Divorcees suppressed by rising interest rates
Individuals who have recently been through a divorce or separation are finding it extremely difficult to refinance or obtain fresh credit, according to a focus group of national finance and mortgage brokers.
As Peter White AM, managing director of the Finance Brokers Association of Australia (FBAA), put it during a recent focus group on the effects of interest rate hikes on inflation, this was the top concern of brokers from all over the country.
He called it "grossly unfair" that those who have recently gone through a divorce or separation are being penalised for the behaviour of their ex-spouse or the circumstances in which they found themselves.
"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 remarked.
"But now banks are simply rejecting applications outright, due solely to financial problems around the relationship breakdown and despite the applicant having an excellent credit history to that point."
He argued that lenders need to look at each borrower separately and analyse the specifics of their financial situation before extending credit.
"Relationship breakdowns are messy. 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.
Continuing, the MD expressed: "But surely the Australian spirit of a fair go must be extended to people who deserve a chance to reposition their lives and move on from a difficult situation."
Mr. White acknowledged that brokers are assisting and that some have successfully advocated for their clients with lenders, but he said that the solution lies with a shift in the way in which banks conduct their evaluations.
"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."
"Banks can easily extend some compassion instead of being pig-headed and applying an overarching and inflexible policy for everyone."
