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Borrow Better, launched originally as “Moneygrams” in 1987 for $100 ($250 today), helps borrowers contact more lenders for more competitive mortgage loans.

As it is not a “broker” there is no $7,000 or whatever brokerage bill for the lender to build into your loan interest and charges. As Borrow Better lets banks bid for your loan business and you to negotiate for the best possible rates and charges business owners and farmers can do quite well out of it.

One borrower in 1987 saved $300,000 interest for his $100 investment. Dropped his interest rate on a 5 year $1m loan from 24% to 18%. Good to remember that what goes down can go up and interest rates are relatively low.

But those who borrowed at very low rates and are suffering from the increases that the bankers must have known would come, need and deserve whatever help they can get.

For that reason and due to the current cost of living crisis Australia-wide, Borrow Better is being temporarily offered free for businesses and farmers. Make the most of it to get the best deal whether borrowing afresh or refinancing.

Banks will always charge you the highest rate you will pay. That is how businesses sell their products and services and how farmers sell their livestock and crops too.

Competition brings interest rates and charges down.

There is talk about “getting out of mortgage prison”. But it is really a “Debt Trap” set by skilled moneylenders who knew the rates would rise from historic lows to trap unwary borrowers.

The last people a small business owner would ask for the way out would be a free financial counsellor funded by those same moneylenders, because that might be the most expensive way out.

The best way out is to turn the tables on the moneylenders.

Find out what they have done wrong then convince them to open the trap-door or endure yet another scandal.

GBAC came into being when Politicians let Banks escape regulation in the 1980’s. Help was necessary, because bankers saw they could make billions of dollars profit and earn multi-million dollar salaries by screwing borrowers. GBAC helps borrowers screw them back, in the nicest of ways.

A warning has been issued to 800,000 Australian households about the possibility of mortgage stress in the near future. This is particularly concerning given the already high levels of household debt in the country, with many business, farm and home owners already struggling to make their mortgage repayments each month.

For almost two years, the Reserve Bank of Australia had consistently suggested to Australians that interest rates would not increase until 2024. However, with several consecutive rate hikes already delivered, Philip Lowe, the Governor of the Reserve Bank of Australia (RBA), has been forced to address the mounting public anger caused by interest rate hikes by issuing an apology.

It is estimated that over 300,000 Australians who listened to the RBA’s advice regarded its comments as gospel and took out a mortgage; these people may now face mortgage stress as interest rates continue to climb in Australia. Unfortunately an apology will not save the homes of many people who now will face mortgage stress as another rate hike has occurred; the official cash rate is now 3.35%.

What is Mortgage Stress?

Mortgage stress refers to the financial strain experienced by borrowers when their mortgage repayments become difficult to afford due to their income not being sufficient to cover their mortgage repayments, leaving them with limited funds for other expenses.

This increase can be caused by a variety of factors, including:

• Interest rate increases: If the Reserve Bank of Australia raises interest rates, this can result in higher mortgage repayments for borrowers.
• • Changes in the housing market: If the value of homes in a particular area decreases, this can result in lower security value for lenders which alters what is called the Loan to Value Ratio (LVR). Then the lenders ask for more security which the homeowners may not have.
• • Changes in the borrower’s financial circumstances: If the borrower’s income decreases or their expenses increase, this can result in higher mortgage repayments becoming unaffordable.

These points can lead to financial difficulties and put a significant amount of pressure on the borrower. Mortgage stress can also have a wider impact on the economy, as borrowers who are struggling to make their mortgage repayments may be forced to reduce their other spending, leading to a decline in consumer confidence and economic growth.

How can you prepare for mortgage stress?

Australians who find themselves stressed about the RBA’s announcements of potential interest rate increases need to take action now. There are a number of actions you can take to reduce the risk of defaulting on your mortgage repayments and having your bank on your back. At GBAC Advisory, we are skilled in negotiating difficult loans when necessary. Because we really do not want the banks to win and take your property, we advise borrowers to take the following steps early.

1. Review Mortgage Options

Borrowers should review their current mortgage and consider switching to a different loan product that may be more suitable for their current financial circumstances. This may or may not include switching to a fixed-rate mortgage, which provides greater certainty and stability in terms of mortgage repayments. However, if rates fall again those on fixed rates will be disadvantaged. Borrowers can also ask the bank to allow a longer loan term so that the regular principal repayments are spread over a longer term.

2. Consider Refinancing

Refinancing is the process of taking out a new mortgage to replace an existing one. Farmers and business owners may consider refinancing if they can secure a lower interest rate, which would result in lower mortgage repayments. GBAC offers a very easy and inexpensive way to do that with its ‘LoanApps’; these are based on the ‘Moneygrams’ that we introduced immediately when banks were deregulated. LoanApps make banks compete for the loan business.

3. Increase Income

Borrowers can take steps to increase their income, such as finding a higher-paying job, taking a second or third job, or starting a side business. This may help them better manage their mortgage repayments and cope with any increases that may occur. This may lift your stress levels if you have children. In family-owned businesses or farms, one member may choose to work outside the business. On farms it is common for one to take a nursing or teaching job to supplement farm income.

4. Reduce Expenses

Borrowers can also take steps to reduce their expenses, such as cutting back on non-essential spending and consolidating debt. This will help free up more money each month that can be put towards mortgage repayments. It is almost always easier to cut expenses than to earn extra income; a borrower controls most of their expenses but others control most of their income.

When GBAC CEO Greg Bloomfield bought his first home, ran his family businesses, bought their sheep property and then sold that to buy their cattle property, he and his wife cut all expenditure to the bone. They skipped the pub, coffee shop and movies to channel all funds into paying down their loans as fast as possible.

It’s also important for borrowers to keep an eye on interest rates and stay informed about any changes that may impact their mortgage. This can be done by regularly reading financial news sources and monitoring the Reserve Bank of Australia’s monetary policy statements. GBAC offers a constant loan management service to help borrowers adapt to changes as soon as they happen.

Resources to help you

It’s worth noting that while a mortgage stress can be a difficult and stressful experience, there are government and industry-based support services available to help borrowers through this time.

For example, the National Debt Helpline provides free financial counselling and support for individuals who are struggling with debt. If you are however past this point and have your bank breathing down your back, please contact GBAC Advisory for honest advice and help. It is handy to know that the banks subsidise financial counsellors.

Remember to be proactive about your finances and take control of your mortgage. By taking the above steps to prepare for any potential increases in mortgage repayments, you can ensure that you are in the best possible position to weather any financial challenges as they arise. But always remember to talk to the bank first to calm them down. Big problems frequently arise because borrowers have ignored letters from the bank about late payments. Don’t turn that little molehill into an erupting volcano by ignoring it.

 

Beware of the bank
Bankers in particular knew that ultra-low interest rates were unlikely to last for long without a recession or depression, as did most accountants and economists. The rates would probably rise instead. This would apply equally to a home loan, farm loan and business loan.

Most business loans and farm loans are for between 15 and 30 years. Most home loans are for 30 years. So borrowers are in there for the long haul and a lot can happen to interest rates in a year.

If in 2023 Australia goes into recession or depression, the properties providing mortgage security for loans would probably collapse and many borrowers would not have the assets to make up the required security. The other impact of a recession is worse, loss of jobs and income. The bank might try to foreclose and sell the property up. Those borrowers could lose all their hard earned equity in their home, business or farm.

If on the other hand interest rates continue to rise, the borrowers may find that they cannot afford the increased repayments. There are plenty of million- dollar loans out there throughout Australia. Each 1% increase in the interest rate on each $1m of a loan costs the borrower $10,000 a year.

To survive, the borrowers would have to earn an extra $10,000 in net disposable income. That is an extra $10,000 in pay-packet or an extra $10,000 Net Profit, per million dollars of the loan or a similar reduction in spending. But rising interest rates can be synonymous with inflationary increases in prices, so to earn extra net disposable income could be a serious challenge. If that happened, many borrowers would again be unable to meet the loan repayments.

Because the banks had already been clever enough to issue a variety of loans that were always unaffordable from the start, there is potential for a mass of debt defaults in 2023-2025. In these cases the banks could foreclose and overall mostly recover close to the amount they had loaned out, maybe even more because accumulated unpaid interest can take a debt way beyond what it started out as.

Profit before principles – always
The big four banks, having earned $2.8 billion dollars profit last year between them, could afford to lose a bit here or there. The borrowers given potentially unaffordable loans would not be so lucky.

Of course, there are some excellent smaller banks and bank staff at non-executive level are mostly very helpful and honest people.

Just to ensure that they were in control, the bankers had legislation passed by the last Federal Government to prevent many consultants from helping borrowers, particularly home buyers and other consumers. These borrowers are restricted by law from getting help from almost anyone not in the pay of the banking and financial services industry. Lawyers are an expensive exception. The aim of the banks is to send people to financial counsellors who receive bank funding and are not known for getting dishonest banks to write off debt that has been fraudulently created. The alternative is to receive assistance from the moneylenders’ very own industry body called AFCA which is so blatantly working for the banks that until recently the most compensation they would award was a maximum of $5,000. Recognising their own dishonesty AFCA, as the result of a critical review of its operations following the Banking Royal Commission, has increased that to $2 million. But it has not gone back over past cases to re-assess compensation and increase amounts from $1500 to $15,000 or even $150,000 when that was the damage done by the bank to the borrower.

Even restricted free speech
The bankers have even successfully banned free speech in Australia with the Credit act preventing any paid consultant outside of the ruthless, bullying bank-controlled circle of “dispute resolvers” from even speaking to a borrower about dishonest bank action or speaking to the bank about it on behalf of the borrower. “We have ways of resolving your dispute”. Indeed the bankers do!

The banking industry has stitched up control  so that it can continue to rob, defraud and deprive borrowers just as it did before the Hayne Royal Commission exposed its dishonest practices and issued multi-million dollar fines. I don’t think it sent one bank director or CEO to gaol. Yet a woman who stole $2m from nab was quickly sentenced to imprisonment. Crooked bankers are well protected from gaol no matter how much they steal from or defraud Australians.

Batting for the borrowers
For the past 35 years since de-regulation, GBAC has worked steadfastly with business and farm borrowers, to have their banks write off unreasonable amounts of debt that were created by the bank’s improper lending practices, lies, deceit or totally inappropriate loan management. We have done that by working with those banks to carefully explain to them what they had done wrong and the impact it that had on their particular customers. The banks, some very willingly, and some very grudgingly, have paid up to compensate their customers for the damage caused to them by the bank’s action. We have had 100% of two debts written off and $5 million written off another. At least one bank CEO has been most helpful and really does care about his customers.

However, profit is key to bankers and that comes largely from charging customers more for the services, than it costs to provide them. People in Rural and Regional Australia and in the suburbs know about that. After the Royal Commission some of the banks had to come up with a clever way to continue to rip off their customers and they have found, in the Credit Act and AFCA, a way to do it.

However, we have very good parliaments in Australia, despite the impression often given in the media. The parliaments are our source of fairness and justice. Borrowers worried about how they will manage their loans throughout the years ahead will be able to easily take their cases to ALL parliamentarians by sending Votergrams to MPs.

Act Early
Meanwhile all borrowers might look closely at how to minimise risk by increasing their loan terms by some years to reduce the principal amount that is included in each repayment. They could also look around to see what cheaper loans might be available if they needed to refinance in the face of a bank demand for full repayment of the loan. LoanApps can help with that. It may, if possible, also be wise to cut expenses and do everything possible to increase income.

None of us knows what the future holds, but the Girl Guides and Boy Scouts have a great motto that could be followed to advantage  by borrowers. It is “BE PREPARED”. I have found it invaluable in the farms and businesses I have run, as well as for helping those we consult.

Greg

Using higher profit to reduce debt
The average debt of indebted Australian farms is probably just over $2 million with average farm profit at perhaps a bit under $200,000, up from $100,000 in 2021.

This provides a golden opportunity for farmers to pay down debt before interest rates head higher.

For those farmers carrying past tax losses, the whole of this year’s profit will be available to them. If half of it could be allocated to debt reduction it might help them to clear debt faster. By reducing the interest charged, extra loan repayment accelerates debt repayment.

Farm management
Farmers are highly skilled at stock, pasture and crop management. But for many, that occupies so much of their time and effort from sunup to sundown, that they do not have time for the vital area of financial and debt management. It is not difficult, but it does require skills too. It does not just “happen”. If the farm borrower does not manage a debt, the bank will do so in the way that delivers it the highest profit. If the money is not properly managed on farm then family drawings and loan management can both suffer as a consequence.

Bank De-regulation
We hopefully run our farms to earn income. As a 4^th generation farmer born in the city, I ended up in Chartered Accountancy before running Merinos in the centre of NSW and beef cattle in the Southern Tablelands. Being heavily involved in NSW Farmers, I became aware of the devastation that followed bank de-regulation. Since then the banks have had legislation passed to protect them from prosecution and compensating the customers they treat so badly. So I dumped my accounting and tax  practice to focus on helping farmers battle the banks.

I have been staggered at the dishonest bank practices I have encountered all over Australia. No matter what state or territory, farmers have been cheated and defrauded on a huge scale as the Banking Royal Commission revealed. That has not stopped and will not stop. Only borrowers can stop it.

I have never given my sheep, cattle or bank control of my farming enterprise. I don’t imagine many farms want to do that. The problem is that when the seasons don’t go well, workload increases and ability to repay loans can decrease, sometimes causing catastrophe. Then a bank, if allowed, can start exerting more control and extracting more of the farm profit for itself.

Loan management
There are three aspects to loan management.

1 is to earn substantial profit and let the bank see that, so it does not worry about the loan security. Quite a bit of farm profit can be held in the grain silo or in stock born on the place. That usually does not feature in the tax figures but it is worth letting bankers know about it. On my place a calf was valued at $20 for tax, yet the female retained might grow to be worth $4,000. 100 of them would make a $400,000 difference to profits and 1,000 would make a $4 million difference. Yet that profit is only seen when they are sold.

2  is communications with the lender. These are extremely important but often forgotten. Imagine if you have loaned $2m to someone and then you don’t hear from them for 5 years. If a payment is missed, your heart is suddenly in your mouth. Whenever there is a really good result on the farm it will pay to quietly let the bank know about it – a big profit, exceptional prices received, great season. That builds relationships which can pay off handsomely in the next bad season when a repayment holiday is needed. As soon as there are problems that might affect repayments, get in touch with the bank and let them know. Never promise a repayment that you might not make. That is the greatest sin in loan management.

3 is to plot the loan from start to finish. We like to set up a spread sheet with a line for each repayment date and a column each to show the date, last loan balance, interest charged since then, payment made since then and loan balance after the loan repayment has been made. It is then easy to see how the loan is decreasing over the years until it is repaid.

4. As soon as the loan has been cleared contact the bank and ask for the title deed back and a mortgage discharge. Do not let the bank talk you out of that, because as long as the bank holds your title deeds and a mortgage your property is at risk. It could be lost by something as simple as a guarantee, hackers or bank fraud. Banks love to hold the deed as they can then talk the borrower into another loan to make them money out of farming.

5 Then run debt-free until the next time you need to borrow for a major capital purchase. It is best not to borrow for farm operational costs, particularly on overdraft. A single bad season can send the farm into a debt crisis.

6 The best long term solution as well as storing feed on farm, is to store money away in the bank so that the next time you need money you can use your own instead of borrowing. It is more profitable. Savings also need a serious management plan to accomplish because there are many calls on every dollar received. Careful planning can create large savings as well as meeting all other necessary demands for cash.

But a caution.
Everyone’s situation is different. When you borrow, check with a banking consultant to ensure that you are doing the right thing and will manage the loan to make money for your self and the family, not just for the bank. That consultant needs to know your profits for the past 5 years, your plans for the next 5 and the impact that your annual principal and interest payments will have on your cashflow. Negotiate terms that suit you, not just the bank!

Meanwhile, have a Merry Christmas and may the New Year be a happy and prosperous one.

Greg Bloomfield, GBAC

“Why would anyone invest their money on term deposit with the major banks at 3.35% when the government also guarantees term deposits placed with Macquarie Bank at 4.1%, AMP at 4.1% and Rabobank at 3.9%”, asks banking consultant GBAC?

With business and farm loans, GBAC offers it’s Loan Apps for borrowers wanting the best rates as well as best  charges and terms to suit the specific enterprise. Bargaining with the banks is the only way that GBAC believes borrowers get  fair go. Brokers serve the interests of the banks that pay them. GBAC and Loan Apps serve the customers because the bank customers pay them – a lot less than the banks pay the brokers.

GBAC invites readers to phone  to chat about what works best.

Difficult debt is descending on many borrowers. Many risk losing their homes, farms businesses. Let’s save them, but first ask why it has happened and who benefits most. Bankers perhaps?

Teachers taught writing in the 1940s & ‘50s but can’t teach it now!! Few can read & understand their bank loan contracts.

A regulated casino is deemed not fit to hold a licence; pays $100m and is allowed to continue operating! Corruption or fair? Banks who give loans to cover losses, receive profits in deposits.

Medicare (taxpayers) robbed of $8 billion! Bankers who lend to government benefit.

Political donations and fundraisers deliver favours to donors (like big banks?). Pure corruption! What about 100% government funding, for those who do not accept any other funding.

Pork barrelling pleases voters and politicians but disadvantages those in safe electorates! What about a ban on grants in 12 months preceding election? And make bank loans declarable by politicians voting on matters that benefit banks.

Federal politicians pass Credit Act to prevent skilled consultants not in the pay of the moneylenders (bankers) from rescuing destitute borrowers facing foreclosure. More corruption! Who benefits? Bankers!

It can be – because voters have failed to direct their parliamentary representatives to Advance Australia Fair, leaving MPs and voters at the mercy of the self-interested and corrupt ( bankers?).

Time to take control voters!! Join FairGO’s Voters Network and guide government through your elected representatives (MPs) so that vulnerable borrowers get treated fairly. Aussie debt solutions lie in parliament.

In Australia bank de-regulation has allowed banks to take advantage of borrowers without any rules to regulate those moneylenders.

Imagine driving on country roads and major highways without any rules. Borrowing from banks is much the same. Banks have taken control and because they bleed borrowers dry, they are rich enough to fund many of those supposed to be helping borrowers. Those receiving bank funding will never help the borrowers if it reduces bank profits.

So the challenge for farm and business borrowers is to find the right debt solutions. Aussie debt solutions are unique because of our seasons and the development around the edges of the country and sparse development inland. For farm borrowers the seasons are critical in loan management.

What are the options?  There are lawyers. In my experience as Chartered Accountant with lawyer clients, most lawyers know little about loan finance and little about farming. Their solutions are standard legal ones rather than farming ones.

There are accountants, but most accountants focus on preparing financial statements and tax returns which is a highly skilled field on its own. They often get clients referred by the bank so they mostly do not want to offend the bank.

Then there are a lot of “shonky” operators who claim they can solve debt problems by “consolidating debt. That can be moving all the eggs from a number of baskets into one big basket which, if dropped, means scrambled eggs . Or they talk about tightening your belt and bankruptcy.

GBAC has been advising farmers in every part of Australia, for decades. Greg Bloomfield started his career with Price Waterhouse in Sydney and early on was dealing with some of the biggest names in agriculture. His grandfather and great grandfather had been farmers.  Greg became  partner in a medium sized city firm of Chartered Accountants, then established his own firm, GBAC.

In 1980s he acquired a 9,000 ac sheep property in the NSW Central West and bred Merinos from Haddon Rig Rams. In 1990 he purchased a 3,300 ac  beef cattle property in the Southern Tablelands of NSW that had been settled by his great grandfather. In 1986 he invented the Votergram service that gives every Australian a very effective voice to parliament. He was head of the largest branch and  District Council in NSW Farmers. He formed FairGO to help people influence government decisions.

In 1987, when banks were de-regulated he invented Loan Apps, then called Moneygrams. They enabled borrowers to easily bargain for better loan rates and charges and cost $100. One of the first farm users saved $300,000 on his loan costs over the loan term.

Seeing that many people used his service to apply for loans were doing so because they had a problem with their existing loans and needed to refinance, he decided to devote himself to assisting them exit their old bank on the very best and most profitable terms. GBAC’s biggest debt write off was $5m and in two other cases it had 100% of the debt written off.

He was unhappy with the way banks treated  borrowers for a reason. His widowed mother, with 3 young children and no financial skills at all, had been allowed by a Big Four bank to guarantee a relative’s business loans, on the security of her home. The business failed and the bank took the family home.  Greg never forgot! So when banks were de-regulated in 1987 he converted his Chartered Accountancy practice into a bank loan consultancy.

At the same time as running his Chartered practice Greg also ran a couple of businesses to provide funds for the family. So he got  to actually run his own businesses and farms as well as consult others. There is nothing like doing it yourself to learn how it should be done.

That is why GBAC has a focus on farm and business debts. He and his firm are highly skilled at analysing what the bank has done and “persuading” it to write off some of the debt to compensate the borrowers for not looking after them properly as banks did before de-regulation.

When Greg considers loan solutions or debt solutions he is looking first at the problems and then for solutions that suit the particular business or farm.

Businesses are usually affected by the general economy, health of owners and succession plans.

Farms are affected very much by seasons and commodity prices, as he learned on his own place.

Loans are easier when the season is like this-

More difficult when it is like this-

Both are affected by government policy. Greg wants the outcome to suit the particular business or farm. His farm apps enable very competitive refinancing and his Votergrams allow him to report improper bank practices to each of the 225 Federal Members of Parliament for their action, like the Banking Royal Commission.

Treat banks like bulls. Never turn your back on them. If they give you a hard time, send them to the butcher. Never  let your home or farm be sold up on you without a very serious fight. When you want good fighters in your corner, give GBAC a call on 0428 417 496. They will be very happy to oblige.