By Nick Tabakoff The Daily Telegraph December 05, 2011
BANKS have taken the unprecedented step of launching a website calling on financially stressed homeowners to negotiate "hardship" packages to avoid default on their mortgages.
The Australian Bankers Association's launch in recent days of the site shows the Big Four banks are on high alert for a rocky 2012 with a sharp rise in defaults. Association CEO Steven Munchenberg admitted economic uncertainty had been a key factor in the move.
"We don't know what's going to happen in Europe and in Australia, but it's better we start to think about making sure we're prepared for whatever happens," he said.
He confirmed it was the first time the banks had set up a site to deal with customer hardship on mortgages and other financial products like credit cards and personal loans.
Even though Australia’s economy is doing well, lots of Australians are doing it tough. For some of us, it’s getting harder and harder to make ends meet.
If you feel like you’re losing control of your finances, or finding it more difficult to manage your money, having trouble repaying a credit card bill or making your home or personal loan repayments, then this website is for you.
This website provides information for those in financial hardship and helps them get in touch with banks and others who may assist. Avoid companies or people who make unrealistic promises about getting you out of debt or who use advertisements claiming they can help no matter how desperate your financial situation is. Your financial circumstances
Perhaps your financial situation or personal circumstances have changed. This can happen because of all sorts of reasons. For example, maybe:
Your hours at work have been reduced, or you’ve lost your job altogether? You or someone in your family is sick and you need to pay unexpected medical bills? You’re going through a relationship breakdown?
Being in financial difficulty can happen to anyone. So, even if you’re just after some information to help you make sense of your finances, your rights, and how to make the best of a tough situation, then this website is for you. Help from banks
Banks know that most people want to pay their debts. It might take time to get back in control of your finances – financial worries rarely spring up overnight. But there is information and advice available, and banks want to help you get through these tough times.
The Australian Bankers’ Association (ABA) has compiled this website so that bank customers and consumers can easily find information and advice if they’re experiencing financial difficulty. This website provides some helpful information and tips and aims to direct you to the right place to suit your circumstances.
Property investors and pundits may be forgiven for thinking new AFG data showing an increase in the number of new home loan inquiries is a good sign for the sector, but a new site designed to help home owners in financial trouble has put the brakes on any celebration.
The site, doingittough.info, was developed and now operated by the Australian Bankers' Association, and allows home owners who are experiencing financial difficulty to contact their banks and figure out ways of obtaining some financial assistance.
But despite the connotations of releasing such a site in the current economic environment, ABA chief Steve Munchenberg says the site isn't a commentary on whether the European crisis could impact home lending, as some economist have predicted.
Instead, he says the website is a response to home owners who feel they don't have the ability to continue paying their mortgage when they actually have numerous options available.
"Back at the beginning of the year, with the floods, and then cyclone Yasi, we were able to go public then and highlight the fact that people could talk to their bank and get a quick release for a period of time to get them through some difficulties."
"We've seen other parts of the economy doing it a bit tough. And there is a reluctance on the part of some people to tell their bank they are going through hard times."
"I think people have given us a lot more credit for foresight than we should take."
The website itself offers tests for financial strength, along with information on what you can do when struggling through financial difficulty, and how you can apply for hardship provisions.
Munchenberg says the website isn't a commentary on arrears or defaults, which he points out is quite low. Instead, he says it's about dealing with people who don't feel they have any other option.
"When we have people in financial difficulty, they don't instinctively think to contact the bank. But the reality is the bank has a bunch of programs in place to help people in those situations."
"We would rather find out if you're under pressure early to make sure we can all work through that, rather than have people hide that fact and then get into a state where it's much harder to pay it all back."
However, despite the insistence that the site is not a warning, data shows Australians are spending more of their income on mortgage payments, even as prices have slowed. Real estate groups such as the Real Estate Institute of Australia believe this to be a serious problem.
But new figures from AFG paint a different picture for the market. The country's biggest mortgage broker recorded an 18.4% increase in mortgages processed in November, altogether worth $2.9 billion.
Investors took up 40% of mortgages, with the company saying it was most likely spurred on by the Cup Day interest rate cut.
The figure was the highest since March 2009, on a monthly basis. Fixed rate loans fell to just 17.2%, with stand variable loans taking a 63.1% share. The average size of all mortgages rose to $396,000 from $395,000.
But while the figures may suggest the market is on the verge of booming, auction clearance rates present another story. In both Sydney and Melbourne, sales have remained in line with results from the past three months.
In Melbourne, the Real Estate Institute of Victoria recorded a 55% rate, slightly up on last week but down from the 60% recorded this time last year. Chief executive Enzo Raimondo said for the fifth week in a row "there has been no substantive change in the level of demand".
It expects that trend to continue through the end of the year, even during next week when 900 auctions are expected.
Sydney recorded a 52% clearance rate, while Brisbane and Adelaide recorded rates of 20% and 36.8% respectively.
By Anthony Keane News Limited newspapers December 12, 2011 12:00AM
MORTGAGE stress has become an increasingly common word in Australia, and while there are a few different definitions for it, the end result is always the same - financial and emotional pain. High property prices have conspired with soaring living costs to put households under increasing money pressure, particularly in terms of paying their biggest debt. So how do you work out if you are suffering mortgage stress, and how do you combat it? A popular definition of mortgage stress is when your home loan repayments swallow more than a third of your disposable income, although some financial experts see things differently.
"There wasn't any activity in mortgage interest rates before November, but this term mortgage stress has been bandied about," says Resi Mortgage Corporation chief executive Lisa Montgomery.
"I see it more as being household stress rather than mortgage stress because it's the impact of the cost of living - fuel, food, energy, and the threat of new taxes also places pressures on households."
Australian Bankers' Association chief executive Steven Munchenberg disagrees with the third of disposable income theory.
Young people are bearing the brunt of Australia's high real estate costs and are much more likely to encounter "housing stress", according to new research.
One in five Australians aged 15 to 24 spend more than 30 per cent of their income on rents and mortgages, compared to just one in 10 for the overall population, the National Centre for Social and Economic Modelling has found.
Monash University student Hiba Casablanca pays around half of her weekly income on housing costs for her shared student house in Melbourne.
Ms Casablanca, who works part-time at the university and receives youth allowance for study, said the expense siphoned off money she would otherwise spend on other living expenses.
“I definitely struggle at the start of the month when my rent is due,” said the 24-year old. “I forego food, entertainment, clothing."
Her housemates understood because many of them had to cut back on expenditures to make up the shortfall between their income and housing costs as well, she said.
University students, young people living away from their parents, or youth transitioning from foster care faced twice the risk of finding themselves in a form of housing stress than the general population, according to Australians for Affordable Housing.
“Housing stress puts thousands of young people on the brink of financial crisis every single week,” said Sarah Toohey, campaign manager for AAH.
She said the housing, welfare and community sector organisations that back AAH said that it wasn't uncommon for university students to dramatically cut back on spending for clothes, food, even for medical care because of rental and mortgage costs.
By Nick Tabakoff The Daily Telegraph December 05, 2011
BANKS have taken the unprecedented step of launching a website calling on financially stressed homeowners to negotiate "hardship" packages to avoid default on their mortgages.
The Australian Bankers Association's launch in recent days of the site shows the Big Four banks are on high alert for a rocky 2012 with a sharp rise in defaults. Association CEO Steven Munchenberg admitted economic uncertainty had been a key factor in the move.
"We don't know what's going to happen in Europe and in Australia, but it's better we start to think about making sure we're prepared for whatever happens," he said.
He confirmed it was the first time the banks had set up a site to deal with customer hardship on mortgages and other financial products like credit cards and personal loans.
When were the 95%" loans being handed out in Australia? 2009+? I'm guessing that the first lot of people coming off the honeymoon rates are confused as to why they cant service a 700k loan on 50k a year? Surely this is an indication things aren't going so well if banks themselves are trying to stop people foreclose on homes and rates of foreclosure/stress are most likely higher than they would like to admit perhaps? It is very interesting actually... I'd like to see if they down play it or release figures on how many households are requiring the service each month.
When were the 95%" loans being handed out in Australia? 2009+? I'm guessing that the first lot of people coming off the honeymoon rates are confused as to why they cant service a 700k loan on 50k a year? Surely this is an indication things aren't going so well if banks themselves are trying to stop people foreclose on homes and rates of foreclosure/stress are most likely higher than they would like to admit perhaps? It is very interesting actually... I'd like to see if they down play it or release figures on how many households are requiring the service each month.
I think that the average loans size for an FTB is about $289,000 - the $700,000 loans for borrowers earning only $50,000 simply don't exist.
It's a common misperception that well informed bear commentators are very well aware of, but still they choose to allow the myth to live on because it suits their agenda.
The High Ground is claimed by all, but in reality it's a rare commodity in the debate.
Any expressed market opinion is my own and is not to be taken as financial advice
The ABA gets points for trying here: the information presented is generic, but well laid-out and plainly expressed.
However, I really wonder about the implicit support throughout the site for a "DIY approach" when it comes to (initially) talking to one's bank about a credit issue. Step 1, according to the ABA, is "get in touch with your bank first".
IMHO, Step 1 should be to "consult a qualified independent party first", preferably one under at least a notional client-privilege obligation, unless the issue is of the most minor kind, e.g. a delay in a single payment.
That does not mean that the creditor should delay informing the bank of a more substantive issue, but rather that s/he should seek counsel and/or representation independent of the bank, to frame the issue (and the creditor's proposed resolution of it) appropriately.
It is often said that the world is in the midst of the biggest economic transition in modern times. In short, the West is in the process of ceding economic power to the East.
The old Group of Seven – Canada, France, Germany, Italy, Japan, the United Kingdom and the United States of America – have a combined firepower of $US34 trillion. The new G7 – China, Hong Kong, India, Korea (south, of course), Malaysia, Singapore and Taiwan – have a combined GDP worth $US12 trillion (see postscript), but the Asian G7 (AG7) economies have been growing by 16% per annum since the GFC, which is four times faster than the old G7.
Remember, the eighth wonder of the world is the power of compound growth.
The AG7 countries have a massive population base, but very low incomes when compared with the West. The average income per capita across the G7 is $45,000; whilst across the AG7 it is just $4,200. Yes, Asia’s income levels have doubled over the last five years, but they are dwarfed by Western standards.
This world shift is a massive bonus to Australia, most obviously via the demand for mining and agricultural resources. This, in turn, is creating wealth in Australia, although not as evenly spread as many of us would like. The demand for luxury goods is, once again, on the rise.
Did you know that Australians have the fifth (yes, fifth) highest income per capita is the world? In US dollars, every Australian (yes, on average) earned $67,000 last year. The four countries above us in income rankings were Luxembourg ($122,000), Qatar ($98,000), Norway ($97,000) and Switzerland ($85,000).
House prices
According to data house, RP Data, house prices rose by 0.2% during the March quarter. This might not sound like much, but at least the result wasn’t a negative.
Now, while the CommSec super-luxury car sales index is a small one, it does a pretty good job at forecasting the direction of house prices across the country. This index shows that 126 top-end vehicles sold across Australia during March, which is up 22% on this time last year.
Over the last twelve months 1,129 super-luxury vehicles were sold. The record high was during calendar 2007, when 1,606 top-end rides were traded.
There is a close relationship with super-luxury car sales and house prices. The theory is that confidence levels repair first at the top-end of the market and then flow through to other asset markets. The rebound of the CommSec super-luxury car index suggests the housing market may also be poised to recover.
Now, I’m no car buff – just a four-wheel drive kind of guy – but I think Craig James and the boys at CommBank are onto something there.
It is always good, every now and then, to think outside the square. They just need to work on what they call stuff: ”super-lux index” reads heaps better if you ask me.
Struggle Street
I am getting tired of hearing about how more and more Australians are doing it tough. Despite what you might believe, most of us are not on “Struggle Street”. We are confusing what we “want” with what we “need”. I am as guilty as the next person.
Unlike almost anywhere else, Australia has had 20 years of uninterrupted economic growth, and continues at an enviable rate. Real wages have risen by more than 30% since 2005. In addition, we are close to full employment and we can afford to build some of the largest houses in the world.
The super-luxury set hasn’t done this by themselves. Most Australians must be doing well. Even inflation is tamed, and so much so that “cost of living pressures” has replaced “inflation” in public debate.
Now, there are people who are really doing it tough – and something like half a million in Queensland sadly live below the poverty line – but there are 4.6 million people in the state.
Yes, we are more frugal these days, with the average household putting aside 10% of after-tax income for future needs. Companies, too, are retiring debt and building up cash reserves. A decade ago, Australian households on average were not saving. Today, our saving rate is similar to the traditionally thrifty Germans and double that of the US.
So, what does it really tell us when one-third of Australians believe passion is the most important reason for taking a new job, while just 17% nominate a good salary? And in another poll, two-thirds of Australians say they are happy. There is nothing wrong with both sets of replies, but they don’t suggest that we are on Struggle Street – especially when Aussie mums are increasingly hiring “personal assistants” to help them with their day-to-day routines.
We desperately need to change the public debate. We should be rejecting the nebulous “cost-of-living pressure” spin and change the focus away from “my personal finances” and towards creating world-class infrastructure, smart business incentives and helping those few with genuine difficulties.
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