Rush To Counsellors As More Hit The Panic Button

Rush To Counsellors As More Hit The Panic Button

Sydney Morning Herald

Thursday November 8, 2007

Paul Bibby

MORE than 30,000 households will experience mortgage stress for the first time as a result of yesterday's interest rate rise with financial counselling services already noticing an increase in calls.

The Housing Industry Association of Australia said yesterday that the number of households spending more than 30 per cent of their income on mortgage repayments would increase by about 5 per cent with the latest rise, bringing the number under strain to 654,000.

Sydney accounted for 146,000 of these households, an increase of 5000 since the last rate rise.

The association's chief economist, Harley Dale, said the figures painted a grim picture. "Our analysis found that since August 2006 the number of households in Sydney experiencing mortgage stress increased by 14.5 per cent," Mr Dale said.

"Those who have entered the housing market over the last two years are probably the hardest hit. Younger people who have not yet reached their earning peak who are being affected by the interest rate environment."

Financial counselling services said they had already experienced a jump in calls yesterday, as news of the interest rate rise spread.

"You do see a bit of a spike in calls as people see all of the media coverage and start to freak out a bit that they're not going to be able to make their mortgage or credit card repayments," the principal solicitor at the NSW consumer credit legal centre, Katherine Lane, said yesterday.

"But it's when the first letters from the bank start coming in that things start to get really crazy. ... By that point you're really starting to see the social consequences - the impact on people's relationships and their marriages. Household debt and personal debt is crippling people's lives."

Sydney's counselling services have seen a dramatic increase in the number of calls for help over the past two years as cumulative effect of multiple interest rate rises take their toll.

Calls to the Wesley financial service increased from 5500 in the 2005-06 financial year to 7287 in the 2006-07 financial year, and the Salvation Army's counselling services took 1000 more calls in the six months to June than over the six months before.

However the services have not been able to keep up with the demand. The Salvation Army took 10,000 calls in the 12 months to June, but could only provide help to 30 per cent of the clients because there were not enough counsellors.