Sep 6

According to recent statistics, the savings ratio for households has decreased to 1.5% -  being the lowest level in three years.

Shane Oliver, chief economist at AMP Capital, told The Sunday Telegraph the level of savings has been steadily declining over the past year, partially through choice and partially due to increasing cost of living and rising interest rates.

“Growing job security and decent pay rises have made people more willing to spend but rising interest rates have also taken their toll and eaten into disposable incomes, prompting people to spend from their savings.”

New car sales are up 11.2%, thanks in part to tax-breaks for businesses, while spending on transport overall, which includes flights, is up 5.7%.

According to Treasury figures, during the credit crisis the average household savings ration was at 6.9% in December 2008.

While savings was at a high, interest rates were lower, petrol prices fell and the government sent out stimulus package money.

Economists link increased spending to renewed sense of job security.

Aug 25

Aussie borrowers have taken on $86.3 billion more debt in the past year, but current research reveals Australians are attempting to gain some control of their debts by using savings to pay down credit cards and personal loans as well as mortgages.

People would rather pay out current debts before putting any savings together. This certainly makes sense.

According to data provided by the RBA, Australian consumers have paid out $20.5 billion off their credit card balances in June 2010.

The ING Direct index found 48 per cent of homeowners making extra repayments on their mortgage, and 3 per cent struggling to meet repayments.

Currently Australia’s median mortgage balance is $175,509, down from $177,259 in the first three months of 2010. The median card debt per Australian household has gone down from $1802 to $1673.

Half (53 per cent) of households have less than $17,000 in savings and 17 per cent have no savings at all. The cash squeeze isn’t limited to low-income households, with 11 per cent of households earning $100,000 or more annually having no personal savings.

Clearly people have realized that they need to be careful with taking on debt which they are not able to service and have commenced to slowly pay out existing debts from savings.

Borrowers who have excessive non tax-deductible debts, such as credit cards or a home mortgage, should pay them off as soon as possible.

Borrowers with a large amount of debt should review available methods of debt reduction including consolidating various unsecured debts with a higher rate of interest into their mortgage.

Aug 20

According to a recent survey of over 1000 loan applicants conducted by Mortgage Choice, over 66% of people who refinanced their mortgages recently were able to secure a lower interest rate and a better loan.

The survey also found that 54 per cent who refinanced changed their loan product and lender when refinancing, while 46 per cent stuck with the same lender but changed their mortgage.

Of those, 23 per cent were now saving more than $300 a month, while 88 per cent were saving more than $50 a month.

These figures are not surprising given a spate of interest rate increases in recent month – people are doing what they can to save money on their home loan.

From October 2009 to May 2010, the Reserve Bank raised its cash rate six times, taking the rate from 3.25 per cent to 4.5 per cent.

While most economists agree that the RBA is unlikely to move on rates in the next few months, many are predicting a rate rise by the end of the year or early next year.

“With a recent spate of rate rises and the possibility of more before 2011, plus a renewed focus on mortgage exit fees, it is no surprise Australians are refinancing to a cheaper mortgage deal and/or one that better suits their current needs and goals,” Ms Sheppard said.

“In good news for borrowers, the survey revealed that most of the people who refinanced their mortgage were not burdened with loan exit fees.

Of those surveyed, 24 per cent said they were refinancing to switch to a cheaper loan, through a combination of lower interest rates, fees and charges.

Eleven per cent said they refinanced to consolidate debts and 10 per cent said they were funding renovations.

Other motivations to refinance were buying an investment property (nine per cent) and accessing additional funds for other reasons such as holidays.

In a bad credit market, much of the refinance activity is due to debt consolidation and an attempt by borrowers to keep their heads above water.

“We are happy to see so many respondents keen to add value to their property through renovation and others utilising their market knowledge to invest further in their property portfolio,” Ms Sheppard said.

“This is good news for the residential market and something I am sure the construction industry will welcome.”

Ms Sheppard encourages borrowers to throroughly investigate their options before committing to a loan.

Aug 16

According to figures released by the Commonwealth Bank, in a sign that financial pressures have somewhat eased for many borrowers, the number of account holders whose loan problems are being closely monitored by the CBA has almost fallen by 50% over the past 12 months.

Figures released by the bank as part of its record $6.1 billion profit announcement demonstrate that far fewer customers are still experiencing problems with mortgages and personal loans as compared to October 2009.

Certainly late last year the fallout from the GFC was having its biggest effect on the Australian economy. There was the threat of rates going higher and higher and at the same time as the Reserve Bank moved to battle inflation.

CBA had put on a large number of people during 2008 to manage problem loans and customers with mounting debts.

By June 2009, 9325 account holders had sought assistance from the bank for their home and personal loans and outstanding credit card bills. Mortgages took up an increasing share of the referrals during the remainder of the year. The total number of customers requiring help with their loans went up to 13,299 in October before starting a slow but steady drop from January.

That figure has since decreased to 5132 customers with credit card problems, which has remained at a relatively constant level for the past six months, now drowning out the smaller numbers of borrowers with problem home loans and personal loans.

The figures are a useful guide to the wider affect across the community of mortgage stress given that the Commonwealth Bank is the largest lender in the Australian housing market. They also underline just how much customers have been focusing on reducing their levels of debt.  Current statistics indicate that 70 per cent of CBA funded home-loan borrowers were well ahead on their monthly repayments. The average figure among them is nine payments.

Nonetheless, like its competitors, the CBA has introduced more stringent lending criteria since the first-time home buyer boom of last year that was underpinned by government cash handouts to prevent the housing market slipping into recession.

Aug 11

According to the latest research by Ratecity, Aussie household are holding $86.3 billion more debt this year than in 2009. While much of this debt is unsecured and therefore is not reflected in home loan commitment figures recently reported, credit cards and personal loan debt is higher than ever.

In an analysis of data from the Australian Prudential Regulatory Authority (APRA), RateCity found that households borrowed $771.3 billion in June – 12.6 per cent more than in the previous year $685 billion. This includes personal loans, credit cards, and owner occupied home loans.

The risk of over-borrowing is something that is greater today than this time last year. This is despite the interest rates being put up a number of times by the RBA over the past 12 months.

Aug 5
Mortgage refinance can provide you with a multitude of benefits with a cheaper interest rate being only one of these. However when deciding to make the plunge you should be aware of all the risks, costs, and implications.
While often refinancing your mortgage makes perfect sense, sometimes all is not what it seems on the surface. If your current lender’s interest rate is higher than its competitors, for instance, or you need to access cash to finance renovations, investments or your child’s education, then refinancing is a great way to tap into your equity.
However, you need to enter the process fully aware of whats in store, as there are many factors that can influence the outcome of a refinancing application.
Before you get stuck in a legally binding contract to move your mortgage to another lender, make sure you carefully answer the following questions:
Has your income, asset and debt position changed?
If your income has changed for any reason since your previous application, you may not have the same borrowing power today as you did when you applied for your existing loan. Perhaps you are currently on maternity leave, have recently changed jobs or employment industries. Financial factors that can impact your borrowing power include: moving from full time to part-time or casual employment; starting a new business, so you’re now self-employed; increasing your personal debts, such as credit cards or car loans; and/or losing an income temporarily to have a baby.
Reasons for Mortgage Refinance
If your personal debts such as credit cards and personal loans have escalated, and you wish to refinance so you can consolidate them into your mortgage, make sure that you understand what you are saving. “People usually ‘bundle’ to reduce their monthly commitment, rather than to pay down the debt more quickly. Refinancing your debts into your mortgage will reduced your monthly repayment but will increase the period over which you will be repaying your mortgage.
Have you considered mortgage exit fees?
Lenders don’t want you to refinance your mortgage to another lender, and they can financially punish you for doing so. Make sure you check your loan contract carefully: early exit fees, pre-payment penalties and deferred establishment fees can equate to thousands of dollars, which can cancel out any benefits you’ll receive by refinancing.
Has your credit rating changed ?
If your credit history has changed due to outstanding debts or financial difficulties that you’ve experienced since you were approved for your current mortgage, you may have trouble refinancing your home loan to a bank or a traditional lender. Bad Credit Lenders invariably charge a little more in terms of rates and fees. It’s best to do a credit check prior to applying elsewhere; order a free copy of your credit profile at www.mycreditfile.com.au
Jul 29

Australians have made more mortgage applications during the June quarter than in the March quarter.  According to a report by Veda Advantage, Home Loan applications were up by 2.3 per cent in the June quarter. Whereas consumer demand for unsecured credit has dropped with credit card application numbers being down by 9 percent.

While we have seen a minor increase in demand for mortgages over the past three months, the results over the past 12 months are showing a home loan application drop of 20.3 per cent compared with the June 2009 quarter. The most significant reason for the lower numbers on an annual basis is the changes introduced by government to the First Home Buyer Entitlements. As these dropped off so did the home loan application numbers.

According to a spokes person from Veda Advantage there’s no sign in Australia of  a US-style sub-prime mortgage crisis.

Veda Advantage statistics on bad credit instances including loan defaults, arrears, bankruptcy and the like suggest that the Australian numbers of bad credit loan applications have actually fallen over the last couple of years.

Consumer credit quality has improved. Over the last two years households have adjusted to the tougher economic conditions by being more cautious and people with poor credit history seem to be staying out of the home loan market.

Jul 28

Australian annual inflation figure has come in at only 3.1 per cent, making another interest rate rise next month less likely.

The consumer price Index headline rate for the past June quarter was 0.6 per cent, but the headline rate for the past year was 3.1 per cent,  significantly under the expected rate of 3.4 per cent.

Given the CPI figures there seems to be little reason for the RBA to move on rates next week.  This is especially true given that the country is in the middle of an election campaign.

The cost of living is proving to be very significant to the outcome of the  Australian voter.

The inflation news are very positive for all home owners with a mortgage.

It now looks more likely that RBA will not lift rates until the end of 2010. Of course this will not necessarily prevent other lenders from lifting rates independently of the RBA.

“Certainly home buyers will be happy, politicians will heave a sigh of relief they won’t have to focus on interest rates in this election campaign.

“The government’s probably got more reason to cheer than the Opposition, but that’s the way things go.”

The lower than expected CPI is not such a surprise given the difficult trading conditions being experienced by most retailers.

One of the largest contributors to the headline CPI figure was a 5.9 per cent rise in tobacco and alcohol prices, for an annual rise of 8.7 per cent.

This was the result of the Federal Government’s 25 per cent tobacco excise, introduced earlier in the year, Mr James said.

JP Morgan economist Helen Kevans said both headline and core inflation came in below expectations, “so that’s definitely reducing the chance of an RBA rate hike next week”.

The median market forecast was for the headline CPI to have risen by 1 per cent in the June quarter.

The Australian Bureau of Statistics data shows the CPI rose 3.1 per cent through the year to the June quarter.

The biggest price rises in the quarter were for tobacco, surging 15.4 per cent, hospital and medical services, rising 3.8 per cent, and automotive fuel, up 2.1 per cent.

Jul 22

The National Rental Assistance Scheme is not keeping up with the ever increasing rental costs therefore failing to provide adequate assistance to Low-income tenants trying to afford to keep a roof over their heads.

Over the past 15 years the median weekly rents in capital cities rose 41 per cent.  Whereas the Commonwealth Rent Assistance – an untaxed income supplement paid via Centrelink to low-income renters – has remained essentially unchanged.

Renters are struggling to cover the larger landlord bills from their shrinking allowance.

Singles without children saw among the largest shifts in relative expenses, with the government’s maximum rental assistance sinking from a 21.4 per cent share to 16.4 per cent over the period. Other renters, such as couples with children, saw a similar reduction, the TUV report said.

The falling share of rental assistance shows another aspect on Australia’s housing affordability problems. On the one hand we have a large number of low-income renters struggling to meet weekly payments, on the other we have home prices rising by as much as 20% over the past year in most capital cities. Therefore home ownership is becoming an unattainable dream for many.

The TUV report comes as politicians from the major parties focus on population issues, particularly around asylum seekers and long-term sustainable growth, but have said little about specific housing costs.

Charity organisations have also noted the stress on households, particularly for those on a low income.

”We have seen a significant increase in people seeking assistance from our organisation to help them meet rising rent costs,” said St Vincent de Paul research and policy manager Gavin Dufty.  ”Government need to review and assess the adequacy of the private rental rebate to ensure that it provides real housing assistance to those most in need,” he said.

Jul 16

The Financial Services Ombudsman has come out with a publication about what evidence a financial institution needs to show to establish to  the Ombudsman satisfaction that, on the balance of probabilities, it sent a document to a customer’s last known address.

It is expected that clients have the person that serves the notice complete a proof of service form and attach it to a copy of the default notice that was sent. Having read through the FOS note it seems this would be perfect and provide FOS with all the information they need.

There are a number of standard proof of service forms that should be used to make sure that the claim for payment is legitimate.

We find that using a proof of service form provides sufficient proof and if Court proceedings follow, we have all the service information on the one document that we need for a proof of service affidavit. Also the proof of service forms contain the correct service information for that state or territory so it ensures the client complies with the state legislation service requirements and the NCC service requirements as well.

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