Anna Bligh Interview Sky News, discussing financial hardship and what banks can do to help

Tom Connell 

Those people with a home loan who have had a fixed rate are getting a shock as they come off that fixed rate. Often as low as two percent and onto the new variable rate that can be as high as six or even seven percent. So how is that affecting people out there, in terms of those not just in mortgage stress but going even worse perhaps becoming in arrears? Joining me now is Anna Bligh from the Australian Banking Association. Thanks very much for your time. This has been a sort of $64,000 question, what are the latest figures on how many people coming off those ultra-low rates are running headlong into as I said, not just mortgage stress but even worse?

Anna Bligh 

Tom, we are seeing a slight uptick in the number of Australians who are defaulting on their mortgage. But in total, it is still not yet back to what it was at the default rate in 2019, before COVID hit. So, it’s fair to say that even those people who are coming off fixed rate mortgages onto a variable rate are managing I think, to be honest, better than we had anticipated they might. But we do know that for some, it’s really tough and banks are able to offer people in that circumstance, very practical assistance. We’ve seen more than 20,000 Australians take up that sort of hardship support, and we want to encourage those people who are either struggling or worried that they may miss a payment, talk to your bank as early as they can and that means banks will have the best chance of getting you back on your feet.

Tom Connell 

I’m sure there are people out there in the community that don’t have the best view of banks, maybe they don’t trust them, maybe they think let’s avoid any conversation until we know that moment when we cannot actually make a payment. So going earlier, what options does that open up for people? If they go they go, look, I’m going to be a few hundred behind when I come off this fixed rate, what can I do? What are my options?

Anna Bligh 

Well, first of all, I’d say Tom, that two thirds of all of those people who took out fixed rate loans, when interest rates were very low during COVID have already come off those fixed rate loans and what we’re seeing in all the data is that those people are managing and they’re doing that through a number of ways. Firstly, many of them, more than ever, 630,000 Australians in the last 12 months refinanced either within their own bank, are going and looking for a better rate, or with another bank that offered them a better rate. So, in some cases, people are taking things into their own hands. But if people are worried, if they think they’re at risk of missing payments, banks have got really practical support. They can defer, they can put you on an interest only arrangement for a period of time, they can extend the length of your loan to reduce your payments. In some cases, they can defer your payments, or reduce them for a period of time. These are things that actually help people get through until interest rates start coming down, or their circumstances improved. So, as I said, I think it is hard sometimes, and people are often very embarrassed about talking about money and financial problems. But it can get very difficult for banks to help if people let things spiral too long.

Tom Connell 

Okay, so you said people take it into their own hands. I mean, the tricky part is the people in the most dire trouble often have trouble shopping around because of getting reassessed. With this APRA rule, is that one that’s not really fit for purpose anymore? We all understand why you add basically a 2% buffer to the current interest rates, if it’s a new loan, but if you’ve already got your loan, and you’ve been paying it off, surely adding 2% just punishes the customer?

Anna Bligh 

Tom, there is a little bit of wiggle room in that for customers that are customers of the bank that they’re refinancing with, that bank can be very competent, they’ve got a long history with the customer and they can be a little bit flexible. It’s when you’re new to a different or new to a bank, when you’re still shopping around. So yes, we do have rules in place in Australia, that makes sure we have a very stable, very strong and very safe banking system. But for people who are finding it difficult, we also have very well practiced very experienced teams that can provide very real relief through those hardship arrangements.

Tom Connell 

Yeah, which you’ve alluded to. I understand completely why they matter, but for those where that number is relatively low falling in arrears, that’s great. But there’s a bigger number who might be really struggling. Again, freedom for them to shop around. I mean, it’s great they can renegotiate with their bank, but that’s not really kicking off competition is it?

Anna Bligh 

Well, as I said, in our system Tom, there is always a compromise or a juggling of competition, or of strength and stability. APRA is charged with ensuring the way that banks assess loans is done in a way that preserves the strength and stability of the system, which can make it harder for some individuals. But as I said, their own bank does have flexibility with that buffer and right now we’re in a very competitive market. You’ve got 630,000 people refinancing, some of them about 40% with their own bank. So that means your own bank is highly motivated to keep you as a customer. Right now is a very good time to be talking to them about a better rate.

Tom Connell 

Always a conversation to have, it can save your money. Anna Bligh I appreciate your time. Thank you.

Anna Bligh 

Thank you.