A national finance and mortgage broker focus group has revealed that individuals who have recently been through a marriage or relationship breakdown are now finding it almost impossible to refinance or take out a new loan, and has blamed a lack of compassion from lenders.

Managing director of the Finance Brokers Association of Australia (FBAA) Peter White AM said this was the biggest concern of brokers from across the country who participated in the association’s recent focus group to discuss the impacts of interest rate increases and rising inflation.

He explained that as credit assessments are tightening, those who have recently divorced or separated are paying the price for actions of their former partner or the circumstances in which they found themselves in, and called it “grossly unfair”.

“It’s always been a more difficult path for people in this situation, but in the past it has been easier for them to buy out a property that was owned jointly, or refinance to start a new life,” Mr White said.

“But now banks are simply rejecting applications outright, due solely to financial problems around the relationship breakdown, and despite an applicant having an excellent credit history to that point.”

He said every situation is different and lenders should assess every person individually and take into consideration the circumstances of any finance problems.

“Relationship breakdowns are messy. Sometimes one partner makes decisions that affect the other, or the stress of the situation causes medical issues, or legal and relocation costs put financial pressure on a couple and repayments fall behind.

“But surely the Australian spirit of a fair go must be extended to people who deserve a chance to reposition their lives and move on from a difficult situation.”

Mr White said brokers are helping and some have successfully made the case for their clients to lenders, but the solution is for banks to change the way they are making assessments. 

“We understand there are responsible lending criteria, but this is no excuse for denying people who meet these criteria the opportunity to start again by holding a past circumstance against them forever.

“Banks can easily extend some compassion instead of being pig-headed and applying an overarching and inflexible policy for everyone.”