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

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.

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.

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.

The Premier of Tasmania has come out with an offer of $2 million in no-interest loans to help Tasmanians suffering from financial stress.

NILS Tasmania will manage a $1 million fund for essential household goods and expenses and another $1 million fund to help start small businesses.

These funds are a part of a $5 million Community Development Finance Fund announced during 2009.

David Bartlett has told a budget estimates committee the loans will be extremely helpful for low income Tasmanians trying to get back ‘on their feet’.

“The research shows us that the additional support for expanded items and services under the micro-finances program will greatly assist people facing financial hardship and help raise financial literacy and reduce dependency on emergency relief,” he said.

This is the first time since November 2006 when households believe that their Credit Card Debt is a Greater Problem than their Mortgage Debt.

According to the survey conducted, Victorians are Australia’s best savers.

It also showed the proportion of respondents nominating holiday or travel as their motivation for saving was 55.8 per cent, up from  55.0 per cent in March.

The Melbourne Institute household financial conditions index rose 17.2 per cent to 33.7 in June, up from 28.8 in March.

Credit card debt overtook mortgage debt as the main form for households, up almost 3 per cent, to 36.6 per cent.
The proportion of Australians saving grew marginally.

“About 48.8 per cent of Australian households saved part of their income in June 2010, up from 46.2 per cent in March,” the report said.

The June survey revealed three quarters of Australian households fully own their own home or have a mortgage, falling from 79.8 per cent in March and 78.8 per cent a year ago.

Just over 30.5 per cent of households said they would put new savings into deposit-taking institutions, while bank deposits remained the most popular form of savings.

More than 40 per cent of households said they were debt free, while a third said they held mortgage debt, down almost four per cent since last quarter.

Almost 60% of households interviewed indicated that they use only 10% of after tax income to apply towards debts.  Clearly debt balances continue to grow.

Queenslanders were more likely to run into debt than those in other states, while NSW and Victorian residents were more likely to save than their counterparts in other states.

The outcomes kept wages growth just inside the RBA expected 4.5%.

There has been a marked increase in Australian Home Loan Arrears in the first quarter of 2010.

According to a report released by Standard & Poor’s Ratings Services, arrears rose by 0.19 per cent to 1.44 per cent in the March quarter, while subprime RMBS arrears grew 0.67 per cent to 12.24 per cent.

“While we observe that the RBA has increased the official rates 6 times in a row and this may have contributed to higher overall arrears levels, we believe any worsening impact on RMBS collateral performance due to factors such as increased interest rates would likely be moderate and temporary,” Ms Chaplin said.

“In our view, if interest rates continue to rise, some first-home buyers who entered the property market when interest rates were historically low, and self-employed borrowers whose cash flows are more sensitive to economic conditions and borrowing costs, are likely to be most affected. Nevertheless, we believe the overall impact on defaults and losses is likely to be low if property values are preserved.”

RBA is hoping the current levels of household debt will not escalate. The levels of debt are manageable for the time being, but the governor of the Reserve Bank of Australia hopes that they do not climb much beyond their present level.

In a talk to the Western Sydney Business Connection yesterday, which surveyed current global and domestic economic conditions, Stevens noted that “households have serviced the higher debt levels very well. The arrears rates on mortgages, for example, remain very low by global standards. As a result the asset quality of financial institutions has remained very good.”

The debt to household income ratio stood at 156 per cent at December 2009, up from a post GFC low of 151 per cent earlier in 2009 and, apparently, continuing its steady climb. This ratio has doubled over 12 years and increased fourfold since financial deregulation commenced almost 30 years ago.
Governor Stevens would like to make sure that people do not get ‘carried away’ with borrowing in anticipation of future property gains as these are neither certain nor quantifiable.

“One would have to think that, however well households have coped with the events of recent years, further big increases in indebtedness could increase their vulnerability to shocks – such as a fall in income – to a greater extent than would be prudent.”

“It may be,” Stevens said, “that many households have sensed this. We see at present a certain caution in their behaviour.” Stevens went on to cite modest growth in consumer spending (which he linked more to consumer caution than to the absence of last year’s stimulus payments), an increase in savings rates and wariness toward borrowing.

Stevens noted that increased interest rates must have certainly had the affect desired to bring debt appetite down but also said “the level of rates is not actually high by the standards of the past decade or two. We can’t rule out something more fundamental at work.

“We can’t know whether this apparent change will turn out to be durable. But if it did persist, and if that meant that we avoided a further significant increase in household leverage in this business cycle, it might be no bad thing.

“Moreover if a period of modest growth in consumer spending helped to make room for the build-up in investment activity that seems likely, perhaps that would be no bad thing either.”

Every time you make a  loan application to a financial institution, they will look at your credit report to decide is they wish to offer you a loan.  According to a recent research more than 80 per cent of Australians have no idea what  their credit report says about them.

Credit reporting agency Dun & Bradstreet says people should check their credit report at least once a year – it’s free – and be aware of what actions can affect a credit report.

Credit reports in Australia only include identification details, credit applications and negative events such as defaults and bankruptcies. But from next year, extra details such as a person’s repayment history are set to be added.

Dun & Bradstreet chief executive Christine Christian (pictured) says regularly checking your credit report can help people secure credit.

“Consumers should place themselves in a position to understand exactly what a lender will see, and this means the first step to applying for credit should be ordering a copy of your credit report,” Christian says.

“This will allow consumers to find out whether recent credit applications will make it look like they have taken on too much debt, or if previous late payments are listed, potentially making it harder or more expensive to get credit.”

Dun & Bradstreet research shows that 86 per cent of Australians have no idea what their credit profile looks like.

Your credit profile is a combination of many factors.  Have you ever had a default recorded against your name? Is the default paid or unpaid?  How many times have you applied for a loan?  Many people do not realise that making too many loan applications will prevent lenders from approving their loan application.

National Australia Bank says it considers an applicant’s credit history every time approval for lending is required.

“A credit report is an assessment of the customer’s credit history and a key piece of data used in the lending decision,” a NAB spokeswoman says.  You will find that most lenders check your credit report each time you make a loan application .

Naturally it would be wise to know what is recorded on your credit report so that if the report contains any errors you are able to take action to remedy these.

A NATIONAL register of debts and claims against personal property is to be launched in Australia.

The Personal Properties Register will provide data about people and businesses that have borrowed money by using personal property as security.  The information will provide details of all non-land assets over which debt amounts exist.

The register will be publicly available and help track and identify this type of borrowing and the assets that have debts lodged against them.

The kind of property to be included in the register will be almost anything except land.

This new register is expected to be heavily used by the motor vehicle market. Boats, machinery, crops, shares, art, intellectual property and even contract rights can all be offered as security against a loan and therefore can also be included on the register.

Credit rating agency Veda Advantage says the new system will greatly increase protection for consumers.

“It shifts the power the consumer’s way,” Veda spokesman Chris Gration says.

“If a consumer wants to buy something, they want to be sure they are going to pay for it and get property title to it.

“This register will make it easier for people to look it up and check it before buying it.”

Funding for the new system was included in this month’s Federal Budget. The Government has earmarked $18 million to the Attorney-General’s Department to establish the national register. The register follows similar models already in place in the US, New Zealand and Canada.

In Australia, there are more than 70 similar state-based and private systems but the information collected differs greatly.

The main purpose of the new register is to provide uniformity for borrowers and lenders to track assets and loans.

It will also increase the ability of people and businesses to use personal assets as security against borrowing.

By creating a reliable system to track and record this type of activity, it will give lenders greater confidence.

The new system is to be managed by the Government’s Insolvency and Trustee Service Australia and is expected to be up and running next year.

The register will also list the date securities are lodged against an asset, which will help set the priority for repayment or repossession of the property.

A new study by Dunn and Bradstreet suggests that in the next 12 months over a quarter of Australians will fall into arrears with their mortgage.

Younger Australians and those in lower income households are more likely to be late with paying their bills as well as their home loan.

One in five older Australians (aged 50-64) indicated they will pay at least one bill late – this compares to one in three for the two younger groups (18-34 and 35-49).

Meanwhile, 30 percent of people in high income households ($80,000+) said they expect to pay late in the year ahead – this figure jumps to 37 percent for households earning less than $80,000.

One of the most significant findings of this study was that majority of Australians did not understand the implications of paying their bills late.  More than half the people interviewed stated that they would be more likely to pay their accounts on time if they knew late payments were listed on their credit report and could negatively impact their credit profile.

Not enough people understand that a payment can be listed on an individual’s credit record if it is 60 days overdue.  New Australian credit reporting laws – which have been accepted by the Federal Government – will allow payments to be listed on an individual’s record if they are just one day late,” the report said.  Such credit reporting will undoubtedly create more non-conforming loan inquiries over the next 24 months.