Applying for a home loan and getting declined would upset even the most stoic consumer. At Multi-Choice Home Loans we sometimes experience a case where the client is confused and upset and demands to know why credit was refused.

Understanding how the credit approval system of the lenders works goes a long way in securing your loan. Many lenders have fully automatic credit scoring where the system is triggered to react by recent enquiries and an application could be declined without the system looking into it further, so the client does not get the opportunity to explain.

Let’s look at an example where Caroline wishes to apply for a credit card as she would like to replace her bedroom furniture. Caroline has a good job and no credit problems.  She has not missed payments on any of her bills or accounts. She is sure that she will be approved.

She hops online and researches the available options and narrows it down to four likely lenders. Caroline applies to all, knowing that she will only accept one of them, but this way she will be able to choose the best of the cards that she will be approved for.  But it does not end up being that simple. Carolyn, over the next couple of days receives one decline after the other.

Not being able to work out a reason for these declines, Caroline goes online again and tries a few more lenders to see if they will approve her credit card application. But more declines come in instead.

Caroline decides to go to the store and buy her bedroom furniture on the shop’s credit scheme. This should be easy, remember Caroline has never had a credit problem and she has a steady income. But no, the finance is declined.

Caroline is not aware that each time she applied for finance, an enquiry is sure to be made on her credit report. Even though none of her enquiries went any further, only a limited amount of information appears on the credit report. In case of a home loan this information would be the date, the type of enquiry (home loan), the credit provider and the amount. No notes are available to say if the application was approved or if the client accepted the credit offer.

So the credit card provider in Caroline’s example is flying blind. All that is visible is a large amount of enquiries and without knowing the outcome, a safe route will often be selected. Many credit suppliers will assume that the applications were declined and they will in turn decline as well.

The enquiries will remain on the credit report for 5 years and like Caroline, few consumers will realize the potentially debilitating effect their many enquires can have. Only time can heal the damage as there are no hard and fast rules that the different lenders adhere to.

More consumers would apply for credit in a more informed and responsible way, if they would realise that a credit enquiry will be made and that a high volume of enquiries will adversely affect credit score.

The national average on residential vacancy rates currently remains at an “excessively tight” 1.7% with Perth continuing to be the hardest major city in which to find a place to rent, according to new data.

The managing director of SQM Research, Louis Christopher, said “Perth is now an area of major concern with vacancies now sitting at an incredibly low 0.5 per cent,”

SQM Research said Australia’s rental market remained “excessively tight for the time being, with no capital cities recording considerable increases month-on-month or recording a vacancy rate of three per cent or higher.”

 “With the housing market itself remaining sluggish, it is likely that more and more individuals are choosing the rental market over deciding to purchase property at this time,” the company said.

“This continued negative sentiment when it comes to real estate is assumedly putting increased pressure on the nation’s vacancies.”

To calculate vacancies SQM compares online rental listings that have been advertised for three weeks or more, to the total number of established rental properties, only working with unique addresses or a unique listing id, and taking out duplicate entries.

Sydney’s vacanacy rate touched 1.5 per cent in March (no change from February); Melbourne was at 2.9 per cent (3.0 per cent in February); Brisbane 1.5 per cent (down from 1.6 per cent); Adelaide 1.4 per cent (up 0.1 per cent on-month); Canberra 0.8 per cent (up from 0.7 per cent); Hobart 2.4 per cent (up from 2.3 per cent); and Darwin was down to 0.6 per cent (dropping 0.1 per cent).

A pick-up in mortgage inquiries for the first time in two years could be an early indicator that house prices will recover in future months.

According to lending statistics by VEDA, home loan inquiries rose 1.5 per cent in the year ending March – the first annual rise since the 2008-2009 global financial crisis.
Veda head of consumer risk Angus Luffman said on Tuesday that “Turning points in mortgage inquiries usually occur one to three quarters ahead of turning points in house prices,”
“This is a trend to watch, particularly if you are hoping for a future pick-up in house prices.”
There have been significant differences between the states though, as the mortgage demand in WA surged by 7.6 per cent, where NSW suffered a plunge by 7.6 per cent, after stamp duty exemptions expired at the end of last year.
“Australian households have spent the post-GFC period firmly in saving rather than spending mode, and the results show consumers are still cautious about taking on credit,” Mr Luffman said in a statement.
He said weakness in credit card demand reflected a rise in debit card usage and the introduction of responsible lending laws in 2011, which added more steps to the application process.