Higher hardship threshold to aid homeowners

Homeowners with a mortgage of up to half a million dollars will be able to seek assistance from their lender under fresh changes designed to help people hold onto their homes if they hit financial difficulties.

From November, the Rudd Government plans to lift the 'hardship threshold' under which lenders must formally consider variations to a loan if the borrower can't pay due to unemployment.

The threshold, currently $312,400, will rise to $500,000.

The Minister for Corporate Law, Nick Sherry, says borrowers under the new threshold will be able to seek assistance from their lender.

"Many Australian families may be missing out on the help these hardship provisions can provide - help that may keep people in their homes during challenging economic times," Sherry says.

"This (change) means if homeowners find themselves in financial hardship they'll be able to request help. That might be a change to certain terms of their credit contract on the ground of hardship or a postponement of enforcement proceedings."

The government is also simplifying the way the threshold is calculated, which Sherry says will provide greater certainty to credit providers, as the threshold has varied from approximately $295,000 to $368,000 since 2004, "making it difficult for providers and consumers to know if a loan qualifies".