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Misconceptions of Brokers

An article by
Caroline Dann of BrokerNews

20/07/2012 7:30:00 AM

 

 

Consumers' Misconceptions of Brokers

Consumers believe going direct to the bank will secure a better deal, according to new research.

A Loan Market survey of brokers found the two biggest misconceptions:

1. that a direct-to-bank approach results in a cheaper loan.

2. that broker services came at a cost.

Loan Market spokesperson Paul Smith said it was crucial consumers know the value of using brokers, not only to secure a good deal but to utilise their experience in the market.

“The reality is that a mortgage broker can negotiate your needs between several lenders and uncover discounts not available to those shopping on their own,” he said.

However, new research shows nearly 50% of home loans are written through mortgage brokers, showing a shift in attitudes of lenders.

“The banks and lenders are moving to recognise mortgage brokers as a preferred distribution network for mortgages because of the number of customers using them and the fact there are no fixed costs associated with brokers such as a branch facility,” he said.

My personal experience:
I recently went into a major bank to get my Corporate Credit Card changed to a Business Credit Card.  I thought it was quite a simple thing to do . . . . .just needed the product switched.

I was served by a branch loans processor who had

• No idea what they were doing,
• Limited English skills and
• No experience in business lending

It got so bad I literally had to spell out business terms such as "depreciation"  and "addbacks". 
After the loan was declined. I did not even realise I was makeing a formal application, nor did I sign anything including a mandatory privacy form.

I was advised I would need to speak to a business lender.  It took me 2 weeks to arrange a meeting with the Business Specialist. She seemed a little more knowledgable and was then told they will speak to someone and get back to me in 2 days. That was over 3 months ago, and although I have left emails and phone calls and I still waiting for some help  . . .  .

Questions:
1. Why did I go into a Branch?
2. Why would you?

Newsletter - July 2012

Hello

July 2012

Please find your Jul/ August newsletter below. If you have any questions or changes please email john@powerport.com.au There is a lot of media hype about out-of-cycle interest rate movements but little in the way of explanation. We have fielded many questions from clients about why lenders are moving their interest rates out of cycle with the RBA and what it means for home owners. Our page two article attempts to answer these questions by explaining the case for both sides of the argument. To understand more about this topic, your mortgage broker is always a good person to turn to for reliable unbiased advice. In this issue we also look at how to build equity in your home loan quickly - page 3 - and the changing face of the Aussie household - below. Our page 4 article explores the topic of empathy and how important it is for effective relationships and communication. Kind Regards, Robert Ward & John McLennan Directors - Equitimax Pty Ltd

Equitimax Pty Ltd PO Box 929 Chatswood NSW2057 Tel: 02 9411 5322 Mob: 0417 448 691 Fax: 02 9411 5200

1. A Typical Home In Profile 2. Out-Of-Cycle Rate Hikes 3. Book Review 4. Useful Tips When Purchasing A Property 5. Finding Empathy

A Typical Home In Profile The stereotypical Aussie family home made up of mum, dad and a couple of kids is on the wane, as couples without children fast become the family norm. As our population ages and baby boomers become 'empty nesters', it is predicted that couples without children will increase the fastest of all family types, making up 43% of all families by 2031. Other big changes include a massive increase in the number of Australians living alone - again largely a result of an ageing population. This type of household is expected to increase by up to 91% over the next 25 years, representing the fastest growing household type over the period 2006 to 2031. The number of people in our households will continue to decline until it reaches an average of between 2.4 and 2.5 by 2031. By 2016 Australia's household size is projected to be the same as Japan and New Zealand and larger than England (2.2) and Scotland (2.1). Although there will be fewer people per house, the number of households continues to rise. Estimates place the number of Australian households at over 11 million by 2031, an increase of 4 million households since 2006. Over the same period, Australia's population is projected to increase by 39% to 28.8 million people. So what picture does this paint for property investors? It shows there will be plenty of demand for property into the future but it will pay to keep an eye on projected demographics when planning your next property purchase.

Out-Of-Cycle Rate Hikes There's a very public stoush going on between the banks and the politicians about out-of-cycle rate rises. While each side argues its case, consumers are left confused about whether they are getting a raw deal. Since the RBA began cutting interest rates by 125 basis points from last November, there has been a shift in the tradition of lenders moving their rates in line with the RBA. Lenders have instead chosen in many cases to withhold part of each reduction and to make their rate announcements up to two weeks after the RBA's first-Tuesday-of-the-month announcement. We have lately fielded many questions from confused clients, asking 'who is driving rates', 'am I being ripped off', 'why are out-of-cycle rates rises happening'? Here we'll take a look at both sides of the argument and what it means for you as a mortgage holder. The government argues ... The banks are protecting their profits at the expense of consumers. We've all heard Treasurer Wayne Swan's very public criticism of the banks for moving out of cycle with the RBA. He has suggested they have a responsibility to match the RBA's rate cuts and their 'high returns' give them the profitability to be able to do so. The banks argue ... They have always been independent of the RBA when setting their interest rates and they are under no obligation to follow the Reserve Bank. Their profit margins have been hurt by an increase in 'funding costs' (the amount of interest cost paid by a financial institution for the money they have acquired from various sources), largely as a result of Europe's debt problem and they have a duty to shareholders to adjust rates based on these pressures. The Australian Bankers Association has warned that lenders can't follow the Reserve Bank's cash rate moves without risking the stability of Australia's financial system. "The risk is that if international investors become concerned that the banks in Australia are politically constrained from managing their higher costs, they will perceive us as riskier and they will reflect this in what they charge for the money we raise, adding further funding cost pressures on the banks, and ultimately, customers." We say... If you feel unhappy with the rate movement your lender has made, give us a call to find out if there is a better alternative out there for you. When you come to us you can be sure we will help you find the best deal, answer your questions honestly and provide clear unbiased advice.

Book Review A young woman walks into a laboratory. Over the past two years, she has transformed almost every aspect of her life. She has quit smoking, run a marathon, and been promoted at work. The patterns inside her brain, neurologists discover, have fundamentally changed. Marketers at Procter & Gamble study videos of people making their beds. They are desperately trying to figure out how to sell a new product called Febreze, on track to be one of the biggest flops in company history. Suddenly, one of them detects a nearly imperceptible pattern--and with a slight shift in advertising, Febreze goes on to earn a billion dollars a year. An untested CEO takes over one of the largest companies in America. His first order of business is attacking a single pattern among his employees--how they approach worker safety--and soon the firm, Alcoa, becomes the top performer in the Dow Jones

Useful Tips When Purchasing A Property How to build equity in your home quickly Every home owner has the chance to build equity in their home over time, but here's how to speed up the process. Equity is the difference between the market value of your property and the amount you still owe on your loan. The quicker you build equity, the earlier the opportunity to invest further, expand your portfolio and build your wealth. Buy at a good price At the start of your investing career, it doesn't hurt to knock $25-50k off an average priced home. Paying a lower price not only saves money up front, but also long term through reduced interest payments. Mastering the art of negotiation is your best bet for knocking down the purchase price. Start by doing your sums and knowing your limit, but never let on to the seller what your top price is. Place a time limit on your offer and tempt the seller with something like a quick sale. Stay calm during the process; keep a clear mind and a cool heart. Buy in an up-and-coming area Look to buy your property in areas that market demographics show are just about to boom or that will soon receive new infrastructure or an injection of new business. It can take time to put in the research but the payoff is you will be able to buy a property for a reasonable price and it won't be long before its value starts to rise. Buy a property that can be improved Renovation can increase the value of a property but be aware that it takes time, money and experience. For those would-be-investors not able to make this kind of commitment, the alternative is to buy a property that only needs a bit of cosmetic work. Freshening up the exterior, a lick of paint, new storage areas or a simple bathroom/kitchen tidy up will cost less and can significantly improve property value. Pay your loan off sooner Aim to make your initial down-payment at the time of purchase as high as possible. Then look for ways to repay your home loan early: increase the regularity of your repayments, make larger repayments and make lump sum repayments (ensure your loan has the flexibility to allow this without penalty). Another option is to use the interest offset accounts that come with many loans - these reduce the amount of interest that is charged by offsetting your savings to the value of your loan. As your mortgage broker we are happy to guide you through various strategies for building equity in your home loan.

Finding Empathy Despite the common adage 'never judge a man until you have walked a mile in his moccasins', many of us are too quick to judge others without considering the full picture. How long since you have given someone the benefit of the doubt rather than forming a quick judgement? How long since you stopped to take in someone else's perspective? If your answer was 'today', then congratulations, it means you have what it takes to be empathetic - to place yourself in the shoes of another person and be able to identify and understand their situation. It has been said that a common characteristic of people who are successful as business leaders, teachers, parents, spouses and healthcare professionals is their ability to be empathetic. By gaining an insight into what others are feeling and thinking, they are able to create bonds of trust. They are also able to understand how or why others are reacting to a situation and use this to inform their decisions. Empathy is sometimes wrongly confused with being too soft, giving in or not being assertive. You can be empathetic and yet disagree with another person - it simply means you are in tune with what they are going through and respond in a manner that acknowledges their thoughts, feelings or concerns. How to develop empathy You can strengthen your ability to emphasise by learning to listen attentively and ask questions. To listen attentively means putting your complete focus on that person without getting distracted. For example, if you're doing chores and your child wants to tell you something, stop what you're doing and turn to your child. If you need a few minutes to finish that task or email before comfortably being interrupted by an employee, then let the person know that. To be curious; to ask questions is to learn what the person is feeling and to gain a clearer understanding of the full picture. It also demonstrates you want to know more and you care about what they have to say.

Disclaimer: This newsletter is intended to provide general news and information only. Readers should rely on their own enquiries before making any decisions regarding their own interests. Please do not rely on any part of this newsletter as a substitute for specific legal or financial advice. All material is copyright 2012. Click here if you would like to unsubscribe from future newsletters.

SMH Article - Your Credit Report

Tougher stand taken on credit files

John Kavanagh  June 30, 2012

 

View the www.smh.com.au/money article here

Credit reporting agencies will get greater access to your information in exchange for stronger consumer protection.

The information held on consumer credit files will change in the coming year so that lenders, utility suppliers and telcos can find out more about the way we use credit.

OUR NOTE: If you have concerns please give Equitimax a ring and we can check your credit rating with Veda and advise on your current position.

The government has agreed to make Australia's credit reporting system more comprehensive in return for tougher consumer protection. Consumers have access to their credit files and the right to demand that mistakes are corrected. With big changes on the way - which will involve more information going into files - this is a good time to check your credit file and make sure there are no incorrect entries.

  

Any incorrect default listings or other errors could make it hard for you to get access to credit, a mobile phone contract or a utility service account. 

And it is not just low-income earners who are affected.
Veda Advantage, Australia's biggest credit reporting agency, says while people living in ''blue-collar areas'' account for the majority of default listings on credit files, that profile has been changing and there is now a broader spread of people affected.

Under the current reporting arrangements, a credit reporting agency can include the following information in a credit file: payment on a credit contract is at least 60 days overdue; a cheque for $100 or more has been dishonoured twice; a bankruptcy order has been made against the individual; a credit provider considers that the individual has committed ''a serious credit infringement''; the individual's current credit provider status; and details of recent credit inquiries.

The new scheme, which was introduced in an amendment to the Privacy Act by the Attorney-General, Nicola Roxon, last month, will allow credit reporting agencies to add the following information: the date a credit account was opened; the type of each current credit account (mortgage, credit card, personal loan and so on); the date a credit account was closed; the current limit of each open credit account; and repayment performance history.

The aim of the reforms is to facilitate better assessment of consumer credit risk by creating greater transparency. Information about repayment performance will be available only to licensed credit providers.
In return for giving the industry a more comprehensive view of the consumer's credit position, the government has included tougher consumer protection provisions in the amendment.

Consumers will be compensated if they are adversely affected by a contravention of the credit reporting provisions and courts will be given power to order compensation in cases where a civil penalty provision has been contravened. The new law includes a substantiation rule for corrections.

If a person requests a correction and is refused, the credit reporting agency or credit provider must furnish evidence to substantiate the correctness of the information.

A big problem with credit files is that errors creep in, because questions such as whether someone has committed ''serious credit infringement'' can involve a degree of subjective assessment. The Financial Ombudsman Service reported last month that it was dealing with several disputes in which consumers raised concerns about serious credit infringement listings on their credit files.

The Ombudsman found that credit providers did not always investigate sufficiently to determine that the consumer's actions indicated they were not going to comply with credit obligations. The Ombudsman also found a lender that was listing commercial debts on consumers' credit files. Commercial debt does not fall under the legislation.

''Errors in credit listings continue to be an area that raises systemic issues,'' the Ombudsman said.
Changes to the credit reporting system were first proposed by the Australian Law Reform Commission in 2008, and those recommendations were accepted by the government the following year. Change has been slow in coming because the issue has continued to be hotly debated.

The Consumer Action Law Centre has argued that some lenders target borrowers who have a high likelihood of defaulting because they pay high fees, rates and penalties. More detailed credit files allow those lenders to identify targets more easily.

The joint chief executive of the centre, Carolyn Bond, says all the overseas research shows that more comprehensive credit reporting leads to more lending and ''we are putting a lot of trust in lenders''.
Lenders have argued that the current system forces them to rely on a ''very limited snapshot'' of the credit applicant.

Access Economics has produced a report that says more comprehensive reporting would help overcome financial exclusion. A small number of adult Australians have no access to credit.
Access says lenders that rely on the current credit reporting system have to fall back on information about income when assessing credit applications.

One result is that people on low incomes may miss out on credit, even though they could service a debt. A more comprehensive report would highlight the fact that they had a good repayment history.

Beware credit repair companies

The co-ordinator of the NSW Consumer Credit Legal Centre, Karen Cox, says consumers should be wary of dealing with credit repair companies, which, in some cases, charge large upfront fees to investigate a consumer's credit file and ''clear'' the file. Cox says some consumers are being charged hundreds of dollars for having errors in credit files corrected, which they could do themselves for nothing.

In other cases, the credit repair companies have used aggressive tactics to try to persuade the lender or credit reporting agency to remove legitimate listings. And in some instances that Cox's staff have dealt with, the credit repair company has persuaded the consumer to enter Part IX insolvency arrangements, which they subsequently administer for a fee.

''It is a completely unregulated area,'' Cox says.
Australia's two main credit reporting companies, Veda Advantage and Dun & Bradstreet, provide access to credit files, via their internet home pages.

OUR NOTE: Websites referred above are:

Veda www.mycreditfile.com.au

D&B http://dnb.com.au/

Veda offers an alert service that informs consumers of any changes to their credit file.
Consumers should try these services first and take the matter to a dispute resolution service if unhappy with the outcome. A credit repair company might be an option as a last resort.

Read more: http://www.smh.com.au/money/borrowing/tougher-stand-taken-on-credit-files-20120629-217q4.html#ixzz1zjisoDLn

SMH Article - Build your savings using Offsets

Build your savings

Sydney Morning Herald - Lesley Parker July 4, 2012

www.smh.com.au/money/saving/build-your-savings-20120703-21dt8.html

Redraw and offset facilities can be tax-effective ways to save, but there are pitfalls that must be avoided.
Using your mortgage as a place to save gives you the best after-tax return outside super.
But financial advisers warn there can be traps if you're not disciplined.
Anyone with a redraw facility or offset account can, in effect, ''save'' by putting money on, or alongside, their mortgage.

With a redraw facility, the money goes in as an extra repayment, with the ability to redraw it if needed.
An offset account works slightly differently, sitting alongside the mortgage. If it's a 100 per cent offset account, any money in the account is fully offset against your mortgage and you pay interest only on the balance left after that.
So, for example, if you had a $350,000 home loan and $50,000 in the offset account, you'd pay interest on $300,000.
Because you continue to make your usual monthly repayment, the impact of extra repayments and offset deposits is that you pay your loan off faster.
And because you're not actually earning interest, there's no tax to pay on those savings.
A minority of offset accounts provide only a partial offset.
In this case you'll pay interest at a reduced rate on the amount of home loan equal to the money in the offset account.
In the example above, you might pay 5 per cent, instead of 6.5 per cent, on $50,000 of your home loan.
Redraw and offset were once features of ''premium'' loans but have become more standard in recent years.
Nevertheless, check you won't be hit with extra monthly or annual fees or a higher interest rate on the sort of loan that comes with this kind of facility.
If so, do the sums to see whether you'd be better off taking a basic loan with a low interest rate and no fees. On the RateCity database, loans with offset or redraw had interest rates ranging from 5.65 per cent to 7.46 per cent, application fees ranging from zero to $795 and annual fees ranging from zero to nearly $400 - all much the same span as for home loans in general.
If the facility is attached to a basic home loan, there can be a fee for redrawing. McPhail HLG Financial Planning principal Anne Graham says using redraw and offset are tax-effective ways of saving. But such facilities - including line-of-credit loans - require discipline. ''People get trapped when they don't keep track of what they've taken out,'' she says.
''They're feeling good that they're paying a lot off but they forget about the money that comes back out.
''They can end up with no movement at all in the [home loan] balance.''
Also, care needs to be taken if you want to use the money you've parked in your mortgage to help buy an investment property.
''It's very important that you separate the interest charged on the amount used for investment purposes versus the interest charged on your home loan - the reason being that the investment-loan interest is tax deductible and the home-loan interest is not,'' Hewison Private Wealth client adviser, Andrew Hewison, says.
That can be a little messy with redraw. So Hewison's advice is to refinance, take what was the redraw money and establish a separate investment loan account.
Key points
❏ Redraw allows extra repayments to be withdrawn if needed.
❏ Be careful not to redraw more than you put in.
❏ Money in an offset account sits alongside the mortgage, in effect reducing the balance.
❏ Check for extra fees or a higher interest rate on loans that feature these facilities.

Read more: http://www.smh.com.au/money/saving/build-your-savings-20120703-21dt8.html#ixzz1zjBOJPS3

Govt Registration Fees Increase 1 July

Registration fees for some of the more common Dealings are outlined below. For further information, please refer to the relevant Titles Office website.

NEW SOUTH WALES
New Fees (Effective as at 1 July 2012)
Mortgage $102.00
Discharge of Mortgage $102.00
Transfer $204.00
Change of Name $102.00
For further information refer to: www.lpi.nsw.gov.au/

VICTORIA
New Fees (Effective as at 1 July 2012)
Mortgage $105.00
Discharge of Mortgage $105.00
Transfer $127.90 + $2.46 per $1,000 (rounded up to the nearest dollar)
Maximum fee is $1,358.00
If the consideration is not a dollar amount, then the fee is $127.90
Change of Name $110.30
For further information refer to: www.dse.vic.gov.au/property > Land Titles > Forms, guides and fees

SOUTH AUSTRALIA
New Fee (Effective as at 1 July 2012)
Mortgage $144.00
Discharge of Mortgage $144.00
Transfer
Does not exceed $5,000 - $144.00
Does not exceed $20,000 - $159.00
Does not exceed $40,000 - $175.00
Exceeds $40,000 $245.00 plus $71 for every $10,000 (or part of $10,000) above $50,000
Change of Name $144.00
For further information refer to: www.landservices.sa.gov.au

WESTERN AUSTRALIA
New Fees (Effective as at 1 July 2012)
Mortgage $160.00
Discharge of Mortgage $160.00
Transfer
Up to $85,000 - $160.00
$85,001 to $120,000 - $170.00
$120,001 to $200,000 - $190.00
$200,001 to $300,000 - $210.00
$300,001 to $400,000 - $230.00
$400,001 to $500,000 - $250.00
$500,001 to $600,000 - $270.00
$600,001 to $700,000 - $290.00
$700,001 to $800,000 - $310.00
$800,001 to $900,000 - $330.00
$900,001 to $1,000,000 - $350.00
$1,000,001 to $1,100,000 - $370.00
$1,100,001 to $1,200,000 - $390.00
$1,200,001 to $1,300,000 - $410.00
$1,300,001 to $1,400,000 - $430.00
$1,400,001 to $1,500,000 - $450.00
$1,500,001 to $1,600,000 - $470.00
$1,600,001 to $1,700,000 - $490.00
$1,700,001 to $1,800,000 - $510.00
$1,800,001 to $1,900,000 - $530.00
$1,900,001 to $2,000,000 - $550.00
Over $2,000,000 $550.00 plus $20 for every $100,000 or part thereof
Change of Name $160.00
For further information refer to: www.landgate.wa.gov.au

ACT
New Fees (Effective as at 1 July 2012)
Mortgage $110.00
Discharge of Mortgage $110.00
Transfer $213.00
Change of Name NIL
For further information refer to: www.ors.act.gov.au/community/land_titles/forms_and_fees

TASMANIA
New Fees (Effective as at 1 July 2012)
Mortgage $123.12
Discharge of Mortgage $152.64
Transfer $188.64
Change of Name $123.12 (Nil if change is due to marriage)
For further information refer to: www.dpiw.tas.gov.au

QUEENSLAND
Existing Fee (Effective as at 1 August 2011)
Mortgage $132.50
Discharge of Mortgage $132.50
Transfer
Up to $180,000 - $132.50
$132.50 plus $27.90 for every $10,000 or part thereof over $180,000 (plus $27.90 for each additional lot)
Change of Name $132.50
For further information refer to: www.derm.qld.gov.au

NORTHERN TERRITORY
New Fees (Effective as at 1 July 2012)
Mortgage $109.00 (plus $42.00 for each additional title)
Discharge of Mortgage $109.00 (plus $42.00 for each additional title)
Transfer $109.00 (plus $42.00 for each additional title)
Change of Name NIL
For further information refer to: www.nt.gov.au/justice/bdm/land_title_office/fees.shtml