Figures just in from the Australian Bureau of Statistics (ABS) show Australian Housing Finance has flattened out for April 2014, despite economists expecting a slight lift this month. Many are saying this is good news for the economy, but for brokers, it may also mean flatter sales results while house prices remain higher. You may need all the clients you can get. Or – clients with a better quality credit rating. In the past, some brokers have not bothered to investigate the validity of bad credit with their clients, and have instead preferred to either show them the door, or steer them to a second-tier or non-conforming lender. But what if those options are no longer viable or wanted by the client in this flat market? Credit repair assessment becomes a great option to keep in the top pocket for brokers who have bad credit clients in Australia. We look at how, if clients can fix their credit rating with credit repair, it can be a cost effective alternative to a second-tier loan, and a great way to ensure you don’t lose those clients whose bad credit just shouldn’t be there.
By Graham Doessel, Non-Legal Director of MyCRA Lawyers www.mycralawyers.com.au.
ABS data shows April’s home loan figures remain flat at 52,109, despite an expected 0.2 per cent lift predicted by economists. Here’s the ABS’ key points below:
APRIL KEY POINTS
VALUE OF DWELLING COMMITMENTS
April 2014 compared with March 2014:
The trend estimate for the total value of dwelling finance commitments excluding alterations and additions rose 0.4%. Investment housing commitments rose 0.5% and owner occupied housing commitments rose 0.4%.
In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions rose 1.7%.
NUMBER OF DWELLING COMMITMENTS
April 2014 compared with March 2014:
In trend terms, the number of commitments for owner occupied housing finance rose 0.1%.
In trend terms, the number of commitments for the construction of dwellings rose 1.1% and the number of commitments for the purchase of established dwellings rose 0.1%, while the number of commitments for the purchase of new dwellings fell 1.3%.
In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments fell to 12.3% in April 2014 from 12.6% in March 2014.
JP Morgan economist Tom Kennedy, says the ABS figures confirm that the boom seen in the second half of 2013 is slowing down.
‘‘We’ve seen building approvals, house prices, auction clearance rates and now loan data all signalling that things are moderating a bit and suggesting that things have softened from very quick growth rates,’’ Mr Kennedy says as reported in the Sydney Morning Herald’s story ‘Home Loan Figures Below Expectations’.
CommSec chief economist Craig James says in the same publication that the slowing market is “encouraging”, indicating the housing market is moving at a “more sustainable pace.”
The stable market and bad credit clients
This is an interesting phenomenon. When markets flatten out, it can at times mean that clients who present with bad credit may have less confidence to tackle the second-tier market. This is often due to being less inspired by the likelihood that the extra interest they will pay will necessarily be absorbed by a short and significant rise in equity.
Our own research has shown that typical bad credit loans can incur tens of thousands more in additional home loan repayments over the first three years of their loan. In a flat market, many buyers would consider this expense too hefty to justify. They may simply choose not to buy rather than pay the extra in interest.
Instead of losing your clients to a flat market, it may be worth considering the validity of the bad credit in the first place. Rather than waiting for the bad credit listing to ‘drop off’ the client’s credit file, which could take 5-7 years in Australia, brokers could recommend the client investigate credit rating repair.
Many clients who currently have negative listings on their credit file may be living with bad credit history unnecessarily. Often times the clients don’t even know they have a bad credit rating before they apply for a loan. It’s only once the credit check is done that these problems arise – and sometimes unpaid bills for as little as $150 can kill the deal.
Although not every client is eligible for credit repair due to the nature of their default – creditor errors are surprisingly common, and given the experience and knowledge of legislation of some credit rating repairers, the success rate for removal of inconsistencies is high – much higher than if the individual attempted to repair their credit rating themselves. The first step is to refer that client to a credit repairer who will assess their situation.
How can credit repair save money for your client?
Let’s calculate the figures on an average loan of $400,000 over 30 years, comparing non-conforming loan interest rate of 9.5% with a standard variable rate of 7%. The client would be paying a staggering $702.71 per month with non-conforming loan interest rates. They will be hit with $22,867.15 more in home loan repayments over the first three years of the loan.
Credit rating repair allows brokers to get a better deal for their client. The fee they pay the credit repairer is miniscule compared with the thousands they will save on interest alone.
But beware – the wrong kind of credit repair could be costly to your client. Credit repair in Australia is not regulated, and credit repair rip-offs are common. That is why a law firm could be your client’s safest choice for credit repair. A credit repair lawyer can review the case and based on legislation demonstrate why the Creditor should remove the negative listing on the bad credit client’s credit rating. Click here to find out more about credit repair, including choosing the right credit repairer.
If you want to know more about credit repair and credit repair lawyers in Australia, or just want to talk discuss how we can fix your client’s bad credit rating then you can contact us on 1300 667 218 or if you want to refer a client, visit the link below.
Image: pakorn/ www.FreeDigitalPhotos.net