What Causes Mortgage Arrears?

A mortgage arrears generally occurs as the result of an unexpected change to a person's professional or personal life. A change in circumstances, such as the loss of employment, a death or illness in the family, or a separation/divorce can cause borrowers to be unable to repay their debts as they had in the past. The financial stress of falling behind on repayments only compounds the stress of such events making it important to get the proper advice, help and support.

Such unexpected, and often unplanned for, events can have a greater impact than you may think. For example, the serious illness of a spouse or partner could easily result in the loss of three-quarters of the household income, as one partner reduces work hours to care for the other. Such a reduction of income would quickly put any family into financial difficulty. With home, car and credit card debts, the sudden and unexpected loss of income can have devastating effects.

It can be hard work to get back on track financially in the instance of a mortgage or other loan falling into arrears but it certainly isn't impossible. Looking at the above example more closely, the different repayments due such as Home Loan ($1400 per calendar month), two car loans ($400 pcm each), and three credit cards ($600 pcm) could cause serious financial stress if repayments were to fall behind.

The above example is based on everyday situations that families across Australia face but there is help available. A debt consolidation mortgage or bad credit loan could provide help for people who find themselves with an unexpected mortgage or loan arrears.

See the 'What is a home loan arrears?' FAQ for more information.