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Defaults rise dramatically

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  • Defaults rise dramatically

    Defaults rise dramatically across regional Australia

    30 October 2007 << Back

    A study by Veda Advantage of the rise in reported Australian default rates in 2007 compared to 2006 has shown that regional Australia and mortgage belt suburbs are among the worst hit areas of Australia. Default rates in these areas have risen dramatically in the last financial year – regional Australia had the highest average defaults, rising by more than 50%. Areas with a high percentage of mortgages or mortgage belt suburbs** increased by 42.3%. Other capital city areas of Australia, while lower, still saw very significant rises in reported credit default rates* at 28%.

    Key findings of the national study, completed by Veda Advantage, Australia’s largest credit file company included:
    • Regional NSW had the highest increase in percentage defaults, increasing by almost 60% in FY07 compared to FY06. Regional VIC increased by almost 52%, regional QLD increased by 42% while regional SA by 40%.
    • Nationally there was a 35.5% rise in reported credit defaults in 2007 over 2006*.
    • The mortgage belt** areas with the highest percentage increase was in NSW (44.5%), QLD (44.4%), and VIC (40%).
    • The non-mortgage belt** default rates for those same cities: NSW (31.9%), QLD (36.9%) and VIC (36.3%).

    Veda Advantage General Manager of Information Services and Solutions Erica Hughes said the survey highlights the growing debt divide throughout regions of Australia, and a new battleground emerging for those who cannot pay their bills on time.

    “This study is significant as it demonstrates that people living in regional Australia as well as those in mortgage belt suburbs are struggling over other areas to repay the credit they owe.

    “The drought and other environmental hardships, as well as rising interest rates may have paid their toll as country families seem to be suffering more than their city cousins. A rise of almost 60% in regional NSW indicates the situation is getting very tough.

    “We are also concerned about the rise in defaults in mortgage belt suburbs as some families purchasing their own houses are also struggling to repay money,” Ms Hughes said.

    “Our study shows Australians are finding it much harder to repay their bills on time than they were a year ago. This can be seen right across the country. Although the default rates differ across all states, the overall conclusion is that credit conditions will be tough for many Australians over the next 12 months,” she said.

    These findings come on top of a recent Galaxy Study*** that found four in five Australians are worried about their ability to pay their debts in the next 12 months. Of these 51% were concerned about a rise in interest rates and 60% about a rise in living expenses.

    “These findings reinforce the need for decisive action to reform credit reporting laws to protect borrowers and lenders across Australia - especially with growing concerns about interest rates and the cost of living,” said Erica Hughes General Manager of Veda Advantage.

    “The best protection for borrowers and lenders is having access to the right information about credit. Currently lenders are not able to see when a consumer is over-committed or their payment history.

    “Government needs to act to make sure that borrowers and lenders get the best information when considering new credit. We are calling on the Federal Government to make swift, decisive changes to credit laws, especially credit reporting under the Privacy Act, accelerating and extending the limited reform proposals of the Australian Law Reform Commission.

    http://www.vedaadvantage.com/latest_news/defaults_rise_dramatically_across_regional_austral ia.aspx

  • #2
    Looks like the market is setting itself up for a slowdown in finance. Problem is this could take a long time to flow through to market.


    • #3
      Percentage figures can be - of themselves - a worry.
      Real numbers would be better, in a case like this.
      Reminds me of when the Swiss annual unemployment
      figure rose by 66%. There were five people on the
      dole, instead of three.
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