Australia boasts that it survived the global financial crisis without major damage to its economy, nor to its financial institutions.
Yet the self-congratulators ignore the extreme difficulties that have been faced by many households who have struggled to meet their mortgage repayments in recent years.
A major study of mortgage distress by our team at the UWS Urban Research Centre, assisted by colleagues at the University of Sydney, has uncovered tales of desperate measures as households do everything possible to hold onto their dream of home ownership.
The study confirms reports by ratings agencies that Western Sydney neighbourhoods are the places most affected by mortgage distress.
The study exposed three common experiences of mortgage distress in Western Sydney.
The first is that many households with mortgage commitments have no spare financial capacity to cope with unexpected jolts to their lives. The key triggers of mortgage distress are loss of income, sickness, the birth of a child and family breakdown.
The second is that borrowers will go to extraordinary lengths to maintain their mortgage rather than forego the Australian dream of homeownership. Participants in the study revealed how they have cut back their weekly outgoings, even the most basic items - for a diet of basic rice in one instance - rather than default on their mortgages.
A third common experience is that of inadequate attention to their problems from financial institutions. Study participants reported that lenders offered poor support and inadequate advice to help them through their difficulties or to ease them out of their mortgage contracts. In one case a distressed borrower reported being encouraged by her bank to build her credit card debt to extraordinary levels rather than default on the mortgage contract.
The Urban Research Centre's report argues for better assistance to mortgage borrowers. Independent third party advice should be mandatory at the time of signing a mortgage contract. And when borrowers find themselves in distress, financial institutions should provide an ombudsman-style service to help distressed borrowers receive the best possible advice on how to negotiate the options available to them, including a gracious exit from the mortgage contract.
Overwhelmingly, buying a home is the most important financial venture in Australians' lives. Successfully buying a home can also be a cruel measure of a person's worth in a nation which holds up home ownership as a compulsory part of a successful life.
Australians are extraordinarily dedicated and disciplined in their mortgage commitments. But for some, the task is unfairly difficult. We should take these people's suffering into account when we proclaim the financial health of our nation.
The mortgage distress report can be downloaded at www.uws.edu.au/urban
Phillip O'Neill is Professor and Director, Urban Research Centre, The University of Western Sydney.
Email a friend