Posts Tagged credit rating

Your Credit Score

Ok so you  have heard about this thing called your credit score but do you really understand what it is?   I have come across a helpful service that will allow you to look up your credit score with VEDA (at no cost). VEDA is the biggest credit reporting company in Australia and virtually all of the banks and lenders buy information from them (to varying degrees).

Obtaining your score on this website will only take around 1 minute. https://www.getcreditscore.com.au/

Before you get started, the credit score is just that, a bottom line score. The score does not show your detailed credit history.  We should also note that most lenders have their own scoring systems that only partially use VEDA information.

Each of the scoring categories below have implications for your future credit applications.

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If you want to discuss this or any other finance questions please call me Kim Wight Mortgage Broker Sydney on 0412167551 or email kwight@smartline.com.au

 

Posted in: Bad Credit History, Blog, First Home Buyers, Latest Mortgage News, Mortgage Broker Sydney

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Changes to Investment Lending You Need to Know About.

The federal regulator is currently implementing major and unprecedented changes to the Australian mortgage industry. This means there are changes to investment lending you need to know about.

Given governmental concerns over the booming property market, particularly in Sydney and Melbourne, a range of rules are being introduced that specifically target investment loans

APRA (Australian Prudential Regulation Authority) is the department that is implementing these changes.

APRA has mandated that Financial Institutions must not grow their Investment Loan portfolio by more than 10% this year. This change seems harmless but current demand is running much higher than 10%.

Many of our banks and other financial institutions are already very close to, or over, this 10% growth limit.

Some lenders have recently reached and exceeded this 10% threshold and one lender in particular has just announced that they will not be able to offer investment loans until they get back under the threshold.

 How does this impact you?

If you have an owner occupied home loan that is set up with principle reducing repayments, you will not be impacted by these current changes.  You may even benefit as banks try to attract more owner occupied loans, with greater competition potentially leading to reduced interest rates.

However, if you have an existing variable rate investment loan, you may receive notification from your lender that your interest rate has increased.

If you have a variable home loan or investment loan with “interest only” repayments, you may also receive notification from your lender that your rate has increased.

Exactly why some lenders are lifting rates for existing clients is hard to confirm, however, the major lenders have been asked to set aside approximately 50% more capital by the end of this financial year. This new policy is going to make our financial institutions significantly stronger but it will increase their costs. The cost of this additional capital will be passed on to borrowers. This current rate hike may be the first step in this process.

 What should you do?

Seek advice. That is what I am here for.

The mortgage market has just become far more complex. We are currently attending multiple training sessions with our 30+ lenders and Smartline’s Lending Services team are working overtime to systemise the multitude of changes.

Every mortgage holding client has a unique set of circumstances that may require a unique strategy.

If you are looking to buy an investment property, contact me early.  While many lenders are getting more restrictive on investment loans, there are others who are well below the APRA cap and are stepping up to plug the gap in the market.

Please give me a call , Kim Wight , Mortgage Broker Sydney, if  you want to discuss any of the above in relation to your current loans or future plans.

 

Posted in: Blog, First Home Buyers, Latest Mortgage News, Mortgage Broker Sydney

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RBA Decision – The Need to Plan

Since Tuesday’s RBA decision to keep rates on hold, we have heard that the Australian economy has grown quite strongly over the first quarter of 2015.

Strong economic growth, if sustained, could lead to an increase in rates. However, the ASX futures market, armed with these positive economic growth numbers, are still predicting stable interest rates for a while to come (see below).

What I  find disappointing is the almost universal belief (in the media) that borrowers will be in deep trouble if interest rates begin to rise.

I have a contrary view. Although there will always be individual circumstances where people unfortunately find themselves in mortgage stress, the majority of borrowers are prepared to handle a modest increase in interest rates. This view is based on two key points:

  1. When banks assess a clients ability to repay a loan they use a “test” interest rate that is almost always above 7.00% p.a..

This means that most variable rates would have to increase by around 2.50% before clients could potentially struggle. In fact some lenders assess repayment capacity at 8.00% p.a., which is nearly double the current interest rate.

  1. The average monthly variable interest rate over the last 10 years is approximately 6.71% p.a. (see below). So the “test” rate is approximately 0.30% p.a. above the long term variable interest rate.
Interest rates

RTBA Decision

As you can see, our banks have and are adopting quite conservative lending practices. Australian banks are arguably some of the most prudent financial institutions in the world. This conservative lending approach underpins the current price growth that we are seeing in some of our Capital cities. Far from contributing to house price growth, we feel that current lending policy is keeping a lid on the market.

As always  if you would like any advice around your mortgage, please do not hesitate to give me a call, Kim Wight Mortgage Broker Sydney. 

 

Posted in: Blog, First Home Buyers, Latest Mortgage News, Mortgage Broker Sydney

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Credit Cards Or Personal Loan Debts

Do you have credit cards or personal loan debts that stubbornly refuse to go away? I  may have a solution.

Whilst a minimum monthly credit card repayment of 3% seems quite easy to handle at first glance, a $30,000 debt will require a $900 per month payment. A significant commitment.

Compare this with a current $30,000 home loan and the minimum repayment would be approximately $157 per month (see below).

Credit cards or personal loan debts

Given the right set of circumstances, I  can sometimes alleviate this type of cash flow burden by consolidating credit cards and personal loans into a residentially secured loan.

However, if this option is not possible or desirable, there is one very effective long term solution.

“Cut it up and pay it off.”

“Cut it up” – This part of the solution is often seen as too difficult because shopping with a credit card is so convenient, however, the credit card organisations such as Visa and MasterCard now offer debit card facilities which give people all of the efficiencies of using a credit card without the temptation of using the credit.

“Pay it off”– This part of the solution can be made easier too. Most credit card providers have a direct debit system that will allow customers to make automatic fixed repayments (similar to a personal loan) on their credit card.

I believe that long term debt should only be used for buying assets that have a reasonable chance of appreciating. Holidays, cars, LCD screens and boats generally head the other way and should only be financed over a shorter term. There is nothing worse than a big debt with nothing to show for it.

This is a sensitive issue to bring up with people but if you know of anyone that would like to talk to me, Kim Wight Mortgage Broker Sydney  about getting their credit cards or personal loans in order, I would be more than happy to assist with some confidential and useful advice.  

 

 

Posted in: Bad Credit History, Blog, First Home Buyers, Latest Mortgage News, Mortgage Broker Sydney

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Tuesday’s Rate Cut

Tuesday ‘s 0.25% rate cut was very big news. Records have been broken.

Assuming the banks pass on all of this rate cut, some borrowers will now enjoy historically low rates down near the 4.50% p.a.mark.

There are 2 perspectives to consider here:

1. Investors – You could buy an investment property where the rental income might exceed the mortgage repayment.

2. Tenants – You could buy a home where the mortgage repayment could be cheaper than renting.

Don’t believe us? Have a look at the table below. The median annual rental yield for capital city units is now sitting at levels near or above most variable home loan interest rates.

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As you can see below, interest rates are at a historically low point.

Mortgage Broker Sydney

This highly unusual situation begs the question…. “How are you taking advantage of these low rates?”

Regardless of your perspective, the conclusion is the same. Mortgage finance is at very affordable levels and opportunities abound. Please give me , Kim Wight. Mortgage Broker Sydney a call if you would like to run some numbers. You might be very surprised at your options.

 

 

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Why waste money on an overpriced mortgage?

Why waste money on an overpriced mortgage?

Some good news to kick off 2015.

At the end of last year we heard a few economists suggesting that we could see further interest rate cuts by the RBA in 2015. It appears that the ASX futures market now agrees with this assessment.

As you can see from the chart below, the implied yield curve is showing a predicted 0.25% p.a. drop in March or April. A further 0.25% drop is estimated to occur toward the end of 2015.

The main basis for this prediction is the current environment where inflation remains low and stable, unemployment is slightly growing and economic growth remains subdued. These are all ingredients that lean towards a rate cut in normal circumstances.

Mortgage Broker SydneyWhilst a 0.25% cut does not seem like much, the following chart shows just how much this can save a borrower.

Mortgage Broker Sydney

As you know, my offer to conduct a “health check” on your loan is always on the table. Just shoot me, Kim Wight Mortgage Broker Sydney an email if you would like to check that your loan is still competitive. There are terrific deals to be had.

 

 

 

Posted in: Blog, First Home Buyers, Latest Mortgage News, Mortgage Broker Sydney

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Your Credit Report – The Changes

There was a big change to Australia’s privacy legislation in 2013 and it changed the way your Credit Report looks and rates you for  future borrowing. There was a lot of controversy at the time, however, like many things these days, our attention gets diverted easily and often.

The rubber hits the road on that legislative change on the 1st of January 2015 and it impacts you.

Our credit providers will be able to view a lot more information about your credit behaviour.

Up until now, lenders could only see the following information about you;

  • Your defaults (only over 60 days in arrears),
  • Your insolvency history (ie bankrupt events), and
  • Your credit applications (although they could not see if your application was approved or declined)

 In 2015 (6 weeks) they will be able to see the above, and a lot more…..

  • The date that your credit was opened or provided (in other words, if your application was approved)
  • The type of credit that you have and what your credit limit is (in other words, if you have used up all of your credit)
  • The date that a credit account was closed, and
  • 2 years worth of month by month repayment history on each credit facility that you have.

Your repayment history will report like this (the boxes with numbers represent the days in arrears) –

My Credit rating

Most of Australia’s lenders have agreed to provide your data to the credit reporting agencies. If a lender does not report this information they do not get to see the information from the other lenders. So it is just a matter of time before every licensed credit provider jumps on board.

I am  not saying that this change is necessarily a bad thing.  I  could even see a situation where clients with good credit ratings are offered a better deal. However, we now live in a new world of big data. Keeping your credit rating clean has never been more important.

As always if you have any questions about this r maybe have had difficulty getting a home loan due to a poor credit report contact me Kim Wight, Mortgage Broker Sydney and I will be happy to answer your questions.

 

Posted in: Bad Credit History, Blog, First Home Buyers, Latest Mortgage News, Mortgage Broker Sydney

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Our Annual RBA Form Guide

The RBA’s cash rate decision is always handed down at 2.30pm on the first Tuesday of each month. This means the November cash rate decision always occurs half an hour before the big race.

Every year for the last five years I  have sent you our annual RBA form guide for the RBA’s November decision. This year is no exception. Enjoy.

Centrebet

Very short odds for no change.

Mortgage Broker SydneyThe ASX Futures Market

As you can see, the ASX futures market is not predicting any change to the status quo for the next 18 months.

Mortgage Broker Sydney

Westpac, CBA and NAB

A slight increase by the end of next year.

Mortgage Brokler Sydney

As you know, predicting the future is a difficult business, however, it is pretty clear that most “experts” are suggesting a stable variable interest rate environment for most of 2015.

If you are a betting person, I hope you have a lucky Melbourne Cup. If you are not having a punt, my tip is to put your money on your mortgage.

As always if you want to talk about home loans and interest rates contact me, Kim Wight  Mortgage Broker Sydney or maybe you have a hot tip for the race to share. 

 

 

Posted in: Blog, First Home Buyers, Latest Mortgage News, Mortgage Broker Sydney

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Apathy is the Enemy of Home Loan Savings

I will get straight to the point. Apathy is the enemy of Home Loan savings. If you have a 5 on the front of your interest rate then you could be wasting hundreds, even thousands of dollars every year.

I have a product on my panel (with a well know lender) that is now offering 4.65% p.a. (with a 100% offset account).

The table below demonstrates the substantial savings that can be made on a $300,000 home loan.

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The chart below shows the 15 year history of a basic variable home loan with one of our major banks. The current rate for this product is 5.18% p.a..

Most Australians are unnecessarily paying more than 5% p.a..

Home loan rates

Put me to work  for you.   I will do the comparisons for you, and if necessary I will help you move across to a cheaper mortgage.

Contact me Kim Wight Mortgage Broker Sydney to discuss your home loan and make sure you have the right rate and loan for you. 

Posted in: Blog, First Home Buyers, Latest Mortgage News, Mortgage Broker Sydney

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The RBA CASH RATE

The RBA cash rate has not moved from 2.50% p.a. for 13 consecutive months. The ASX futures curve is predicting another 15 months of cash rate stability.

Variable home loan rates seem set to remain in the range of 4.65% p.a. to 5.10% p.a. (depending on what lender you are with).

This chart below is showing a spectacular drop in the 5 year fixed rate. Three of the “Big 4” lenders are now offering 4.99% p.a. as a 5 year fixed rate. This is genuinely remarkable. 5 year fixed rates at less than 6% p.a. are as rare as hen’s teeth. The fact that we are now under 5% p.a. is ground breaking.

RBA Cash Rate

If 3 year fixed rate terms seem more sensible to you, a reputable “non major” lender is currently offering 4.69% p.a..

Should you feel that your circumstances are not likely to change much over the next 3 to 5 years, fixing your rate is certainly something worth considering.

Give me a call and we can talk through the pros and cons.

As always  please feel free to pick up the phone and call me Kim Wight Mortgage Broker Sydney  for a chat.  I am here to help you.

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