Archive for the 'Case Studies' Category
July 22, 2008 12:00am
MORE Queenslanders than ever before are defaulting on their mortgages and losing their homes to the banks, caused by high interest rates and petrol pain.
State court records show the number of property repossessions has escalated in the past few months and housing experts blame rising petrol prices as much as interest rates for the spike in cases around Brisbane’s urban fringe.
Records show the number of repossessed residential and commercial properties hit a record 1019 last year and continued at the same rate – about 85 a month – until May.
But a Courier-Mail search of electronic court files has revealed the state’s Supreme and District courts handled 100 property repossession cases in June and another 83 cases by July 17, with two weeks of the month still to go.
The figures show a majority of the recently surrendered homes were in suburbs surrounding Brisbane and on the Gold Coast.
Browns Plains couple Robert and Bettina Bengtsson have to come up with a seemingly impossible sum of money within days or have their Browns Plains home repossessed.
Aged 31 and 27, with a nine-month-old baby to look after, the Bengtssons have already cashed in their super, looked for higher-paying jobs and tried to start a business.
But they are still about $14,000 behind in their mortgage payments, which they have defaulted on numerous times.
Mr Bengtsson said the nightmare started when they both lost their jobs. Mrs Bengtsson was pregnant when she lost hers.
“Everything was going great and then the company I was working for decided they were going to close down nightshift, so I took an involuntary redundancy and my wife, because she was a casual … they just said she wasn’t needed any more,” Mr Bengtsson said.
“When we first got the house it was only $437 a week, so we were paying $500 a week.
“And now it is up to about $550 a week, so it has jumped over $120 in those two years.
Bray Park, Scarborough, Narangba, Alexandra Hills, Kingston, Browns Plains and Thorneside are the top targets for repossessions in Brisbane, while Carrara, Arundel, Ormeau Hills, Currumbin, Tallebudgera Valley, Runaway Bay and Surfers Paradise were some of the affected suburbs on the Gold Coast.
National Shelter chairman Adrian Pisarski said the figures demonstrated the compounding effect of high petrol prices on already financially stressed homebuyers.
“It always seems to be in areas poorly serviced by public transport,” he said.
“People there are double-whammied. Their housing costs are going up and their transport costs are very high because they are car dependent.
“I think many households would cope with one or the other, but not both.”
Housing Industry Association chief economist Harley Dale said a higher rate of mortgage defaults was expected, given the increased burden of interest rates and petrol prices.
HIA calculations show the repayments on a $250,000 loan would have increased by $449 a month in the past three years, while the monthly cost of petrol for an average household would have risen by $150 in the same time.
It has been estimated that about 160,000 Queensland households are experiencing mortgage stress.
“There is no doubt it is a much more difficult environment out there in 2008 than it was in 2007,” Mr Dale said.
Mortgage and Finance Association Queensland president Bruce Mawson said stalled property values had exposed some stretched homebuyers, who had been in the habit of using the equity in their home loans to pay off other debts.
He urged anyone having trouble making their mortgage repayments to talk to their bank as soon as possible.
Credit crisis to crunch harder next year
Author: adminCourier Mail
July 11, 2008 02:22pm
NEARLY half of Australian businesses have been affected by the fallout from the global crunch but the worst could still around the corner, a credit insurance company says.
Atradius Australia and New Zealand managing director David Huey said payment defaults and insurance claims reported to his firm had doubled since last year.
“Our enquiry rate for new business has also doubled, in part due to the high-profile insolvencies like Beechwood Homes, which has meant that industry segments like construction have been looking at insuring themselves against non payment,” Mr Huey said.
Companies in United States had the highest response in a 14-country survey.
About 68 per cent of US firms said they had been affected by the credit crunch, followed by Mexico, at 60 per cent.
Other nations where companies said the credit crisis had a high impact were Italy with 58 per cent, the UK, 46 per cent, Spain, 44 per cent and Australia/New Zealand, 43 per cent.
The Atradius credit crisis survey analysed comments from 2,500 respondents about their company’s experiences and the likely effect of tougher financial conditions.
“Factors that may be contributing to these reports include reliance on the building and construction or the financial services industry for GDP growth, a relatively large percentage of GDP tied to trade with the United States or heavy use of receivable securitisation,” Mr Huey said.
Restrictive credit and increased default payments would dampen growth and raise business defaults globally for the rest of 2008 and into 2009, the survey said.
Some 71 per cent of companies said an increase in payment defaults was their biggest concern, 67 per cent worried about restrictions in sales growth and 65 per cent feared increased capital costs.
Mr Huey said it was essential for a healthy company to be aware of how to protect themselves from risk exposure.
“The credit crisis is highlighting the importance of protecting your cashflow,” he said.
“The reality is that without good cashflow your business will be in jeopardy.”
Do your finances need a new hair style?
Author: adminLike bad hair, how long can you afford to let things go? If your fringe stopped you from seeing properly & you nearly had an accident as a result of it getting in the way or distracting you, would do something about it & get it cut!
In terms of your cash flow is it starting to go grey and thinning? Just like my hair!? Perhaps it’s time for a new finance hairstyle. One that will help with the working environment! Bottom line -improve the amount of cash you have, to do what you need to do, when it’s required.
Hairstyles can go out of fashion, but for now perhaps the number 4 is required with a few highlights. Keeping it simple, but works for the foreseeable future until it grows a little and then it can be developed into another style.
Some instances where you may be able to adopt the Number 4 could be:
Self employed – who have taken on a ‘Lo Doc home loan’ in the last few years. No doubt the debt had been capped to a % of the value of a residential property. That was great before because you didn’t have to provide financial statements and alike. The down side is you are likely to be carrying a lot of ancillary debt on top of this. Like credit cards, car & equipment loans etc etc. All of which drain your cash flow resources.
There are lenders that can role several debts into one. In a lot of instances there will be a requirement for financial statements to be provided however there are others that will consider the situation without profit & loss statements. The end result being that perhaps hundreds or even thousands of $$ can be saved on a monthly basis.
The structure of your debt may need to be looked at, are there commercial assets that could be structured over longer periods?
What sort of debtors do you have? Is there an opportunity to have those funds quicker?
Can you gain discounts for quick payment?
All these sorts of questions need to be asked of you when looking in the financial mirror. Could you need a new finance hairstyle?
What have you got to loose in asking the question? Ask Finance Know how!
SMALL businesses that deal mainly with householders are now finding it harder to be paid because of rising interest rates.
Author: adminCourier Mail April 07, 2008 12:52pm
SMALL businesses that deal mainly with householders are now finding it harder to be paid because of rising interest rates.
Plumbers, electricians, accountants, architects, builders, mechanics and even schools have to use tough tactics if they want to extract from householders what is owed to them, said debt collection agency Prushka.
“An air of nervousness has afflicted the business-to-homeowner sector as we have witnessed a marked increase in organisations taking a much tougher, almost relentless attitude to recovering overdue debts,” Prushka CEO Roger Mendelson said.
“The trend has become quite noticeable. Prushka is receiving accounts from this sector at a much earlier stage in the cycle than previously, with businesses less open to negotiate terms directly with their customers.”
“Now for the first time we have tangible signs that the last interest rate rise has started to bite.”
He said the signs came from the company’s existing clients who have businesses that deal with householders.
“Our best test of the changing environment is in tracking our existing clients,” said Mr Mendelson.
“Their debts are fresher, which means that they are under pressure for the money that is owed to them.
“The feedback is that it is becoming harder to collect the money that’s owed.
“But this isn’t happening with business-to-business clients,” he said.
“The household budget is now under more pressure, while business cash flows are still reasonably strong.”
He believes, however, business-to-business arrangements will be affected soon, that there will be a flow-on effect when one business’s cash flow is affected because of the non-payment of bills by householders.
He said small businesses used to be lenient with their payment terms but, as things have tightened up, this has changing.
“They are now tightening up on the credit they allow,” Mr Mendelson said.
“They are not concerned if they upset a client. Instead they are putting pressure on them.
One option for business owners was to offer an instalment payment plan but, if that failed, the next step was to take legal action, he explained.
Demanding the money upfront before the job began was not an option for small businesses, said Mr Mendelson.
“This would be difficult to do in a competitive market.
“All they can do is take more care in allowing the credit they used to offer.”
A big concern of small businesses was dealing with householders in the mortgage belts because, as well as having difficulty meeting their obligations, many are also losing the equity they have in their homes.
“By the time the banks sell them up, it’s too late for businesses. There’s nothing left. Two years ago if the bank sold up, there would still be some money left to pay outstanding bills.”
Mr Mendelson said he believed things would tighten up more before they got better.
How to ensure you are paid
- Make sure you have only quality credit
- Do more credit checks on new clients
- Be more concerned about who you deal with
- Act more quickly to retrieve debt
When a marriage comes to an end, it is always a tragedy. Of course the ending of the family unit and the emotional hardship for the children is the most difficult at the time of divorce. But the difficulty of separating one home into two can be challenging and tedious to say the least.
In addition to the management of the divorce, the household debt that was once shared as part of the family financial picture, must also be divided. In most joint credit contracts in Australia both parties are jointly & severally liable for the debt. So when the union splits up, the transition, from a financial point of view of your accounts separating, is not over night.
So one of the many issues to be discussed or managed is a plan on how to deal with the household debt. This is where emotions can get the better of people or a lack of awareness of not keeping up with these responsibilities in a timely fashion, that can have a NEGATIIVE IMPACT ON YOUR CREDIT FILE FOR UP TO 5 YEARS!
To put this into context, the oversight of not paying or perhaps abusing credit cards limits or trying to get one up on your ex will dog you for a considerable time after your relationship is no more.
Over the next 5 years your requirement for finance is likely to grow again through one reason or another. As a result of a dissolved relationship you will carry the poor credit burden.
Does an impaired credit rating stop you obtaining credit? No! There are various lenders who cater to these sorts of situations. However it will come with an increased cost via interest rates and alike. And in a tightening credit environment, most lenders are becoming more & more particular in who they are prepared to lend money to.
However it pays to be mindful these sorts of solutions are not for extended period of time and are usually one component of a strategy to re-engineer your financial position.
In trying address some these scenario’s it may pay to consider some of the following:
Credit Card Limits – do they need to be cancelled or the limit reduced.
Budget – for 2 households, do the books balance?
Income – what & how you receive may change – support pensions, maintenance. How lenders view these may differ dramatically. What impact is it likely to have moving forward?
Remember most loans for a couple have joint & several repayment requirements. So if one party is not making payments the responsibility will be sort from you.
While this situation is most always challenging there are ways to deal with issues ahead of time and certainly if it has already taken place there are always differing solutions to assist in managing your finance requirements in the intermediate future.
Finance Know How is one who is willing to listen and provide some options for your consideration.
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