Better deals for a good history - what CCR will mean for Aussie first homebuyers
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.
RELATED: Ladies first: Aussie women are taking over the property market
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.
Aussies can head over to Mozo’s home loan comparison tool to compare some of the current refinance deals on the market today and potentially shave thousands off their repayments.
* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.
** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.
^See information about the Mozo Experts Choice Home Loan Awards
Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.
While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.