Victorians hurt by home loan fiasco

A new report, commissioned by the Victorian Borrowers' Association, claims that thousands of low-income earners were damaged by a state-run home loan scheme operated in Victoria in the 1980s and 1990s. The report states that the then Housing Ministry, which created the Capital Indexed Loan Scheme, did not exercise due care, leaving thousands of borrowers with total losses in excess of $1 billion.

CAPIL loans were made to about 5,700 low-income earners, including disability pensioners, single parents, non-English speaking migrants and the elderly, with the interest rate set at 3 per cent plus increases for inflation. Many of the borrowers were lent sums of money far in excess of what they were able to repay, sometimes by as much as 50 per cent more. In addition, the report states, many of these people had been eligible for rent assistance and would have paid out far less on public rental than borrowing for their housing costs. Many of these people ended up with losses in excess of $10,000 each.

The report focuses on the CAPIL scheme but its findings are applicable to other state-run schemes, says its author Phil Stott. Between 1984 and 1996, more than 27,000 people took out government housing loans in Victoria. The Victorian Borrowers' Association represents this group. Last week the Government announced an $80 million support package to assist those in hardship, but the Borrowers' Association rejected the offer, claiming that only a small number of its members would benefit.