Aussies suffer mortgage distress

People are taking extreme measures to "hold onto the dream of home ownership", a study has found.

AAP

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• Home ownership a lost dream

AN Australian family suffering from mortgage stress is living on rice to avoid losing their home, a researcher says.

People are taking extreme measures to "hold onto the dream of home ownership", a study of home mortgage distress in western Sydney has found.

The research, carried out by the University of Western Sydney over 12 months, uncovered examples of the desperate lengths people will go to as they struggle to meet loan repayments.

Governments and the finance sector have also "grossly underestimated" the impact of the global financial crisis, said the study's lead author and director of the university's Urban Research Centre Professor Phillip O'Neill.

"Borrowers will go to extraordinary lengths to maintain their mortgage rather than forego the dream of home ownership," he said in a statement on Wednesday.

"Participants in the study revealed how they have cut back their weekly outgoings, even on the most basic items - for a diet of basic rice in one instance - rather than default on their mortgage."

The report identified the key triggers of mortgage distress as loss of income, sickness, the birth of a child or family breakdown.

"Mortgage distress has been rising in Australia," it concluded.

"(And) where stress and distress occur, they invariably involve great personal hardship."

Prof O'Neil said the findings cast doubt on the dominant view of regulators and financial experts that Australia has come through the economic downturn relatively unscathed.

"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," he said.

The report found that many households on tight budgets didn't have any backup funds to cope with unexpected costs, while participants in the study said banks ignored their problems.

"People told us lenders offered them poor support and inadequate advice services to help them through their difficulties," Prof O'Neill said.

"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.

"In some cases people may be better off financially and emotionally if they let their mortgage go - let go of the dream of owning their home - and rent a house."

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