Contrary to comments made by consumer groups, a rising incidence of bankruptcy in Australia had little to do with mortgage brokers according to The Mortgage & Finance Association of Australia (MFAA.
"The predominant cause of individual bankruptcies, as opposed to company bankruptcies, is personal debt, often associated with out of control credit card use," said Phil Naylor, CEO of MFAA. "Where people go wrong is taking on additional personal debt after gaining the maximum mortgage they can afford. The 'buy now pay later' mentality coupled with the 'have it all' attitude that is becoming more prevalent in society is the root of many financial problems."
Choice has issued a statement blaming rising interest rates, spiralling debt levels and aggressive lending practices to a big jump in the number of people filing for bankruptcy in Australia after the Insolvency and Trustee Service released its latest bankruptcy data.
The report showed that a total of 6,585 Australians have filed for bankruptcy in the March quarter - an increase of 8.9% from the same period last year. A large proportion (81.7%) of the total bankruptcy applications were from individuals compared to only about 18% from businesses.
Choice has called for immediate industry-wide adoption of a responsible lending charter by financial institutions that would include generous hardship provisions for consumers struggling to repay mortgages and credit card debts. It also wants an immediate implementation of the uniform finance brokers' legislation which would protect consumers from unscrupulous mortgage brokers who have been known to push people into loans that they cannot afford.
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