Mortgage Shopper

Credit Access: 3 million Australians not good enough for a $3,000 emergency loan

Nearly 3 million Adult Australians do not have access to fundamental financial services, including credit cards, bank accounts & car insurance

Australia's banks need to take a good hard look at themselves

Got a $3,000 emergency? Save yourself the embarrassment of a decline and don't ask your bank!Your family and friends are more likely to respond to your emergency than a bank.

Payday lenders, who will charge much higher rates will fill the gap. And a little known source for smaller amounts can be centrelink, if you are a client.

How can you operate without a bank account today? Move to Woollongong or the ACT!

Parts of NSW have the highest number of people without even a basic bank account.
But the Wollongong region tops the nation, with 7 per cent of adults without a bank account.
The number of adults in Sydney's southern suburbs and the ACT without a bank account is running at 5 per cent, with the National Australian average of 3 per cent of adults.

And that excludes Aborigines and Torres Strait Islanders. If you add those, then up to 43 per cent operating outside the mainstream banking system.

Why do people have problems getting credit or insurance?

Main issues in credit exclusion cited were:

• The cost of basic financial services remains too high.
• The average annual combined cost of banking, credit card and either car or home insurance is $1794. 
• The level of documentation needed to establish an account can often be a hurdle, 
• Many banks won't lend less than $5000 as a personal loan, instead steering customers to credit cards.

National Australia Bank says Australia's banks need to lift their game

The National Australia Bank were part funders of this survey, and NAB chief executive Cameron Clyne says the banking industry needed to "lift its game" by providing affordable products to more people.

"The absence of access to mainstream financial services does preclude people from advancing socially and economically,'' Mr Clyne said yesterday.

When the fridge, telly or car breaks down or someone needs to get to a job interview the banking system needs to improve financial inclusion and community spirit.

Access to credit is improving

While efforts to improve access to basic bank accounts & to promote low-cost credit products are being made, more needs to be done.
The Government has recently chipped in with Federal Treasurer Wayne Swan brokering an agreement with the banking industry to provide free ATM transactions for indigenous people in remote communities. That still leave millions left to help.

Source: Mr Mortgage

Australian Mortgages: Why we're finding them easier to manage

Australian Mortgages in 2011 from the rear view mirror

The fact that Australian mortgage delinquencies have declined in the third quarter in Australia points to the fact that the worst of mortgage stress may be over.

The return of the saver, and the virtue of saving

This year has seen more Australian households reining in their expenditures, and the biggest fatality of all this is the credit card. Australians seem to be shunning credit card debt like the plague as well as mortgage debt. This year has been credit card debt reduction as the biggest shift to saving has occurred.

That has to be a good thing for everyone, except retailers who have been milking Australians with over priced goods for generations.

The rise and rise of online sales

This year we have seen online sales surge to the point of critical mass, as Australians are starting buy online in a big way, and that has to mean better retail pricing and services in 2012. Even grumpy old Gerry Harvey has capitulated, and has online offers. [Not convinced Gerry, Sorry] If you want to buy superceded stock at new retail prices, shop Harvey Norman is may motto. His ads can shout at me all they like. I have only ever bought duds from Gerry. THat's why I never shop there anymore. But there is a suckerborn every minute, right Gerry?

The 2011 Christmas shopping season

This is one reason I feel that Christmas is going to be challenging for retail. Spending money you are yet to earn is becoming very unwise to savvy Australian shoppers, and those waiting for the Christmas sales to spend their holiday wages are being tempted with ever more attractive pre Christmas sales. And our high dollar means overseas spenders are less likely to come, and have less money to spend if they get here. At the same time cashed up Aussies are flying out and spending on holidays and spending their money overseas. But Australians know that the family home is more important than tinsel and glitter, and so only people with cash in hand seem to be shopping these days.

The banks are a multi-channel money machine

The banks however are doing OK, despite the loss of credit card revenues, and that is due to business loans growing to replace the shrinkage in credit card debt and home mortgage loans applications, which continue to fall away.

So mortgage delinquencies may have fallen, which is good for the banks, but that does not mean that new people want to be roped into 30 years of debt, so we are seeing a fall in housing prices in all capital cities, as interest rates fall and wages rise.

Did Real Estate become a Ponzi Scheme? I think so.

The combination of rising wages, full employment, lowering mortgage rates and falling house prices tells me that Australians have learnt the lesson from the US finance collapse. That Real estate prices can and do get ahead of themselves and must eventually collapse when they grow out of kilter with the wages and supply.

In this respect I feel that real estate price growth has been a massive Ponzi scheme, and that has deflated slowly in Australia, unlike what has occured in the US, the UK and Europe where house prices are down for possibbly a generation.

Suddenly a house is not an investment anymore, it is a way of securing your accommodation for the long haul. Isn't that what a home should be about?

So what will happen to Australia's 1.7 million residential home investors who lose more on their investment every year in the hope of seeing capital gains? Well they are the victims of their own folly. As tax rates have fallen, the attractiveness of these negative gearing schemes was only shored up by one off growth spurt on the early 2000's, and that was on the back of sales pitches historical housing figures that will not be repeated. So all this fluff and puff is behind us.Like all ponzi schemes, the ones holding the baby when the music stops carries the lose, as those out early get to spend their money. What a beautifu swindle! It's not legislation as a crime! So the perpetrators get out scott free.

What's ahead for Mortgages in 2012?

Whats ahead? A flat house market and steady house prices. Maybe a little more price easing. Hopefully a big fall in land prices that is the real problem in home prices.[Ever wonder why the biggest donations to political parties were from Property Developers? Hmmmm.]

Expect to see house price inflation in country areas where the mining boom is happening. Other areas will see falls in house prices I predict. Its already happening in residential land prices in the towns across Australia. If I were buying a home in a country town, I would want a 10 year mortgage with comfortable repayments. Otherwise renting would be my option. A thirty year mortgage only makes sense in the capital cities of Australia today, because are economy and our society is so dynamic, and mobile. You can't shift real estate.

Australia: Experts in Digging Holes and turning dirt into Gold

The great thing about Australia is that most of it is lousy for growing things, but the soil is rich in minerals. So we have become more into digging holes and shipping the dirt off for Gold. Not a bad earner.

What we have also become is the beacon for climate change and hopefully we can transform this into an energy creation earner. More renewal energy means less imports of oil, and less pollution. Can we export energy so produced, or at least the kit to make it happen. I hope so. My Crystal ball is telling me is that energy, clean air, clean water and food will all be at a premium in the years ahead. We should position the Nation for this inevitable future World.

The cost of money will rise in 2012

The banks are trying to warn people, but the Government is pretending not to listen. The Euro crisis, and in particular, the fact that the UK does not want to touch their baby [smart brave move], will mean that France's banks is caught holding that particular baby, so expect to hear the music stop anytime soon. Once that happens we will have a credit crunch, lower RBA cash rates, not all passed on by the banks because the cost of their borrowing will zoom up.

2012? A good time to be a Saver. A good time to be in Australia. Have a good one!

Source: Rick Adlam, Mr Mortgage

Mortgage and credit card lenders asked to exercise more forbearance with struggling clients

Mortgage Lenders must improve procedures for assisting mortgage and finance customers in that fall behind in repayments.

Borrowers who get into trouble with their home loan or credit card repayments should be able to go to their lender and nut out a plan to help overcome the crisis without pushing the borrower into default.

But the reality is few people would know their lender has such a facility, so poor is the communication about this area of banking. Problems that could be fixed end up getting worse.

The Banking and Financial Services Ombudsman has warned lenders they need to improve this area of their business. The office says it has advised some lenders their communication with customers about hardship provisions needs to be better, as does their staff training.

It cited examples where requests for assistance were ignored by staff, even after repeated approaches. It said some lenders risked being disciplined for maladministration of loan accounts. Among the complaints the ombudsman recently dealt with was a case where a lender made an inappropriate request for detailed medical evidence when a borrower reported financial difficulty resulting from illness.

In another case, the credit provider transferred the balance owing on a credit card account to a personal loan at a lower interest rate to assist a borrower having difficult making payments - but failed to cancel the credit card account.

Several lenders had made default listings on customers' credit reference files while requests for assistance were still being negotiated.

One lender was negotiating a repayment arrangement with a borrower whose monthly credit card interest was taking the account over the credit limit each month, while continuing to charge overlimit fees. All lenders report increases in the numbers of borrowers falling into arrears with their loan repayments. For example, the Bank of Queensland reported a 56 per cent increase in arrears over a six-month period. Loans payments 90 days or more past due jumped from $60.3 million at August 31 last year to $94.4 million at February 28. Borrowers affected included home loan, credit card and personal loan customers.

Increases in interest rates last year hit borrowers hard and it is not just low-income earners feeling the pinch. Financial counselling services such as Canberra's Care Inc report they are seeing more middle- and high-income earners with financial problems. Care's David Tennant says: "When I started working here in 1995, the country's credit card bill was about $5 billion. Today it is $40 billion."

In the latest issue of the Banking and Financial Services Ombudsman Bulletin, published in March, the Ombudsman cautions lenders to review their obligations under the Code of Banking Practice. Section 25.2 of the code says: "With your agreement, we will try to help you overcome your financial difficulties with any credit facility you have with us. We would, for example, work with you to develop a repayment plan. If, at the time, the hardship variation provisos of the Uniform Consumer Credit Code could apply to your circumstances, we will inform you about them."

The ombudsman says: "While the outcome [of a response to an application for assistance] is a commercial matter for the bank, whether or not the steps taken amount to compliance with the promise (made in section 25.2 of the code) falls squarely within our jurisdiction.

"At the centre of compliance with these obligations is that the credit provider responds when put on notice that the customer is in financial difficulty and gives real and genuine consideration to the relevant information their customer has provided about their financial position."

Catriona Lowe, the co-chief executive of the Consumer Action Law Centre in Melbourne, says borrowers need to be aware that compliance with section 25.2 of the Code of Banking Practice extends beyond signatory banks: "The ombudsman uses that provision of the code as the benchmark for all lenders under its jurisdiction."

Lowe says banks are better at handling approaches from customers experiencing financial difficulty than organisations in some other industries. She says the telecommunications industry probably has the worst record in that respect.

But the banks are well behind other industries.

"The utilities industry is well advanced in this area. Companies in the industry have developed tools to assess their customers' capacity to pay and they put these to use in working out payment plans.

"Yarra Valley Water has an incentive plan for customers in financial hardship where if they make five payments on time the next one is waived. We have not seen anything of that nature coming from the banks.

"To be fair to the banks, section 25.2 of the code is relatively new; it was added as part of a review in 2003. But I would say it is time they engaged with it. They need to make it a higher priority for their staff. And they need to make sure staff are listening to the customer and responding with flexibility, rather than dealing with approaches in a legalistic fashion," she says.

The ombudsman says one of the biggest systemic problems is that lenders tend to devise short-term assistance programs, usually no longer than a few months, when longer-term programs would be more appropriate in many cases.

Lowe agrees. "The lender has got to take a realistic view of what the borrower is capable of managing. If it is not a realistic plan, it will fall over and then the borrower will have another black mark on their file."

A finance sector organisation called the Code Compliance Monitoring Committee has also reviewed the way the banks deal with approaches from customers in financial hardship. It reported that "generally, banks have good systems and staff in place to ensure they are meeting their obligations under section 25.2 of the code.

"However, the committee has some concerns about the possibility that not all customers suffering hardship are being identified and referred for assessment to the appropriate area of the bank."

The committee says there is a tendency for lenders to apply a "one-size-fits-all" approach to dealing with customers, which is not appropriate. It is critical of the approach taken by some lenders of not raising the issue of financial hardship with customers in default but relying on the customer to raise the issue.

As a result, "some customers in genuine hardship may not receive the assistance they are entitled to under the code because they do not, for whatever reason, provide unsolicited information about their financial circumstances".

What you should do
If you find yourself in financial trouble, you should act quickly.

■ Raise the issue with the lender. Lenders have been criticised for not being more upfront about their obligations in dealing with customers in financial difficlty. So it is up to you to let them know.

■ Get advice. Some organisations that will help consumers with money problems include the Consumer Action Law Centre in Melbourne, the Consumer Credit Legal Centre in Sydney and Care Inc in Canberra.

■ Complain. If a lender will not discuss your problems with you, find out what complaints body they are part of and get in contact with it. The most commonly used is the Banking and Financial Services Ombudsman.
Source: Sydney Morning Herald

Australia's mortgage belt hip pockets fleeced by rising interest rates

The nation's Reserve Bankers are confident Australians are coping well with higher interest rates. But comments from News.com.au reveal we're hurting where it hurts most, in the hip pocket, and life is getting a bit more depressing for those with more debt than dollars.

Some Australians are ditching the daily espresso and drinking Nescafe Blend 43. Others are contemplating buying tents as home affordability plummets. Babies are being deferred, despite Treasurer Costello's wish that we have more. We're cutting back hard on spending, even avoiding going shopping.

Below is a summary of readers' comments on higher interest rates - and you won't read anything like it in the RBA's recent summary on household finances.

Our central bankers might be doing OK with their mortgages (because they think we're all doing OK), but that's not the people's message.

"I am under a lot more stress at the moment. I have no money for anything extra. Got a family of four on a single low income. If the RBA ups the rates again, I might have to buy a tent."

"I can't afford to eat out or buy clothes. I just miss the little things like buying coffee at work. I also lost my sunglasses the other day and can't afford to replace them. Now days when things break, I go without."

'I can't afford another mortgage increase. I have to find things to sell on eBay every month as it is to make my repayments."

"Cutting back on expenses as much as possible. No more eating at restaurants. Now have to drink Nescafe Blend 43. Only use the car to go to work. Miserly with electricity usage. Cutting back on luxuries."

"It is another kick in the face after struggling with high petrol prices, rises in food, medical, government rates and charges. What planet are these Reserve Bank Board members from?? Come out and talk to the mortgage belt families."

"Since buying a house 2 years ago and being a single female I have had to work my full-time job as well as part time as a bar maid. The more interest rates go up the more hours I have to do at the pub. Currently working 45 hrs/week in full-time job and 20 hrs/week at pub."

"It has affected the way we spend our money, we cannot afford to start a family, as we bought only two years ago in Brisbane, if rates keep going up we may be forced to sell. It has certainly increased my stress levels which in turn have caused me to be far more irritable than in the past."

"Having to cycle to work to save on parking and petrol. Not able to buy things for around the house. No trips anywhere."

"(Interest-rate rises are) adding to the demoralising feeling that Australia is becoming a place that is impossible to have a simple life in."

"Another interest rate rise will mean our children will be pulled out of private schooling and have to attend public schooling as we will no longer be in a position to afford the private school fees or we will not be able to have our family holiday which we are only having every two years now. I feel we need that holiday for our sanity."

"Anxiety that cost of living is rising much faster than income and that I may not be able to meet my commitments in the future. Pension increases are not keeping pace with other costs such as car running costs, debt servicing."

"As most mortgagees I was trying to get as far ahead of repayments as possible but the interest rate rises are gradually bring the repayments up to the amount I am putting into the account each month, so basically it is extending my home loan by two years each time the rate is increased by .25 per cent. A bit disheartening really."

"Anger at which we have to pay interest rates which is high and anger at the Government who don't even address the problem of high interest rates and no combat to lower the rates in any polices."

"I am a single person with an income of $50,000. With that, I have to pay a home loan, income protection, health insurance, car insurance, home and contents insurance, phone, gas, electricity etc. I get no assistance from anyone. I haven't seen prices go down anywhere . If the interest rates continue to increase, I will have to sacrifice elsewhere, be it health insurance or selling my home."

"Less savings, less disposable income, less money to spend on choices rather than necessities......overall stress, fear and uncertainty of the future, worry that we will not have much retirement savings, no extra funds for emergencies, makes life a struggle less savings, more stress, life seems a little less stable."

Views from the survivors
For those doing well, often the reason why is rising wages - but also the reason rates are increasing, to curb inflation from strong wages growth due to low unemployment.

"Salary increases have greatly outstripped the effect of the interest rate increases."

Some are lucky and fixed interest rates on their loans, meaning their mortgage isn't ruining their life.

"Locked into a fixed interest loan in August so further rises won't impact me for the next couple of years."

"My partner's and my home loan has been 80 per cent fixed since we got it in 2005 so no real impact there, we have so much money 'saved' in the variable part as redraw cash. I fixed my investment loan in 2006 so no impact there."

For those people are doing well, perhaps like the nation's Reserve Bankers in Martin Place in Sydney, here is the sentiment.

"Having to read rubbish in the newspapers about higher interest rates. It doesn't affect the majority of Australians. Get over it."

But such reader's comments are few and far between.

Source: NEWS.com.au

First Mortgage interest rate increases, then fuel cost increases, now we are being stung by credit card fees at the bowser.

Australian homeowners hit by the recent mortgage rate hike are now having to deal with high petrol prices and a growing trend to charge for using their credit cards instead of cash at service stations.
With petrol prices across the ACT topping $1.46 for a litre of unleaded petrol over the long weekend, the prospect of drivers being charged between 1.5 and 2.6per cent bill for paying by some forms of plastic [credit cards] has given rise to money, cash flow and credit issues for the average homeowner with a home loan mortgage with higher interest rates to pay.

The petrol station sector has defended itself against claims of exploitation by asserting that retailers' margins have been squeezed by price rises and they cannot afford to soak up the costs incurred when customers use credit cards. These credit card charges are made by the banks to the merchants and more and more retailers are passing these on to the consumer, especially in low margin transactions such as petrol.

But motoring organisation the NRMA warned that drivers' patience with the rising costs of using a car were running out.

Prices at some service stations in Canberra had dropped to the pre-holiday weekend cost of $1.39.9 a litre yesterday - a level which had seemed only the stuff of nightmares at the start of the year - but other pumps kept the higher prices.

NRMA motoring services president Alan Evans and the head of the Service Station Association, Ron Bowden, are to meet representatives from oil and credit card companies this week in an attempt to ensure the credit card fee - which so far appears to have been mostly confined to rural NSW - does not become the new norm.

Mr Bowden said petrol retailers were allowed to charge the credit card fee under reforms the Reserve Bank introduced last year.

He insisted service stations were operating on "very, very thin" retail margins, despite the record high petrol prices and said motorists using the cards with the highest use charges - American Express and Diners Club - were the ones most likely to pay the fee. It was important for motorists to know that service stations were not seeking to capitalise on high petrol prices, and for many the fee was a case of staying in business.

"Operators are being squeezed and they are making less money now than when petrol was at 80c [a litre]," he said.

Both he and Mr Evans believe incidents of passing on the credit card charge are rare, with the NRMA chief keen to ensure this is as bad as it gets when the men have talks with the credit card and oil industry.

"We were shocked when we found out this was happening," he said.

"For motorists to be stung twice, once paying record prices for fuel and again when you're at the counter, it's certainly high on our priority list [at this week's meeting]."

Around this time last year, motorists were being warned that the price of a litre of unleaded may break through the $1.20 level as the cost of crude oil threatened to top $US60 a barrel.

On Friday the price of crude was more than $US71 and the new price unleaded is threatening to reach in Australia is $1.50. Strong demand for oil, especially from the United States and China, is one of the main forces underpinning the escalation in prices. Another is the massive amount and cost in fuel that prosecuting the war in Iraq is spiralling out of reckoning.

Then there is the volatile political situation in the Middle East.

It is hoped the death of al-Qaeda terrorist Abu Musab al-Zarqawi at the hands of the US military may encourage investment in the oil industry in Iraq. But many people believe that Iraq is on the verge of civil war and the death of Abu Musab al-Zarqawi will rob the US of its dubious claim that the insurgents are foreigners, should a full blown Iraq civil war scenario become a reality. And if it does then expect petrol prices to increase further.

Malaysia ahead in fighting online credit card fraud

KUALA LUMPUR: Although the usage of electronic payment in Malaysia is still low compared with developed countries, it is nonetheless a “fast mover” when responding to online fraud, MasterCard International vice-president for operations and advanced payment products (South-East Asia) David Chan said.

He said Malaysia was among the first countries in the world to migrate to EMV (Europay-MasterCard-Visa) cards in an effort to combat credit card fraud.

“Realising that online fraud can cause huge losses, banks in Malaysia are moving fast to equip themselves with more secure anti-fraud codes and devices. 

“The rate of adoption by local banks is fast, judging from its size if compared with developed countries,” he told StarBiz after presenting his paper entitled “Banking Technologies and Cost Effectiveness: Migration to Electronic Payment” yesterday. 

He added that online authentication was essential for sustaining continued online payments and banking growth.

Chan said online payments globally currently accounted about 10% of the total US$5tril plus e-payments business. He attributed this enormous figure to the rising e-commerce business worldwide.

He said although online fraud was 20 times higher than total card fraud in the US, nevertheless it had declined with the usage of more secure online fraud codes and devices.

Source: Malaysia Star