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A survey conducted by the Australian Securities and Investments Commission’s (ASIC) Moneysmart through YouGov has found that three in 10 (30 per cent) of respondents said they would not seek hardship assistance from their bank or lender despite struggling to meet repayments.
The survey collected responses from 1,061 Australians over the age of 18 between 11 and 15 April in order to understand the scope and experience of financial hardship.
The research found that 47 per cent of Australian adults with debt (equivalent to 5.8 million people) have struggled to meet repayments over the last 12 months, with the top reasons being cost of living pressures, reduced income, and unexpected expenses.
However, in the last quarter of 2023, there was an increase of 54 per cent in the number of hardship notices related to home loans when compared to the same period in 2022, indicating an increasing number of mortgage holders reaching out for support, according to ASIC.
A matter of concern for ASIC commissioner Alan Kirkland was the proportion of respondents who said they would rather sell their belongings or assets (42 per cent) before applying for hardship assistance from their bank or lender.
A further 40 per cent indicated that they would gain secondary employment in order to meet repayments instead of applying for financial assistance.
“For many Australians, the path to seeking help feels daunting, confusing, and challenging. It is concerning that people would rather sell their personal belongings or get a second job rather than seek financial hardship assistance,” Kirkland said.
“Customers in hardship are entitled under the law to request assistance. These findings should be top of mind for lenders when supporting Australians in financial hardship.”
Emotional barriers holding back borrowers from seeking help
The regulator’s research also found that a lack of awareness and emotional barriers were preventing borrowers from seeking out help when necessary.
Fifty-five per cent of respondents said they were not aware of their entitlement to financial hardship from a lender or bank, while 20 per cent said they had previously sought out financial help.
A lack of awareness of available assistance programs was the case for 37 per cent of respondents, 33 per cent did not know where to go for help, and 31 per cent said they did not know which sources were trustworthy when seeking help.
The common potential emotional barriers respondents faced were anxiety and stress caused by hardship (51 per cent), feelings of embarrassment or shame (40 per cent), and feelings of failure (40 per cent).
Furthermore, 96 per cent of respondents who have gone through financial hardship have experienced negative side effects such as stress or anxiety (73 per cent), sleep loss (56 per cent), and deteriorating physical health (41 per cent).
Kirkland said: “The message for Australians experiencing financial stress is that banks or lenders have a responsibility to support customers. If you are worried about being able to make your repayments, you’re entitled to ask your bank or lender for help.
“If you aren’t happy with your bank or lender’s response, make a complaint and, if that doesn’t resolve the issue, contact the Australian Financial Complaints Authority.”
Borrowers don’t believe lenders will help
Out of the respondents who said they would not seek out hardship assistance from their lenders or credit providers, 31 per cent said they did not think their lender would do much to help their situation.
This comes off the back of ASIC’s Hardship, hard to get help: Lenders fall short in financial hardship support report that found that lenders are not doing enough to support Australians who are struggling to honour their debt repayments.
For example, the report found that some mortgage lenders’ financial assistance application process was too difficult for customers, with 35 per cent dropping out of the application process on at least one occasion.
The Moneysmart research also found that 50 per cent of respondents worried that gaining financial support from their lender would cost them more in the long run, while 32 per cent feared that it would negatively impact their credit scores.
[RELATED: Lenders need to do better on financial hardship assistance: ASIC]
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