Bad Credit Loans, Bad Credit Home Loans – Bad Credit Finance Australia

There is expectation across the board that interest rates will be coming down a number of times during 2012 – the first rate cut is expected in February.

As home loan rates begin to ease, overextended borrowers will be able to breathe a sigh of relief. Rates will be reduced not only on home loans but also car loans, personal loans and credit cards…making it easier for families to stay afloat.

While 2011 had brought 2 interest rate reductions only towards the end of the year – it was enough to make a difference to many families carrying significant levels of debts. Borrowers have been on a look out for debt consolidation opportunities with many looking for a well priced fixed rate mortgage which allows them to consolidate unsecured debts in to the loan.

Further reductions to interest rates should bring further mortgage stress relief which is very much in demand.

According to Fitch Ratings, mortgage arrears in Australia had declined midway through the year as interest rates on home loans especially fixed rate home loans began to come down.

Figures released to the market yesterday show that mortgage arrears were down to 1.42% of all home loans in September, after being recorded in May this year at 1.77%.

Fitch Ratings believe that greater stability in the interest rates is mostly responsible for this decline.

While overall home loan arrears and default levels improved in all states, localities still doing it tough included Sydney’s south-western suburbs, the NSW Central Coast and the Gold Coast in Queensland.

The south-west of Western Australia was likewise still among the regions with higher delinquencies, and tourism destinations in coastal locations were increasingly in arrears.

Non-banks have jumped on the rate cutting wagon after most big banks and other lenders had reduced their variable loan rates by 25 basis points.

Banks caved to pressure from the consumers and the Treasury last week when they finally announced their decision to pass on the Reserve Bank’s 25bp cut. Non-bank lenders have also done the same, making most variable home loans offered in Australia another quarter of a percent cheaper.

Liberty Financial announced it would cut 25bps off its variable home loans, taking the rate on its basic home loan to 6.49%.

Liberty Financial national sales manager John Mohnacheff said that the rate reduction is expected to benefit the deflated property market and generate more interest in non-bank home loans.

“With credit growth and consumer confidence both down, this change will create momentum and set the scene for an improved outlook in 2012,” he said.

FirstMac and Australian First Mortgage have also announced that they will pass on the full 25bp cut. AFM’s move will bring the rate on its 95% LVR full doc home loans to 6.49%.

Second tiers have also followed the Reserve Bank move, with AMP Bank and Westpac subsidiaries St. George, BankSA and Bank of Melbourne announcing 25bp cuts.

Australian Home Loan arrears that are greater-than-30 days  remained stable at 1.69 per cent in July 2011.

According to a report published by Standard & Poor’s Ratings Services, non conforming home loan arrears including bad credit home loan arrears increased by 52 basis points to 12.18 per cent, with $1.63 billion in subprime RMBS outstanding, which is down by around $282 million in July compared to June 2011.

It seems that borrowers who are self employed are most significantly exposed to the risk or arrears on their loans.
Clearly the current economic conditions in Australia have a lot to do with cash flow problems experienced by the self employed borrowers. Many business owners are struggling and are having difficulties meeting all their repayment obligations.

Debt Consolidation options for borrowers with impaired credit history can appear to be limited. Certainly any application made to a bank for a personal loan to consolidate debts would be declined. Unsecured personal loans generally require borrowers to have a clean credit history as do credit card applications.

Borrowers with a history of bad credit but with equity in property may wish to consolidate unsecured debts into their mortgage. In doing so you may find that your monthly repayments are reduced significantly. Naturally to qualify for a mortgage refinance at an increased amount you must be able to demonstrate loan affordability.

If you are not a home owner but own a motor vehicle outright or perhaps a boat or a motorbike, you could use the equity in these assets to apply for a secured personal loan for debt consolidation. Value of your asset must exceed the amount that you wish to borrow.

If you have some history of bad credit, have no assets and are looking to consolidate unsecured debts – you may also wish to consider a debt agreement. To qualify for a debt agreement you must have at least $8,000 in unsecured debts (this can not include your home loan or car loans). If you have previously had a part 9 agreement or were previously bankrupt you will not qualify.

Mortgage arrears levels continue to show improvement as people are paying down their debts and limiting their spending.

According to the latest arrears report from Standard & Poor’s, home loans underlying Australian prime residential mortgage-backed securities (RMBS) that are greater than 30 days in arrears fell to 1.69 per cent in June 2011 from 1.81 per cent in March.

The decline in the levels of home loan arrears indicate signs of recovery.

Ms Chaplin said she expects arrears to fall even further over the coming quarter as the Reserve Bank’s 25 basis point rate cut begins to filter its way through to home owners.

“This was evident when the RBA cut the cash rate from 7.25 per cent to 3 per cent over seven months from September 2008 to April 2009.

Many borrowers do not realize that irregular payments on their home loans can give them bad credit history.

Sometimes paying your home loan 1 day late because your loan repayment was set up to occur one day before your salary, can result in home loan providers declining your refinance application. Even if your home loan is in order, you are simply making payments a day or two late every month, will make it difficult if you apply for debt consolidation or a car loan with your mortgage provider.

Bad credit history will prevent borrowers from accessing unsecured loans and may create difficulties when going for a mortgage refinance.

““As a result of the GFC, all lenders considerably tightened up their lending criteria with a much greater emphasis on the credit worthiness of applicants. In this environment, you really can’t have a clean enough credit history for the lenders and any suggestion that a person can’t meet their debt repayments on time is a red flag,” he commented.

The problem is even more serious if you wish to borrow more than 80% of your home value and need to obtain mortgage insurer approval.

Mortgage insurers won’t even consider an applicant with any sign of home loan arrears.

More and more home owners are caving in under the pressure of home loan costs, choosing to sell the family home and go out to renting to ease financial stress.

A new study shows that between 2001 and 2009, 20% of home owners in Australia had decided to sell up and go renting. This is double the figures in the UK.

More than 50% of these subsequently returned to the property market, buying a cheaper property with a smaller home loan, however many others went on to apply for public housing and continued to rent.

The Royal Melbourne Institute of Technology survey was based on the housing histories of thousands of Australians over nine years.

It found that former owners who did not return quickly to the property market were more likely to enter public housing or qualify for Commonwealth rent assistance than long-term renters.

It seems that the lack of housing affordability with escalating property prices and escalation costs of home loans are largely to blame for this trend.

During 2011, Australia has taken the unenviable title as the second most unaffordable housing market in the world.

Australia featured eight of the top 20 markets in which housing is ranked as being “severely unaffordable”, according to the 7th Annual Demographia International Housing Affordability.

The survey found that Sydney was the world’s second most unaffordable city, Melbourne sixth and Adelaide 18th.

The remaining capitals all feature in the top 50 with median house prices more than six times the average salary compared to the accepted international standard of three times annual income.

Furthermore Australia has suffered from a very high increase in mortgage defaults in recent months.

Investment services firm Moody’s said the rate of mortgage holders nationwide failing to meet their repayments rose from 1.36 per cent to 1.67 per cent between March and June.

Meanwhile, the number of homeowners facing mortgage stress jumped to 25 per cent last month from 21 per cent in June, mortgage insurance provider Genworth Financial said in its monthly Homebuyer Confidence Index.

Rental vacancies have declined to 1.8 per cent from 1.9 per cent, it reported.

CREDIT reporting agency Veda Advantage has urged the Australian government to move quickly to update credit reporting laws, claiming the threat of a second economic downturn is causing uncertainty in the finance sector.

A Senate committee gave its support to the government’s draft plan to upgrade Australia’s credit reporting legislation and processes, prompting Veda adviser Matthew Strassberg to ask for a quick turnaround.

“Two years ago, the Minister for Privacy Brendan O’Connor announced a timetable to ensure passage of credit reporting reforms by mid-2012. We support that timetable,” he said said in a statement.

In view of the growing uncertainty on financial markets and the possibility of another global recession this legislation needs to be given priority.

Mr Strassberg said there were a number of gaps in today’s credit reports that have to be addressed as a matter of urgency. One such gap is the lack on info on the report as to the borrowers true credit limit on all their credit facilities and loans such a personal loans, home loans, car loans and credit cards.

Allowing credit agencies to obtain that type of information could only benefit consumers, he said, because companies would then have a clearer idea of the customer’s financial standing and their ability to pay their debts.

It was a view backed up by the Senate’s Finance and Public Administration Legislation Committee, which handed in its report on the government’s credit reporting draft today.

It would also change the regime from negative, where agencies mostly accessed bad information such as defaults, to positive.

This would offer a more comprehensive picture of the credit position of a borrower.

Recent research by Moody’s indicated that mortgage defaults are ripe in the community as borrowers struggle to meet repayment obligations while home values decline and businesses struggle.

This is certainly something the RBA should give some serious attention to when considering their future interest rate strategies.

The report shows that the proportion of home loans in default – where borrowers are behind on their repayments by 90 days or more – has gone up  from 1.36 per cent in March last year to 1.67 per cent at the end of June.

While house values have declined significantly in Victoria, Moodys had found that the most affected areas were in Queensland, NSW and WA.

There is certainly evidence of the two-speed economy, said Moody’s senior analyst Arthur Karabatsos.

Borrowers in the less affluent areas with a high proportion of their income going towards their home loans are the most affected.

In Western Australia’s non-mining areas, price rises for food and utilities took a heavy toll.

In other negative reports, a NAB survey of industry players found that house prices have fallen 2.4 per cent across Australia this quarter.

Victorian house priced declined the most during the current quarter. Things are expected to get worse before showing some improvement.

CommSec economist Craig James described it as a “dead cat bounce” in what was the weakest housing sales market in a decade.

And a report released by RP Data revealed that nationwide, 7.7 per cent of houses bought since 2007 are now worth less than their purchase price.

Many home owners as well as owners of investment properties are now experiencing equity crisis with more than 300,000 homes nationally today worth less than their owners paid for them.

That includes almost 100,000 homes bought since the onset of the global financial crisis in early 2008, many of which were first homes purchased with the assistance of federal and state grants.

Queensland has been hardest hit by declining home values, with about one in seven homeowners sitting on paper losses, according to RP Data’s analysis of the difference between the price of the property at purchase and today, but not homeowner debt.

The worst regions were far north Queensland, the Gold Coast and the Sunshine Coast.

One in 10 homes in Western Australia are now worth less than their owners paid for them, with the southeastern region dragging down the state’s overall figure.