Better deals for a good history - what CCR will mean for Aussie first homebuyers
Friday 09 February 2018
They say that hard work always pays off and prospective first homebuyers with good credit history could soon be reaping the benefits with a cheaper home loan.
Thanks to Treasurer, Scott Morrison, a draft legislation that was introduced on Thursday detailing a new requirement called ‘comprehensive credit reporting’ (CCR) - a system that forces lenders to take your entire credit history into account to give you a rate that appropriately reflects your reliability as a borrower.
It’s set to come into effect in July with ANZ, Westpac, CommBank and NAB already signed up to the new rule.
"The new credit reporting rules will help open up the lending market to competition by allowing new lenders entering the market to better assess credit risk, meet responsible lending obligations and at the same time reduce exposure to defaults,” Morrison said in a statement.
Previously, banks had only provided “negative” data for a borrower’s credit report, for instance, if they had ever defaulted.
But with CCR, banks will also have to provide “positive” information about borrowers, such as, how often they pay their bills on time.
"Others, whose previous credit histories only included default rates, will also get a better chance to demonstrate their creditworthiness because there will be more credit information available on their reliability.”
The competitive edge
Morrison also believes that CCR will give customers with excellent credit scores the opportunity to shop around for a better deal, as all lenders will have access to their credit history, sparking competitive rates from even the smallest lenders.
"Customers with good credit histories will be able to obtain lower rates, and be better placed to shop around because their credit history will now become available to all lenders," Mr Morrison said.
The Productivity Commission and Reserve Bank are also onboard with CCR, as they too believe it will stir up competition.
A clean state
On Wednesday, new statistics from the Australian Bureau of Statistics (ABS) revealed that interest rate charges on home loans increased by 4.5% since December 2017, despite the RBA holding the cash rate at 1.5% for 16 months.
And with the anticipated arrival of CCR, Aussies looking to refinance their home loan could see their monthly repayment drop with the new personalised rates.
"If you have a good credit history - you're paying down your mortgage, you haven't missed a payment on your car loan and your credit cards are under control - you will be able to demand a better deal on your interest rates, or shop around, armed with your data,” Morrison explained in a speech at a Melbourne fintech conference.
"For borrowers, this regime should lead to one thing - a better deal on your mortgage, your personal loan or business loan.”
But luckily, home owners looking for a better deal on their home loan don’t have to wait till July to refinance after the CCR legislative changes kick in.