Mortgage Hardship 'no Worse Than Usual'

The Age

Friday May 9, 2008

Ari Sharp

THE number of home buyers encountering hardship is no higher than normal despite inflation and interest rate rises, a leading mortgage insurer says.

Genworth Financial says the increase in borrowers seeking a "hardship solution" is typical for this time of year, with the intensity largely attributable to the lag effect of Christmas purchases on credit.

Borrowers are reeling from four interest rate rises since August, as well as inflation and higher petrol prices that are eating away at household incomes. Some home owners have seen a fall in the value of their property, leaving them out of pocket if forced to sell.

Data released by Genworth showed illness or injury was the main cause of mortgage holders hitting financial hardship in 38% of cases.

This was followed by unemployment and less income, each on 15%, followed by maternity leave on 11%.

Overcommitment to a mortgage, in which borrowers have bought a property beyond their means, was the main cause in only 2% of more than 1000 applications assessed by Genworth, while interest rates alone were also blamed for just 2% of hardship cases.

The company said delinquencies by first-home owners in the first year of the mortgage had fallen 40% between January last year and this March.

© 2008 The Age

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