Approximately one in four of these people could fall into a debt spiral if Australia suffers an economic downturn. It is no wonder than consumer confidence is low.

Veda’s twice-yearly Australian Debt Survey found that in a time of economic stress 25 per cent of struggling consumers would seek to increase their credit card limit, or try to refinance their home loans to get access to more money. The problem with home loan refinance is that the debt continues to pile up while value of property is decreasing.

When they start falling behind, people look to borrow from family and friends often with no way of ever paying these debts back.

Veda said that, currently, consumer credit reports do not show a person’s credit limit or if they are failing to make minimum payments on their credit cards or loans.

This makes it possible for people to borrow more.

But upcoming changes to credit reporting would include a person’s current credit limit, number of credit cards and a record of failure to make the minimum payment on time.

Residents of South Australia and Queensland are in most difficulty when it comes to keeping up with re[payments, whereas WA residents are performing better than those living in any other state of Australia.

The survey covered 1,052 respondents who were interviewed in early March.

Over 1700 people seeking emergency assistance and support from The Salvation Army were surveyed The survey results surprisingly revealed that has revealed that the vast majority of people seeking help from the Salvation Army do not fit the poor-man stereotype. Many are working family people.

Almost half of those most needing assistance had children, 57 per cent were aged 26 to 45 and almost a third lived in private rental accommodation that was not public housing.

A mere 5% were homeless. In the past these statistics would have looked very differently.

Many family people who have lost work and could not maintain ongoing repayment of loans and cover debt obligations.

People are living from paycheck to paycheck with no reserves.

The survey found that more than half of those seeking assistance had gone without meals to help make ends meet, while almost 60 per cent had cut down on basic necessities like clothes, shoes, milk and bread. Almost half had sold or pawned possessions for extra cash.

Sadly, 94 per cent of people surveyed said they had no cash savings and almost 90 per cent could not afford house or car insurance. This paints a very sad picture of working families financial position.

ANZ has made a statement on Friday that the bank will be passing on to borrowers 37bps of the RBA cash rate cut, reducing its standard variable rate to 7.05%. The announcement further reaffirmed NAB’s position as lowest among the majors. NAB chief executive Cameron Clyne has told the media that the bank is intending to remain the cheapest amongst it’s immediate rivals.

Cameron Clyne believes that Australia’s borrowers will enjoy further rate cuts over the year ahead. He told the ABC that the RBA was likely to deliver another 50bps of cuts in 2012, despite an unexpected drop in unemployment.

Before applying for a car loan you should check your own credit history, You can do so for free by contacting one of the Australian Credit Reporting agencies such as Veda Australia and lodging a request.

If your credit report is clean, you are free to contact any lender and compare any car loan as borrowers with a clean credit history do have a lot more options in borrowing. If your credit history is not clean, do not be concerned.  There are still quite a number of Car Finance Brokers that should be able to assist you with car finance.

Do plenty of homework before buying a car. According to Choice, only 40 percent of car buyers in Australia arrange their car loans before visiting the dealership. Make sure that you fall into the other 60% category.You should conduct research online looking at many specialists who offer assistance to borrowers with sourcing the best car loan deal in the country. Many of our customers use the services of HTTP//WWW.CARLOANSAU.COM>AU for this purpose.

Consider more than just the fees and the rate of interest. Also take into the account things like loan term, required deposit, balloon payments etc.

Research statistics suggest that, of the 450 respondents, 14 per cent did already rent out room/rooms in their house to assist with repayments, and another 11 per cent said they would if they had space.

In view of the current economic times, results are a clear indication that mortgage stress is very much an issue for many borrowers.

First home buyers are finding it progressively more difficult to hold on to their loans as well as other existing debts. Some have temporarily lost work Others are trying to consolidate their debts but finding that their property has lost equity.

PRDnationwide conducted a similar poll in August 2009 which found one in five homeowners would consider renting their spare room to help pay the mortgage.

Despite the fact that 2009 was not our best year, things have clearly deteriorated since then.

The researcher said many homeowners bought properties with a granny flat or spare bedroom to give them the option of renting it out, though many had never actually done so.

While increased funding costs are an ongoing problem for Australia’s banks, they have at least been able to recoup these costs quickly and easily from consumers without fear of repercussion as a consequence of limited competition within the home loan arena

This is despite the banning of the home loan exit fees in July last year with the intention of increasing competition between lenders. Unfortunately this did not really work.

over the past decade,  the bank’s share of all new Australian home loans increased to 93 per cent – this leaves less than 10 % for other lenders.

The competition in the home loan space that Aussies have benefited from over the 20 years prior to GFC has all but disappeared.

The Federal Government keeps talking about making lending more competitive but legislative measure introduced have the opposite effect.

But while the lack of competition in the mortgage lending space is ultimately hurting mum and dad borrowers, there seem to be little interest to have this addressed.

The stability and strength of our banks has certainly helped put us in good stead in comparison to the rest of the world, so a solution to re-igniting a competitive landscape will take time, effort and resources to formulate. However unless the current problem is recognized and addressed we may find that the Australian lending landscape is more of a monopoly held by the big four than what we had 10 tears ago.

This announcement will bring the Westpac’s standard variable rate to 7.09 %.
The market had no expectations that Westpac would pass on the RBA rate cut in full, especially given that the bank’s published financial results released earlier last week reported that the bank’s profits for the first half of 2012 were down by 25 per cent. This is a different situation to most other large banks, reporting profit growth from year to year.

Westpac’s net profit for the six months to March 31 stood at $2.967 billion, in contrast to the $3.96 billion the bank posted in the previous period.

One of the reasons behind the bank’s drop in profit, was a one-off tax benefit enjoyed by the bank the previous year.

Despite the overall decline in profitability during 2012, Westpac Interim results demonstrate that profit from mortgages was up from $304 million in the half year to September 2011, to $309.6 million this half of 2012, with 38 per cent coming from third party origination.

CBA has announced today that it would cut 40 basis points from the bank’s standard variable rate, bringing it to 7.01 per cent – 0.02 per cent higher than NAB who decided a day earlier to only pass on 32 basis points of the rate cut. NAB’s standard variable loans are now at a low 6.99%.

We are yet to hear from ANZ and Westpac to see what they will do with their rates.

Unfortunately no one is really expecting that the full 50 basis points will be passed on to the borrowers by any of the big banks.

Most are expecting that the lenders will hold on to some of the rate cut for their benefit.

It is not clear what Australia’s second tier lenders will do at this stage. However last night, ING DIRECT announced it would decrease the interest on its variable rate mortgages by only 30 basis points. ING direct already offers on of the cheapest mortgages in Australia . Their Mortgage Simplifier Loans will, from 11 May, be priced at 6.42 per cent.

RBA expressed a view that it was prudent to bring the cash rate down to 3.75 per cent, after headline inflation turned out to be significantly lower than the RBA’s target range of 2 to 3 per cent.

While majority of forecasters expected a cut of 25 basis points, the more significant reduction is certainly justified.

RP Data’s Cameron Kusher told The Adviser that the RBA’s decision was the “right” one, as the economy was in serious need of a “boost”.

“We have seen a lot of softness in the economy of late. House prices are down on where they were, retail activity has slumped and headline inflation was just 1.6 per cent for the year,” he  said.

Everyone is hoping that this more significant rate cut will generate improvement in consumer confidence and spending in all sectors of the economy.

1300HomeLoan MD John Kolenda, and Aussie Home Loans chairman, John Symond, have both made it known that the Australian property sector needs to see at least a 50 basis point cut.

There is expectation that some of the 50 basis points will be kept by the lenders while some will be passed on to borrowers in the form of cheaper loans.

Minutes from the meeting today show the RBA considered the inflation figures was making the rate cut decision.

“Recent data for inflation show that after a pick up in the first half of last year, underlying inflation has declined again, and was a little over two per cent over the latest four quarters.”

“In considering the appropriate size of adjustment to the cash rate at today’s meeting, the Board judged it desirable that financial conditions now be easier than those which had prevailed in December. A reduction of 50 basis points in the cash rate was, in this instance, therefore judged to be necessary in order to deliver the appropriate level of borrowing rates.”

The bank said it would cut the interest rate on its one-year fixed loans, to new borrowers, by 0.15 percentage points to 6.34 per cent. The new one year fixed loan will be offered at only 6.39%. This represents a drop of 14 basis points.

While any cut to official rates tomorrow will not affect fixed rates, a Westpac spokesman said the bank was responding to competition and growing demand for fixed products.

Earlier this month, St George, a bank also owned by Westpac announced that its 3 year fixed home loans will be offered at only 5.99 per cent.

Borrowers are worried about economic uncertainty and have demonstrated a tendency to gravitate towards fixed rate products.