Episode 141 | Early release super, payment holidays ending and banks sharing your data | Simon Bligh, illion | Insights from illion

Has early covid contingency benefited the economy and will data rights and open banking improve your ability to get better finance?
In this episode we welcome Simon Bligh, CEO of illion. illion is the leading independent provider of data and analytics to the largest industries in Australia and New Zealand, providing insights into the spending behaviour through leveraging their data on over 25 million consumers. Simon gives the wrap on the recent and controversial early access to super, breaking down who made it their fun fund and who took it seriously. Moreover, how the future of banking will be through the free flow of your data between commercial entities, leading the way to better rates and appropriate finance.
Here’s what we covered:

• Should people be taking out their superannuation?

• How will early super withdrawal impact the economy?

• What items did people spend their super on?

• Can you use your super withdrawal as a deposit?

• Will our spending habits return to normal post Covid?

• How big has the renovation industry become due to Covid?

• How much of the property market is mortgaged?

• What is your credit score?

• What can you do to improve your credit score?

• Will open banking benefit you?

• Will the future of banking charge rates based on the consumers repayment reliability?

• How open banking and data rights will change how you apply for finance in the future.

This weeks Dumbo:

• Knowing that you should refinance but never actually going through the process

RELEVANT EPISODES:
Episode 123 | Martin North
Episode 126 | Stuart Wemyss
Episode 132 | Mark McCrindle

GUEST LINKS:
Alphabeta - illiontracking
creditsimple.com.au

HOST LINKS:
Looking for a Sydney Buyers Agent? www.gooddeeds.com.au
Work with Veronica: https://linktr.ee/veronicamorgan

Looking for a Mortgage Broker? www.wealthful.com.au
Work with Chris: hello@wealthful.com.au

Send in your questions to: questions@theelephantintheroom.com.au

Veronica Morgan: It's been said that liquidity is what's driving the share market to climb, even though the economy is tanking and governments are applying the same principle in pumping money back into the economy through various stimulus packages. But what does that money need to be spent on in order for it to do its job?

Veronica Morgan: Welcome to the elephant in the room. This is the podcast where we love to talk about the big things in property that never usually get talked about. I'm Veronica Morgan, real estate agent buyer's agent cohost of Foxtel's location, location, location, Australia, and author of auction ready.

Chris Bates: And I'm Chris Bates mortgage broker. Before we get started, I need to let you know that nothing we say on here can be taken as personal advice. We always recommend you engage the services of a professional.

Veronica Morgan: Don't forget that you can access the transcript for this episode on the website, as well as download our free fall forecast report, which experts can you trust to get it right? The elephant in the room.com did I use,

Veronica Morgan: It's not just the share market. Isn't following an expected pattern through the pandemic. The property market is largely holding up pretty well too, but there is constellation of a rising unemployment, the winding back of job keeper and job seeker, as well as knowing that the banks at some point will have to call an into mortgage repayment holidays. The question must be asked, can we be trusted to use our stimulus money wisely? And these our own financial wellbeing necessarily aligned with that of the nation today, we're going to get an insight into the changing spending patterns of Australians, the industry's hottest heat, and those that are flourishing. We'll find out how many people have been making early superannuation withdrawals, whether or not they needed the money and what they've been doing with it. Simon blight joins us today. He's a CEO of Illion, which is a leading independent provider of data and analytics to clients in the financial services, telecommunications utilities and government sectors, Illion gains, incredible insights into the spending behavior of Aussies and Kiwis through leveraging their consumer and commercial credit registries, which can access data on over 25 million individuals and over 2 million commercial entities. Thank you for joining us today. Simon, we've been looking forward to this chat.

Simon Bligh: It's a pleasure.

Chris Bates: Thank you, Simon. I want to go directly to what Veronica just spoke about around super withdrawals. There's some pretty fascinating insights. I'm sure you can say with how people to spending that money. Can you alert our listeners a little bit of an understanding of what's been happening?

Simon Bligh: Sure. well I think, I think as your listeners will know there was an ability created to withdraw $10,000 up to $10,000 of super last financial year and a further $10,000 this financial year. And we've seen a good adoption of that. Obviously it's it's important for people to be able to access money when they need it during things like the pandemic. But there were, I think a couple of problems. One is that the intent was that superannuation was only withdrawn if there'd been a drop in income. And certainly when we looked at our data, that's not always the case. And secondly, it's, you know, it's, nobody's right to tell you how to spend your money, but you would hope that people are financially responsible, particularly at such a time as the present. And what we're seeing is that a lot of the superannuation is withdrawn. It's spent very quickly and it's spent on a range of things that that probably is not a great use of your future pension.

Veronica Morgan: And what are you talking about specifically Simon?

Simon Bligh: Um so what we see is both last year and this year people withdrew money, they spent roughly a third of it to 40% within the first two weeks. And two thirds of that expenditure was on what we call discretionary items. So that includes things like alcohol gambling and, and home delivery of of, of food. So Uber eats and Menulog and companies like that. So things that, things that, you know, that they're fun things to spend money on, but if you've had money put away, you know, for your retirement, probably not that great use,

Chris Bates: It's a really interesting point. You kind of skipped over the initial kind of what makes you qualify for the super release. And that was a drop in income. And you know, it's kind of coming out now that there was not real regulation around that she could literally log onto the, my gov website, click a few boxes. And as long as you told, you know, the ATO that you had a drop in income, that they would basically release the money and because they wanted the super withdrawals to happen extremely fast, there was no ability for them to kind of verify every application of millions of people and they're basically bought or approved. Was that kind of what happens?

Simon Bligh: That's right. It's essentially a trust model. So you know, you have to make a declaration and you have to you know, say that you qualify. But obviously there are, there is a group of people who from our data aren't telling the truth when they're answering that question. So we saw in the the latest round of super withdrawals from our data about 38% of people who access super, hadn't seen a drop in income and co during the covert crisis. And in fact about 20% of people, their income had gone up by 10% or more. Wow. So you're saying 60% of people really shouldn't have qualified, but yeah. So 38% of people shouldn't have qualified and all of that 38 you know, half would probably have flat and half had happened. Increase. Yeah. Yeah.

Veronica Morgan: So how do you know this?

Simon Bligh: Um so, so we, we have we, we generate data, that's basically anonymize, so I have no idea but real information on from people's bank and credit card statements. So we know we're not able to say Simon Bligh with drew super or Chris bass with drew. So I've no idea who it was. I just know that somebody did something, so I see the transactions, but not the person behind the transaction.

Veronica Morgan: And so you can join the dots between those that suddenly got 10 grand in their bank account after doing this, and then what that money has literally been spent.

Simon Bligh: That's correct. So we can compare what people did before they got the 10 K to afterwards. And then by looking at the changes we can say, okay, then, you know, we saw an increase in expenditure of a certain amount of money, and we can also see what category that increase was spent on.

Veronica Morgan: So I guess it's good for the economy in the sense that the money did go into the economy, but really bad longterm. And certainly for those individuals, because it seems like they have absolutely zero understanding or zero financial literacy. They're not building their buffers, they're actually taking money out of investment to just fritter away. And if they really did need it, they're going to start in a couple of weeks cause they blew through so much of it in two weeks. I'm just, I'm a bit appalled. What percentage of people would you say you know, really can't be trusted with this money?

Simon Bligh: Well, I think it's a very emotive, so to phrase, to say trust, cause, cause again, you know, I do think it, it's probably not anybody's position to really say you cannot can't spend money on, But in this case we're talking about funds that have been taken out of superannuation. Yeah. It would have been good to see the rules tested. And so people who needed the money have access to it and the people who had just kind of wanted to go out and have a good time weren't able to access it if they didn't qualify. I think once people have qualified yeah, that's, that's really where I would like to see a democracy stop and you, you hope the person can do what they like with it, but obviously you would hope that they're going to be sensible in their hope. And you would hope that they're thinking about you know, let me put it this way. If you have you know, $10 of superannuation today might be a hundred dollars when you retire. So if you want to put a bet on it, better committed more than 10 to one, a hundred percent.

Chris Bates: I think you're bang on Simon. I think the the rules around it were way too relaxed and the trust in terms of you know, expecting people to follow the rules, I guess. Because you know, it was all over the papers, et cetera. It was a massive kind of cash grab by the government. They knew that they wanted to stimulate the economy. They could only do so much lifting. They needed consumers to do a bit more lifting. And this was a way to put money in consumer's hands so they could spend money. But you know, there are genuinely people that, you know, are in a lot of trouble right now and are struggling and, you know, accessing their super to get them through this, this bad period is, is definitely something that I think is fair. And I just, I think that's where the, it all kind of went wrong.

Chris Bates: You know, the government's thought that, you know, it was good for the economy, but you know, unfortunately some people that not potentially used it the right way, and we're saying quite a bit of it in bank applications for high minds. And as soon as a bank sees it they don't want to really go anywhere near you as a customer. So you know, and that's one of the consequences that people who probably were thinking a bit short term, took the money out, but you know a couple of months later it's kind of coming back to bite them a bit.

Simon Bligh: I have actually heard about it, you know, anecdotally about first home buyers who accessed it so that I could beef up their deposit. So you're saying that actually could backfire

Chris Bates: A hundred percent, if a banks knows that that money's come from super, they will not use it for genuine savings. And it doesn't look great on a bank application because they're like, well, the only way you got that was through hardship and who was you know, and then that's not what using for a deposit. So it's kind of like going to a, to a loan application. You've just got a short term loan. It doesn't look great on application. A lot of banks won't want to go near you because they know that that deposits really just another line. And so you know, if that money has come to a bank account that they don't know about and they don't see, then maybe you could potentially, you know, they're not going to know about it, but if that's on your main transaction account where you do your spending, which is kind of you track for

Chris Bates: A lot of people, Simon it is creating problems. So the same as these payment holidays, a lot of those payment holidays that were seen as a bit of a a win win, there was no negative to them, but if you want to apply for more finance or refinance, those payment holidays is starting to hurt people because banks want to see them. And then for some time so I'm an incentive. How many bank accounts are you really kind of saying as a collective? What sort of numbers are you able to conduct track?

Simon Bligh: Uh we see about 50,000 that counts a month.

Chris Bates: Well, I guess it's it's pretty amazing data to kind of look at as collective cause you've probably got a very good broad set across the country. Yes, it's, you know, it's obviously all data has a bias, so we need to be very conscious of that. But you know, we've, we've found that the amount of information we have is, is pretty predictive. You know, we can see trends, trends that are going on. And and certainly, you know, some very interesting insights emerging.

Veronica Morgan: So before we get to that, you did mention when we were talking about the superannuation that some people's incomes had gone up. So before we sort of get to what we're spending, let's think about how the money's coming in, what sort of people are actually seeing an income increase, other than those on job keeper that might've been casual and actually got more than before. Is there anyone else that you can, or any other industries, for instance, where you can pinpoint to actually incomes rising at the moment?

Simon Bligh: And w you know, we are, once the economy in general is down, there are bits of the economy that are doing very well. So, you know, food delivery is going absolutely gangbusters. It's elevated levels. You know, since, since the moment that pandemic started. So I've, we've not, I've not actually looked at whose incomes have increased but you certainly rise. You know, job seekers generally increased certain people's income. And, you know, if you are in bits of the gig economy and you're willing to work pretty hard then it's certainly possible that, that you know, that your income will go up.

Chris Bates: In terms of our spending. There was a massive drop off because we're all in lockdown, Sydney, Melbourne, et cetera, and then expanding sort of increased kind of back to what we were paying, you know, spending pre COVID and then it's dropped off again, I believe with Melbourne sort of in lockdown. Do you think that, you know, consumer spending will bounce very quickly back and we'll go back to our old behaviors when sort of we feel safe and the economy's opening up again.

Simon Bligh: I generally that's true. So that, you know, it is quite a complex picture. So you know, if you sort of step through the pandemic as things started to hate and walk down to come around, we all went to the supermarkets. We all got stocked up on toilet roll. There was that kind of rapping phase where expenditure increased. And really since then, it's been a story of, of two groups of people. So people whose income is licensed 65,000 a year, you know, generally speaking, that's not a very high income and you spend what, what, what you receive. There's always more bills to pay than there is more than there is money to pay them.

Simon Bligh: Or the other things where if you get a little bit of a windfall that's quite useful, you'll go and buy something. So the government stimulus was very much targeted that group of people, it was good policy because they received the stimulus and they spent it, and it went back into the economy to get that multiplier effect. And that was the cash payment you're talking about. Yes, that's right. It's that group of people have tended to see elevated levels of expenditure because they've been receiving, receiving government stimulus and doing things like you know less reliance on payday loans paying bills off you know, more spend on children's clothing. So, you know, whilst, whilst, you know, it's always easy to point to the bits of the spend that, you know, you might not ideally like the vast majority of the expenditure thing has had that desired effect at the other end of the income spectrum.

Simon Bligh: You know, people whose earnings are over 104 K year, they've obviously got a little bit of flex. They don't need to spend every dollar that comes into the bank account. And those people are pulled back pretty hard on spend. So they say, well, I'm really, you know, maybe I'm not getting a bonus. Maybe I'm a bit worried about my job. Maybe I just want to make sure I can continue to pay my credit card service, my loan, et cetera. So they've pulled back on expenditure by about 20% and I've continued to do so as locked down as locked down started to cease, and the economy started to open up. People had a bit of a, you know, hooray, you know, we're out, I'll go and have a hacker, I'll go back to the pub or actually have a mail-out as opposed to a meal delivered. So we all had a bit of a splurge. I think that's good for the good for the soul. And then as you know, as Victoria started to lock down again, spending Victoria is decreased, but it's, it's also been a bit of a shock to everybody's confidence. So you can see people now starting to reign back in again, because they're a little bit fearful about what might happen next.

Veronica Morgan: And it is all about confidence, isn't it. And but on the flip side, as I mentioned earlier, you know, that the share market and even parts of the property market have actually shown a lot of confidence and I've been quite surprised. I know that at first, you know, back in the late March, everyone's sat in their hands. He, Oh, I'm going to eyes widened. I'm going to look around and wait and see what happens, but certainly people sort of seem to get on with it. And certainly there's been lots of demand for people upgrading and getting homes, extra room for at home office, but there's also been quite an uptick in the home improvement side of things too. Right.

Simon Bligh: Yeah, absolutely. Yeah. What's going on there? So yes, so we, we've seen very elevated spend in home improvement. And you know, we, we dug into that and we surveyed at some of our consumer customers and asked them what was driving it. And essentially the reason was during the pandemic, my employer asked me to go off on leave, take some, you know, use some of my annual leave. There wasn't any way to go. So, you know, zip off the barley, I couldn't go off to the gold coast couldn't necessarily go to the beach. So I had to take leave, and it was at home and decorate the house.

Veronica Morgan: Bunnings just went crazy.

Simon Bligh: Yeah. And again, it's very interesting to see how, you know, certain parts of the economy of the benefits. You know, the other one I like looking at is pet care. You know, there's been lots of articles in the press about you know, puppy scams and things like that. But people clearly want a bit of an emotional crutch and spending a bit of money on the pet is the way to do it. So now the expenditure has been up about 40% for the last three months.

Chris Bates: And I think why this is so interesting is what kind of Veronica said, the confidence is everything right? And it's the same thing as sentiment. And, you know, that drives our investment markets and drives out decisions to with work and, you know, swapping careers, et cetera. So, you know, if we're out there spending money, it does is a good sign that, you know, we're quite confident about the future.

Chris Bates: We're not kind of battening down the hatches, et cetera. So I think it's a very interesting thing. And I love reading your insights because of that, because now it just gives us an idea of what people are doing on the ground at an aggregate level. Have you seen much around the payment holidays? And do you have any data to know what percentage of those have had income drops? I know some of the banks are starting to release that in their reports this week which are basically showing a lot of people don't need it, but have you kind of anecdotally or through your data saying that?

Simon Bligh: Yeah, look, I mean, I think I, I probably what I know is really through what the banks are saying. Yeah, so definitely, you know, you have a trend where I think more people have more people registered to have a holiday than took it out. That's the first thing that's quite prudent, that's quite prude and it's always good to have a plan B just in case you need it. So more people registered than took it up. Those people who've taken it up, some people at need it, and some people are just doing it because they're, they're prudent. You know, if, if you think about the general maths, you know, the, the average mortgage is somewhere around the $350,400,000 Mark. And the average interest on that mortgage is about a thousand dollars a month. So somebody is taking a holiday, they're probably re gearing, re levering that handles to the tune of a thousand dollars a month and not a massive amount of money if you're doing that for six to nine months, that could come in very useful. You know, if if money sites and if the, you know, your loan to value ratio is quite low and your prospects of employment or employment are good, that's absolutely the kind of thing that, you know, you would want people to see.

Simon Bligh: That's a key that confidence of keep spending up and, you know, have people avoid hardship. I think what's going to be interesting is then how many people who have lost their employment taken up a holiday and as the, you know, government stimulus and, and some of the stimulatory activity starts to go away as the banks inevitably finish these holidays and that legit, that policy drops away. And what happens to those people then in the will undoubtedly the group of people who were you know, who've got issues to deal with at that time.

Chris Bates: Yeah, I think the the payment holidays is a big, big number when you look at it as a percentage and the actual billions of dollars. But from what I've seen and speaking to lots of other brokers, et cetera the real risk is nowhere near that number. And I think we're already starting to see people roll off their six months because it's, you know, getting to that period where you, a lot of people are just making that decision. Well, it's going to end next month. I might as well just ended early. I mean, I'm okay. And I think it's gonna be very interesting to see what number actually get the four month extension. That's when we will start to see the real number, and then that's where you'll start to see the banks do a lot more assessment on those people. And we'll actually say, you know, how many people really need these payment holidays and the struggling and The mind is scary. A lot of people thinking is this 10% of property owners are really struggling. I don't think it's anywhere near those numbers.

Veronica Morgan: Don't leave sort of numbers surrounded at the seven to 9% of some banks, loan books. I mean, do we have it, do you have any access to that sort of data of it?

Simon Bligh: We do. And it's, it's probably not appropriate for me to mention any numbers, excuse me, not in the public domain, but maybe just, you know, one way to think about it. You know, I think Australian domestic properties worth about $6.6 trillion, you know, the, the, the entire board. So everybody's mortgage added up is $2.1 trillion. So, you know, if we're, if we're looking at deferral on you know, several hundred billion of that number, it's a big number, but it's, it's, you know, normally, but it's a small percentage and remember 2.1 trillion out of 6.6 trillion. So if you look at the LVR at the national level 30% exactly right. And that, that money isn't evenly split across our cities. And a lot of that debt is with the younger generation, because they're the ones who have mortgages rather than the retirees and baby boomers who bought their houses, you know, 10, 20, 30 years ago.

Chris Bates: And a lot of young people have bought two things. They bought, you know, apartments, new apartments, cause it's cheaper than say buying houses or house and land packages. And so a lot of that debt is shifted in different areas of the country, which kinda shows you where potentially risk is higher than say more established premium suburbs where you know, 30, 40% of the houses are paid off or 30, 40%. I've got very low debt and maybe, you know, 10 or 20, you've got quite high debt as a LVR, so that's wrong.

Simon Bligh: And once we don't see the information and so this is kind of Simon's theory, not something I can point to data and talk about other forms of, of of loans or the forms of payment of, of obligations while a lot of them are being serviced very responsibly. So credit cards are being paid off. Personal loans are being paid down, payday loans are being paid down. So we're seeing those companies who have been allowed by their regulators or, or commercially have decided to stay in market and keep collecting from from that, that consumer, that consumer customers and they're doing quite well. Cause again, generally paid, generally speaking, you know, most people are willing to pay their bills. They don't always have the capacity, it can come and go. So, you know, if you've taken a holiday on you know, your mortgage that you're continuing to pay your car loan, or you're catching up on that, people might be restructuring their own individual balance sheets but they're still behaving responsibly. So we're seeing that, you know, people are really making an effort to use this additional liquidity that's out there. So, you know, to make sure that they're paying their bills appropriately,

Veronica Morgan: Very interesting that because obviously I think there's a temptation for some people I've heard about this anyway, I haven't done it, but, you know, rolling their car loan into their home loan, for instance, which means they're still paying this car off in five years time when they go and get another car, right. For another 30 years of whatever. So if people are paying down that short term debt, you know, and using their holiday periods on their mortgage to do that and get themselves sort of in a bit of a better situation, why then is after PE why is their share price continuing to go up? I mean, I know it's going to take in another tangent

Simon Bligh: It's it's what a business so I have no idea whether their stocks appropriately valued. I certainly wish I bought some when there were, there were eight or $9, but you know, what's happening in buying a buy now pay later, look at very interesting segment of the industry. And if I go back a few years, you know, buy now pay later was focused on millennials and, and on certain segments of the market like retail. So, you know, your, your stereotypical customer, might've been a 30 year old woman probably living in a numb Metro area. So, you know, not Sydney or Melbourne and who would use buy now pay later to shop for fashion. And you know, if there is such a thing as that sort of archetypal customer, that times have changed. So you know, we all, we all got sent home on leave or, or sent home.

Simon Bligh: And when, when decorating our home, you know, we were, we were internet shopping. So a big shift away from physical to digital and buy now pay later really popular channel popular payment method in a digital channel so that you know, that product from zip open pay or after pay in front of our eyeballs whilst we were looking at at different categories of spend, and it's no longer retail, you know, you can, you can after pay for your, your paint and your wallpaper and your home furnishings and things like that. So the broader range of categories, a shift to digital and a desire for people to be prudent, why should I pay for something now when I count? So on the one hand, you've had a real explosion in the adoption of buy. Now pay later are different demographics. And on the other hand people have been getting stimulus supplement, maybe pulling a bit of money out of super, and they've been paying their bills. So I think, I think all of the players in the buy now pay later space of how the good pandemic, and it will be very interesting to see whether what we're seeing is a permanent shift in consumer behavior, or whether it's just temporary walls with all things locked down. Clearly, it's going to be a bit of both

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Chris Bates: You made a fascinating point there around the changing consumer behavior in terms of what a covert does as well, because it's all about you know, if you're thinking about business management or personal finance management cashflow and access to cash is without doubt the thing that gets you through tough times, whether you lose your job health or whatever it is at business or personal. And you're right, if you could potentially, instead of paying, you know, $2,000 at a big dentist straight up, and you can split that into four payments of $500 over the next, you know, couple of months, that actually makes sense if it doesn't cost you anything. And and, and that's, so that's changing the demographic that would use after pay because more people are saying actually, you know what, even though I doubt I would traditionally, I wouldn't do that when times are good, but now maybe I should just do after, by I think another thing with the occupy success stories, they've gone to the U S market. And from what I can see that they're going amazing over there, and you can even pay on a after pay card on your phone instead of paying on a visa card. So, you know, they're just innovating et cetera. I mean, the heart, we did go down the credit card and the personal loan route. Simon, can you give our listeners a bit of an insight in terms of how our credit assessment and our credit system works here because it's very misunderstood

Chris Bates: Around what creates a good credit rating, what you need to do to get a good credit credit rating. A lot of people think it's very much like an American sort of star point system. So can you kind of help explain how that's working and how that's potentially done a change show?

Simon Bligh: Um so everybody can see that credit score. So if you want to see your alien credit school, you can go into one of my businesses called credit simple. So www.credit, simple.com that I, you, you sign in and you to do that, you have to pass equivalent of a hundred point checks. So you know, Chris, you couldn't look at my credit score and I couldn't look at yours and I can only see mine if I prove I really am Simon Bligh, whose file I'm looking at. So you go through an electronic identification process and then you can see your score and you can see your file.

Simon Bligh: So firstly, what's on your file. That would be things like are you a director and what are you a director of? Have you ever been bankrupt? So we'll take into cause so that information would stay there for seven years in the case of a bankruptcy five years in the case of the court judgment, let's say I didn't pay my, you know, my Telstra bill. And I, I, I did that six years ago that wouldn't be on my file. If I did it three years ago, it would also see who you've applied for credit with. So, you know, I've applied for an HSBC credit card, a latched chewed credit card, and a, you know, a CBA mortgage, for example, all of that is on your file that then gets put together into pretty complex algorithm that looks at, you know, all of the adults in Australia.

Simon Bligh: So it looks at 16 or so million people and how they behave and what they do. And it creates a prediction, which is your credit score. And that range is in a number between zero and a thousand, virtually nobody, zero and virtually. Nobody's a thousand, you know, most people are somewhere in the middle. So let's say between five 50 and 850 would be a large portion of the population. And then when a bank, a bank comes and says, well, when I go to bank and I say, I'd like to take out a personal loan as part of the boxes I take, there'll be a, a box that will say, are you okay if we go and check you out with a credit deal around, just to see whether what you're saying is true on your application form and to see whether it's, I'm responsible to lend to you you know, for the loan you want at the price at the price that's being offered. So that bank called come into the credit Bureau, they'll ask for the information and they'll take that into their systems and they'll make a decision as to whether they want to offer you the loan or not, and at what price.

Simon Bligh: So I want to encourage, I'd always encourage people. You know, you can know what I know about you. It's one of the obligations I have as a credit Bureau, that that information is made freely available to people instantaneously. And that, you know, the tip I always say is, go and check it out and make sure it's accurate.

Chris Bates: 100%, we do a credit check on every single client ad before we launch any applications. And the amount of times we find issues that the client does need to know about, whether it's a credit card that they don't use. It it's an annual fee that they haven't paid that they're now missing payments on. It's a very common one and you know, their payment history is now looks like they're, you know, from a credit file, it looks like they're purposely not paying their credit card, but they're just not aware of it. We've had credit card fraud. We've had you know, facilities not closed when they thought they were closed. You know, lots of things that you can find out that you don't know about. And sometimes you can get really relieved cause you go watch, I've got a really good credit report because, you know, I haven't had done anything wrong. So the best thing you got to credit simple was probably a good tip there. Simon

Veronica Morgan: Put the sh the link in the show knows her. What can you do if you find that there's some inaccuracies or that you've sort of stuffed up?

Simon Bligh: Yeah. Great question. So when you're on the platform, there's a little tab and it says, dispute this, you just click on that button, you get a drop down list that can recommend, you know, that says an increase is exactly right. I'd like to dispute that credit card. Cause actually I canceled it. That's, that's a pretty common one. So

Veronica Morgan: If you can't dispute it though, what. If you actually have been, But remiss,

Simon Bligh: If you've been a bit remiss, you just have to wait and eventually the data disappears. So usually between so there's a data retention period for each type of data. So I was a bit late paying my credit card that will live with you for two years, three years. Yeah. I didn't pay my electricity bill on my phone bill and I got defaulted that will live with you for five years. I was bankrupt that will live with you for seven. Now. Why, why, why is that that it's there to protect everybody else. So, you know, financial institutions have obligations to lend responsibly. They don't want to give money to people who come actually have any foreseeable way of paying it. So they just sink deeper into debt. You know, the whole Wagyu and Shiraz thing with Westpac was about that.

Simon Bligh: So banks have obligations that they treat very seriously to lend to people responsibly. And at the end of the day, you know, people don't pay that bills. Those people who do pay their bills, pay, pay, pay a little bit piece on top for people who don't pay. So, you know, if you're out there paying, you know, 50 bucks a month for your, your phone bill some of that you're compensating the telco for all the people who've done Patty. So you know, sort of the strength of the community is stronger. If people can access the services that they should be allowed to at a price that's appropriate for them. And that obviously includes an assessment of credit risk.

Veronica Morgan: The waiting's interesting, you know, five years for teleco or your power bill and only seven,

Simon Bligh: If you were bankrupted. Yeah. Not setting in legislation

Veronica Morgan: The bankrupt bit or all of it.

Simon Bligh: And what you tend to find is you know, people's it's, it's what you're doing most recently, which has the biggest impact on your score. So if you did something five years ago, five years ago, you know, you might, you might've been young and reckless, you know, it was pretty pandemic. You, you know, your uni you know, everybody understands that you know, you were a little riskier when you're younger, so that kind of information doesn't have a big impact on the score. And certainly the, the bank will look at that typically and go, we understand that, and you might have something there that it doesn't matter if you didn't pay your credit card bill, the last two or three months, that's important. 100%.

Chris Bates: I think if just knowing your credit score, if you haven't ever done it, you don't know what's on your credit file. Um it's very easy to do, which is obviously what you alluding to in terms of your website, but, you know, and then if there is issues, you can dispute it. And sometimes you can get even lawyers involved to dispute things and get them off your credit file, et cetera, which we've had, what I would advise everybody to do.

Simon Bligh: There's lots of companies out there who will charge you a lot of money to clean stuff up. Don't go down that path because we all have obligations. I have obligations to help people do it for free. And, you know, and if I'm, if I'm liaising with a bank and I'm asking them, they have to do it for free. So nobody needs to get their hand in their pocket to get their credit file accurate, especially that probably understanding where to go and what to do. And it's a right to et cetera, and how to position your case, which I think sometimes people are, we don't know what to do there in terms of people when they're lodging, lots of applications is a you know, I have never done it that, you know, I've seen, I've got friends who have done an inclines, et cetera, where they love the frequent flyer points, which are a bit useless at the moment and they've recycled credit cards, et cetera.

Chris Bates: How do you think that those sort of behaviors where there's lots of applications for credit, and even if they get approved, they pay them all on time and they close them. But do you, does that sort of affect your credit rating or is it, it does.

Simon Bligh: So again, when you're looking at millions of people you know, I can't work out, who's a points junkie versus who's being quite rough. So, you know, there are certain behaviors that are risky. One of those behaviors is applying for lots of things all at once. Yup. So again, what you should do instead is you should go and have a look at your score. You should go and really study and look at the kind of products that you'd be interested in. And then you pick the one or the two that you want. Don't apply for 10 and take one or two work out, which are the one or two you want to go for and go go. Only for them. Another behavior that's risky is having lots of credit cards. So again, if you look at the population and you find people who've got maybe five credit cards from five different financial institutions, they're a factor more risky than the person who's got one card from one bank. And so if you have those cards and you don't need them, chop them up,

Veronica Morgan: Chop them up, right. You have to go in and getting those annual charges. You don't know about that thought you close the account and you check on your credit file that it shows is closed.

Chris Bates: So there's a big shift. It's not a shift it's legislation around open banking where you know, the ideas behind to stop the big four being the big four. And hopefully there's a big 10 back credit competition within the banking system for all products, not just timelines by allowing consumers to share their data much more easily across different banks. Basically. Can you kind of explain to our listeners how that such a big shift in hype, what some of the hopeful outcomes you say might happen?

Simon Bligh: Yeah, no, look, he's a great, it's a great piece of legislation. And whilst we often talk about open banking re what, what the banking is the first consumer data rights. So essentially what the legislation says is, you know, that information is yours and it's yours to use for your benefit and you can go and get it. There's going to be a number of data rights. The first one is open banking. The next one is in relation to energy. And the one after that is in relation to telecommunications and the logic is I can go and get my data from my bank and I can in a secure way, give it to whoever I choose to give it to who was in the system and they can sit there and they can go, Hey, Simon's a great, you know he's, he's got a good income. He spent responsibly and I'm happy to lend to him and that that can happen digitally and quickly. So rather than a fatiguing process where you've got to fill in lots of paper, it goes into a process. And six weeks later, you know, this kind of white smoke above the Vatican and you get your mortgage, it can happen.

Veronica Morgan: What's interesting about that in terms of timing, because of course you know, I think it's fairly well known that a number of these banks have got a lot of their mortgage processing facilities set up in India, which is obviously suffering a lot from COVID and had a number of shutdowns. So that slowed things down. You know, we've heard lots of blowouts hearing applications taking upwards of three weeks, whereas before there might have been turned over in a week. So we'll open banking, actually smooth all of that out, even with mortgage applications as well.

Simon Bligh: Absolutely. So open banking is one of a series of data sources and, you know underpin tied in with technology changes, which are, you know, really accelerating the ability to handle things digitally. So one of my customers said at an online mortgage lender called talk they can do a simple mortgage in a period of less than two hours. And, you know, take the talk of solve that a lot of the rest of the market are moving there as quickly as they can. Yeah. And and that's, that's a good thing. Cause at the end of the day, the less friction there is in the process, the more likely you are to reprice your finances. And the more competition they'll be for you, if you're a good credit, a hundred percent, it's all about the line of least resistance.

Chris Bates: If you made that line really difficult. I having to go to a bank branch to refinance your mortgage app, people's apathy and at other fees that are more enjoyable in life, take that tension. And you know, the finances over time, just get forgotten about. But if you make that process really smooth and not onerous in terms of asking for too many documents, et cetera hopefully what you'll see is that, you know, people will start to move their money around to get themselves a better deal, which is ultimately better for consumers, but not great for the banking profits. Do you say Simon that we will move to a more, you know, at the moment, like if you like your home loan rate, they don't look at you as a credit file and say, you're more risky than others. They just look at your LVR and they'll basically give you a rate based on that.

Chris Bates: A lot of the time, you know, there are little intricacies to the rating in terms of the pricing, but do you see that the banks or potentially start pricing much more on an individual level and start to reward the customers that are a lot lower risk with a lot lower rates and potentially those with higher risk and with higher rates in all different products, not just hormones.

Simon Bligh: Yeah. Look, I think that's right. I think there's going to be greater price differentiation in unsecured credit rather than secured because you quite right at the end of the day, Chris, that LVR protects the bank. So whether my credit scores seven 50 or 800, what's much more important is that my LVR is a subset of Oh 95%. And so from a property perspective credit risk will be a factor in the pricing. But it's not going to make the difference between paying two and a half percent and 2%. It's a very different story from looking at a personal loan or looking at a credit card. That's where the spreads will be, what they get.

Veronica Morgan: Cause that's really, it comes down to where the risk is, isn't it? I mean, you can never really, really frugal, smart person. Who's really not smart, but he's really good at paying their bills, but buys a dud property. You know, it doesn't go up in value and the LVR is, as you say, what protects the bank there, but you could also have someone as a bit more cavalier and by luck she luck because they're not really good at spending saving or managing their finances. They bet they'd managed to buy a better asset. That's right.

Simon Bligh: So your income and your expenditure are going to become a big, big factors in your access to credit and the price of which you get it. So, you know, when a, bank's making a credit assessment, the complex things and they take into account lots of factors, your credit score, how responsible it is to lend to you, you know are you in the gig economy and that your income can come and go, or are you a salaried employee working for stable employer? So income and expenditures is also really important.

Chris Bates: So you kind of at the case that you of mentioned 10 minutes ago but that was a huge case between Westpac and assets that I personally watched extremely closely. Cause I think it was one of those things that was having a huge impact on the property market in terms of lending and lending drives a lot of the property market because access to credit you know, completely changes the dynamic. What was your view on that case? If you, not sure if you're able to provide your personal opinion on it, but what were some of the positives and negatives and the flaws with it?

Simon Bligh: It was obviously very complex because you know, it, boy, it went on for quite a few years, right. And it went through various courts and, and you know lots of you know, lots of determination. You know, I I've, I think what's a little unsatisfactory is doesn't massively help the banks on what is responsible lending. Yeah. It, you know, case law, it's kind of determined that westbound did lend responsibly good for them. But where's the line. And I think a lot of the market is still a bit confused about that. So my, my personal view would be that if we had some clearer rules and then everybody knows where they stand in order to be the right side of the line, we've got a very responsible financial infrastructure in Australia.

Simon Bligh: Everybody strives to be compliant. And I think it would be useful if we could give them some clarity as to what is compliant and what isn't. And there's still, there's more guidance out there about that now, but it's still subject to quite a bit of interpretation and you'd rather not have uncertainty in that area. I'm sure are sick would not, rather than not having certainty. And I'm sure Westpac would have rather not spend all that money on lawyers to be proved right at the end of the day. Well, that's exactly right.

Chris Bates: I think assay Gaga relates to him more guidance around it. It's just whether the banks want to follow that. If that is a bit too prescriptive because you know, their business is basically built on blending growth right across all their avenues, but mainly home loans is a big chunk of the sort of profits. Um and it's just very interesting as a broker to be watching bank credit policy change. Cause it, it tightened up ridiculously tight with the Royal commission and all the banks were freaked out and went through a forensic line by line, looking at people's expenditure. Some banks sat on the fence and said, we're not going to go to that detail. We don't think we have to for responsible the NT and their business has boomed because there were a much easier way to get a home line. And just in the last couple of months, we're starting to see most banks go back the other way and start to say, we don't really want to look at transactions again. Which is just interesting cause that's kind of what it used to be like. So we thought we're heading in a new direction. And then now people are going back to the older and wise. It's a case to keep watching

Veronica Morgan: Is that partly because fundamentally, you know, property is so important to this nation's economy. And so, you know, you tighten it, tighten it up too tight and everything. We've got a pandemic and there's other reasons why we want money in the economy.

Chris Bates: I think there's probably a big picture of you. Yes, that's probably right. I think the the governments RBA you know, are all sort of out there saying lend money, lend money. And the banks are saying, well, what's been, I want to lend responsibility. What can I do? And what can I do? And I think Simon's hit the nail on the head is they're not really sure. Right. And so but fundamentally everyone wants their governments want the banks to lend money. Right. So everybody wants clarity. Yeah. So, I mean, she had a property Dumbo for us.

Simon Bligh: Yeah. Look we've kind of touched on it. So, so my Dumbo is I, in fact, I'm the candidate Dumbo because I'm one of those classic people who the banks make lots of money on. I've got a low LVR, I've got a good credit score. I have a job. And and I haven't taken the time to go and reprice my mortgage. So whilst I've been happily dishing advice out here, I'm not actually, I'm not actually sort of you know, eating dog food or sipping Mai and champagne. Yeah. Digital process now is pretty good. So know there are ways that you can, you know, use your data go in there, go and get a new mortgage and do so quite quickly and efficiently not as onerous as a process as it used to be and save yourself a bit of money. So if you've got a good credit risk and a good income, and you haven't refinance your mortgage for a while ago, the credit simple first, just to make sure that you are a good credit risk.

Chris Bates: I think a lot of Australians are typing that up. We've had the biggest not me personally, you know, but the biggest you know, rise in refinances ever and billions and billions of dollars getting refinanced now. Cause I think people are having that time to look at their, their mortgage. And, and the problem with that Simon is that people think what was a good rate in 2014, 2015 was about a one to 1.2% discount. I remember when we got at 1.25, and we're like, wow, this is huge. But now discounts could be even 1.9 or 1.8, five or nine five. So, you know, depending on your situation, you could be 50 to 70 basis points on dock, which is about, you know, if you times not 0.505 times, whatever your loan amount is that give you an idea. So it's five grand on a million dollar loan in your pocket after tax. So some big savings out there by just, you know, looking at it's very significant and, you know, whereas a few months ago you might've sat there and whatever they do on a Saturday morning, you know, I'll take of, you know, refinance my house or go and watch the kids it's sport. Well, you can't watch the kids at sport at the moment. So go and refinance your house.

Chris Bates: Very good. Just one final thing around sort of personal finance management tools. What, Short's your view on, on sort of the sort of apps and things like that? Do you quite gimmicky? Do you see that they're quite you know, strong in terms of helping people better understand their finances or, you know, do you see them progressing a lot, I guess?

Simon Bligh: Yeah, look, they're really useful. So, so again on credit simple, there's an app within that or money simple, you can load any bank account, visualize your spend. You know, if you're a director of legal entity, you can go and look at the the credit score that legal entity for free as well. You know, there are some great apps out there that help you robo save. There are some great apps out there for kids to, you know, teach them financial literacy. So it's a super innovative space. You know, I think it's I think at the end of the day financial literacy is really, really important and the more people understand where to get good credit what pitfalls to avoid, you're going to make better decisions on the biggest decisions in your life. And the more that you understand the issue and these personal financial management tools are a key way in which in which somebody can do that. So I'm a big fan of them. I use it myself. I'd run one. I think they're they're very important. And again, as we move into this world where you know, things are digital there's a lot more choice amongst financial providers out there. They're, they're a good way of understanding what's out there in the market that can suit you.

Chris Bates: I think it's a very good snapshot, to be honest, I think all the banks are moving in this direction. And then you can use ones that include multiple banks. You know, like your tool I imagine does. And you know, what's the, I don't know what the saying is always a laugh when I try to say quiet, but, you know, you can't improve what you don't measure basically. And you know, that's basically the thing with, with spending you can't really track or try to look at where you potentially have you're leaking money or potentially overspending or where you're very good. You know, in terms of much under the averages, I guess. So I definitely think looking at your expenses for a period is, is quite insightful to know how you're actually living your life. So thank you very much for today's Simon. I've run it cause microphone's not working. So she said, thank you as well, but I really appreciate your time. It's a pleasure. Thank you.

Veronica Morgan: We want to make you a better elephant rider. So this week's elephant rider training is

Chris Bates: I think the most important thing to understand is the when you're looking to borrow money is how much you can borrow. And how will a bank look at your application? And I think what we are starting to see is a few mistakes that people are potentially making that, you know giving banks that when this file is potentially on the border of whether they want to do it or not is enough just to tip it over the edge and for the bank credit assessor to change their view on whether they want your customer or not. So we did say this pre code, we did see the after pay and multiple applications for credit cards like zip money, Liberty impacting applications when things were super tight, especially when they're in lender's mortgage territory. And we did have one case in particular that was declined and this customer was earning over $300,000 a year was buying well in their capacity, but was borrowing at 90% and the lenders mortgage insurance knocking them back.

Chris Bates: And really the reason was after pay and a thousand dollar credit card. So just be really careful with using those sorts of things. If you're looking to borrow money. The second thing is that the super withdraw, if you've already done it you can't get back in time and put the money back into super. So you just gotta be aware that banks aren't looking at that very favorably, but it is what it is. And the payment holidays, if you are thinking about refinancing or upgrading your home or buying an investment property or anything like that in the next, you know, three to six months, I'd go and call up an end, anytime at holiday straightaway, rather than extending it or letting it drag out because it doesn't look great in the bank size that you just maximize the six months, even though you didn't need it. So try to remove those and they won't look at any application on to your, at least a few months back in payment at the moment is what they're saying, but we don't really know cause not many people have ended or have had them and then are looking for credit. So I just try to get on the front foot and end those payment holidays. If you thinking about borrowing more money or refinancing,

Veronica Morgan: They'll just add one more thing. I think what really alarmed me when Simon was talking about the way in which you know, 38%, well, he talked about 38% of people that had access their super early didn't actually need to. And there was a high percentage of people who had spent the money. I think he used the word frivolous frivolously. And if he didn't, well, I'll use the word when you look on their website and we'll include the link in the show notes for the way in which these dollars have been spent, gambling is really high on the list. Quite a lot of money has been spent of the super money on gambling. And I just think that just shows a higher level of financial illiteracy, but it also shows in addiction. And I guess if you listen to this, you're probably not in that category, but if you know anyone, I just encouraged them to go and get some psychological for that addiction. Cause I just sing. It's absolutely heartbreaking, really.

Chris Bates: So gambling like I say, is an addiction potentially for some, some potentially don't say it that way. And I just say it as a bit of fun, but you know,

Veronica Morgan: Your super money that you've withdrawn and a large amount of it on gambling, it's more than just a bit of fun.

Chris Bates: Yeah. And that's just, and you know, it's, it's quite a touchy subject because, you know, it's, it's pretty horrible, you know, the the addiction of gambling and how powerful it is. And you know, the people are stuck in, in that situation. They do need to get some help, et cetera. But from a, from a purely loan point of view, if I was going to talk about that without doubt we've had applications declined when banks have seen that there's been gambling activity on the file when they looked at transactions. So, you know, it doesn't look great from a bank point of view as well. So if you are looking to borrow money, that's one of the behaviors which Simon talked about on the podcast that a bank may look at and may the credit assessor may say, I'm not comfortable with that because of that behavior. So it's just another thing that, you know, if you, if you are looking to borrow money, you wouldn't want a bit of money on bed, easy to be stopping you, buying your first home. It just feel a bit pointless, wouldn't it? So I think you've just got to be very careful of these sort of things. When you're looking to apply for credit,

Veronica Morgan: Join us for our next episode, we have a very lighthearted one coming your way. You know, what's been happening through covert is a lot of people are becoming quite creative and coming up with different ways to entertain digitally. Well, we've got Jimmy Thompson coming back and he's joined by bright hour Warren Coleman. You know, the pair of those have actually put together a podcast, which is a podcast comedy, all about the trials and tribulations of believing in Strava. It's mostly humorous, but it doesn't mean we're not learning anything because there are a lot of lessons to be learned through the comedy and the weird ways they will be. H