Stressed homeowners raiding super

HOMEOWNERS making a final desperate grab to save their homes from repossession are raiding their superannuation at an alarming rate.

Broken piggy bank

Stressed homeowners raiding super

HOMEOWNERS making a final desperate grab to save their homes from repossession are raiding their superannuation at an alarming rate, new figures show.

More than $175 million was released from super funds last year to help homeowners pay their mortgages.

Since January 2007, more than 10,000 people have received approval for mortgage assistance, according to Australian Prudential Regulation Authority documents obtained under Freedom of Information.

Mortgage assistance is released to homeowners only in a final bid to prevent the foreclosure of a property.

Rising interest rates and the increased cost of living have been blamed for the sky-rocketing numbers.

Financial counsellor Carolyn Joy, from Eastern Access Community Health, said accessing super was a last resort but a growing number of people had no other options.

The figures show $175.4 million was released from superannuation funds last year -- 130 per cent higher than $76.7 million in 2005.

Of the 16,348 applications approved by APRA last year asking for early access to superannuation, 9011 were for mortgage assistance. The second-largest reason was for medical treatment, with 2500 approvals.

In the first quarter of this year, 1260 homeowners were given access to their super to prevent foreclosure -- more than double that for any other reason.

Ms Joy said people who pulled money out of their super had to pay tax on the withdrawals and were left with a fraction of their original balance.

She said the demand for super cash led to processing delays at APRA, putting borrowers at further risk of losing their homes.

"Emergency applications to stop foreclosures on houses used to take five days but now take 12-14 days,'' Ms Joy said.

She said that the move towards casual employment and work contracts was also to blame for the increase.

"If people get sick for a week or month or two, or get injured, they are finding they don't have sick leave and then it doesn't take long to fall behind,'' she said.

The data backs up predictions by financial analysts that almost one million households will experience mortgage stress by September, with 40 per cent under severe stress.

But some financial planners warn that using superannuation to save a home may be a Band-Aid solution.

"These figures confirm that APRA still hasn't heard the message that raiding the superannuation piggy bank is not an appropriate response to dysfunction in the mortgage market,'' said David Tennant, the head of Care, a financial counselling service.

"My experience . . . is that all it does is shift the date on which foreclosure takes place.''