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

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.

Statistics gathered by ASIC seem to suggest that 2011 has not been a good year for Australian businesses with more businesses going bust than seen over the past 3-4 years.

Many business bankruptcies were caused by excessive and out of control bad debts.  There has been a significant surge in the number of Australian companies in administration during the third quarter,  to levels last seen during the 2008 financial crisis, according to figures released by the securities regulator today.

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.

New research by Loan Market Group is pinpointing Generation Y as being the best savers amongst us all.

According to a survey by Loan Market Group, 69 per cent of respondents had become determined savers and more concerned about taking on further debt since the GFC. Many have looked at debt consolidation options and paying down their home loans, car loans etc.

The Loan Market poll which asked “Did the GFC fundamentally change your approach to finances?” found Gen Y respondents were the most savings conscious, with 44 per cent saying they were now focused on creating a savings buffer.

The online survey found 42 per cent of the 498 respondents said they had been creating a savings buffer since the GFC, while 27 per cent said they had been conscious about taking on more debt.

Ten per cent said they were now more risk averse as a consequence of the GFC.

These results are not really surprising given that many Generation Ys are only starting out to live on their own and are learning to cope with managing family finances such as home loans or rental payments.  Many are having issues with credit card balances and are looking to consolidate these and pay them down as soon as possible. Overall the Gen Ys have really understood the need to save in these uncertain economic times.

Credit Repair is the process of cleaning up your credit history as reflected on your credit report. While Credit repair may be an attractive option to anyone unable to qualify for a loan with a bank, to qualify for this service you must believe that your bad credit mark was placed in error or for some reason you should not have it on your report.

Borrowers with a history of bad credit as a result of bankruptcy, part 9 debt agreement, property repossession, etc. – ie borrowers who acknowledge that the bad credit was due to some even in their life and the report truly reflects this – will not be able to clean their credit history simply by making a request to do so.

Credit repair is only possible where for some reason the applicant believes that the bad credit is:

- a case of mistaken identity;

- the bill was already paid at the time that the default was lodged and it was lodged in error;

- applicant was never notified that the bill was due, etc.

Credit repair is not an option where you acknowledge the debt and believe that it was placed on the report correctly but would simply like to have the default removed.

Now and again we feel frustrated at the lack of financial education provided in our schools. On a daily basis we receive dozens of inquiries from people who would like to purchase a home but do not have a deposit. There may be a minor credit issue in the past or even a discharged bankruptcy.

People are almost offended when we com back with an explanation that due to their credit default they will need to have a deposit of at least 10% and in some cases even 20%. We get to hear…”what..$80,000 deposit…this will never happen. Well the deposit requirements are simply the lender’s way of insuring their loan against mortgage arrears or defaults. The lender must be secure in the knowledge that if you default again they have sufficient equity in your home to sell it and cover their costs. Is it really so unreasonable? We think not.

No it is not possible to consolidate your debts into a home loan if you are relying on the first home owner grant for your deposit. The days of the grant being sufficient as a deposit are long gone. How can any responsible lender offer you a loan of $400,000 to buy your home and another $30,000 on top to consolidate your debts if all the home you are buying is worth is $400,000? If you have paid defaults on your credit report and you wish to purchase a home for $400,000, you can count at best on a loan of $360,000 and possibly only $320,000 – the difference needs to come from you.

Under the recently introduced National Credit Code all lenders must hold a credit license as do all brokers. It would constitute irresponsible lending in the eyes of ASIC is someone offered you a home loan without a deposit when your credit history is far from clean.

Protect your credit history and then you too will be able to qualify for the cheap home loans offered by mainstream lenders with low deposits. Bad Credit Home Loans by their nature are more expensive and do require  deposit.

It seems that borrowers are beginning to catch up with their arrears as the number of home loan arrears has leveled out and came in slightly lower in May as compared to April of this year.

New data from Standard & Poor’s found home loans underlying Australian prime residential mortgage-backed securities that are greater-than-30 days in arrears eased to 1.80 per cent in May 2011, from 1.83 per cent a month earlier.

The mortgage arrears levels seem to have stabilized, with only marginal movements between May and April,” Standard & Poor’s credit analyst Vera Chaplin said.

A significant improvement in mortgage arrears may not occur until we see an overall improvement in the economic conditions in Australia.

Home loans held by the self employed on a low doc basis continue to be the most affected by financial pressures. Although the Low Doc Home Loan SPIN has dropped to 5.79 per cent from 5.88 per cent during the same period.

Changes to lending rules which followed the GFC and the introduction of the National Credit Code , in conjunction with Tax Office crackdowns on small businesses have caused a 6 per cent increase in the number of Australian companies going under.

Australian Securities and Investments Commission insolvency figures, released yesterday show 9829 companies entered external administration in the 2010-11 financial year, the highest figure since the peak of 10,005 during the global financial crisis.

Businesses who are experiencing tough retail conditions are not finding an understanding ear with the banks, who are making it far more difficult for borrowers to qualify for loans even where the borrower has plenty of equity in their home.

The leader of ASIC’s insolvency team, Adrian Brown, said banks in an effort to  prevent client bankruptcies have gone some way to meet stable clients, in some cases allowing facilities to be rolled over without the provision of further financials.

In addition to borrowing from banks, Australian companies are exposed to US credit conditions through their heavy reliance on North America’s private placement market, the source of a third of the Australian corporate sector debt raised last year.

About $6 billion of the $21 billion in Australian corporate debt that needs to be refinanced next year is sourced from the US private placement market, with $7.2 billion coming from banks, according to research released by Moody’s in March.

While large corporates are able to issue bonds and borrow offshore, the smaller companies that make up the bulk of insolvencies depend on bank finance. The Australian government has introduced tough lending regulations which has meant that much of the low doc home loan business acceptable in the past would be declined today. It is not unusual for small business owners to resort to using the equity in their homes to finance their business debts – however today such financial solutions are more difficult to implement and are more costly than in the past.

Smaller businesses were finding it more difficult to borrow. ”For example, you continue to see not as much finance available for property development, particularly suburban-type property development, while for more blue-chip properties you’ll see there’ll be market finance available.

Ferrier Hodgson partner Morgan Kelly said small to medium businesses were having difficulty borrowing and had also been hit by changes in workplace laws, the threat of a carbon tax and the ATO’s crackdown.

He said banks were also concerned about concentrations of risk in specific areas, such as commercial property.

In theory banks want to lend money – unfortunately the people they are prepared to lend to – do not need to borrow.

Pepper Home Loans has officially completed its acquisition of GE Capital’s $5 billion residential home loan book.

This acquisition will assist Pepper to take control of a larger portion of the non-conforming home loan market in Australia.

Pepper MD and CEO Patrick Tuttle sees this transaction as offering transformational opportunities for the non-bank lender.

This acquisition will enable Pepper Home Loans to gain greater exposure to self employed borrowers or borrowers with a bad credit history looking for debt consolidation or mortgage refinance deals.

Pepper executive chairman Mike Culhane said the strong support of senior facility providers, Commonwealth Bank of Australia, National Australia Bank and Westpac Banking Corporation, as well as mezzanine investors comprising Deutsche Bank AG, Värde Partners, Inc., York Capital Management, IFM’s Alternative Fixed Income Fund, MKM Capital and Sturt Capital, was instrumental was paramount in allowing Pepper to finance this acquisition.