ASIC bank crackdown as borrower woes mount

At a time when more Australian families and borrowers are struggling to make ends meet, the country’s financial services watchdog is cracking down on banks that fail to properly support customers facing financial hardship.

The Australian Securities and Investments Commission (ASIC) has completed its review of 15 banks outside the four major banks on their scam prevention, detection and response activities.

ASIC Deputy Chair Sarah Court on Monday (9 September) said an unnamed list of lenders is firmly in the crosshairs of Australia’s corporate, markets and financial services regulator.

“We are actively conducting investigations into suspected breaches of hardship obligations (and) we will not hesitate to take enforcement action to ensure compliance.”

The half yearly report is part of ASIC’s ongoing focus on anti-scam practices in the broader financial services landscape and follows on from a review of the scam-related activities of the four major Australian banks released in April 2023.

Joseph Longo, Chair, ASIC, said the stress of continued cost-of-living pressures makes Australians increasingly vulnerable to financial exploitation and harm.

“We have seen firsthand, through our work on financial hardship, the impacts on Australians when lenders fail to appropriately support their customers.

“In the wake of our financial hardship review we took decisive action to address poor practices – and we have also seen the lenders included in the review swiftly address our feedback to improve their support for customers as cost-of-living pressures increase.

“We are considering further regulatory and enforcement action related to the issues our review identified … and working to educate customers on how to seek help and break down the administrative and emotional barriers that stand in their way,” Mr Longo said.

Mortgage stress at record highs

A staggering 1.4 million mortgagors are in distress, having struggled to meet repayment demands in August.

Finder’s Consumer Sentiment Tracker recorded the highest level of mortgage stress since it first began tracking in early 2019. 

More than 2 in 5 (42 per cent) homeowners struggled to pay their home loan last month. At the sharp edge of the debt picture, 13 per cent missed one or more mortgage repayments in the past six months, the survey found.

Owner-occupiers are, on average, taking out larger loans than ever before despite the fact the cash rate is sitting at a 12-year-high.

The average owner-occupier mortgage is now $634,479, which is up by 1.3 per cent from the previous month and up by 9.3 per cent from the previous year, according to data from the Australian Bureau of Statistics.

Richard Whitten, home loans expert at Finder, said many Australians are spending a disproportionate amount of their income on their home loans.

“Millions of mortgage holders have managed rate hikes so far, but now they’re facing severe financial strain as their savings and emergency funds dry up.

“Housing is increasingly becoming a major source of stress for Australians, with many struggling to keep afloat.”

In ABS data released this week, it was clear that debt obligations were only heading in one direction.

In July 2024, the most recent data available, new loan commitments rose 3.9 per cent for housing.

For investor housing, the value of new loan commitments in Western Australia rose 18.3 per cent, in Queensland by 8.6 per cent, New South Wales 4.0 per cent, Victoria 4.5 per cent, South Australia 3.0 per cent and in the Northern Territory it rose 0.5 per cent.

The Queensland Council of Social Service’s (QCOSS) 2024 Living Affordability Report, released Monday (9 September), painted a grim picture of a majority of households going backwards financially.

Three in five Queensland families are sinking further into debt every week, it found.

“We can see in the report that three out of five Queensland families are running deficit household budgets each week and that’s just to afford the basics,” QCOSS' CEO, Aimee McVeigh, said.

“We are now seeing a generation of children growing up in poverty through no fault of their parents.”

Western Australians are also feeling the pinch.

The share of WA homeowners falling months behind on mortgage repayments has jumped almost 50 per cent in 12 months.

The rush for properties in affordable Perth suburbs that has resulted in epic price growth is at least partly to blame.

Perth’s south-east borrowers are suffering some of the highest rates of mortgage pain in the country, with almost one in six homeowners in the area saddled with a high mortgage burden.

REIA’s latest Housing Affordability Report showed the average loan repayment now amounts to 48.1 per cent of the median family income, 1.3 percentage points more than last quarter.