According to almost 300 borrowers and their families, banks have offered them loans which are outside of bank guidelines and which should not have been offered and now, the borrowers are facing losing their homes and some have already lost their homes because they are unable to afford their home loans.

Retired British insurance broker Roger Brown, who is orchestrating the case, has set up a website takingonbanks.com and is currently seeking claimants.

According to Mr Brown, many home and property owners are currently experiencing financial hardship through no fault of their own because they should have not been given the loans that they currently have.

If the case proves successful, it will be the first time banks have been prosecuted under the new provisions of the National Consumer Credit Protection Act.

According to Australian Securities and Investments Commission (ASIC) some of CBA’s advertising material promoting its Wealth Package loans did not reflect the true cost of the loans.

ASIC was concerned the ads did not include a $350 annual fee in the advertised comparison rate.

Under the National Credit Code, advertising of credit products that include an annual percentage rate must also include a comparison rate. Such comparison rate needs to fully reflect the complete cost of these loans.

“Comparison rates help consumers work out the true cost of credit,” said ASIC Commissioner Peter Kell.

“It can be difficult for people to compare home loans, car loans or personal loans with different combinations of interest rates and fees. This is why credit providers must include the comparison rate when they advertise a rate or a weekly payment for loans.

Comparison rates incorporate the fees, charges and interest relating to a loan to better reflect the true cost of credit.

Unfortunately unsecured loans beyond a couple thousand generally have the same lending criteria no matter which lender the borrower makes an application through. There is simply no such financial product as a bad credit unsecured personal loan or a low doc unsecured personal loan.

If you have been declined for a personal loan with a bank because you have some paid defaults on your credit report, you will also be declined through other lenders that you may approach. What will affect your ability to qualify is your ability to offer some security for this loan – eg. real-estate or a motor vehicle.

If you have a problem with your financials, ie your tax returns are not up-to-date, there are no low doc personal loans available. Any loans you may qualify for will need to be secured by real-estate.

Consumers are especially concerned about being able to earn enough to cover the cost of utility bills. Many also expressed concerns with lack of job security and poor economic management skills of the Australian Government.

Survey participants have stated that over 50% have had to access their savings in order to cover the cost of living and repayments for car loans, home loans, credit cards, rental, school fees and day-to-day bills. Consumers look for debt consolidation loans to help them maintain control over their bills and repayment obligations.

Almost 10 per cent have of the 1086 people surveyed said they have saved more to combat the price hikes.

When asked about their confidence in the Australian economy for 2012, 56 per cent were “fairly confident” or “very confident” (compared to 75 per cent in 2010), 20 per cent were “a little worried” (compared to 11 per cent), 19 per cent were “not worried” (compared to 13 per cent), and 5 per cent were “very worried” (compared to 2 per cent).

“Year on year confidence in the Australian economy has declined, however, it is good to see the majority of Australians still see a positive economic outlook for 2012,”

Despite the low levels of consumer confidence one in five consumers has stated that they intend to take out a home loan during 2012 and 9 per cent of mortgage holders plan to tale out new home loans.

Gen Y was the most positive about the economy and purchasing property,

Most people interviewed ie, 86 per cent feel say the rental squeeze is having an effect on property prices in their state.

Three out of ten consumers believe Australian property prices will increase over the next 12 months, The same number believe that they will decrease and the same number believe that they will remain the same.

In terns of a buffer for their home loans, 67% of respondents only have enough savings to cover 2 months of home loan repayments.

People without a deposit or with only a few thousand for deposit are hoping to borrow hundreds of thousands in order to purchase property. In the current economic climate lenders are even more conservative than they were years earlier.

Qualifying for home loans today is much more difficult than in the past, and rightfully so. The last thing that we want to see in Australia is a repeat of what happened in the US with thousands of people walking away from their homes because their home loans are substantially higher than the value of their homes.

Many people who had purchased a property in the past 3 years and borrowed 90% or more as a home loan, are most likely already behind…ie. their loan is higher than the value of their home. This is a dangerous situation.

Borrowers who want a safety barrier when making a purchase should try and keep their home loan under 80%. If you do not have the required deposit – what is the rush? In a growing market, people want to make a purchase quicker in order to ‘freeze’ the purchase price before it goes up further.  In the current market, prices are already soft and it is not clear how long they will remain so, It is prudent to save a significant deposit before making a purchase.

The Mortgage Choice consumer sentiment survey found that increased living costs were hampering New South Wales residents’ ability to save money – causing the household nest egg to dwindle. Families are searching for small loans and debt consolidation alternatives to help them manage.

The survey found that, while NSW residents were “fairly confident” in the economy, they wanted to make big changes to their personal financial strategy.

When asked about how they felt about their savings, almost half of respondents, 46 per cent, said they were “unsatisfied” and only 34 per cent were happy with what they had in the bank.

The cost of living was revealed to be the biggest concern for 2012, followed by worries about economic management at a federal level, job security, petrol prices and rising rents. It seems that the recent drop in interest rates has had very limited impact on people’s perception of their cost of living.

“These costs are likely to have a significant impact on NSW respondents’ ability to save,” Mortgage Choice spokeswoman Belinda Williamson said.

Telephone, Gas and electricity bills and other living costs are biting into NSW respondents’ budgets,  even more than interest rates.

There has also been a significant spike in the number of online searches for personal loans.

Loan Market Group’s chief operating officer Dean Rushton supported the findings and said the brokerage’s own website had also seen inquiries for commercial loans increase over the past month.

“The first interest rate cut by the RBA in more than two and a half years has obviously had a positive impact,” he said.

However the overall demand for home loans has not seen too much increase. People are holding back to see what will happen next.

Borrowers are looking for additional funds to cover the running costs of their businesses and personal debt consolidation. Many people are struggling with debt repayments and are simply trying to stay afloat.

New data reveals 80 houses are repossessed a month, while up to a third of people in the worst-hit suburbs are struggling to cover rent payments.

The rental stress epidemic has engulfed NSW, where up totals of the families experiencing rental stress have to forego purchasing essential items such as food.

Borrowers who can not meet their home loan repayments generally have their homes repossessed by the lender. The number of people whose homes were repossessed by banks during 2011 has soared by 22.5 per cent.

In the 10 months to November, the Supreme Court issued 2466 writs of possession, with 825 executed.

Many more people are unable to afford their home loans and are putting them up for sale to avoid bank repossession.

However given the recent declines in property prices, not every home owner will be able to sell their home for enough to repay their home loans. First home buyers who had only purchased recently and borrowed up to 95% may find that they have no equity in their home and are unable to sell it for enough to repay their mortgage.

New modelling commissioned by Australians for Affordable Housing reveals the worst hit areas in NSW for housing stress are Sydney, Wyong, the mid north coast, the Hunter and far north coast with one in five families paying most of their income on rent or mortgage.

Across Sydney, those in Auburn, Fairfield, Canterbury, Strathfield, Bankstown and Liverpool are the hardest hit, with up to 28 per cent in those areas suffering housing stress.

Following a review of broker activity, last week ASIC had highlighted low doc loans as a growing area of compliance concern under the new NCCP.

According to ASIC, the major non-compliance risk associated with offering low doc loans was the steps taken by mortgage brokers to confirm applicants income.

While the ASIC review will undoubtedly make some brokers nervous about writing low doc home loans, Mr Rehayem said any extra caution was unnecessary.

Pepper Home Loans are a leading Australian provider of non conforming loans. Pepper do not just get a loan application and approve it. Pepper already spend significant time and resources on ensuring that each loan application processed abides by the responsible lending requirements and make sure borrowers have the ability to pay back the loan.

“We wouldn’t put our licence in jeopardy, so brokers need not be worried that ASIC is going to suspend their license for failure to meet the new requirements.

Providing brokers make a reasonable level of inquiry and Pepper Home Loans accepts the deal, there should be nothing to worry about.

The review, included a relatively small sample of only 16 mortgage brokers and their complance with NCCP in the six months since NCCP regulations were introduced.

Results of ASIC review had identified that low doc loans are an area of potential risk of non-compliance with respect to responsible lending regulations.

The major risk in terms of non-compliance with the responsible lending for loans promoted as low doc was the steps taken to verify a consumer’s income, as many brokers continue to view low doc loans as they would asset loans.

“The requirement is for brokers to make reasonable inquiries about the borrower’s needs, objectives, financial circumstances and an active effort to verify those financial circumstances when assessing suitability for any proposed loan.

With low doc loans some brokers continue to do the bare minimum in verifying borrower income.

Many brokers will only conduct tests required by the lender with respect to low doc products – sometimes lender requirements fall short of ASIC expectations and this is where mortgage brokers are expected to make up the difference.

While overall most brokers were fulfilling the new responsible lending obligations and attempting to adhere, there was still room for improvement, the review found.