Rising rates hitting split couples hard

Couples with relationship issues are now finding it almost impossible to refinance or take out a new loan, according to the Finance Brokers Association of Australia's (FBAA) national finance and mortgage broker focus group.

Such customers have blamed a lack of compassion from lenders, the FBAA group found at its most recent meeting.

FBAA managing director Peter White AM said that the impact of rising rates and inflation on this cohort of borrowers was now the biggest concern of brokers across the country.

He explained that as credit assessments are tightening, those who have recently divorced or separated are "paying the price for actions of their former partner or the circumstances in which they found themselves in", and suggested this was “grossly unfair”.

“It’s always been a more difficult path for people in this situation, but in the past it has been easier for them to buy-out a property that was owned jointly, or refinance to start a new life,” Mr White explained.

“But now banks are simply rejecting applications outright, due solely to financial problems around the relationship breakdown, and despite an applicant having an excellent credit history to that point.”

Case-by-case consideration, please

Mr White said every situation is different and lenders should therefore assess every person individually and take into consideration the circumstances of any financial problems.

“Relationship breakdowns are messy,” he said.

“Sometimes one partner makes decisions that affect the other, or the stress of the situation causes medical issues, or legal and relocation costs put financial pressure on a couple and repayments fall behind.

“But surely the Australian spirit of a fair go must be extended to people who deserve a chance to re-position their lives and move on from a difficult situation.”

Stop being ‘pig headed’

Mr White emphasised that brokers are helping these borrowers - and some have successfully made the case for their clients to lenders - but the solution is for banks to change the way they are making assessments. 

“We understand there are responsible lending criteria, but this is no excuse for denying people who meet these criteria the opportunity to start again by holding a past circumstance against them forever,” he continued.

“Banks can easily extend some compassion instead of being pig-headed and applying an overarching and inflexible policy for everyone.”

[Related: 40,000 Aussies helped by no-interest loans: NAB]