The Westpoint, Fincorp and now ACR could see thousands of small investors lose up to $1 billion, with many retirees sucked in by TV advertising.
Collapsed property group Australian Capital Reserve targeted retirees in a string of advertisements offering returns of up to 9 per cent -- much less than a professional investor would require for the same risk.
ACR advertised heavily on TV in the "retirees'' timeslot -- 1pm to 3pm -- and through newspapers.
The company, which went into voluntary administration on Monday, had raised more than $300 million from about 7000 small investors.
ACR issued unsecured deposit notes, using the money raised to finance apartment projects being developed by its development arm, Estate Property Group, in NSW and Victoria.
In 2005, ACR's Prospectus 7 offered one-year returns of 8 per cent and up to 10 years at 8.9 per cent.
Real estate consumer advocate Denise Brailey said she alerted the Australian Securities & Investments Commission to the company's activities in December 2005.
"ASIC should have gone into a heavy campaign to warn them about the model being presented,'' she said.
ASIC placed a final stop order on ACR's ninth prospectus in April. The regulator's handling of property-related collapses such as Westpoint and Fincorp is already under scrutiny from the Senate Estimates Committee.
The role of trustees will also come under the spotlight in committee hearings with Bendigo Bank-owned Sandhurst Trustees involved with both Fincorp and Westpoint, while Sydney-based Trust Company is trustee for the ACR noteholders.
In a statement yesterday, Trust said it was not aware of a "breach of the obligations by ACR under the terms of the Trust Deed''.
Trust's executive general manager, Vicki Allen, said Trust had appointed an independent expert to review ACR and its property arm's financial position.
A statement from ASIC said Trust had been in talks over ACR's financial position for the past two months. Trust was also looking for updated valuations on ACR's properties, ASIC said.
Adminstrator McGrathNicol will oversee the 26 companies in the group which own 21 property developments in NSW and Victoria.
The first meeting of creditors and a separate noteholder information session will be held on June 4.
Ms Brailey, who is employed by litigation funder IMF (Australia) Ltd, said yesterday the group had lured mum-and-dad investors through a network of referral agents that included accountants, solicitors, real estate agents and financial planners.
Source: The Australian
Thursday, May 31, 2007
Monday, May 28, 2007
Australians are going ever deeper into debt to make ends meet
Australians are getting overloaded with debt to make ends meet despite many working harder and longer hours, research from internet auction site eBay reveals.
The research shows Australia's love affair with credit was strong, with more than two-thirds of Australians happy to borrow money to maintain their lifestyle.
The nationwide survey of about 850 people revealed that seven out of 10 Australians were working longer and harder in an effort to meet obligations and negotiate some of life's bigger financial hurdles.
The researchers found that one-third of first-time car buyers used some form of credit to finance their car, while three out of 10 Australians used either a credit card or bank loan to fund moving out of home for the first time.
The survey also found that 45 per cent of new parents said that despite planning financially for their baby, they still had to fork out for unexpected costs.
EBay, in partnership with the founder of savings tips website SimpleSavings.com.au, Fiona Lippey, have produced the Stages of Life Survival Guide.
For more information on the eBay Stages of Life guide visit www.eBay.com.au/stagesoflife.
SOurce: AAP
The research shows Australia's love affair with credit was strong, with more than two-thirds of Australians happy to borrow money to maintain their lifestyle.
The nationwide survey of about 850 people revealed that seven out of 10 Australians were working longer and harder in an effort to meet obligations and negotiate some of life's bigger financial hurdles.
The researchers found that one-third of first-time car buyers used some form of credit to finance their car, while three out of 10 Australians used either a credit card or bank loan to fund moving out of home for the first time.
The survey also found that 45 per cent of new parents said that despite planning financially for their baby, they still had to fork out for unexpected costs.
EBay, in partnership with the founder of savings tips website SimpleSavings.com.au, Fiona Lippey, have produced the Stages of Life Survival Guide.
For more information on the eBay Stages of Life guide visit www.eBay.com.au/stagesoflife.
SOurce: AAP
GE Money profits down as bad debt grows
In a clear sign that credit conditions have taken a turn for the worse, a blowout in bad debts has resulted in a profit slump for the local consumer and business finance operations of GE
Loan impairment losses for GE Capital Finance Australasia, which bought AGC from Westpac five years ago, jumped 54 per cent from $185 million to $285 million.
Along with a higher tax bill, this contributed to a 31 per cent slide in net profit from $159 million to $109 million.
The GE division, with total loans and advances of $13 billion, up from $12 billion, represents only part of the fast-growing group in Australia.
Apart from AGC, the unit includes credit-card services, the Custom Fleet leasing and fleet management business purchased from National Australia Bank for $550 million, and general and life insurance activities. It does not include Wizard Home Loans.
GE representatives were unavailable for comment on the accounts, lodged yesterday with the Australian Securities and Investments Commission.
However, the GE Capital Finance numbers are consistent with warnings from the nation's big-bank chief executives in the recent interim profit reporting season that the credit cycle had turned, with stresses appearing in unsecured lending and credit-card operations, in particular.
ANZ boss John McFarlane said he expected provisions to be higher in the second half, with the first half unusually low due to recoveries.
NAB chief executive John Stewart said he was most concerned about the consumer space.
"The consumer is getting overextended with debt in certain pockets and that will always come out in danger areas like credit cards and unsecured lending," Mr Stewart said.
JP Morgan banking analyst Brian Johnson said yesterday personal lending loss rates were rising "quite dramatically", as shown by provisions at the GE unit rising to 219 basis points (as a percentage of total loans and advances).
Comparative rates for the big-four banks were far lower, at less than 20 basis points, but this was because of their massive, low-risk home lending books.
Mr Johnson estimated credit-card losses were running at about 260 basis points.
"Westpac's sale of AGC is now shown to be a pretty good decision, despite the short-term dilution in earnings per share at the time," he said.
"The banking industry is now exiting the optimal part of the cycle, and things will get worse from here."
GE's tax bill in 2006 was sharply higher, up from $18 million to $70 million. Unlike 2005, when it took a $39 million benefit from paying too much tax previously, the business had to stump up an extra $6 million.
Total assets at the end of last year came to $17.1 billion, up from $14.5 billion.
Finance income was relatively steady at $1.62 billion, but non-interest income doubled from $387 million to $767 million.
The biggest contributor was operating lease rental income, largely from Custom Fleet, which surged from $74 million to $223 million.
Custom Fleet contributed $167 million in revenue and a net loss of $2 million to the group from August 1 last year.
The total asset base for the GE group in Australia is estimated to be about $40 billion, up from $8 billion five years ago.
GE Capital Finance directors said they expected to grow the business further this year.
Source: Australian
Loan impairment losses for GE Capital Finance Australasia, which bought AGC from Westpac five years ago, jumped 54 per cent from $185 million to $285 million.
Along with a higher tax bill, this contributed to a 31 per cent slide in net profit from $159 million to $109 million.
The GE division, with total loans and advances of $13 billion, up from $12 billion, represents only part of the fast-growing group in Australia.
Apart from AGC, the unit includes credit-card services, the Custom Fleet leasing and fleet management business purchased from National Australia Bank for $550 million, and general and life insurance activities. It does not include Wizard Home Loans.
GE representatives were unavailable for comment on the accounts, lodged yesterday with the Australian Securities and Investments Commission.
However, the GE Capital Finance numbers are consistent with warnings from the nation's big-bank chief executives in the recent interim profit reporting season that the credit cycle had turned, with stresses appearing in unsecured lending and credit-card operations, in particular.
ANZ boss John McFarlane said he expected provisions to be higher in the second half, with the first half unusually low due to recoveries.
NAB chief executive John Stewart said he was most concerned about the consumer space.
"The consumer is getting overextended with debt in certain pockets and that will always come out in danger areas like credit cards and unsecured lending," Mr Stewart said.
JP Morgan banking analyst Brian Johnson said yesterday personal lending loss rates were rising "quite dramatically", as shown by provisions at the GE unit rising to 219 basis points (as a percentage of total loans and advances).
Comparative rates for the big-four banks were far lower, at less than 20 basis points, but this was because of their massive, low-risk home lending books.
Mr Johnson estimated credit-card losses were running at about 260 basis points.
"Westpac's sale of AGC is now shown to be a pretty good decision, despite the short-term dilution in earnings per share at the time," he said.
"The banking industry is now exiting the optimal part of the cycle, and things will get worse from here."
GE's tax bill in 2006 was sharply higher, up from $18 million to $70 million. Unlike 2005, when it took a $39 million benefit from paying too much tax previously, the business had to stump up an extra $6 million.
Total assets at the end of last year came to $17.1 billion, up from $14.5 billion.
Finance income was relatively steady at $1.62 billion, but non-interest income doubled from $387 million to $767 million.
The biggest contributor was operating lease rental income, largely from Custom Fleet, which surged from $74 million to $223 million.
Custom Fleet contributed $167 million in revenue and a net loss of $2 million to the group from August 1 last year.
The total asset base for the GE group in Australia is estimated to be about $40 billion, up from $8 billion five years ago.
GE Capital Finance directors said they expected to grow the business further this year.
Source: Australian
A third of Australians live payday to payday
Consumer confidence may be at its highest in more than 30 years, but for many Australians last week's announced tax cuts will have little impact on their day-to-day lives.
A survey conducted by career networking site Linkme.com.au shows that 34.3 per cent of Australians live "pocket-to-mouth".
And while 82 per cent would like to plan their finances better, 43.5 per cent say they did not make enough money to be able to budget any differently.
And for 29.6 per cent in the survey of more than 800 respondents, they say unexpected expenses always get in the way of getting ahead financially.
”Recent tax cuts will not improve the situation for most people and housing shortages and rising rents are just making things worse,'' Linkme.com.au CEO Campbell Sallabank says.
”Housing prices, petrol, bread and milk costs have all sky rocketed whilst salary levels have languished over the past decade.''
Tax cuts help, but more money sought
Tax cuts from July 1 will see a monthly saving of $14.42 per week or $750 per year for someone on an average salary of around $50,000.
For people in the $30,000-$40,000 wage bracket, they will get a slightly higher $21.15 per week or $1100 per year, but for anyone on $25,000 per year of less, they will get just $2.88 per week or $150 per year.
Data released yesterday showed consumer confidence is sitting at its highest since January 1975.
But Mr Sallabank says 24.6 per cent of respondents say they are currently forced to look out for a job that pays more money, while 61.3 per cent say they have to make their lifestyle suit their pay and this means cutting back on luxuries in order to survive.
”The reality is there are tremendous skill shortages in Australia and employees can charge themselves out at a premium,'' Mr Sallabank says.
”There seems to be a great deal of job hopping and no wonder as the pressure to make ends meet is reaching boiling point.''
Source: AAP
A survey conducted by career networking site Linkme.com.au shows that 34.3 per cent of Australians live "pocket-to-mouth".
And while 82 per cent would like to plan their finances better, 43.5 per cent say they did not make enough money to be able to budget any differently.
And for 29.6 per cent in the survey of more than 800 respondents, they say unexpected expenses always get in the way of getting ahead financially.
”Recent tax cuts will not improve the situation for most people and housing shortages and rising rents are just making things worse,'' Linkme.com.au CEO Campbell Sallabank says.
”Housing prices, petrol, bread and milk costs have all sky rocketed whilst salary levels have languished over the past decade.''
Tax cuts help, but more money sought
Tax cuts from July 1 will see a monthly saving of $14.42 per week or $750 per year for someone on an average salary of around $50,000.
For people in the $30,000-$40,000 wage bracket, they will get a slightly higher $21.15 per week or $1100 per year, but for anyone on $25,000 per year of less, they will get just $2.88 per week or $150 per year.
Data released yesterday showed consumer confidence is sitting at its highest since January 1975.
But Mr Sallabank says 24.6 per cent of respondents say they are currently forced to look out for a job that pays more money, while 61.3 per cent say they have to make their lifestyle suit their pay and this means cutting back on luxuries in order to survive.
”The reality is there are tremendous skill shortages in Australia and employees can charge themselves out at a premium,'' Mr Sallabank says.
”There seems to be a great deal of job hopping and no wonder as the pressure to make ends meet is reaching boiling point.''
Source: AAP
Wednesday, May 23, 2007
US Mortgage Brokers and Mortgage Brokers blame each other for the sub-prime meltdown
It got nasty between mortgage bankers and brokers were at loggerheads Tuesday over who's to blame for the housing market's woes.
[The Mortgage Bankers seemed to have "lost their rag" by trying to infer that Mortgage Brokers were somehow to blame for the difficulties that some people have found themselves in by taking on sub prime loan arrangements. After all who determined Mortage Brokers compensation as commission, who pays the commission, and who verifies the facts of the loans before issuing documents? And don't the Mortgage Bankers make money on sub-prime loan mortgages? If not why are they in the business? Surely the Mortgage Bankers have the ultimate say, and so should be ultimately responsible and accountable. ]
The head of the mortgage banking industry's trade group claimed brokers profited from a home loan boom but didn't do enough to examine whether borrowers could repay.
Amid increasing evidence of financial distress for homeowners with weak, or sub prime, credit histories, John Robbins, chairman of the Mortgage Bankers Association, says he is "mad as hell" at "a few unethical actors" that have sullied his profession's reputation.
"Unethical people, they're responsible for this mess," Robbins said. "The short-term folks. People who get a commission when the deal happens. For them, it's the number of loans that counts. Good loan? Bad loan? Who cares? For them it's all about their commission."
In reaction, the president of the National Association of Mortgage Brokers, e-mailed a statement that said: "It is truly unfortunate (Robbins) has attempted to shift blame away from Wall street, federally chartered banks, state-chartered lenders and underwriters for the sub prime situation we find ourselves in today."
Harry Dinham, president of the brokers' group, added that congressional hearings have shown that "most residential mortgage loans are quickly sold into the secondary market - in fact most lenders are really just brokering the transaction but afraid or ashamed to admit it," he added.
In a lunchtime speech at the National Press Club, Robbins called for a national licensing system for mortgage brokers, which would help weed out "scam artists."
The industry's woes are confined to a small segment of the market, he said. About 5 percent of homeowners have sub prime adjustable-rate loans that feature low "teaser" rates which can move sharply higher later. He estimates about half of those homeowners will be able to avoid default or foreclosure. If so, foreclosures among sub prime borrowers will amount to 0.25 percent of U.S. homeowners, Robbins said.
"No seismic financial occurrence is about to overwhelm the U.S. economy," he said.
Yet RealtyTrac Inc., an industry research firm, said last week that mortgage lenders foreclosed on 62 percent more U.S. homes in April than a year ago.
Home prices are falling too. The national median existing single-family home price in the first quarter was $212,300, down 1.8 percent from a year ago when the median price was $216,100, according to the National Association of Realtors. The median is a typical market price where half the homes sold for more and half the homes sold for less.
Earlier this month, Sen. Charles Schumer, D-N.Y. and two other senators introduced a bill that would mandate tougher federal standards for mortgage lenders. No hearing date has been set and the bill is under review by the Committee on Banking, Housing and Urban Affairs. House lawmakers are talking about introducing their own reform bill this summer.
Robbins warned against an overreaction by lawmakers that could cause the country to "revert to a time when without perfect credit you couldn't buy a home."
His speech comes a day after the Mortgage Bankers Association and four other industry trade groups banking industry trade groups endorsed mortgage reform principles.
Any legislation or new regulations should focus on lenders only being permitted to issue high-risk, home loans - if they "reasonably believe" at the time the loan is made that borrowers have the ability to repay, the statement said. Mortgage terms should be "clearly disclosed" to consumers, and estimates of monthly payments that could quickly jump in later years should be made clearer, the groups said.
Banks say they are already stepping up efforts to assist borrowers who face default or foreclosure and tightening loan standards.
Federal Reserve Chairman Ben Bernanke last week said the central bank is considering tougher rules to reduce abusive home loan practices even though he believes the economy should escape without significant harm from the problems in the sub prime mortgage market.
In March, the Fed and the other four federal agencies that regulate banks, thrifts and credit unions proposed guidelines that call for strict evaluations of a borrower's ability to repay and caution when lenders make sub prime mortgage loans.
The guidelines have not yet been made final. The Fed plans a mid-June hearing on ways to curb abusive lending practices.
Source: Forbes and AP
[The Mortgage Bankers seemed to have "lost their rag" by trying to infer that Mortgage Brokers were somehow to blame for the difficulties that some people have found themselves in by taking on sub prime loan arrangements. After all who determined Mortage Brokers compensation as commission, who pays the commission, and who verifies the facts of the loans before issuing documents? And don't the Mortgage Bankers make money on sub-prime loan mortgages? If not why are they in the business? Surely the Mortgage Bankers have the ultimate say, and so should be ultimately responsible and accountable. ]
The head of the mortgage banking industry's trade group claimed brokers profited from a home loan boom but didn't do enough to examine whether borrowers could repay.
Amid increasing evidence of financial distress for homeowners with weak, or sub prime, credit histories, John Robbins, chairman of the Mortgage Bankers Association, says he is "mad as hell" at "a few unethical actors" that have sullied his profession's reputation.
"Unethical people, they're responsible for this mess," Robbins said. "The short-term folks. People who get a commission when the deal happens. For them, it's the number of loans that counts. Good loan? Bad loan? Who cares? For them it's all about their commission."
In reaction, the president of the National Association of Mortgage Brokers, e-mailed a statement that said: "It is truly unfortunate (Robbins) has attempted to shift blame away from Wall street, federally chartered banks, state-chartered lenders and underwriters for the sub prime situation we find ourselves in today."
Harry Dinham, president of the brokers' group, added that congressional hearings have shown that "most residential mortgage loans are quickly sold into the secondary market - in fact most lenders are really just brokering the transaction but afraid or ashamed to admit it," he added.
In a lunchtime speech at the National Press Club, Robbins called for a national licensing system for mortgage brokers, which would help weed out "scam artists."
The industry's woes are confined to a small segment of the market, he said. About 5 percent of homeowners have sub prime adjustable-rate loans that feature low "teaser" rates which can move sharply higher later. He estimates about half of those homeowners will be able to avoid default or foreclosure. If so, foreclosures among sub prime borrowers will amount to 0.25 percent of U.S. homeowners, Robbins said.
"No seismic financial occurrence is about to overwhelm the U.S. economy," he said.
Yet RealtyTrac Inc., an industry research firm, said last week that mortgage lenders foreclosed on 62 percent more U.S. homes in April than a year ago.
Home prices are falling too. The national median existing single-family home price in the first quarter was $212,300, down 1.8 percent from a year ago when the median price was $216,100, according to the National Association of Realtors. The median is a typical market price where half the homes sold for more and half the homes sold for less.
Earlier this month, Sen. Charles Schumer, D-N.Y. and two other senators introduced a bill that would mandate tougher federal standards for mortgage lenders. No hearing date has been set and the bill is under review by the Committee on Banking, Housing and Urban Affairs. House lawmakers are talking about introducing their own reform bill this summer.
Robbins warned against an overreaction by lawmakers that could cause the country to "revert to a time when without perfect credit you couldn't buy a home."
His speech comes a day after the Mortgage Bankers Association and four other industry trade groups banking industry trade groups endorsed mortgage reform principles.
Any legislation or new regulations should focus on lenders only being permitted to issue high-risk, home loans - if they "reasonably believe" at the time the loan is made that borrowers have the ability to repay, the statement said. Mortgage terms should be "clearly disclosed" to consumers, and estimates of monthly payments that could quickly jump in later years should be made clearer, the groups said.
Banks say they are already stepping up efforts to assist borrowers who face default or foreclosure and tightening loan standards.
Federal Reserve Chairman Ben Bernanke last week said the central bank is considering tougher rules to reduce abusive home loan practices even though he believes the economy should escape without significant harm from the problems in the sub prime mortgage market.
In March, the Fed and the other four federal agencies that regulate banks, thrifts and credit unions proposed guidelines that call for strict evaluations of a borrower's ability to repay and caution when lenders make sub prime mortgage loans.
The guidelines have not yet been made final. The Fed plans a mid-June hearing on ways to curb abusive lending practices.
Source: Forbes and AP
Will Australia's rampant economy raise mortgage interest rates?
The pace of economic activity in Australia has picked up in March, with interest rates likely to rise next year, says Westpac.
The Westpac-Melbourne Institute leading index of economic activity, which indicates the likely pace of activity three to nine months in the future, was 4.4 per cent, and above its long-term trend of 4 per cent.
The annualised growth rate of the coincident index was 5.7 per cent, which was well above its long-term trend of 3.6 per cent.
Economy to gain strengthWestpac senior economist Andrew Hanlan said the outcome pointed to a positive economic outlook.
"We saw the Australian economy gather momentum late in 2006 and into early 2007," he said.
"Non-farm GDP strengthened in the December quarter and year-ended growth was a healthy 3.5 per cent.
"A significant lift in consumer spending also suggests the economy has accelerated."
Mr Hanlan said real retail sales over the last two quarters were up 6 per cent annualised, the strongest pace since the housing boom of 2003-04.
"In our view the Leading Index suggests that this new found momentum in the Australian economy is likely to be sustained throughout 2007."
Rates set to rise The international economy continues to provide a significant stimulus to our economy, Mr Hanlan said.
"The risk is that inflation pressures re-emerge with the labour market to tighten further and the housing sector to move into recovery mode," he said.
Mr Hanlan said the inflationary pressures would most likely lead to an interest-rate rise in Australia in the first half of 2008. The central bank raised interest rates three times in 2006.Westpac said that although global economic expansion was set to continue, the pace at which many economies grow was likely to slow over the coming months.
Source: AAP
The Westpac-Melbourne Institute leading index of economic activity, which indicates the likely pace of activity three to nine months in the future, was 4.4 per cent, and above its long-term trend of 4 per cent.
The annualised growth rate of the coincident index was 5.7 per cent, which was well above its long-term trend of 3.6 per cent.
Economy to gain strengthWestpac senior economist Andrew Hanlan said the outcome pointed to a positive economic outlook.
"We saw the Australian economy gather momentum late in 2006 and into early 2007," he said.
"Non-farm GDP strengthened in the December quarter and year-ended growth was a healthy 3.5 per cent.
"A significant lift in consumer spending also suggests the economy has accelerated."
Mr Hanlan said real retail sales over the last two quarters were up 6 per cent annualised, the strongest pace since the housing boom of 2003-04.
"In our view the Leading Index suggests that this new found momentum in the Australian economy is likely to be sustained throughout 2007."
Rates set to rise The international economy continues to provide a significant stimulus to our economy, Mr Hanlan said.
"The risk is that inflation pressures re-emerge with the labour market to tighten further and the housing sector to move into recovery mode," he said.
Mr Hanlan said the inflationary pressures would most likely lead to an interest-rate rise in Australia in the first half of 2008. The central bank raised interest rates three times in 2006.Westpac said that although global economic expansion was set to continue, the pace at which many economies grow was likely to slow over the coming months.
Source: AAP
Tuesday, May 22, 2007
Home finance worries as most Australians will experiance financial difficulty in their lives
Three-quarters of Australians experience financial difficulty Super and home affordability are common concerns.
75 percent of Australians will suffer financial difficulty in their lifetimes, with home affordability a common worry, a survey finds.
Trouble understanding superannuation and not being able to afford the home they want are ranked as the most common concerns.
And not surprisingly, the young are worse off than older generations, says a study by the Financial Planning Association of Australia (FPA), published today.
FPA chief executive Jo-Anne Bloch said young people needed to take control of their finances now, not when they're older.
“Young people need to think about their financial future today, not in 20 years time,'' Ms Bloch said.
“They need to consider salary sacrificing, insurance and good budgeting practice now.''
Financial difficulty widespread The FPA found that of the 1100 people surveyed, 73 per cent of Australians had experienced financial difficulty.
The most common woe was not being able to understand superannuation, with 39 per cent of respondents listing it as a problem.
Being unable to afford a home ranked second, at 35 per cent, while meeting major unexpected expenses (30 per cent), regular expenses (24 per cent) and the cost of education (22 per cent) rounded out the top five.
Credit card concernsCredtt card debt troubled 17 per cent of respondents, and 11 per cent struggled to pay large bills.
Generation X and Y - those born after about 1964 and 1978 respectively, struggled more to meet the cost of housing than older geneations.
The survey found 51 per cent of those between 25-34 unable to afford the home they wanted.
Only 26 per cent of those older than 50 had similar troubles.
Financial tips the FPA recommends include setting realistic financial goals, sparing use of credit cards, sticking to a budget, and shopping around for loans.
The FPA survey has been released to coincide with financial planning week, which begins today (May 21) and runs until May 27.
AAP
75 percent of Australians will suffer financial difficulty in their lifetimes, with home affordability a common worry, a survey finds.
Trouble understanding superannuation and not being able to afford the home they want are ranked as the most common concerns.
And not surprisingly, the young are worse off than older generations, says a study by the Financial Planning Association of Australia (FPA), published today.
FPA chief executive Jo-Anne Bloch said young people needed to take control of their finances now, not when they're older.
“Young people need to think about their financial future today, not in 20 years time,'' Ms Bloch said.
“They need to consider salary sacrificing, insurance and good budgeting practice now.''
Financial difficulty widespread The FPA found that of the 1100 people surveyed, 73 per cent of Australians had experienced financial difficulty.
The most common woe was not being able to understand superannuation, with 39 per cent of respondents listing it as a problem.
Being unable to afford a home ranked second, at 35 per cent, while meeting major unexpected expenses (30 per cent), regular expenses (24 per cent) and the cost of education (22 per cent) rounded out the top five.
Credit card concernsCredtt card debt troubled 17 per cent of respondents, and 11 per cent struggled to pay large bills.
Generation X and Y - those born after about 1964 and 1978 respectively, struggled more to meet the cost of housing than older geneations.
The survey found 51 per cent of those between 25-34 unable to afford the home they wanted.
Only 26 per cent of those older than 50 had similar troubles.
Financial tips the FPA recommends include setting realistic financial goals, sparing use of credit cards, sticking to a budget, and shopping around for loans.
The FPA survey has been released to coincide with financial planning week, which begins today (May 21) and runs until May 27.
AAP
Mortgage lending coasting as property prices are yet to boom
Owner occupier home lending hit $14.52bn in March Investor finance dropped 5% to $6.29bn Property prices aren't booming yet.
The housing sector is showing early signs of recovery with four consecutive months of housing approval loan growth but analysts say it is not the start of another property boom.
But investors remain reluctant to spend because the stock market is offering superior returns.
Economists said a combination of stable interest rates, easing inflation pressures and jobs growth will stimulate a surge in house prices nationally over the next 12-18 months.
Yesterday, Australian Bureau of Statistics data showed that borrowing for owner-occupied housing, driven by the influx of new migrant workers, was up 1.7 per cent to a record $14.52 billion in March.
Investors stick to sharesInvestor concerns, later proven to be unfounded, that the Reserve Bank of Australia would lift interest rates in March or April resulted in investment loans dropping 5 per cent to $6.29 billion.
CommSec equities economist Martin Arnold said the reluctance of investors to cash out of the booming share market, which has delivered returns of almost 12 per cent since the start of the year, was delaying the expected upswing in the property market.
In the 12 months to March, national house prices were up 8.6 per cent on average as the boom in Perth prices had been offset by the lacklustre Sydney market.
"The share market is likely to start trading sideways over the next few months and we then expect a pick up in the investor segment of the property market,'' he said.
"It is likely to be more of a gradual improvement in the housing sector rather than a massive turnaround. The strength of the jobs market is one of the only reasons there is any growth in the property market.''
Dollar liftedby dataThe Australian dollar lifted on the release of the ABS data and closed at US83.34 as some financial market participants bet on a interest rate rise later this year.
But most economists are forecasting the RBA will leave rates on hold at 6.25 per cent until early 2008 after Governor Glenn Stevens earlier this month said annual inflation levels were likely to fall to below 2 per cent over the next couple of quarters.
Westpac senior economist Andrew Hanlan said that the three rate rises in 2006 have lost their sting. Source: Herald Sun
The housing sector is showing early signs of recovery with four consecutive months of housing approval loan growth but analysts say it is not the start of another property boom.
But investors remain reluctant to spend because the stock market is offering superior returns.
Economists said a combination of stable interest rates, easing inflation pressures and jobs growth will stimulate a surge in house prices nationally over the next 12-18 months.
Yesterday, Australian Bureau of Statistics data showed that borrowing for owner-occupied housing, driven by the influx of new migrant workers, was up 1.7 per cent to a record $14.52 billion in March.
Investors stick to sharesInvestor concerns, later proven to be unfounded, that the Reserve Bank of Australia would lift interest rates in March or April resulted in investment loans dropping 5 per cent to $6.29 billion.
CommSec equities economist Martin Arnold said the reluctance of investors to cash out of the booming share market, which has delivered returns of almost 12 per cent since the start of the year, was delaying the expected upswing in the property market.
In the 12 months to March, national house prices were up 8.6 per cent on average as the boom in Perth prices had been offset by the lacklustre Sydney market.
"The share market is likely to start trading sideways over the next few months and we then expect a pick up in the investor segment of the property market,'' he said.
"It is likely to be more of a gradual improvement in the housing sector rather than a massive turnaround. The strength of the jobs market is one of the only reasons there is any growth in the property market.''
Dollar liftedby dataThe Australian dollar lifted on the release of the ABS data and closed at US83.34 as some financial market participants bet on a interest rate rise later this year.
But most economists are forecasting the RBA will leave rates on hold at 6.25 per cent until early 2008 after Governor Glenn Stevens earlier this month said annual inflation levels were likely to fall to below 2 per cent over the next couple of quarters.
Westpac senior economist Andrew Hanlan said that the three rate rises in 2006 have lost their sting. Source: Herald Sun
Mortgage foreclosures four times higher than reported
The number of home foreclosures around the nation is up to four times higher than reported figures show, because lenders are disguising the nature of forced sales to prop up property prices.
Australia's biggest private debt collector, Prushka, yesterday said about three-quarters of sales forced by bank and non-bank lenders were co-ordinated with the consent of home owners, meaning they were not recorded in court repossession figures.
"By far the most popular way for lenders is to sell the property with the consent of the borrower to avoid advertising the property as a forced sale," Prushka chief executive Roger Mendelson said.
"The idea is to work with the seller because if they sell the property as a mortgagee in possession that will slaughter the price because you're going to attract the bargain hunters."
Mr Mendelson said statements by Peter Costello yesterday that Australia had a low home loan "default rate" - where borrowers can't meet mortgage repayments - failed to address the impact of increasing unreported levels of repossessions.
During a discussion about US default rates hitting an all-time high in the first quarter of 2007, the Treasurer had told Macquarie Regional Radio: "The default rate in Australia is much, much lower than it is in the US ... in fact, we have one of the lowest default rates in the world."
Experts said rising interest rates, coupled with the prevalence of low-documentation loans that do not force borrowers to disclose their income, had caused a spike in mortgage defaults in Australia.
Ian Graham, chief executive of PMI Mortgage Insurance, which insures about one million home loans, said Australia had no register for compiling total home repossessions.
"We would like to see a register introduced - I think the Reserve Bank would be one body in particular that would benefit from more complete data," Mr Graham said.
State "writs of possession" registers record only sales where lenders are forced to apply for repossession orders.
Sydney's outer western suburbs are being hardest hit by the surge in repossessions.
In NSW, 5363 writs of possession were issued last year - up 10 per cent on 2005.
Figures from the Victorian Supreme Court show there were 2791 repossession claims lodged last year, up from 2578 in 2005. The figure has more than doubled since 2003, when there were 1225.
"In southwest, west and northwest Sydney, property prices are weakest and in forced-sale situations property price declines of between 20 and 25 per cent are not unusual," Mr Graham said.
Dara Dhillon, principal of Dhillon Real Estate in Ingleburn in Sydney's outer southwest, said 90 per cent of properties coming to the market were forced sales, and the number of homes hitting the market was rising.
"It's actually getting worse by the month - in one family I was working with, the elderly mother had to return to work to keep a roof over their heads," he said.
But he said that with high employment and healthy wages growth, it was last year's interest rate rises and lax lending policies of non-bank lenders - especially "low-doc" loans where borrowers are not required to prove their income - that were to blame for the current fallout.
"It's a joke - if it was my money I wouldn't lend it but I believe lenders are still doing it," he said. "Low-doc, no-doc, whatever doc - doc doesn't even come into the picture."
Source: The Australian
Australia's biggest private debt collector, Prushka, yesterday said about three-quarters of sales forced by bank and non-bank lenders were co-ordinated with the consent of home owners, meaning they were not recorded in court repossession figures.
"By far the most popular way for lenders is to sell the property with the consent of the borrower to avoid advertising the property as a forced sale," Prushka chief executive Roger Mendelson said.
"The idea is to work with the seller because if they sell the property as a mortgagee in possession that will slaughter the price because you're going to attract the bargain hunters."
Mr Mendelson said statements by Peter Costello yesterday that Australia had a low home loan "default rate" - where borrowers can't meet mortgage repayments - failed to address the impact of increasing unreported levels of repossessions.
During a discussion about US default rates hitting an all-time high in the first quarter of 2007, the Treasurer had told Macquarie Regional Radio: "The default rate in Australia is much, much lower than it is in the US ... in fact, we have one of the lowest default rates in the world."
Experts said rising interest rates, coupled with the prevalence of low-documentation loans that do not force borrowers to disclose their income, had caused a spike in mortgage defaults in Australia.
Ian Graham, chief executive of PMI Mortgage Insurance, which insures about one million home loans, said Australia had no register for compiling total home repossessions.
"We would like to see a register introduced - I think the Reserve Bank would be one body in particular that would benefit from more complete data," Mr Graham said.
State "writs of possession" registers record only sales where lenders are forced to apply for repossession orders.
Sydney's outer western suburbs are being hardest hit by the surge in repossessions.
In NSW, 5363 writs of possession were issued last year - up 10 per cent on 2005.
Figures from the Victorian Supreme Court show there were 2791 repossession claims lodged last year, up from 2578 in 2005. The figure has more than doubled since 2003, when there were 1225.
"In southwest, west and northwest Sydney, property prices are weakest and in forced-sale situations property price declines of between 20 and 25 per cent are not unusual," Mr Graham said.
Dara Dhillon, principal of Dhillon Real Estate in Ingleburn in Sydney's outer southwest, said 90 per cent of properties coming to the market were forced sales, and the number of homes hitting the market was rising.
"It's actually getting worse by the month - in one family I was working with, the elderly mother had to return to work to keep a roof over their heads," he said.
But he said that with high employment and healthy wages growth, it was last year's interest rate rises and lax lending policies of non-bank lenders - especially "low-doc" loans where borrowers are not required to prove their income - that were to blame for the current fallout.
"It's a joke - if it was my money I wouldn't lend it but I believe lenders are still doing it," he said. "Low-doc, no-doc, whatever doc - doc doesn't even come into the picture."
Source: The Australian
Mortgage your stocks and shares investment portfolio
Australians are borrowing at record levels to invest in shares, an asset class which is gaining in popularity over property.
An Australian Securities Exchange (ASX) survey found 46 per cent of respondents now own shares either directly or indirectly, down from 55 per cent in 2004.
Many of those who exited the market in the past two years did so to pay off debts on homes and investment properties, according to the research.
Shareholders are now just as likely to be female as male, aged 35 plus and university educated, with a household income of more than $100,000.
Their method of investing has also become more complex, the typical investor has a stake in nine companies, up from seven in 2004.
But the study also shows a remarkable geographic division in share ownership.
Between 2004 and 2006, direct share ownership in regional areas plunged from 45 per cent to 32 per cent, which the ASX believes is largely attributable to the financial strain of the drought.
While share market participation might be down, those who are investing are borrowing madly to take advantage of booming conditions.
Margin loans are at their highest level in Australian history, with demand jumping more than 40 per cent in December according to financial researcher Cannex.
Shares favoured over propertyConversely, investment for housing loans failed to post even a 10 per cent increase in the same quarter.
”The strong growth in the Australian stock market, thanks largely to China and the resources boom, has fuelled increased demand for margin lending as an investment tool,'' says Cannex financial analyst Michael Moran.
”This suggests investors are favouring equity to housing with its current affordability issues in many areas.''
The fact margin loans have skyrocketed in relation to housing investment loans mirror the fluctuations in each market, he says.
Housing investment soared after the property boom in 2003, but tapered off as prices plateaued in most Australian cities.
ASX market research manager Mary-Anne Muscat says many became shareholders accidentally, through demutualisations, the floating of public utilities and enterprises, or employee share schemes.
These “accidental'' share owners contrast with the sophisticated investors who now typify share ownership in Australia. The Advertiser
An Australian Securities Exchange (ASX) survey found 46 per cent of respondents now own shares either directly or indirectly, down from 55 per cent in 2004.
Many of those who exited the market in the past two years did so to pay off debts on homes and investment properties, according to the research.
Shareholders are now just as likely to be female as male, aged 35 plus and university educated, with a household income of more than $100,000.
Their method of investing has also become more complex, the typical investor has a stake in nine companies, up from seven in 2004.
But the study also shows a remarkable geographic division in share ownership.
Between 2004 and 2006, direct share ownership in regional areas plunged from 45 per cent to 32 per cent, which the ASX believes is largely attributable to the financial strain of the drought.
While share market participation might be down, those who are investing are borrowing madly to take advantage of booming conditions.
Margin loans are at their highest level in Australian history, with demand jumping more than 40 per cent in December according to financial researcher Cannex.
Shares favoured over propertyConversely, investment for housing loans failed to post even a 10 per cent increase in the same quarter.
”The strong growth in the Australian stock market, thanks largely to China and the resources boom, has fuelled increased demand for margin lending as an investment tool,'' says Cannex financial analyst Michael Moran.
”This suggests investors are favouring equity to housing with its current affordability issues in many areas.''
The fact margin loans have skyrocketed in relation to housing investment loans mirror the fluctuations in each market, he says.
Housing investment soared after the property boom in 2003, but tapered off as prices plateaued in most Australian cities.
ASX market research manager Mary-Anne Muscat says many became shareholders accidentally, through demutualisations, the floating of public utilities and enterprises, or employee share schemes.
These “accidental'' share owners contrast with the sophisticated investors who now typify share ownership in Australia. The Advertiser
Monday, May 14, 2007
Housing affordability puts pressure on low income earners
The Howard Government's Budget cash splurge had failed to address key issues facing low income earners such as housing affordability, advocacy groups claimed yesterday.
With new figures released yesterday showing the Australian house price index rose 1.1 per cent in the March quarter, the Australian Council of Social Services said the Federal Government's priorities were wrong.
ACOSS executive director Andrew Johnson said the Government should have funded a range of initiatives to tackle the issue, rather than focussing on tax cuts.
"Rather than cutting taxes, we were looking for the Government to invest more in making housing more affordable,'' Mr Johnson said.
The Australian Bureau of Statistics showed that in the March quarter, house prices rose in every capital city except for Sydney.
In Brisbane, house prices rose by 2.9 per cent.
The Brotherhood of St Laurence claimed that the climate change measures announced in the Budget did nothing for low income earners, the group executive director Tony Nicholson said were the most vulnerable to the impact.
"The solar rebate will only assist homeowners who can pay $14,000 or more upfront for solar panels, making them eligible for the $8000 rebate,'' Mr Nicholson said.
"Renters and home owners on low incomes are left out.''
Source: Courier Mail
With new figures released yesterday showing the Australian house price index rose 1.1 per cent in the March quarter, the Australian Council of Social Services said the Federal Government's priorities were wrong.
ACOSS executive director Andrew Johnson said the Government should have funded a range of initiatives to tackle the issue, rather than focussing on tax cuts.
"Rather than cutting taxes, we were looking for the Government to invest more in making housing more affordable,'' Mr Johnson said.
The Australian Bureau of Statistics showed that in the March quarter, house prices rose in every capital city except for Sydney.
In Brisbane, house prices rose by 2.9 per cent.
The Brotherhood of St Laurence claimed that the climate change measures announced in the Budget did nothing for low income earners, the group executive director Tony Nicholson said were the most vulnerable to the impact.
"The solar rebate will only assist homeowners who can pay $14,000 or more upfront for solar panels, making them eligible for the $8000 rebate,'' Mr Nicholson said.
"Renters and home owners on low incomes are left out.''
Source: Courier Mail
Home values grow above inflation but Sydney struggles to keep up
House prices grew 1.1% in the March quarter
Over the year, house prices jumped 8.6%
Sydney is lagging national gains
House prices are going back up after a long lull with strong gains recorded in most capital cities as the nation leaves the property downturn well and truly behind. Over the year house price median rose 8.6 percent. Howver Sydney is lagging other property hot-spots.
Average house prices grew by an average 1.1 per cent across Australia in the first three months of the year, according to the Australian Bureau of Statistics's House Price Index, which takes the average of the nation's eight capital cities.
Over the year, house prices jumped 8.6 per cent .
Most capital cities posted strong gains.
The mining boom propped up Perth prices, with house values rising a further 2.1 per cent in the first three months, to be up a whopping 32.1 per cent over the year. While house price growth has slowed, Perth house prices are still growing at the fastest pace in the nation.
Over the quarter, Hobart led the way with a 3.8 per cent quarterly increase in house prices, with values up 10.5 per cent over the year.
Brisbane followed with prices up 2.9 per cent over the quarter and 10.2 per cent over the year.
In Darwin, house prices jumped 2.8 per cent over the quarter and surged 15 per cent from a year ago.
In the south, house prices climbed 1.7 per cent in Adelaide over the quarter and 6.1 per cent over the year.
In Melbourne, prices rose 1.5 per cent and 7.4 per cent over the year.
Sydney lags gains, but also rebounding
But Sydney house prices continue to struggle. Prices in Sydney, Australia's largest housing market, fell by an average 0.4 per cent in the first quarter, and grew at a meagre 1.5 per cent over the past year.
Louis Christopher, head of property research at Adviser Edge, said house prices were rebounding around the nation, including a modest recovery in Sydney, with property investors flocking back to the market given rising rents.
Despite modest growth in the first quarter, Mr Christopher expects Sydney house prices to grow 10.5 per cent in 2007.
"I think what we will see from the June quarter onwards is the median house price numbers will move towards the numbers we're forecasting," he said.
Around Australia
Mr Christopher expects prices to rise between 5 per cent and 8 per cent in Melbourne this year, around 8 per cent in Brisbane and 4 per cent to 6 per cent for Adelaide.
"We expect Perth house prices to record flat to negative house price growth.
"If there were further interest rate rises of 50 basis points or higher, it is likely Perth will record steeper house price falls of between 7 per cent to 15 per cent for the 12-month period after the rate rises.
"Conversely, a sustained downturn in commodity prices would also trigger further house price falls," he said.
In Canberra, house prices are forecast to rise by 10 per cent to 13 per cent in 2007, assuming no more than a 25 basis point rise in interest rates by June.
Mr Christopher said there were increasing signs that after a three-year downturn there was a housing recovery underway on the east coast of Australia.
Auction clearance rates in Sydney, Brisbane, Canberra and Melbourne are higher than this time last year and indeed at their highest levels since the downturn commenced in late 2003.
Improved rental yields and affordability in some cities was helping to push up house values, he said.
Source: AAP
Over the year, house prices jumped 8.6%
Sydney is lagging national gains
House prices are going back up after a long lull with strong gains recorded in most capital cities as the nation leaves the property downturn well and truly behind. Over the year house price median rose 8.6 percent. Howver Sydney is lagging other property hot-spots.
Average house prices grew by an average 1.1 per cent across Australia in the first three months of the year, according to the Australian Bureau of Statistics's House Price Index, which takes the average of the nation's eight capital cities.
Over the year, house prices jumped 8.6 per cent .
Most capital cities posted strong gains.
The mining boom propped up Perth prices, with house values rising a further 2.1 per cent in the first three months, to be up a whopping 32.1 per cent over the year. While house price growth has slowed, Perth house prices are still growing at the fastest pace in the nation.
Over the quarter, Hobart led the way with a 3.8 per cent quarterly increase in house prices, with values up 10.5 per cent over the year.
Brisbane followed with prices up 2.9 per cent over the quarter and 10.2 per cent over the year.
In Darwin, house prices jumped 2.8 per cent over the quarter and surged 15 per cent from a year ago.
In the south, house prices climbed 1.7 per cent in Adelaide over the quarter and 6.1 per cent over the year.
In Melbourne, prices rose 1.5 per cent and 7.4 per cent over the year.
Sydney lags gains, but also rebounding
But Sydney house prices continue to struggle. Prices in Sydney, Australia's largest housing market, fell by an average 0.4 per cent in the first quarter, and grew at a meagre 1.5 per cent over the past year.
Louis Christopher, head of property research at Adviser Edge, said house prices were rebounding around the nation, including a modest recovery in Sydney, with property investors flocking back to the market given rising rents.
Despite modest growth in the first quarter, Mr Christopher expects Sydney house prices to grow 10.5 per cent in 2007.
"I think what we will see from the June quarter onwards is the median house price numbers will move towards the numbers we're forecasting," he said.
Around Australia
Mr Christopher expects prices to rise between 5 per cent and 8 per cent in Melbourne this year, around 8 per cent in Brisbane and 4 per cent to 6 per cent for Adelaide.
"We expect Perth house prices to record flat to negative house price growth.
"If there were further interest rate rises of 50 basis points or higher, it is likely Perth will record steeper house price falls of between 7 per cent to 15 per cent for the 12-month period after the rate rises.
"Conversely, a sustained downturn in commodity prices would also trigger further house price falls," he said.
In Canberra, house prices are forecast to rise by 10 per cent to 13 per cent in 2007, assuming no more than a 25 basis point rise in interest rates by June.
Mr Christopher said there were increasing signs that after a three-year downturn there was a housing recovery underway on the east coast of Australia.
Auction clearance rates in Sydney, Brisbane, Canberra and Melbourne are higher than this time last year and indeed at their highest levels since the downturn commenced in late 2003.
Improved rental yields and affordability in some cities was helping to push up house values, he said.
Source: AAP
Saturday, May 05, 2007
Central Equity is back in the Melbourne apartment building industry after recently leaving the sector
Central Equity, Melbourne's biggest apartment developer, is back in the apartment business less than 18 months after leaving the sector because of poor sales.
The then publicly listed Central Equity quit apartments in late 2005 as the inner Melbourne market crumbled in a slump described by chairman Eddie Kutner as likely to continue until the end of the decade. Delisted from the Australian Securities Exchange midway through last year, Central Equity retreated to the suburbs in an attempt to reinvent itself as a residential estate builder.
But with Melbourne's once oversupplied apartment market making a dramatic - and unexpected - turnaround earlier this year, the developer has returned to its old Southbank stomping ground with plans for a 36-storey tower that will cost around $50 million to build and include six levels of office space.
Melbourne's apartment recovery was confirmed last month in Australian Bureau of Statistics figures showing that 1079 apartments were approved in February this year, more than double the 535 approved in the same time last year.
Located at the corner of City Road and Power streets, the planned 317-apartment complex will be known as Vue Grand.
After only three weeks of selling, and with a display suite on the site still under construction, Central Equity is understood to have found buyers for more than 50 apartments.
Some two-bedroom apartments in the mid-levels of the tower have asking prices of more than $800,000, while five penthouses are on the sale block for between $1.5 million and $2.5 million.
The building will also provide new offices for Central Equity.
It intends to occupy all six levels of office space, vacating leased offices at 95 Queen Street. The now privatised Central Equity group, controlled by Mr Kutner and joint managing directors John Bourke and Dennis Wilson, singlehandedly created Melbourne's largest apartment precinct in Southbank, building dozens of towers worth over $2.5 billion since the mid-1990s.
Central Equity could not be contacted yesterday but is understood to be planning to start work on Vue Grand by the end of the year. It is expected to be finished by late 2009.Source: The Australian
The then publicly listed Central Equity quit apartments in late 2005 as the inner Melbourne market crumbled in a slump described by chairman Eddie Kutner as likely to continue until the end of the decade. Delisted from the Australian Securities Exchange midway through last year, Central Equity retreated to the suburbs in an attempt to reinvent itself as a residential estate builder.
But with Melbourne's once oversupplied apartment market making a dramatic - and unexpected - turnaround earlier this year, the developer has returned to its old Southbank stomping ground with plans for a 36-storey tower that will cost around $50 million to build and include six levels of office space.
Melbourne's apartment recovery was confirmed last month in Australian Bureau of Statistics figures showing that 1079 apartments were approved in February this year, more than double the 535 approved in the same time last year.
Located at the corner of City Road and Power streets, the planned 317-apartment complex will be known as Vue Grand.
After only three weeks of selling, and with a display suite on the site still under construction, Central Equity is understood to have found buyers for more than 50 apartments.
Some two-bedroom apartments in the mid-levels of the tower have asking prices of more than $800,000, while five penthouses are on the sale block for between $1.5 million and $2.5 million.
The building will also provide new offices for Central Equity.
It intends to occupy all six levels of office space, vacating leased offices at 95 Queen Street. The now privatised Central Equity group, controlled by Mr Kutner and joint managing directors John Bourke and Dennis Wilson, singlehandedly created Melbourne's largest apartment precinct in Southbank, building dozens of towers worth over $2.5 billion since the mid-1990s.
Central Equity could not be contacted yesterday but is understood to be planning to start work on Vue Grand by the end of the year. It is expected to be finished by late 2009.Source: The Australian
High-rise apartments are symbols of wealth and the cafe society lifestyle for the new rich and wannabes
In 2006 the world's tallest apartment building opened in Melbourne. The 300m, 92-storey Eureka Tower can be seen as far away as the Portsea seaside resort, 115km to the south. Victorian Premier Steve Bracks calls it "an urban sculpture", while architecture reviewer Norman Day has described its beauty from afar as "compelling and dazzling". Eureka Tower, home to the wealthy and the brave. How else to describe homeowners prepared to part with more than $2 million to live above the clouds?
Since flats first appeared in Sydney and Melbourne in the early 20th century, the apartment v suburban home debate has raged among generations of architects, town planners, municipal councils and residents.
At Eureka's opening last year, its co-architect Karl Fender highlighted the tension: "A lot of people like the idea of their feet on the ground, and their back yard. It's been a state of mind," he said. "But more and more, and especially in Melbourne, it's being understood to be a very elegant, safe and sustainable way of living."
Eureka's 556-apartment density is an example of how far the humble flat has come in 100 years. Shunned and ridiculed by their critics, today's apartments are often linked with wealth, social position and cosmopolitan lifestyles.
"The city apartment has become respectable as well as trendy," Caroline Butler-Bowdon and Charles Pickett write in Homes in the Sky: Apartment Living in Australia. "As significant as the raw numbers is the renewed association of city apartment living with affluence." Their new book is the first serious history of Australia's apartment and flat development. Chapter one is titled Slums of the Future? A Century of Controversy, which confirms the book is less about architectural aesthetics (although there is a good deal of reviewer comment included) and more about the social impact of apartments on our suburbs and our population.
Although apartments became popular in cities such as Paris, London and New York in the late 1800s, the first flats did not appear in Australia in large numbers until the years before and during World War I. The Astor in Sydney's Macquarie Street, built in 1905, was the country's first purpose-built mansion flats, while in 1914 a multi-unit development in Chippendale became Australia's first public housing flats.
After the war, workers' flats became a target for commentators who feared a new form of the inner-city terrace house slum was emerging. "Suburban living was promoted as the panacea for the social and public health malaise afflicting cities," Butler-Bowdon tells Review, "and you get that very much in Sydney with the bubonic plague fears, for example ... The term 'slums of the future' was born, and we hear it again and again during the 20th century."
Enter Australian architecture's new dark side: "A very great danger has again crept in ... the danger lying in the areas of flats which are fast springing up in some suburbs," warned Sydney journalist and historian Charles E.W. Bean in 1925. "In these regions the children are again turned out into the streets ... for their normal playground." Grim predictions from Australia's official World War I historian.
Butler-Bowdon, a former Museum of Sydney curator, agrees flats often receive a raw deal from urban planners, architects and social historians. "I think they were at odds with the Australian self-image, which, despite our highly urbanised society, remained for many years (and arguably still today) focused on rural and suburban ideals," she says. "The suburban cottage was the nationalist touchstone and apartments remained excluded from that."
She adds that while middle-class flat life could be tolerated, "flats for workers really inflamed social and political anxieties, and we see this right from the beginning".
Blocks such as The Albany and Kingsclere in Sydney, the Melbourne Mansions that once dominated the top end of Collins Street, and long-gone Cliveden Mansions in East Melbourne became fashionable. At the same time, however, the block of flats phenomenon was spreading. "As far as respectable society and published opinion was concerned," write the authors, "apartments were alternatively a symbol of respectability and progress or a potential blight, depending primarily on their social setting."
Many Australians welcomed the chance to live in a flat; single women, widows, bachelors and country visitors in particular saw them as affordable, pleasant and secure alternatives to boarding houses and hotels. "Melbourne has taken to flats with some of the feverish eagerness of a teetotaller converted to liquor," wrote art critic Basil Burdett in the 1920s.
Between the two wars 70,000 new apartments were built in Sydney, while in Melbourne flats made up one-tenth of private dwellings by 1947. Both cities, because of their populations and flat proliferation, are featured heavily in Homes in the Sky, although developments in Brisbane and Perth in particular are included.
Architectural styles differ between cities. To make the most of harbour views, Sydney went up in height. So did Surfers Paradise, Australia's apartment capital, where an absence of height restrictions unleashed a flurry of residential tower developments from the late 1970s.
In Melbourne meanwhile, Butler-Bowdon says, there were "many more courtyard apartments: two to three-storey walk-ups that blended into the streetscape. We think it's part of the anti-flat opinions which were prevalent in Melbourne, and the regulations in Melbourne."
Another regional difference: Melbourne's ugly public housing high-rise towers in areas such as Fitzroy, Carlton and North Melbourne are still considered blots on the landscape. (The authors point out that some private developments such as Harry Seidler's 1962 Blues Point Tower and East Circular Quay's "toaster" apartments have also ignited community furore.)
Butler-Bowdon describes the public housing tower as "a powerful symbol of social and physical failure to most people". Private high-rise development in the '60s and '70s, meanwhile, also receives a whack from the author, who calls it "an absolute festival of the cheap and nasty: the speculative property boom".
Although high-rise blocks usually attract all the negative comments, Butler-Bowdon wonders why critics often overlook the two or three-storey walk-up, a matchbox-style block with no verandas or balconies, small internal spaces and, often, an external communal staircase.
In 1937 architect Morton Herman was one of the first to criticise walk-ups. "Sydney is fast becoming swamped by innumerable box-like blocks which march, cheek by jowl, down uninteresting streets in increasingly dull suburbs," he wrote.
Years later architect Norman Edwards agreed: "The red texture brick home unit block has done even more to desecrate Sydney's fine natural environment than the proverbial red brick and tile bungalow."
Canberra architect Roger Pegrum is one who, in the '70s, summed up society's anti-flat feeling. Writing in Architecture in Australia, he observed that "soon, few people in the inner suburbs can afford to stay in their detached house, even if they do not object to living in the constant shadow of a large non-human ant-heap. None of this explains why 'home units' should be so bloody ugly."
Flats have always posed a challenge to the traditional Australian quarter-acre-block view of perfect domesticity, but perhaps never more so than at the start of the 21st century. In 2007 more flats are being built in Brisbane, Melbourne and Sydney than houses and, according to Butler-Bowdon and Pickett, urban demographers predict "that by 2030, 45 per cent of Sydney households will be living in flats". Homes in the Sky is an affectionate review of domestic architecture's poor cousin. "We see quite often through history, flat dwellers are part of the floating population of big cities," Butler-Bowdon says. "I think for many flat dwellers, their apartment is their castle. They just love their flat."
Homes in the Sky: Apartment Living in Sydney, Museum of Sydney, May 12-August 26, is curated by Caroline Butler-Bowdon.
Source: The Australian
Since flats first appeared in Sydney and Melbourne in the early 20th century, the apartment v suburban home debate has raged among generations of architects, town planners, municipal councils and residents.
At Eureka's opening last year, its co-architect Karl Fender highlighted the tension: "A lot of people like the idea of their feet on the ground, and their back yard. It's been a state of mind," he said. "But more and more, and especially in Melbourne, it's being understood to be a very elegant, safe and sustainable way of living."
Eureka's 556-apartment density is an example of how far the humble flat has come in 100 years. Shunned and ridiculed by their critics, today's apartments are often linked with wealth, social position and cosmopolitan lifestyles.
"The city apartment has become respectable as well as trendy," Caroline Butler-Bowdon and Charles Pickett write in Homes in the Sky: Apartment Living in Australia. "As significant as the raw numbers is the renewed association of city apartment living with affluence." Their new book is the first serious history of Australia's apartment and flat development. Chapter one is titled Slums of the Future? A Century of Controversy, which confirms the book is less about architectural aesthetics (although there is a good deal of reviewer comment included) and more about the social impact of apartments on our suburbs and our population.
Although apartments became popular in cities such as Paris, London and New York in the late 1800s, the first flats did not appear in Australia in large numbers until the years before and during World War I. The Astor in Sydney's Macquarie Street, built in 1905, was the country's first purpose-built mansion flats, while in 1914 a multi-unit development in Chippendale became Australia's first public housing flats.
After the war, workers' flats became a target for commentators who feared a new form of the inner-city terrace house slum was emerging. "Suburban living was promoted as the panacea for the social and public health malaise afflicting cities," Butler-Bowdon tells Review, "and you get that very much in Sydney with the bubonic plague fears, for example ... The term 'slums of the future' was born, and we hear it again and again during the 20th century."
Enter Australian architecture's new dark side: "A very great danger has again crept in ... the danger lying in the areas of flats which are fast springing up in some suburbs," warned Sydney journalist and historian Charles E.W. Bean in 1925. "In these regions the children are again turned out into the streets ... for their normal playground." Grim predictions from Australia's official World War I historian.
Butler-Bowdon, a former Museum of Sydney curator, agrees flats often receive a raw deal from urban planners, architects and social historians. "I think they were at odds with the Australian self-image, which, despite our highly urbanised society, remained for many years (and arguably still today) focused on rural and suburban ideals," she says. "The suburban cottage was the nationalist touchstone and apartments remained excluded from that."
She adds that while middle-class flat life could be tolerated, "flats for workers really inflamed social and political anxieties, and we see this right from the beginning".
Blocks such as The Albany and Kingsclere in Sydney, the Melbourne Mansions that once dominated the top end of Collins Street, and long-gone Cliveden Mansions in East Melbourne became fashionable. At the same time, however, the block of flats phenomenon was spreading. "As far as respectable society and published opinion was concerned," write the authors, "apartments were alternatively a symbol of respectability and progress or a potential blight, depending primarily on their social setting."
Many Australians welcomed the chance to live in a flat; single women, widows, bachelors and country visitors in particular saw them as affordable, pleasant and secure alternatives to boarding houses and hotels. "Melbourne has taken to flats with some of the feverish eagerness of a teetotaller converted to liquor," wrote art critic Basil Burdett in the 1920s.
Between the two wars 70,000 new apartments were built in Sydney, while in Melbourne flats made up one-tenth of private dwellings by 1947. Both cities, because of their populations and flat proliferation, are featured heavily in Homes in the Sky, although developments in Brisbane and Perth in particular are included.
Architectural styles differ between cities. To make the most of harbour views, Sydney went up in height. So did Surfers Paradise, Australia's apartment capital, where an absence of height restrictions unleashed a flurry of residential tower developments from the late 1970s.
In Melbourne meanwhile, Butler-Bowdon says, there were "many more courtyard apartments: two to three-storey walk-ups that blended into the streetscape. We think it's part of the anti-flat opinions which were prevalent in Melbourne, and the regulations in Melbourne."
Another regional difference: Melbourne's ugly public housing high-rise towers in areas such as Fitzroy, Carlton and North Melbourne are still considered blots on the landscape. (The authors point out that some private developments such as Harry Seidler's 1962 Blues Point Tower and East Circular Quay's "toaster" apartments have also ignited community furore.)
Butler-Bowdon describes the public housing tower as "a powerful symbol of social and physical failure to most people". Private high-rise development in the '60s and '70s, meanwhile, also receives a whack from the author, who calls it "an absolute festival of the cheap and nasty: the speculative property boom".
Although high-rise blocks usually attract all the negative comments, Butler-Bowdon wonders why critics often overlook the two or three-storey walk-up, a matchbox-style block with no verandas or balconies, small internal spaces and, often, an external communal staircase.
In 1937 architect Morton Herman was one of the first to criticise walk-ups. "Sydney is fast becoming swamped by innumerable box-like blocks which march, cheek by jowl, down uninteresting streets in increasingly dull suburbs," he wrote.
Years later architect Norman Edwards agreed: "The red texture brick home unit block has done even more to desecrate Sydney's fine natural environment than the proverbial red brick and tile bungalow."
Canberra architect Roger Pegrum is one who, in the '70s, summed up society's anti-flat feeling. Writing in Architecture in Australia, he observed that "soon, few people in the inner suburbs can afford to stay in their detached house, even if they do not object to living in the constant shadow of a large non-human ant-heap. None of this explains why 'home units' should be so bloody ugly."
Flats have always posed a challenge to the traditional Australian quarter-acre-block view of perfect domesticity, but perhaps never more so than at the start of the 21st century. In 2007 more flats are being built in Brisbane, Melbourne and Sydney than houses and, according to Butler-Bowdon and Pickett, urban demographers predict "that by 2030, 45 per cent of Sydney households will be living in flats". Homes in the Sky is an affectionate review of domestic architecture's poor cousin. "We see quite often through history, flat dwellers are part of the floating population of big cities," Butler-Bowdon says. "I think for many flat dwellers, their apartment is their castle. They just love their flat."
Homes in the Sky: Apartment Living in Sydney, Museum of Sydney, May 12-August 26, is curated by Caroline Butler-Bowdon.
Source: The Australian
More forbearance needed for defaulting mortgagors
Mortgage Lenders must improve procedures for dealing with customers in financial trouble in repaying their home loans.
Mortgage borrowers who fall behind with their home loan repayments should be able to go to their lender and nut out a plan to help overcome the crisis without pushing the borrower into foreclosure.
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.
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 doIf 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
Mortgage borrowers who fall behind with their home loan repayments should be able to go to their lender and nut out a plan to help overcome the crisis without pushing the borrower into foreclosure.
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.
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 doIf 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
More Forebearance needed for defaulting mortgagors
Mortgage Lenders must improve procedures for dealing with customers in financial trouble in repaying their home loans.
Mortgage borrowers who fall behind with their home loan repayments should be able to go to their lender and nut out a plan to help overcome the crisis without pushing the borrower into foreclosure.
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.
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 doIf 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
Mortgage borrowers who fall behind with their home loan repayments should be able to go to their lender and nut out a plan to help overcome the crisis without pushing the borrower into foreclosure.
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.
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 doIf 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
Friday, May 04, 2007
Higher interest rates are slowing credit card use
Applications for new credit cards have fallen for the fourth quarter in a row as shoppers fear further interest rate hikes, a business information group says.
Consumers are instead choosing personal loans, including store finance with interest-free periods, in much greater numbers, the Veda Advantage credit research concludes.
Credit card applications fell 7.3 per cent in the January to March 2007 quarter compared with the same quarter in 2006, down 70,498 applications to 889,396, according to the Vega Advantage research.
The drop represents a 2.2 per cent decrease on the immediately preceding October to December quarter.
Credit surge ends It is the fourth quarter in a row that credit card applications have fallen, down from the all-time high in the previous March quarter of 959,894 applications.
At the same time, personal loan applications rose 7.7 per cent to 745,753 in the January to March 2007 quarter, 53,067 more than in the corresponding quarter of 2006.
That result is a 2.4 per cent increase on the immediately preceding October to December quarter.
Veda Advantage's information services general manager Erica Hughes forecast the two-year surge in new credit has ended.
"This continuing slowdown in the rate of new credit card applications appears to reflect that consumers are increasingly concerned over the high interest rates attaching to the use of credit cards, and of the threat of more interest rate rises," Ms Hughes said.
Overall credit growth was still increasing, she said.
"However, more and more consumers are looking to more cost effective credit products, such as personal loans, to finance their purchases."Source: AAP
Consumers are instead choosing personal loans, including store finance with interest-free periods, in much greater numbers, the Veda Advantage credit research concludes.
Credit card applications fell 7.3 per cent in the January to March 2007 quarter compared with the same quarter in 2006, down 70,498 applications to 889,396, according to the Vega Advantage research.
The drop represents a 2.2 per cent decrease on the immediately preceding October to December quarter.
Credit surge ends It is the fourth quarter in a row that credit card applications have fallen, down from the all-time high in the previous March quarter of 959,894 applications.
At the same time, personal loan applications rose 7.7 per cent to 745,753 in the January to March 2007 quarter, 53,067 more than in the corresponding quarter of 2006.
That result is a 2.4 per cent increase on the immediately preceding October to December quarter.
Veda Advantage's information services general manager Erica Hughes forecast the two-year surge in new credit has ended.
"This continuing slowdown in the rate of new credit card applications appears to reflect that consumers are increasingly concerned over the high interest rates attaching to the use of credit cards, and of the threat of more interest rate rises," Ms Hughes said.
Overall credit growth was still increasing, she said.
"However, more and more consumers are looking to more cost effective credit products, such as personal loans, to finance their purchases."Source: AAP
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