Mortgage stress and rising living costs - your legal rights

From Legal Aid Queensland consumer advocate and principal lawyer Paul Holmes

Many Australians have been doing it tough over the last 12 months, dealing with a run of interest rate hikes and rising cost-of-living pressures. As we approach Christmas, things are getting tougher.

Roy Morgan Research has found that more than one and a half million Australians (30%) are deemed at risk of mortgage stress – where mortgage repayments take up a substantial percentage of their total income.

And after a year of interest rate rises, at least 750,000 additional households are now struggling to keep up with their mortgage repayments.

It is not just mortgage stress affecting the community. Consumers with personal loans and credit cards, and renters are also finding things particularly tough. And with another interest rate rise this week, more people will be trying to work out how they can make ends meet.

That’s why now it’s more important than ever for people to understand their rights if they are having trouble paying their loans.

Australian consumer credit laws give borrowers the right to access hardship provisions if they are struggling to meet their repayments.

Under the national credit laws, consumers have the right to ask their banks or other lenders for financial hardship.? There is no magic to asking for hardship, you just need to say – what for many of us is really difficult – “I am in trouble, I need help.”?

When you ask for financial hardship relief, you should ask your lender for what would help you in your particular circumstances. What you need will be different from your neighbours, your friends and your relatives.? You could ask for more time to pay off the loan, with reduced or no payment amounts for a certain amount of time.? If you’re overdue on payments, you could also ask to capitalise your arrears, where overdue amounts are added to your mortgage in regular payments and paid off over a longer period.

What is important is if you are in financial trouble or think you will be, contact your lender as soon as possible. Generally speaking, the earlier you contact your lender the more help they can provide.

If they say that they can’t help you, there is a process where you can complain to your lender’s internal dispute resolution area, and if you are still not satisfied with the response, take your complaint to the Australian Financial Complaints Authority www.afca.org.au .

Be aware that not all lenders and other service providers, such as body corporates or local councils, are legally required to consider your financial hardship, but that shouldn’t stop you from asking them. It is important to carefully consider your financial circumstances.

It can be really hard to talk to someone if you’re struggling financially. The first step is always the hardest, but also the most important part.

If you are uncomfortable starting a conversation with your lender or service provider, or if you have tried unsuccessfully to seek help and want to know where to go next, we recommend you talk to us at Legal Aid Queensland, your local community legal centre or a financial counsellor. We work closely with financial counsellors to help you and other Queenslanders.

Legal Aid Queensland also has a free legal information guide “Are you struggling to pay a loan?” available to read online at the Legal Aid website.

If you are struggling to pay a loan and need legal advice, call Legal Aid Queensland on 1300 65 11 88 or visit www.legalaid.qld.gov.au .

To find a financial counsellor contact the National Debt Helpline on 1800 007 007.

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