Relieving Mortgage Stress

The Principles: A Common Approach for Assisting Borrowers Facing Financial Hardship

Press Release

Treasurer of the Commonwealth of Australia

The Hon Wayne Swan MP

(05/04/09)

Today I announce a new agreement between the Australian Government and the four major banks, to assist borrowers who are experiencing financial difficulty as a result of the global recession. 

The Principles have been negotiated between the Government and the four majors who represent around 80 per cent of the mortgage market. They are aimed at helping borrowers who may struggle to meet loan repayments if they lose their job and is all about Australians coming together to do what we can to cushion our people from the worst the world can throw at us. While Australia is weathering the global recession better than most countries, we are not immune from its impacts, and one of these is that unemployment is forecast to rise. 

The Rudd Government has consistently said it would do all it can to help cushion the impact of this once-in-a-generation global recession, where both financial institutions and families that find themselves in tough financial circumstances have a mutual interest in working together to pull through this crisis. The agreement with the banks means they will be able to offer a range of options for assistance to people with mortgages who lose their jobs and fall into financial hardship. The Principles place obligations on the four major banks to provide temporary relief to borrowers and to provide assistance options that take into consideration the needs of the borrower concerned. 

Options for assistance that the banks can offer include:

• in relation to mortgages, postponement for up to 12 months the dates on which payments are due under the contract (with interest to be capitalised into the loan);
• an extension of the period of the contract and a reduction in the amount of each payment due under the contract;
• interest-only breaks on loan repayments; and
• fee waivers.

Of course, these options won't be appropriate in every case, and banks will make assessments based on the borrowers' ability to meet new contractual obligations in the long term. But I congratulate the banks for working so co-operatively with the Government on behalf of their customers and encourage all other financial institutions to follow suit and sign up to the principles. 

Discussions are already underway with credit unions and mutual building societies, who already have procedures for working with members facing financial hardship, on appropriate participation in this agreement. Borrowers facing hardship that are customers of one of the four major banks can contact them on: 

If a borrower believes their bank has not lived up to its obligations under the Principles, they should first raise this with their bank's central customer complaints area, and if not satisfied with the response, then contact the Financial Ombudsman Service on 1300 78 08 08 or at www.fos.org.au. CANBERRA

5 April 2009