

Tough times

According to a recent survey of 820 property investors from the Property Investment Professionals of Australia (PIPA), 13 per cent of interest-only borrowers were expecting to “struggle” when they begin repaying principal and interest, with a further 13 per cent “unsure” and 61 per cent confident in their ability to meet repayments.

Of those that said they would struggle to meet principal and interest repayments, 5.5 per cent said they have sold, or would have to sell, an investment property to meet loan commitments.

Additionally, the survey found that 48 per cent of investors said that changes to investor lending policies have impacted their ability to secure finance compared to 43 per cent when the survey was conducted last year.

Cheaper investment funds are more volatile, new research says.

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