On the 1st of July, a system called “comprehensive credit reporting” was implemented by our four big banks.

Comprehensive credit reporting means banks now get a clearer picture of a person’s ability to pay a loan because both the positive and the negative aspects of a person’s credit history is included.

Before this was introduced, banks would only look at the negative aspects of a person’s credit history such as looking at how much a person had personal loans, car finance and a credit card.

What they didn’t have access to were the positive aspects of the mortgage applicant’s credit history. For instance, while the applicant may have finance on a car, they may have never missed a payment. They may also have a credit card, but they only use it in an emergency and pay it off each month to avoid additional interest rate charges.

This meant banks didn’t actually have a clear picture on what a person’s risks were and their ability to pay when it came to deciding on how much it was going to lend you.

What it means for you

The good news is, under this new system, you may qualify for a better deal on your mortgage! In fact, according to consumer advocate group www.creditsimple.com.au, up to 6 million Australians could save up to $40,000 over the life of an average 25 year mortgage, now the Australian Government has introduced this legislation.

The Group claims 90% of homeowners qualify for better mortgage deals, and some may get up to 0.5% off their current mortgage rate once their positive credit history is included on their credit record.

The Group CEO, David Scognamiglio goes on to say “For the average $372,902 home loan, that works out to be a saving of $112 per month, or $40,000 over 25 years.

“Better data gets you better deals, with some of the lowest in the market now being offered at 3.2%.  A lot of people have a 4 in front of their mortgage now, when they should see a 3, and in some cases even a 2,” he concludes.

However, it is more important than ever to make sure you pay your loans on time – missed payments will make your credit score could go down.

Do your sums

It’s definitely time to do a few sums and review your finances. Under the new reporting system, it could mean first time home buyers may be able to get onto the property ladder. For current homeowners, it may mean they can get a better deal on their mortgage and move to a bigger house. When it comes to potential investors, you could not only get a better deal on your mortgage on your investment, but you may find you could release some capital in your investment/residential property and use this to finance an investment property.

With interest rates so low at the moment and still plenty of mortgage deals around, we suggest speaking to a financial specialist and seeing what you can afford – you may be surprised at the results.

Whether it’s from a homeowner or investor’s point of view, get in touch with us. With over 40 years in the business we’ve helped thousands of people realise their financial dreams through property. Give us a ring on 02 4954 8833, send us an email to mail@apnewcastle.com.au or pop into our Cardiff office for a chat.