Evolution Home Loans Newsletter MARCH 2009

Contents

Mortgage Stress Continues To Ease
What's On Your File?

Evolution Home Loans
Elmbay Holdings Pty Ltd - FBL 2395

PO Box 1132
Joondalup WA 6919

Tel:	08 9300 1410
Fax:	08 9300 1412

E-mail:	Click Here
Website:	Click Here

While you are busy looking for a property, Evolution Home Loans can analyse and compare the home loan market on your behalf. We offer a range of home loans with access to 25+ lenders through the Australian Finance Group (AFG).

With fantastic software capabilities we are able to quickly and accurately determine which banks may best suit your lending requirements.

Our service to you is complimentary and may save you time, effort and money. We are available to see you during the day or evening, even on weekends, because we work "your" hours not bank hours.

The Mortgage and Finance Association of Australia (MFAA) has over 10,000 members including all the major banks and lenders, plus mortgage brokers.

The membership application process has strict requirements for experience, education, industry sponsorship, and probity checks.

All members must join the independent dispute resolution service, the Credit Ombudsman Service Limited (COSL), or a recognised equivalent.

Australian Finance Group (AFG) is an independently owned, Australian company specialising in arranging loans for almost any purpose, in most cases at no charge to the customer.

AFG is the largest third party wholesaler introducer of mortgages in Australia processing on average 6000+ residential mortgages per month, with market share in excess of 20% of the Australian broker market.

Mortgage Stress Continues To Ease

relax The latest results from Fujitsu’s monthly mortgage stress survey show that financial pressure is continuing to ease.

Whilst this trend is good, borrowers need to continue to be cautious.

Fujitsu has recently released its February 2009 Mortgage Stress-O-Meter monthly update. This research is based on a sample of 26,000 statistically representative households across the country.

The good news

In February, households in mortgage stress fell 1.5% from December with 625,000 households in some degree of pain. This compares to a peak of 900,000 in August 2008.

The report states that we are seeing some significant changes in the Mortgage Stress landscape. Compared with June 2008, 32% of households are now less concerned about the costs of borrowing and 15% are less concerned about the costs of living.

This is mainly due to the falling interest rates. The RBA’s Cash Rate has fallen by more than half over the past six months, from 7.25% to 3.25%. Home loan interest rates have fallen in a similar fashion, although some lenders have not passed on the full decreases. The Government payments have also helped.

Caution is sensible

On the flipside, there was also a 1.5% rise in those facing a potential sale or foreclosure. This is due mainly to rising unemployment and reduced part-time hours. This means that there are over 160,000 households still at risk of having to sell up or lose their homes.

Also, 15% of those surveyed are more concerned about unemployment, a similar number are more concerned that their investments are not performing, and 5% have directly felt the impact of redundancy.

The report notes that first time home buyers are entering the market now in increasing numbers, encouraged by the significant Federal and State incentives in the form of the First Home Owner Grant and Boost, and low interest rates.

Whilst this is the intended result, these buyers must still be cautious with their level of debt and the “Loan to Value” ratio. Interest rates are at a low point in the cycle, but will no doubt rise again in the next few years. This increase needs to be factored into people’s budgets.

Also there are signs that unemployment will continue to rise. The Fujitsu report states that they expect unemployment to rise to 6% by September 2009, and to 7% by 2010.

This will most likely have a knock-on effect to the levels of mortgage stress. Fujitsu predicts that mortgage stress will begin to lift again by September 2009, of which 419,000 will be in severe stress.

Government payments

The impact of the cash payments which were made in December 2008 was also researched by Fujitsu. The survey reveals that, two months after the payments were received, 41% of households had put the payment in the bank as a hedge for future uncertainty.

The report goes on to conclude that it is highly likely that further payments, planned as part of the $42 billion stimulus package, will end up in bank accounts.

Whilst not the best outcome from the government’s perspective, this cautious approach shows that many households are currently more focussed on managing their levels of debt than they are on spending the “windfall.”

This shows that many people are taking a more conservative approach to their finances and borrowing, which is to be expected given the current economic conditions.

What's On Your File?

Credit files are often used by lenders to help assess whether to lend you money.

So, what is recorded in a credit file, who can look at yours, and how can you make sure it’s in good order?

Virtually all of us apply for credit in one form or another. It may be for a home or personal loan, or even for a service like a mobile ‘phone or electricity where the payment is deferred (invoiced) rather than “cash on delivery”.

As part of their assessment process, the lender or credit provider will seek access to your credit file.

What is a credit file?

The file contains information about you and your credit history, including:

Personal Details - such as your name, date of birth, current and past addresses, driver’s licence number and employment details.
Credit Applications – who the credit provider was, the amount and type of credit applied for. Note that this is all applications made, whether or not the credit was approved or the credit offer taken up by you.
Credit Defaults – all overdue payments of 60 days or more can be listed provided that the provider has taken steps to recover the outstanding amount. These steps must include writing to the defaulter at their last known address to request payment of the outstanding amount.
Paid Credit Defaults – provided that the default was correctly listed in the first place, then it will remain on the person’s file for five years for when reported, even if it has been paid. The file must, however, note that the debt has been paid.
Serious Credit Infringements – information on the Public Record such as default judgements and bankruptcy information are stored on a credit file.
“Clearout” Listings – which is when a credit provider chasing an outstanding debt has tried to contact a person in writing and failed, and has reported that person as a missing debtor.

How to check your credit file

Credit files are created and held by credit reporting agencies. Two of the main agencies in Australia are Veda Advantage and Dun & Bradstreet.

Additional listings are made on your credit file each time that you apply for credit providing that the credit provider made it clear beforehand that your application’s assessment included a credit file check. A listing will also be made if you are in default to a credit provider.

You can get a copy of your credit file for free by writing to one of these agencies. This may take up to ten working days. By paying a small fee you can get your file much more quickly.

It’s a good idea to check your credit file a few weeks before applying for a loan or other credit facility, to ensure that it is up-to-date and accurate:

Are your names and addresses spelt correctly? Simple errors could mean that you have multiple listings for one loan application or have someone else’s defaults showing on your file.
Has someone stolen your identity? Identity theft is a growing problem, and one of the ways it is used is to falsely obtain credit, which of course is never repaid. If it is your identity that is being used, your credit file will show this through the listing of applications for credit that you know nothing about!
Check the accuracy and age of data such as any listed credit defaults, serious credit infringements and Public Record information.] Were the guidelines followed? Is the information accurate?

In the event of any mistakes or disputes, you should inform both the credit provider and the credit reporting agency and ask that they amend the report accordingly – and check that they do. For example, a disputed debt should be noted as such on your file.

If you are unable to fix any inaccuracies on your file then you can take your complaint to the Office of the Federal Privacy Commissioner. Contact details can be found at www.privacy.gov.au.

Maintaining a good credit file

Here’s some tips to ensure your credit file stays clean:

Pay all bills on time. Clearly the best approach is to make sure that you are a good paying borrower.
If there is a problem in meeting a commitment, contact the credit provider ASAP and agree a payment schedule. This is far better for both parties, and many credit providers will be prepared to come to an arrangement.
Don’t make too many applications for credit. Each one shows up on your credit file and can be an issue for some lenders as it can give an impression that you have a debt problem. For example, continuously applying for new credit cards chasing low rate balance transfer deals can cause a provider to refuse you credit. Even if you don’t have a debt problem, they may believe that they won’t be able to make any money from you.

What if the file shows past credit issues?

There can be a number of reasons why a person can have had credit issues in the past.

It is important to be honest and upfront about a situation, rather than hide it and let the provider or broker find the issue when reviewing the credit file.

Many credit providers are understanding of past credit issues, and have products designed to take this into account. Further, there are many home loan lenders that specialise in lending to such applicants.

Provided that the applicants can demonstrate they are able to make the regular repayments, a non-conforming home loan can be an important first step on the road to improving a credit rating.

DISCLAIMER: This newsletter is provided for general information only. Please do not rely on this newsletter as a substitute for specific legal or financial advice. Before making any decisions you should consider your specific objectives, financial situation and needs.