Mortgage Shopper

Australian Mortgages in 2011 review & 2012 prediction

2012-01-23T14:58:00.000-08:00

Mr Mortgage's take on 2010, and predictions for 2012.

Home loans are becoming more affordable as mortgage rates ease, and home prices fall.

The fact that Australian mortgage delinquencies have declined in the third quarter in Australia points to the fact that the worst of mortgage stress may be over. We might see a return to a stronger mortgage market in 2012.

The return of the saver, and the virtue of saving

2011 has seen more Australian households reining in their expenditures, and the biggest fatality of all this is the credit card. Australians seem to be shunning credit card debt like the plague as well as to a lesser extent mortgage debt. This year has been credit card debt reduction as the biggest shift to saving has occurred.

That has to be a good thing for everyone, except retailers who have been riding on the back of credit card debt.

Australia's banks are a multi-channel money machine
The banks however have done well in 2011, despite the loss of credit card revenues, and slower mortgage applications, and that is due to business loans growing to replace the shrinkage in credit card debt and home mortgage loans applications, which continue to fall away.

With customers wanting better mortgage deals and with lower revenues the banks may shed employees.

So mortgage delinquencies may have fallen, which is good for the banks, but that does not mean that home buyers are now queueing to for a home loan, so we are seeing a fall in housing prices in all capital cities, as interest rates fall and wages rise. This is a new set of circumstances that we have not seen in decades.

Did Real Estate become over priced?
The combination of rising wages, full employment, lowering mortgage rates and falling house prices tells me that Australians have learnt the lesson from the US finance collapse of 2008. That Real estate prices can and do get ahead of themselves and must eventually fall when they grow out of kilter with the wages and supply and the desire to own.

US real estate gurus don't understand the differences between the US and Australian Home buyers, so their predictions have been largely unrealised in 2010, 2011. So new predictions of dramatic house price shrinkage are more of the same.

Australia's house prices has deflated slowly in Australia in 2011, unlike what has occured in the US, the UK and Europe. I believe we may see a similar softening of house prices in 2012 as we saw in 2011.

Buying a home has returned to being a way of securing the roof over your head for the long term. Isn't that what home-ownership should be about?

What's ahead for Mortgages in 2012?

What's ahead in 2012?

A flat housing market and steady house prices. Maybe a little more price easing. Hopefully a big fall in land prices that is the real problem in new home prices.
Expect to see house price inflation in country areas where the mining boom is happening. Other country areas will see falls in house prices I feel.
House price falls in residential land prices in the country towns across Australia. If I were buying a home in a country town, may sure you know what the true value is.

Mortgage rates will fall.
The banks are trying to warn people that rate decreases by the RBA may not be fully passed on in coming months. They want to protect their profits even when credit is slow.
However new competition from non bank mortgage lenders and the prospect of Japanese Mega Banks entering the Australia mortgage lending market in 2012 will certainly help to lower mortgage rates.
The Euro crisis could mean a credit crunch, lower RBA cash rates, with not all interest rate reductions passed on by the banks to mortgage holders, because the cost of their borrowing may zoom up.

Actions you need to take in 2012?

Be a good Saver. Don't throw money around like a drunken sailor.
Keep your mortgage on variable rates, as interest rates may be lower in 2012.
Credit may become hard to get. Get in now if you have a strong source of income.
Refinance into a 100% offset account. This will allow you to have all your savings offset against your mortgage interest, with no income tax liability on that interest saving.

Author: Rick Adlam, Mr Mortgage

New homes: Housing sales go south

2011-03-29T00:17:00.000-07:00

New home sales as a whole remained about the same, but detached home sales fell after a small rise at the beginning of the year.

New Home Sales increased fractionally 0.6 per cent in February, following a 2.5 per cent gain in January.

Victoria the shining star leads the way in home sales.
Victoria lead the way in sales, up 3% with around a third of total home sales in Australia, and cheap land.
Queensland hew home sales bring up the rear.
Queensland had a disastrous month with a 16% drop in sales of detached new homes, and things look like won't get better ant time soon. Queensland suffered the most from extreme weather events and a bad number was expected. It also has expensive land and home buyers are staying away.

The current sales figures would suggest that 2011 will be a worse year than 2010.

Compared to a year earlier, total sales over the three months to February 2011 were down 10 per cent, so we expect the trend to show through the rest of the year.

New Government policy required to lower land costs
Interest rates are touted to rise in the coming period, and the stalled Labor initiative on land pricing needs to produce a result for the industry.

New home sales were also down in South Australia and Western Australia.
The cost of land lots has to be addressed in Queensland and NSW in particular, as many feel that the land costs are over $100,000 more than they should be.

Big banks' profits: Are the glory days of mortgage lending over?

2011-03-17T21:40:00.000-07:00

Increased Mortgage Lending competition for the big four banks, and major banking reform from the Gillard Government could see the major banks profits shrink.
The problem is that every government reform aimed at the banks in Australia have eventually added to the bottomline of the big mortgage lenders.
Mortgage loan exit fee reforms: The fly in the ointment
Before Christmas I wrote to the Prime Minister and advised her of the fly in the ointment of the Wayne Swan solution to our mortgage woos.

Make it a no brainer to switch mortgage lenders by removing exit fees on home loans and the rates would fall.

Mortgage exit fees are not the problem
The problem was that mortgage managers, the securitised lenders that helped to reduce mortgage interest rates by 3% were the very ones that would be most hurt by the reform, because they charged the most by way of deferred establishment fees on their mortgages. These deferred fees had a sunset clause of about 5 years, so most people never paid these anyway.
But it gave a way for securitised mortgagelenders to pay mortgage brokers a commission to compensate them for their efforts.
Ralph Norris cries Crocodile Tears over the Mortgage Managers plight.
[Crocodile tears are the tears one cries whilst devouring our prey.]
The funniest thing is that the CBA who have all but destroyed the mortgage managers loan sector, with the help of Kevin Rudd's Banking Guarantee support, now says he is hurting for the small end of town. This is just a ploy, but Mr Norris does make the same point I rose last year. That is that the exit fee ban will hurt small lenders more than the big four banks [if we only focus on the fee income, and not the mortgage market.]
Australia's Banks. Are they too big to control?
Based on Ralph Norris's [CEO of CBA] comments and the reality of the power and control of the Big Four Banks, its time to ask the unthinkable. Are the banks too powerful to control. Have they become the Mafia of Austalia, where they can do what they like and still be supported by the government? Sometimes the lines between the profit motive, the public good, and business ethics are blurred and this I believe is where we are in the banking debate right now.
The business Power of the banks. A case on point
Norris claims that "The moves to limit excess fees on credit cards and improve credit protections will have a similar perverse effect as far as the reaction from the major banks.
"The new national credit protection regulations means that banks simply have a higher cut off level for those to whom they are willing to provide credit."
Does this not smell of a lender who thinks he owns the lenders and credit space? If so is he right. I say yes to both propositions!
The law of unexpected consequences
The best intentions of government regulations often create unexpected consequences,because they neglect the big picture. That's why doing nothing can often be better than doing something when it comes to Government Policy. The Government needs to focus more on the purpose of the reform and how it will affect the mortgage industry as a whole. Winning at all costs can cost too much.
Any reform has to be balanced with the planned growth non bank lenders. That means a no bank involved sector of mortgage lenders.

House prices: Will home values rise 20% in Australia over the next 3 years?

2010-10-12T15:15:00.000-07:00

Experts are saying that house prices will rise between 9% and 20% over the next 3 years. Mr Mortgage disagrees. Here's why.

Experts are rarely good at predicting the future because their minds are full of facts from the past. I have a problem with future house price forecasts and it is this almost never materialises.

When you have someone who has a vested interest in the result [QBE is a house insurance player] then take house price forecasts with a grain of salt.
A QBE "survey" compiled by BIS Shrapnel says house prices will growth between 9 and 20 per cent in Australia's capital cities over the next three years. Really? So I guess that means that you should be paying 9% to 20% more for your insurance then? I see!

The biggest problems I see with House prices forecasting using median house prices

The median price is not an actual price. Any house price survey relies on the notion of the median price of a home. These are the homes that are sold.
There are two problems with this.
1. Many homes sold are new, and therefore are usually better than an established home and worth more to buyers.
2. Most established homes are dolled up prior to sale [paint jobs, renovations, staging and the like]. They are "pushed" and "promoted" and "marketed" to fetch a higher price. Even then many are not currently selling.

We need a segmentation of median house prices

At least if we got a segmentation of house sales [new apartments, new homes, established homes etc, I would be more comfortable believing these figures. That won't happen because the output is designed to deceive buyers and sellers to believinghouse prices are higher than they are.

Here's an example of how median house prices distort true values.

A new apartment block is released for sale with the penthouses at 2.2 million a piece, and apartments from $400,000.

One of the penthouses is sold, and two older units down the road sell for $220,000.

How median house prices are calculated

The median house price is $2.64 million divided by three. That gives a median unit price of $880,000! Whilst this may seem a silly example it is how median house prices are calculated.

Home buyers might begin to believe that the older units down the road are worth more than $220,000, and the $400,000 are worth more too.

Can you see why median house prices is not a good guide?

What about interest rates affecting housing prices?

Australia's housing market [some say housing bubble] has so far fared better than most parts of the US and the UK markets.

In the US for instance they have 30 year fixed interest rates retailing at under 5% pa., and they could go lower to help keep people in their homes, let alone prop up the housing market. No such luck here in Australia.

Australia's mortgage interest rates will rise over the next twelve months

We face a home mortgage interest rate in Australia of over 8% over the next 12 months.

Whilst the "experts say fix your mortgage interest rates now, that's fine if you are buying now or if you have a variable mortgage already. If you are buying in 12 months time that is not going to help you because I believe that rates will be as much as 1.25% higher than they are now.

Result? I see "median" house prices moderating, and home prices for Joe average softening over the next 12 months.

What Mr Mortgage believes.

Anytime is a good time to buy a house that is well priced and what you need to live in, and is affordable, if you intend to live there for more than 5 years. If not its better to rent and invest the savings and housing costs. If you are an investor, there are better places to park your money.

Australia's "Housing bubble" will not pop but lose some of its froth and just shrink to a less inflated size.

Lower returns for property investors, and more certain yields and easier picking elsewhere will keep investors out of the housing market, and moderate home values.

Future house prices will not be a mirror of our past. The RBA has it eye on house prices and the board will do what ever it takes to keep a lid on the housing market to ensure affordability for future home buyers.

The baby boomer influence has run its course in the general housing market, and as they move out of established housing this will take more heat out of house prices.

Author: Rick Adlam Mr Mortgage

Mortgage Lending to be given a boost from non bank lenders

2010-09-29T19:18:00.000-07:00

Why Home Buyers need more competition in Mortgage Lending

Australian non bank securitised mortgage lending has been in the doldrums since the Global Financial Crisis hit in 2008, and as a result Australia's big four banks have over 92% of Australia's loans. This is from less than 75% when the non bank lenders were their strongest. That is not good for home buyers or homeowners, and its why The major banks have increased their profit margins on mortgage lending, and want to raise it even higher.

Government support of non bank mortgage lending

To counter what would have been the complete loss of the non bank mortgage sector sales in 2008, the Rudd government expanded to $16 billion a RMBS purchase plan to assist the survival of Australia's non bank mortgage lenders, who had been taken out of the market during the GFC.
The interesting thing is that Macquarie Bank an investment bank and Westpac, one of the big four Australian banks, are sponsoring the shows Sydney, Melbourne and Brisbane to promote the investments. Westpac were seen as the the worst offenders in raising interest rates above the official cash rate set by the RBA.

Australia's non bank mortgage lenders go from major players to feather dusters

Australia had been a big player in the securitised mortgage lending business up to the global financial crisis, and everyone thought that Australia would follow the US in the loss of home values and therefore mortgage security, but this never happened.
Australia was the fourth largest RMBS market in the World with $100 billion market, but since the US sub prime mortgage crisis growth has all but evaporated.

Non Bank Mortgage lenders represent a great investment opportunity

There has never been a RMBS default in Australia, so mortgage loan securitisation should be a great investment opportunity.
Source: Mr Mortgage

Expect to be whacked by more mortgage rate rises

2009-11-15T17:57:00.000-08:00

Higher petrol prices, another mortgage interest rate rise and global credit market volatility have dented consumer sentiment, with more rate pain predicted, a survey shows.
The Westpac-Melbourne Institute consumer sentiment index, based on a survey of 1200 people, fell 0.3 per cent in October to 115.3 points.
Westpac chief economist Bill Evans said index reading was still 4.5 per cent below where it was before the Reserve Bank of Australia (RBA) raised interest rates by half a percentage point to 6.5 per cent in August.
Survey: Have you been stung by bank fees?
Mr Evans said a December interest rate rise was likely, in the event of high September quarter inflation data, to be released on October 24.
"We are expecting a read that will establish a strong case for another rate hike," he said.
"A December rate hike seems the most likely prospect although a delay to February next year cannot be ruled out."
Mr Evans said higher petrol prices, up by 2.4 per cent since the September survey, had also dented consumer confidence.
"Households will also have been affected by the persistent reports of turmoil in the global credit markets," Mr Evans said.
"Some non bank lenders have actually passed on some of their higher funding costs to borrowers."
The index is still similar to the average level of 2007 despite an 8.1 per cent fall after the August rate increase.

Source: AAP

Keven Rudd needs to apply the blow torch to banks to prevent a mortgage meltdown

2009-07-03T22:02:00.000-07:00

The big four Australian banks have been in the sweetspot, surrounded by a strong economy and a resilient business sector and a strong real estate and under-supplied housing market, but have been copping a serve from Prime Minister Kevin Rudd in recent weeks, as struggling mortgagor homeowners haven’t been getting all the interest rate cuts from the RBA passed on to them. And rightly so says Mr Mortgage who is constantly hereing from mortgage stressed homeowners.

Basically Australian mortgage borrowers and homeowners are paying about 0.4%
more than they should be, and that's going to the Banks' record profit margins.

The Prime Minister has to step up the pressure up a notch and bring some legislation to Parliament to prevent the banks profiteering at the expense of the mortgage belt and small business.
Obviously the banks are used to having their names dragged through the dirt and bank bashing its becoming an Australian pastime. So its not having any effect.
The big four Australian banks [CBA, NAB, Westpac and ANZ] are, obscenely profitable. For example and raked in $9.5 billion in profit in just six months. And this is while there is a global recession? Australia's banks are among the world's most stable and profitable and have been for some time.
The Finance Sector Union (FSU) has urged that banks make their lending practises more responsible by suggesting that Australians' ever-increasing credit card debt is unsustainable; and that linking salaries to peddling high-debt products like mortgages does not serve customers well, especially when it’s to buy shonky and highly geared investment products such as the two tier real estate market in Queensland in the 1990’s and the recent Storm Financial collapse.
Its time for action Mr Rudd, not another verbal bashing. A viable mortgage alternative to the banks is required by all homeowners and home buyers. The current system means that second tier lenders get the customers that the big four don’t want, and this will only increase the gap in profitability between Australia’s big and small mortgage lenders.
Rick Adlam is Mr Mortgage

RBA keeps interest rates at 3.0 percent as Australia Economy looks solid for recovery.

2009-06-01T22:04:00.000-07:00

Australian home owners, home buyers, new home builders and retailers and mortgage lenders appears to have escaped the recession that has swept the World, with the Reserve Bank of Australia deciding to leave interest rates unchanged at 3 per cent, when the board met today at its June Meeting.
The decision to keep interest rates at its 45-year low is good news for the housing industry, home buyers and mortgage lenders and was widely tipped by economists.
Economists believe that the Reserve Bank is right in keeping its powder dry, in case further interest rates cuts are necessary who towards the end of the year, if in fact they are needed.
In a statement released this afternoon, Reserve Bank governor Glenn Stevens said there was evidence emerging the global economy is stabilising.
Australia's economy looking good.
"The turnaround is clearest in China and some other emerging countries," he said.
"Recovery in the major countries is likely to take longer to begin and be slower when it does occur."
Mr Stevens said although the effect of low mortgage rates was yet to be seen, future rate cuts were possible if the economy continued to deteriorate.
"The prospect of inflation declining over the medium term suggests that scope remains for some further easing of monetary policy, if needed."
The Reserve Bank cut the official cash rate by 25 basis points in April ending 425 basis points worth of reductions since September.
The central bank has since indicated it is in no rush to lower rates further as it assesses the impact of its easier monetary policy stance and the Federal Government's stimulus packages.
The stimulus packages have worked their magic and have lifted the retail industry, with figures out yesterday showing consumers spending a record $19.4 billion shopping in April.

One in five mortgage applicants is now a first home buyer in the UK

2009-05-21T00:04:00.000-07:00

UK first home buyers had vanished from the property market when the credit crisis began, but have come out of the woodwork and now account for 20 percent of mortgage applications at one of Britain's biggest brokers.
In Australia the figures went from one in six and is now one in four home buyers that are first time home buyers. The difference is largely due to the First Home Owners Grant Boost that exists in Australia.
According to John Charcol, 21percent of purchasers using the broker in April were first-time buyers. The figure dropped as low as 4.1 percent in October last year.
The John Charcol Index, the broker's monthly mortgage activity monitor, revealed a sharp increase in the proportion of purchases made by first-time buyers in the first four months of this year, with that proportion being three and a half times higher than in the previous four months.

The return of significantly more first-time buyers in to the market this
year, despite the lack of low-deposit mortgages, is one of the best indicators
of confidence we've got at the moment

"A surprising number of first-time buyers have managed to find deposits of at least 25 percent in order to access a wider choice of mortgages and get a cheaper deal." Many were borrowing money from their parents to raise the deposits required by lenders, he added.
The broker also reported that fixed-rate mortgages now accounted for 82 percent of its customers' applications.
It said: "The proportion of applications for fixed-rate mortgages continued to climb in the last month, from 81percent in March to 82 percent of all business written by John Charcol in April. "This number is over 70 percent higher than the proportion of fixed-rate applications in January, when it stood at 48 percent."

Australian Real Estate: The first "green shoots" of a property comeback?

2009-04-30T00:26:00.000-07:00

The economic news in Australia has been better than most other countries, but the recession here may be only just beginning, but no has told that to cashed up first home buyers.
However the home buyers in Australia have shown that they believe that they can weather the downturn and have been buying homes and keeping Mortgage Brokers and the Major Banks alike busy writing home loans.
The upturn in the mortgage business has been due mostly to the impending first home owners grant deadline, and of course low interest rates, neither of which can last forever.
Interestingly, the top of the market homes that were the easiest to sell in the boom can't find buyers right now, whilst the mortgage belt homes are being googled up.
This is due to investors moving back into the market [the ones that sold up last year to put there money into super and the stock market must be really hurting] and the first home buyers which as a market segment has doubled in the last 12 months.
And when you add to this the landslide of first home buyers entering the market the two together have had the effect of supporting home prices in this soft market, so we will not be seeing [hopefully] the downturns in property values that our cousin in the US have had to suffer. The third and suprising factor is that Australians are bullish about Australia being able to weather the storm.
Lets hope that this optimism is well founded and we see a slow down in the number of business failures and unemployment that we have endure over the past few months. But whether you have a job or not, you still have to live somewhere, right?
One thing that I have always wondered about is the mercy factor in small business.
If you have to sack someone is it easier to sack the guy who does not have a mortgage over the one that does? I know that employers used to favour married employees with their own home, and maybe its becasue of the "I need to keep this job" concern, or maybe it because people that are prepared to make long term commitments, make for long term employees?

Is now the time to start investing in real estate property?

2009-04-16T15:34:00.000-07:00

Property as an investment has always had it followers, but in recent years residential real estate fell out of favour with diminishing returns, falling capital values and high interest rates the major reasons.
Now investing is again becoming more popular as interest rates fall to there lowest rates ever, so making a safe bet using other people;s money might seem the safe way to go. Also, the share market remains in the doldrums and returns from cash deposits head towards zero.
One of the first questions any real estate investors must ask themselves is whether they plan to buy an established home or build a new one. Property experts say there are positives and negatives with both approaches. But most our selling new homes, so any advised is biased.
It is important for investors to do research and understand exactly what they want.
Is it peace of mind? Is it instant income? Is it bigger tax deductions? Is it long-term growth?
To me negative gearing has always seemed a losing proposition, and more so now as taxes our lower than when these schemes become popular.
The type of investment property - residential or commercial - also is a factor.
According to real estate author, investor and university lecturer Peter Koulizos says there is no right or wrong answer in the debate over whether it is better to build or buy an established investment property."If you are looking for hassle-free investment in property, you are probably better off building or buying new because you have very low maintenance on the property and you tend to get a better-quality tenant," he said."However, buying established gives you the opportunity to value-add whether through renovations or subdividing."Investors, however, should expect to be paying more for repairs to an older house."Because interest rates are so low and builders are very keen to get work, I think it's a fantastic time to be buying new," Mr Koulizos said."
There are not many times in the property cycle where there is a situation such as we have now where it's worth building from scratch and keeping it to rent."A big potential downside with building an investment property is that investors do not receive any income while it is under construction. Including planning approvals, that can take more than a year."One of the issues you have to address with your bank or lender is are you paying interest while it is being built, or are you going to let that accumulate?" Mr Koulizos said.
Another downside is limited choices on where to build.Vacant blocks are scarce in most established suburbs.Brock Harcourts chief executive Greg Moulton said that was a factor investors must weigh up against the benefits of building, such as tax and stamp duty savings. "The opportunities to build in some of the high-growth areas just aren't there," he said."If you want a better return and bang for your buck in the short term, maybe look at building, but if you are looking at a long-term investment opportunity you will be going where the capital gains are - and nine out of 10 times that is in established areas. "High capital growth areas traditionally were close to the city, near the beach or in the eastern suburbs, Mr Moulton said. "One of the advantages with buying in established areas is convenience with schools. A lot of people want to invest close to decent shopping centres and decent schools," he said."In developments out further, some of the schools haven't been established long and they don't have a reputation."Real Estate Institute of SA president Robin Turner said while most property investors bought established homes, there was a good argument for building."As with everything, they need to do their paperwork thoroughly and be very clear about what's included in the price, so there's no nasty surprises," he said."It can be exciting and rewarding for most people to see a new home rise out of the ground, plus there's a significant saving in stamp duty as it is only charged on the land component.
The Positives and negatives of buying used or building new for investment are:

Most tenants prefer newer properties, so rental returns may be higher.
New homes are usually more energy-efficient.• Repair bills are generally lower for new homes.
Modern floorplans and designs can be popular.
There a limited choices where you can build an investment property.
Building a home can have construction delays and hidden costs.
Established homes deliver investment income from the day of settlement.
The best capital growth traditionally comes from established areas where vacant land is rare and expensive.
When buying established, you know what the surrounding facilities and other homes are like.
Value can be added to established homes by renovating or subdividing.
When you buy established you get quicker returns because you have a finished product.
When building there are so many decisions to make.
Interest costs and holding costs will hurt you till the home is completed. This could take 12 months.
What happens if the builder developer goes broke?

As you can see when investing in real estate, either commercial or residential, both have their pluses and minuses.

Mirvac shares jump in value on new loan deal

2009-02-06T19:05:00.000-08:00

Mirvac Group, the residential property developer, said today it agreed terms for a new unsecured loan facility of $805 million, replacing an existing $1.1 billion syndicated facility that had been due to expire in June.
Nine of the 13 lenders in the syndicate participated in Mirvac's new facility.
The property developer’s shares were up 14 per cent at $1 by mid-afternoon, after falling 31 per cent in the three previous days. The benchmark S&P/ASX 200 Index was 1.2 per cent higher.
Investors earlier this week sold stocks in property developers and trusts - which had previously been depressed because of refinancing, debt and earnings concerns - to boost their holdings in Westfield and Lend Lease after they announced large share placements.
Under the new Mirvac facility, $755 million was refinanced from the previous facility, with $50 million of utilised capacity from other facilities renegotiated as part of the new unsecured bank syndicate, Mirvac said.
The new facility’s term expires on January 31, 2012 and has an interest cover covenant of 2.25 and the total liabilities to total tangible assets covenant ration of 55 per cent remains unchanged, the company said.
Mirvac also said it revalued all of its trust's 58 assets in the six months ended December 31, resulting in a total revaluation decline of $236.3 million.
The company said its share of net losses from joint ventures and associates in the first half was $88.1 million, including net losses from fair value of investment properties and derivatives of $96.3 million.

Why you should never fix your mortgage rates

2009-02-02T01:01:00.000-08:00

A massive interest rate cut this week has made more than 43,000 home borrowers Australia's biggest losers.
The Cost of breaking out of fixed rate home loans
The costs of exiting an average fixed-rate mortgage jumped to $18,000 because break fees for the loan rise as interest rates fall.
Banks charge break fees to exit fixed-rate home loans so they can meet interest payment obligations to term deposit customers.
The Reserve Bank of Australia (RBA) on Tuesday announced it would slash official interest rates by 100 basis points point to a six-and-a-half year low of 4.25 per cent.
The 43,632 borrowers who opted for fixed-rate mortgages between March and August this year, when interest rates were at a decade-high peak, face hefty fees if they want to switch to a standard variable loan.
Official interest rates would have to fall to the lowest levels since February 1965 for these borrowers to recoup the cost of switching out of a fixed loan through cheaper mortgage repayments.
A borrower who took out an average $250,000 loan, fixed at 9 per cent for three years back in June, faces an $18,000 exit fee if they want to move into a standard variable loan.
Leaving an equivalent $400,000 loan would incur a $29,000 charge, according to Canstar Cannex data of exit fees charged by the major banks.
Canstar Cannex senior financial analyst Harry Senlitonga said lenders typically charged higher "break fees" to exit fixed-rate loans when official interest rates were falling.
"The more the interest rate cut, the more the break cost," he said.
"For a borrower, the question they need to ask themself is how long you have left on a fixed-rate and whether it's worth paying the fee or not."
Borrowers who took out a fixed-rate loan in August would face higher exit fees than those who took out a mortgage in March, when the RBA was still talking up inflation as its biggest worry.
Two of Australia's big four banks matched the RBA's one percentage point rate cut, which took the overnight cash rate to 4.25 per cent.
Monthly repayments on a $250,000 standard variable home loan with the Commonwealth Bank and NAB fell to $1,678 as mortgage rates dropped to 6.74 per cent.
By comparison, borrowers on an equivalent 9 per cent fixed rate loan are still paying $2,058 a month.
Switching from a $250,000 fixed-rate to a lower standard variable loan would reduce mortgage repayments by $13,680 over three years at current interest rates.
Borrowers would only recoup the $18,000 cost of exiting an average, three-year fixed-rate loan if official interest rates fell by another 75 basis points to a 44-year low of 3.5 per cent - and took standard variable mortgage rates to under 6 per cent.
After this week's rate cut, a one-year term deposit account with a rural bank was offering 6 per cent interest on $1,000, updated figures from termdeposit.com.au say.
That would be good news for pensioners, who will get a $1,400 cheque on Tuesday if they're single or $2,100 if they're attached as part of the Federal Government's $10.4 billion economic stimulus package.
FIIG Securities head of research, Justin McCarthy, said the prospect of more rate cuts from the RBA in early 2009 would make a term deposit account a good investment.
"The RBA will cut rates further in the new year so it makes sense to lock in deposit rates before that occurs," he said.
Combined Pensioners and Superannuants Association policy coordinator Charmaine Crowe said only about 10 per cent of pensioners would be in a position to invest rather than spend their lump sum.

Mortgage rates are low and home prices are going lower: the perfect time to buy a home?

2009-01-23T14:05:00.000-08:00

Anytime in 2009 might be a Mortgage Shopper's perfect time to buy your first home or your first investment property, as long as you are ready to hold the property for several years before selling.
Recent low interest rates and falling property prices combined with Government initiatives have made entering the property market much easier now, particularly for first home buyers. Yet there is no stampede to buy and this is great when you are a buyer. You will get a better choice and buy a better home for less money. And some pundits say that house prises in Brisbane are set to fall and this market has held prices over a long period of low sales, and long sales cycles.
Both Federal and State Governments are making it easy to buy, and they need to if we are to see a recovery from the recession.
Since September 2008 the Reserve Bank of Australia has cut the cash rate by 3 percentage points to a seven-year-low of 4.25 per cent. That is massive in four months and another big cut is looming in February 2009.
In October, the Federal Government doubled the first home owners grant to $14,000 for used homes, and increased it to $21,000 for buying or building a new home to aid the building industry.
Some are predicting the official cash rate to be as low as 2.5 per cent in June, while many market economists predict at least another one percentage point cut in total by the central bank.
"Mortgage holders in the coming year are likely to benefit from the lowest variable interest rates ever offered in Australia as the cash rate could fall to 2.5 per cent.''
The Housing Industry Association (HIA) has forecast a recovery in the property market in the second half of 2009.
Happy hunting Mortgage Shoppers!

How low will mortgage rates go?

2008-12-15T04:03:00.000-08:00

With economic conditions around the World deteriorating, it is likely there are more cuts to come as the RBA pulls out all the stops to try to avoid Australia dipping into recession. A big ask, but not impossible.
While that is good news for borrowers, experts who research the lenders say that even bigger savings can be made by shopping around with other lenders.
While going to a mortgage broker is convenient, be careful because they do not always offer the best deals.
Consumer watchdog Choice recently shopped around on behalf of three borrowers. It found the best deals came through switching to mortgages offered by credit unions and the online lending channels of the big banks. However, these deals were not always offered through mortgage brokers. Choice found credit unions and building societies have, on average, "lower variable interest rates and lower fees than the Big Four banks".
Frank Lopez, an analyst with researcher Cannex, says those who took out fixed-rate mortgages before the middle of the year when the expectation was for rate increases would be kicking themselves now rates are falling. "Borrowers on fixed rates likely face huge break costs if they want to get out to take advantage of further possible rate cuts," he says.
They need to carefully consider whether the savings in interest rates will outweigh the break costs.
With interest rates likely to fall further, choosing variable rates looks like the better option.
MORE FOR THE MONEY
Markets are pricing in rate cuts that will take the cash rate to 3.75 per cent during the next six months.
The Reserve Bank has indicated it is prepared to cut even further to head off the worst of the global financial crisis.
AMP Capital Investor's chief economist Shane Oliver says the cash rate will most probably reach a low of 3.75 per cent by September next year but the Reserve Bank may have to cut even more.
"Unfortunately, it now looks like we are on the way to a mild recession," Oliver says.
"The threat to growth domestically is far more significant than was the case when interest rates were lowered to 4.25 per cent in 2001, which was the last low for interest rates."
CommSec chief equities economist Craig James is expecting the cash rate to be cut by another 0.25 percentage point next month. The Reserve Bank may then "sit back and see what the impact is on the economy".
He says the Reserve Bank may have to reduce rates again next year and the cash rate may have to be cut to 4.5 per cent.
"The speed of developments has taken everybody by surprise," James says.
"Midyear the Reserve Bank still thought that the next move in rates would be up rather than down." However, it is possible that things could turn up just as quickly as they have turned down. But don't bet your mortgage on it.

Mortgage shoppers delight in variable rate mortgages, fixed rates are for losers

2008-12-08T00:38:00.000-08:00

Fixed-rate mortgage borrowers face hefty fees if they want to switch to a standard variable loan. A massive interest rate cut lastweek has made more than 43,000 fixed rate home loan borrowers Australia's biggest losers.
The costs of exiting an average fixed-rate mortgage jumped to $18,000 because break fees for the loan rise as interest rates fall.
Banks charge break fees to exit fixed-rate home loans so they can meet interest payment obligations to term deposit customers.
The Reserve Bank of Australia (RBA) on Tuesday announced it would slash official interest rates by 100 basis points point to a six-and-a-half year low of 4.25 per cent.
The 43,632 borrowers who opted for fixed-rate mortgages between March and August this year, when interest rates were at a decade-high peak, face hefty fees if they want to switch to a standard variable loan.
Official interest rates would have to fall to the lowest levels since February 1965 for these borrowers to recoup the cost of switching out of a fixed loan through cheaper mortgage repayments.
A borrower who took out an average $250,000 loan, fixed at 9 per cent for three years back in June, faces an $18,000 exit fee if they want to move into a standard variable loan.
Leaving an equivalent $400,000 loan would incur a $29,000 charge, according to Canstar Cannex data of exit fees charged by the major banks.
Canstar Cannex senior financial analyst Harry Senlitonga said lenders typically charged higher "break fees" to exit fixed-rate loans when official interest rates were falling.
"The more the interest rate cut, the more the break cost," he said.
"For a borrower, the question they need to ask themself is how long you have left on a fixed-rate and whether it's worth paying the fee or not."
Borrowers who took out a fixed-rate loan in August would face higher exit fees than those who took out a mortgage in March, when the RBA was still talking up inflation as its biggest worry.
Two of Australia's big four banks matched the RBA's one percentage point rate cut, which took the overnight cash rate to 4.25 per cent.
Monthly repayments on a $250,000 standard variable home loan with the Commonwealth Bank and NAB fell to $1,678 as mortgage rates dropped to 6.74 per cent.
By comparison, borrowers on an equivalent 9 per cent fixed rate loan are still paying $2,058 a month.
Switching from a $250,000 fixed-rate to a lower standard variable loan would reduce mortgage repayments by $13,680 over three years at current interest rates.
Borrowers would only recoup the $18,000 cost of exiting an average, three-year fixed-rate loan if official interest rates fell by another 75 basis points to a 44-year low of 3.5 per cent - and took standard variable mortgage rates to under 6 per cent.
After this week's rate cut, a one-year term deposit account with a rural bank was offering 6 per cent interest on $1,000, updated figures from termdeposit.com.au say.

Aussie Bank drops fixed mortgage rates by 1%pa in price war

2008-11-25T19:33:00.000-08:00

ANZ Banking Group (ANZ) has matched National Australia Bank's (NAB) cut to mortgage interest rates on fixed home loans, lowering the mortgage rates by up to 100 basis points.ANZ has dropped the mortgage interest rate on one and two year fixed home loans by 1.00 percentage point to 5.99 per cent for both terms, the bank said.Rates for all other terms have been reduced by at least 16 basis points.The reductions will take effect from Monday, November 24.The move follows NAB's cut to interest rates on fixed rate home loans which came into effect on November 10th.
Interest rates on one-year fixed rate mortgages from Australia's major banks now stand at 5.99 per cent at ANZ and NAB, 6.99 per cent at Westpac and 7.14 per cent at Commonwealth Bank of Australia.
ANZ is also reducing its variable business loan rates by between 40 and 50 basis points.This includes a 40 basis point cut to the Business Mortgage Loan (Index) to 9.07 per cent, and a 50 basis point cut to the Business Saver Loan (Index) to 8.57 per cent.

Ian Thorpe enters the mortgage game against MrMortgage.com.au

2008-11-23T17:15:00.000-08:00

Ian Thorpe, Australia's greatest Olympian, has become a mortgage broker, of sorts.
The former world-beating swimmer is a partner in a new website, launched yesterday, that matches banks and mortgage lenders with potential borrowers.Once a borrower is registered on the site, lenders bid in a live auction for the right to lend that person money, offering the cheapest rate they can to win their business.
Called ziggy-bid it runs on a similar principle to eBay, except the bidders are the lenders, and they're competing for business by offering low rates and promising excellent service. "I'm so excited by it," Thorpe said. "I was introduced to the concept about a year ago and loved it. It takes away all of the daunting elements about applying for a mortgage and introduces healthy competition into the market as the banks vie for your business."
Home buyers and investors simply register their details on the site, including some basic information about income and outgoings, type or property and rough location, and then stipulate a time frame of between one and five days as a deadline for receiving lenders' bids.
Fifteen lenders have signed up, including all the big banks.
"The longer you give lenders to assess your situation, the better your rate is likely to be, but it does give you the option of asking for a very quick decision," Thorpe said.
"You then get to pick from the best rate or the best service, because we also rate each lender on a customer service basis - usually about how quickly the lender will approve loans and the feedback we get from other borrowers - just like eBay.
"And we also calculate what we call a 'ziggy-rate', which takes into account all of the fees and enables you to accurately compare the true cost of the mortgage. It's all very clever and transparent."
The site runs on similar lines to bid-my-loan which also allows lenders to bid for borrowers' business, but not usually in such short time periods.

BankWest has lowered in rates in line with the big banks

2008-10-10T23:03:00.000-07:00

Overseas owned West Australian Bank, BankWest has cut its standard variable rate by 80 basis points from 9.25 per cent p.a to 8.45 per cent per annum. The move comes after the major banks passed on part of the shock 1 per centage point cash rate cut by the Reserve Bank of Australia earlier this week.
Their rate tracker home loan will also move 80 basis points from 8.35 per cent p.a. to 7.55 per cent. This is one of the best mortgage loans in Australia according to Mr Mortgage
The new rates will be effective from 17 October 2008.

Mortgage Finance: what will happen to interest rates?

2008-10-09T22:06:00.000-07:00

The Reserve Bank of Australia's dramatic 1% interest rate cut has not worked according to Mr Mortgage , even though they were followed with a joint round of rate cuts around the World, because consumers have stopped spending, and this has not helped them to restart because credit card interest has not been lowered and now investments and superannuation plunges are melting away confidence and job security.
On the housing front there are now 800,000 house-holds suffering financial [mortgage] stress, and the 0.8% rate reduction passed on by the banks will help a little, but that will not encourage new home buyers into the property market, with job prospects on the slide.
The fact is Australians are fully loaded with debt, and more debt is not the answer for their problem.
Paying down debt would be easier if credit card debt were lowered the 1% that the cash rate was discounted, but banks Worldwide have liquidity problems, so milking the poor credit card holder is an easy way out of their problem.
The answer to the question what will happen to interest rates is easy. They will fall, so expect another 0.5% reduction before Christmas. This will only solve a part of the problem. The reason that the share markets are in free fall is loss in confidence, and the reason for that is the lack of liquidity in the banking sector. Even if people can repay a loan, they may not be able to get a new one because the banks haven't got the liquidity.

Sub-prime mortgage blunders made in the USA and exported to you by unconscious incompetents

2008-10-06T14:08:00.000-07:00

Henry Paulson, the US Treasury Secretary has been asleep at the wheel for the last two years at least when the Sub-prime Mortgage lending credit crunch first surfaced in finance news says Mr Mortgage.

Paulson seems to be another Bush-era ring and joins George Bush, Donald Rumsfeld and Dick Cheney with the trademark combination swagger and incompetence, [they are unconscious incomptents, i.e. incompetent but they don't have the intellectual capacity to know it.]

As a former chairman of Goldman Sachs you would think that Henry Paulson actually had a clue, but as US Treasury Secretary he does not know what he is doing as he goes from one blunder to the next "rescue" of Fannie Mae, have triggered unintended consequences around the world, resulting in the death-spiral of financial values.

But last Friday, Paulson outdid even these Rumsfeldian achievements, when he demanded $US700 billion ($843 billion) from Congress for a "comprehensive and fundamental" solution to the global financial crisis, without apparently having any idea of what he would actually do.

The good news is that Paulson's blunders no longer matter very much. There will still be a huge US government [US Taxpayer] bank bailout, which Mr Mortgage says will do little to avert a disastrous slump in the US and global economies.

The other good news is that this mess wil have little effect to Australian mortgages and bank mortgage lenders.

But because President Bush and Henry Paulson have lost any political initiative, this bailout will now be led by the Democratic leadership in Congress and will be structured around its priorities -- relief from mortgage foreclosures, restrictions on bankers' pay and big government shareholdings in US banks.

For President Bush it is a disaster, and he now looks certain to pick up the wooden spoon as

"Worst US President Ever". He was certainly the most dangerous ever and the most lawless ever.

Expect more stuff ups from these maverick cowboys before they are done.

PM acknowledges home repossession concerns as mortgage rate rises bite

2007-11-10T13:16:00.000-08:00

Prime Minister John Howard says he is concerned about anybody losing their home because they cannot pay their mortgage, but the percentage of repossessions is still very low.
Sydney's Daily Telegraph is reporting that repossession writs issued by the Supreme Court for Sydney and the New South Wales central coast have more than doubled over the past three years.
Mr Howard says he is following the issue carefully.
"I am sensitive to some of the difficulties and challenges - that is why we provided tax relief, which helps people deal with increased interest rates," he said.
"It's why people have to ask themselves against the background of the recent interest rate rise, 'Will it be better or worse under a Labor government?
"Now my argument is it will be much worse under a Labor government."
Marginal seats
Mr Howard and Opposition Leader Kevin Rudd have both both been campaigning in marginal seats today.
For the second day in a row, Mr Howard headed to Sydney's western suburbs, promising funding for a sports centre in the key marginal seat of Lindsay.
Mr Rudd has arrived in Perth this evening, starting his campaign visit with yet another walk through a shopping centre.
He is visiting the marginal Labor seat of Cowan, held by Graham Edwards, who is retiring at this month's election.
Labor holds the seat by just 0.8 per cent.
Earlier today, Mr Rudd brought his campaign back to South Australia.
"What I sense across Adelaide is a mood for change," he said.
WorkChoices in focus
Mr Rudd was focusing on economic issues.
"Working families face the double whammy of rising interest rates and WorkChoices," he said.
Industrial relations was in the campaign spotlight today, after new figures were released showing half of the Australian Workplace Agreements (AWAs) checked against the Government's fairness test were sent back to employers for re-writes.
Mr Rudd says it is proof that the WorkChoices laws are a red tape burden for businesses.
"Bad for working families and bureaucratic nightmare for business," he said.
Mr Howard says only 5 percent of the wage deals that have been fully processed have been rejected.
"The evidence clearly is that more jobs have been created and businesses are doing very well - it's a double benefit," he said.
He says the figures show the fairness test is working.
Source: ABC

Mortgage rates; NAB and ANZ Bank tell Costello to mind is own business

2007-10-27T14:50:00.000-07:00

On the subject of mortgage rates, two of Australia's biggest banks, ANZ and NAB, have politely told Treasurer Peter Costello to butt out of their business, saying decisions on how to set mortgage rates are theirs alone.

Mr Costello has again warned the banks not to use the subprime meltdown in the United States as an excuse to push up home loan rates.

In response both the chairman of the National Australia Bank, Michael Chaney, and the chief executive of the ANZ, Michael Smith, have firmly indicated that they will respond to commercial not political pressure.

Speaking after a Business Council of Australia dinner in Sydney last night marking the end of his presidency, Mr Chaney said the Treasurer's comments needed to be viewed in the context of the election campaign.

"One can understand the Treasurer during an election campaign providing that sort of advice but at the end of the day the banks will do what they have to do to protect their company and their depositors," Mr Chaney said.

Unveiling the ANZ's annual profit this morning - a record $4.18 billion - chief executive Michael Smith warned that Australian banks could not avoid the current global uncertainty.

And he refused to rule out passing on the additional cost of money to consumers.

"The Australian banking system is more dependent on wholesale funding that probably any other OECD market as a system. Therefore the repricing of risk and the increase in funding costs is obviously going to have an impact," Mr Smith said.

Earlier this week, National Australia Bank boss John Stewart told a newspaper that the higher price of credit would need to passed on at some point.

Pleadged tax cuts will be sallowed up by rent rises

2007-10-22T13:59:00.000-07:00

John Howard and Kevin Rudd's bursts of campaign trail largesse in the form of promised tax cuts will no doubt help those who have large mortgages.
But for many families, the extra money looks likely to be eaten up quickly if the rental outlook is any indication.
According to industry commentator Michael Matusik rents will rise rapidly over the next three years to 2010.
Some households spend 26 per cent of their income on rent, not substantially more than the 25 per cent they spent in 2004, he says.
Rent hike coming
But with fewer housing starts over the next 12 months, and with low vacancy rates already well documented, Matusik anticipates an average increase of 35 per cent in rents between now and 2010.
“The largest increases are expected to be in Melbourne (50 per cent), Sydney (40 per cent), Brisbane (30 per cent) and Canberra (25 per cent),'' Mr Matusik says.
”The current weekly median rent of $275 for a three-bedroom house could be as high as $365 by June 2010.''
Mr Matusik thinks rental growth will be sluggish during the 2008 financial year. But as tenants move less frequently and renters absorb spare bedrooms, the rises will really kick in. Will this create another surge of investors, which in turn will push property prices even higher.
Most capital cities have very low vacancy rates and increasing rentals, but higher purchase prices across Australia now mean buying an investment property is a much larger commitment.
Yields not giving
For many would-be investors, spending money on their own house without the worry of an additional large mortgage seems more appealing. In many areas yields still haven't reached a level that will attract investors en masse.
Take, for example, Canberra, which has a rental figure of $350 a week for a three-bedroom house.
On a median house price of $428,000, the gross return is only 4.25 per cent.
In Sydney the average weekly rent for a three-bedroom house is now $280. The median house price is $525,500, giving a gross return of 3.26 per cent. The gross return obviously doesn't include the benefit of negative gearing, nor does it account for outgoings, all the costs and charges associated with owning a property.
The exception is probably Melbourne, where CBD yields are reportedly now about 7 per cent, and in the inner city 5 per cent.
Demand from both young owner occupiers and investors has already led to substantial median price jumps for apartments in suburbs such as South Yarra, West Melbourne and Richmond. There is limited supply and pre-sales are strong.
Around the country, apartment prices are recovering after years in the doldrums, particularly in Sydney.
Recent figures from researcher RP Data show that the pace of growth in apartment prices is pulling ahead of house price growth.
It's impossible to tell where interest rates, prices and yields will be in 2010.
But it's likely any extra money will be small change to anyone -- renter or buyer, over the next three years. Source: The Australian

Housing bargains in suburban Brisbane getting harder to find.

2007-10-18T02:29:00.000-07:00

Cheap housing is getting harder to find, with only 13 suburbs now left within a 20km radius of Brisbane's central business district with a median house price under $300,000.
The cheapest suburb is Carole Park in Ipswich, according to Colliers PRD research. It offers bargains for home hunters, with the median house price only $183,000.
Researcher Jonathan Rivera, from Colliers PRD, said 73 suburbs within a 20km radius of the centre of Brisbane had a median house price of less than $400,000.
Regions south of Brisbane are classed as the most affordable.
At Gailes in Ipswich, the median house price is $205,000, while at Inala, in southwest Brisbane, buyers can find a property for $215,000.
"Prices within a 5-10km radius of Brisbane are becoming out of reach for many," Mr Rivera said.
The affordable areas identified were also achieving a good yield (annual rent as a proportion of selling price), he said.
"Investors are basically in competition with first-home buyers in those areas," he said. "A lot of these areas, like Carole Park, have a strong employment node nearby. Again that's attracting renters, which creates strong demand.
"The number of (affordable) suburbs is going to continue to shrink."
Centenary First National agent Tony Bishop said Carole Park was experiencing unprecedented interest from first-home buyers.
He recently sold a four-bedroom house in Skepper St in just two days for $265,000.
"Houses in places like Carole Park are selling in the mid-$200,000s and they are affordable," he said.
"We've got stacks of buyers around looking for properties under $300,000 and as soon as you get them, they're gone."
Richardson & Wrench Real Estate agent Shelly Smith said houses in Strathpine, just north of Brisbane, were selling rapidly.
"Usually within 24 hours to a week they're under contract," she said.
"We don't have enough houses to sell for the list of buyers we have."Source: Sunday Mail

Expect to be whacked by more mortgage rate rises

2007-10-10T00:29:00.001-07:00

Strong growth for construction industry and pick up in housing building means mortgage growth

2007-10-08T04:51:00.000-07:00

The Australian Industry Group-Housing Industry Association Performance of Construction Index increased by 6.85 points to 55.2 last month, the strongest rate of growth since June last year.
HIA chief economist Harley Dale says the higher levels of activity reflect an increase in work on both new and existing projects.
"It shows that we're seeing continued solid growth for the non-residential building sector, which is something that's been apparent for quite some time now," he said.
"But we did also see a little bit of a pick-up in the demand for new houses, so a little bit of a better result for the residential side of the building market."
But the HIA also says another interest rate rise before the end of the year could reverse the steady gains in the sector over the last month.
Mr Dale says residential construction is yet to make a significant recovery and higher interest rates will further slow that process.
"There is some growing talk around again about an increased risk of another interest rate rise over the next three to six months," he said.
"Should we get another interest rate rise, that would of course have a dampening effect on the chances of the residential sector recovering into early 2008."Source: ABC

Home buyers vote with their auction tickets

2007-08-26T04:37:00.000-07:00

Homebuyers have shrugged off concerns about global financial markets to push weekend clearance rates close to levels not seen since the housing boom of 2003.
And this month's interest rate rise appears to have had little impact on the auction market, according to Michael McNamara, general manager of researcher Australian Property Monitors.
Nationwide
On Saturday, 69 per cent of Sydney homes offered at auction were sold, while in Adelaide the clearance rate was 80.4 per cent.
In Melbourne, agents reported a clearance rate of 84 per cent. One inner city Melbourne agency, Kay & Burton, notched up the best one-day result in its history, achieving almost $29 million from seven properties. The top sale was one of Toorak's oldest homes at 14 Maple Grove that went under the hammer for $9.11 million.
In Brisbane, agents said the market was hot, with one property in riverside Woolloongabba selling for more than $1 million.
But Mr McNamara sounded a note of caution, saying there may be a delayed reaction to the interest rate rise with some pain felt down the track in lower to middle income families.
"Some decision making may be delayed on speculation of another rate rise", he said.
Property market 'safe'
Frank Gelber, chief economist for BIS Shrapnel, predicted property would ride out the current stock market turmoil.
He said investors, and even home owners, had little to worry about because property wouldn't suffer.
"Don't panic is my advice," Mr Gelber told The Australian. "It's going to mean very little for property."
In fact, Mr Gelber said property might benefit from the stock market chaos because money that would otherwise go into shares would be invested in property. At a residential level, that would help to boost sluggish housing markets in parts of Australia.Source: The Australian

Wespac mortgage rates increase

2007-08-12T00:43:00.000-07:00

Wespac bank, one of Australia's major banks has announced changes to its mortgage home loan interest rates in response to this week's rise in official rates.
Westpac says it will raise variable home loan rates and business lending rates by 0.25 of a percentage point.
Its standard variable home loan rate is being set at 8.32 per cent.
The bank is also putting up some of its deposit rates by 0.3 per cent.
The changes are effective from Friday, August 10th 2007.
Source: ABC

Howard Federal Government credibility crisis on mortgage interest rates

2007-08-06T15:08:00.000-07:00

South Australia's Premier says the Federal Government is not believed by voters when it blames the states for mortgage interest rate rises.
South Australia's Premier Mike Rann says the electorate will not accept the Federal Government's claim that the states are to blame for interest rate rises.
The Commonwealth is running an advertising campaign claiming that debt taken on by the states is putting upward pressure on rates.
Mr Rann says the public has stopped believing the Federal Government a long time ago.
"Apparently the new formula is that when interest rates go down that's John Howard's responsibility and when they go up it's the states," he said.
"The fact is is that states' borrowings are the lowest they've been for 50 years so this one won't wear. I mean it's a sign of desperation."

Mortgage shopper beware as ASIC to crackdown on advertised property investment schemes

2007-08-03T00:55:00.000-07:00

Television advertisements promoting property schemes may need to come with a warning and the schemes' prospectuses assessed by ratings agencies.
University of Melbourne professor Ian Ramsay, a corporate law and securities regulation specialist, says an independent agency could be brought in to conduct a risk evaluation of property scheme prospectuses.
These agencies would also track related-party transactions and assess how secure the investment would be.
Risk assessments could then be incorporated into the television advertisements.
"People are investing on the basis of a 30-second advertisement," Professor Ramsay says. "The risk evaluation might be part of the advertisement."
The Australian Securities and Investments Commission will this month release an update on its plans to investigate companies deemed to be offering high-risk financial products.
ASIC has identified 83 unlisted and unrated debenture issuers, with about $8 billion of investors' funds, that it considers to be high risk. But it has refused to name them, claiming this would be "prejudicial".
An ASIC spokeswoman said ASIC chairman Tony D'Aloisio would probably be releasing his update around the middle of the month.
But the update will be just that — it will not contain a water-tight model to stop more business failures. Instead, a special team has been set up to develop the plan, which will take 12 months to finalise.
About 20,000 investors around Australia have fallen victim to property-related companies Westpoint, Bridgecorp, ACR and Fincorp, which imploded owing more than $800 million. Yesterday, South Australian mortgage business John West was placed in liquidation.
While the products were a lot riskier than some investors realised, some of the other big problems might include lack of development expertise and the dearth of disclosure on related-party transactions, a critical gap because many of the companies were part of a web of related companies. Often investors' funds were lent at higher rates to related companies.
Stuart Wilson, chief executive of the Australian Shareholders Association, said ASIC needed to focus more on the advertisements.
"We have a strong suspicion retail investors are investing because of the advertisements being pitched, rather than the details of the prospectuses," Mr Wilson said.
He said the evidence of that lay in the way investors were shocked when they discovered their funds were not guaranteed and that the investments were riskier than they had believed. "There was also a lack of understanding of the business models behind the schemes."
He said ASIC could have been more proactive but there were limits to how far it could protect investors. "While ASIC could have done more around the monitoring of the advertisements, they shouldn't be held responsible when investors lose money."
Source: The Age

Growth targest needed as suburbs sprawl causing infrasrtucture strain

2007-08-01T14:52:00.000-07:00

Suburban sprawl and urban regeneration are changing the face of our cities as we strive to meet the demands of population increases and lifestyle.
But is all growth necessarily good growth? And who's looking after the interests of future generations as we meet the challenge of change? This week, The Courier-Mail revisits its Our Future, Your Say series, aimed at targeting issues such as growth, transport, city living and climate change.
It will be run with Channel Nine, Griffith University's Urban Research Program and The Brisbane Institute.
Our panels of high-profile speakers include Treasurer and Minister for Infrastructure Anna Bligh, Lord Mayor Campbell Newman and Deputy Mayor David Hinchliffe.
The series kicks off on August 8 with a forum entitled What Price Growth? which questions growth targets in the south-east.
Other forums include The Great Climate Change Debate, about climate change and sustainability, and The Sardine City, where we will discuss density in the inner suburbs.
The Future of the Car will be discussed at the fourth forum on September 26, followed by Generation Y - a look at the next generation of leaders in the city - and What's So Special About Brisbane - preserving the essence of the city, despite the growth.
Have your say in the special Courier Mail series by emailing ourfuture@thecouriermail.com.au
Forum 1: What Price Growth?
August 8, 6.30pm, Customs House
Speakers include:
Treasurer and Minister for Infrastructure Anna Bligh Guy Gibson, general manager - affordable housing and sustainability - Lend Lease Communities writer-actor William McInnes Griffith University associate lecturer Cheryl Paten Forum 2: The Sardine City - Living Closer Together
August 29, 5.30pm, Irish Club, City
Speakers include:
Deputy Mayor David Hinchliffe Conics chairman Jim McKnoulty Forum 3: The Future of the Car - Transport, Tolls and Tired Commuters
September 26, 5.30pm, Customs House
Speakers include:
Lord Mayor Campbell Newman RACQ CEO Ian Gillespie Griffith University Urban Policy Program research fellow Jago Dodson.
Source: Courier Mail

Mortgage interest rate rise more likely as private debt spirals

2007-08-01T04:34:00.000-07:00

Private debt is growing faster than at any time since the last days of the 1980s property boom, increasing the likelihood of another rate rise next week.
The $27.4 billion lift in debt in June was shared among businesses, homebuyers and high earners pumping the maximum $1 million into superannuation ahead of the June 30 deadline.
The increase in debt last month, reported yesterday by the Reserve Bank, was the fastest since November 1989, when home loan interest rates hit 17 per cent under the Hawke Labor government.
The Reserve Bank board is meeting next Tuesday and is expected by financial markets to raise its benchmark cash rate by a quarter of a point to 6.5 per cent.
"If there was not much doubt about a tightening next week, there is less after these numbers," HSBC chief economist John Edwards said yesterday.
The expected rise would push a standard mortgage rate to 8.3 per cent, the highest level since November 1996.
The Reserve Bank has used the rapid growth in borrowing as part of its justification for each of the past three interest rate increases.
Raising interest rates only lowers inflation by reducing the appetite of both business and households for debt-funded spending.
Some of the leap in borrowing in June will be reversed next month. Personal debt soared $5.5 billion in June, the biggest increase on record, as high-income earners borrowed to buy shares and managed fund units to put into their superannuation.
Personal borrowing normally rises by about $2 billion a month, and probably returned to this level in July.
However, the Reserve Bank will be concerned that home buyers are also taking on new debt at a rapid rate, borrowing $12.1 billion in June. This was the biggest monthly increase in mortgage debt since March 2004.
Business took on another $9.9 billion in debt, with the 18.7 per cent growth in borrowing over the past year the fastest since June 1989. "It's the business lending increase which will attract RBA governor Glenn Stevens's eye," Mr Edwards said.
Deutsche Bank chief economist Tony Meer said that although tax planning for the end of the financial year by high-income individuals had added to the surge of borrowing in June, there has been a steady increase in the growth of borrowing since the end of last year.
"Interest rates are not seriously dampening the appetite for borrowing," he said.
Mr Meer said the Reserve Bank was likely to raise rates at least twice over the next 12 months.
The Australian Bureau of Statistics released new home approvals figures yesterday, showing a slow recovery in building levels from the dip caused by the rate rises last year.
"The new housing sector is still struggling to gain traction under the weight of record low housing affordability," Housing Industry Association chief economist Harley Dale said.
The total number of new dwellings approved jumped by 7.5per cent in June, but this was influenced by the level of approvals for new apartments, which vary widely every month.
Trend figures calculated by the ABS show that the number of approvals for private houses has been creeping higher at a rate of just 0.2 per cent a month, while the number of approvals for apartment blocks rose by 0.8 per cent last month.
Source: The Australian

Nab poll shows homeownership continues to be the great Aussie dream

2007-07-30T04:10:00.000-07:00

For most Australians, buying a home is their biggest goal in life, a survey shows.
According to the NAB survey, buying a home is better than world travel, having a family or volunteering - in that order.
Almost 80 per cent of 25- to 34-year-olds also put bricks and mortar near the top of their list, just behind seeing more of the world.
The research also showed that younger generations tended to have more goals and aspirations than their parents and grandparents.
While many young people list owning their own home as their number one goal it is still just one of many that they want to achieve during their lifetime.
People aged 16 to 24 tend to have about five big life goals while those in other age groups averaged two goals.
Other insights from the NAB Big Life Survey include Queenslanders listing overseas travel and owning their own home among their biggest goals in life.
Compared to other states Queenslanders were also most likely to list buying the car of their dreams.
Compared to other states, South Australians were the least likely to list a huge adventure, such as climbing Mt Everest, as one of their big goals in life.
The top three goals for South Australians included seeing more of the world, volunteering and owning their own home.
West Australians were among those most likely to list having a family among their big life goals but still listed overseas travel, volunteering and owning their own home before having children.
Victorians and Tasmanians were most likely to want to travel when compared against other states.
People in NSW tended to share the nation's top goals with travel, volunteering and home ownership heading the list.
Source: AAP

No secret sauce on mortgage interest rates from Labor

2007-07-29T03:48:00.000-07:00

Opposition Leader Kevin Rudd says he cannot guarantee interest rates will not rise under a Labor Government.
But he has promised to maintain budget surpluses and tackle capacity constraints in the economy to help the central bank keep rates down.
His comments came as Mr Rudd prepared to host a summit on housing affordability in Canberra today, amid predictions interest rates could rise following yesterday's inflation data.
Economists said the Reserve Bank of Australia is now highly likely to lift rates by a quarter percentage point as early as next month, after inflation rose to 1.2 per cent for the June quarter, well above expectations.
It would be the fifth increase since Prime Minister John Howard was re-elected, although the Government said rates are still at historically low levels.
"No government can make any promise in relation to interest rates, what you can do is make sure ... the budget policy takes as much pressure off the Reserve Bank as possible," Mr Rudd told Channel 9.
"The Reserve Bank sets rates. Governments don't set rates.
"My job is to make sure, as the alternative prime minister, that through the budget policy we pursue - which is to produce budget surpluses over the economic cycle - that we take as much pressure off the Reserve Bank as possible in order to keep interest rates as low as possible."
He said people were disappointed in Mr Howard because the prime minister had pledged before the last election to keep interest rates low, yet they had risen four times since.
Mr Rudd said he had no silver bullet solutions to the housing affordability crisis, but would consider tax breaks for first-home buyers to help them get into the market.
He warned political leaders had "a real challenge on our hands" to ensure Australians had access to affordable housing.
"If you go back 10 years, the average cost of a house was something like four times that of the average annual wage; today, 10 years later, it is seven times the value of an average annual wage," Mr Rudd said.
"People are particularly concerned about first home buyers.
"One of the proposals we've got on the table today is 'how do we help first-home buyers get into the market' in terms of encouraging them with first-home buyer deposit schemes which could be treated in a concessional way by the taxation system."
State housing ministers will join Mr Rudd and housing industry stakeholders today in nutting out the issues.
Opposition treasury spokesman Wayne Swan said the Federal Government's failure to invest in education and tackle skills shortages in the economy were partly to blame for the rise in inflation.
"This government has been complacent when it comes to the main drivers of productivity in the economy, and there's no doubt in the longer term that's put upward pressure on inflation and upward pressure on interest rates," said ABC Radio.
"We should have invested more in the training and the education of our people - that is one significant factor here."
Mr Swan said the housing affordability crisis was rapidly becoming an economic problem as some workers could not afford to live near job opportunities.
But he rejected suggestions buyers were being too picky.
"Some people may have unrealistic expectations or be aiming too high, but I think the great bulk of people are now struggling just to put a very basic roof over their heads," he said.
Source: AAP

Mortgage rate rise to happen on the back of big spending election promises

2007-07-25T03:04:00.000-07:00

There is still a risk of another interest rate rise as both sides of politics are likely to promise too much in this year's federal election, independent forecaster Access Economics says.
"That extra money will come atop the kerosene of the $70 billion of policy costs splashed onto a raging economy by the federal budget," Access director Chris Richardson said.
While country-wide inflation risks were probably worsening from a falling unemployment rate, a turn in the productivity cycle was expected, he said in Access Economics' June 2007 business outlook released today.
"There has been considerable pent up savings in labour costs from the surge in business investment in recent years," he says.
"Although wage gains are still picking up their pace, a lift in productivity is now underway. That is easing consumer pricing pressures by reducing the cost of doing business."
And business investment has been extraordinarily strong.
"Economists are naturally unflappable. We don't marvel at much. But it is not hard to marvel at the stunning cycle in business investment that has been running since early 2002," he said.
"After stripping out inflation effects, the lift in (capital expenditure) over the past five years is 85 per cent."
China's economic boom continues to drive a clear divide between Australia's "sunbelt" states of Western Australia, Queensland and the Northern Territory and the rest.
But there are signs that the country's most populous state, NSW, may soon be making an economic recovery.
Dr Richardson said the key preconditions for a NSW recovery were increasingly being met with the end of the drought and pent up demand for housing, and state output growth could outpace official forecasts as a cocktail of good news replaces the more "toxic mix" of recent years.
In the meantime, the "sunbelt state" beneficiaries of global growth have resource strengths and fast growing populations.
"Even the ACT is getting a cut of the boom, courtesy of surging federal tax revenues," Dr Richardson said.
"The federal Budget announced the creation of yet another 5,244 public servants, many of which will be in Canberra. That means the ACT's boom will continue for longer.
He said Queensland continued to look a picture of near perfect health.
"Capacity is tight - both unemployment and rental vacancies are very low, business investment spending is very high, and the state government is pouring money into water, hospitals, roads, rail and schools."
Elsewhere, in the west, the equation was simple.
"A stronger-for-longer China is a stronger-for-longer Western Australia,"
"This resource boom can't last forever, but it is not ending any time soon. And that is helping to ensure a relatively soft landing for WA's overly pumped up housing prices."
But he said while NT economic growth was sprinting as it played to its resource strength, the huge engineering spend up of recent years was tailing off, so a tapering off in demand and output was likely.
Victorian economic growth remained surprisingly close to the surging growth of its resource-based neighbours, helped by an increasing population and gaining from the struggles of NSW.
"But can Victoria rely on NSW to continue to fumble the ball? Relying on the competition to remain hapless is not a successful strategy for the longer term," Dr Richardson said.
On South Australia, he said the next few years would be crucial for the state's future as the risk of boomer retirement looms early and large for the "dodgy demographics" of Australia's oldest state.
"SA's job growth has to be strong enough to convince the boomers to stay in their jobs for longer,' he said.
Finally, the business investment boom in Tasmania that stalled in early 2006 may have further to fall, making for a more modest economic outlook.
Source: AAP

'Super-size my home" urge is driving the housing crisis

2007-07-23T23:53:00.000-07:00

Liberal backbencher Bruce Baird, chairman of a parliamentary inquiry into home lending practices, told The Australian yesterday he would investigate the phenomenon of people unwilling to live in suburbs in their price bracket.
"I've heard others say ... there's a wish to go for the McMansion and they want to be in nice suburbs, with ducted cleaning systems, airconditioning and plasma screens," he said.
But Queensland Liberal backbencher Steve Ciobo - who has been urging John Howard to consider doubling the first-home buyers' grant to $14,000 - strongly rejected the idea.
He said people were "self-regulating" but they also had a right to be "aspirational".
"I find it hard to believe that someone would say: 'No, I will not purchase a home because I want four bedrooms and four bathrooms but it's well out of my price bracket' when there's an opportunity to purchase something smaller, further away, within their price bracket," he said yesterday.
The Opposition is due to hold a national housing summit in Canberra on Thursday.
Several Coalition backbenchers have told The Australian they are concerned that Labor is "owning" the issue of housing affordability.
They said it was made worse by the fact the Coalition did not have a dedicated housing minister to develop ideas and take on the ALP.
Mr Baird said he had noticed resistance among home buyers to moving "out to other suburbs which are cheaper, where expectations are not quite as high".
However, Mr Ciobo said families did not need lectures: "From my perspective, it's like saying to people, well you shouldn't be aspirational.
"I don't think there's anything wrong with being aspirational."
Mr Baird said housing affordability would be a key issue in this year's federal election.
"The Government has done quite a bit in terms of the first-home owners' scheme, but it remains an issue."
He said his inquiry would investigate whether banks were to blame for lending people too much money.Source: The Australian

Labour to retain negative gearing for property investors and the first home home buyer grant

2007-07-23T04:14:00.000-07:00

Home rental affordability is a key election issue and so Opposition Labor would retainnegative gearing as a way to make housing more affordable, according housing spokeswoman Tanya Plibersek said.
Ahead of the party's national housing summit in Canberra this week, the Opposition was looking at several strategies but, Ms Plibersek said, negative gearing would not be among them.
"We're not touching negative gearing," she told the Ten Network yesterday. "We are interested in . . . ways of attracting investment into the lower end of the market and there might be things you can do with the tax system to improve that, including a national affordable rental incentive scheme."
"Negative gearing" means that the outflow of cash to keep an investment, such as a rental property is greater than the the inflows of rent and taxation reduction. This means that the investor is effectively subsidising the housing of the tenant. The payoff for the investor is capital growth, which needs a long term view.
In these cases, the Australian Taxation Office allows investors to offset the loss against their income tax assessment.
Ms Plibersek said negative gearing was not the way to make housing more affordable. Labor would look at other solutions.
She said Labor also retain the first home buyers grant.

Mortgage reduction on Steroids can get you owning your home sooner

2007-07-19T04:18:00.000-07:00

Mortgage interest rates are sitting at a six-year higher and could rise even more. If you're a borrower, there are some basic steps you can take to reduce interest costs.
Step 1: Shop around for your mortgage
It's never been a better time to negotiate with lenders as the big banks are undercutting each other on interest rates to win your business.
A slowing property market in 2006 scared many of the big lenders and competition shot up in the home loan market.
So if you're after a home loan, go to ALL of the big banks and other lenders and ask them for a discounted interest rate.
At the moment, the big banks advertise standard discount of 70 basis points to 7.37 per cent if you borrow larger amounts, usually more than $250,000, but banks are giving bigger discounts to people who ask and shop around.
The more you borrow, the more likely they are to chop 80 or even 85 basis points of the standard variable rate (SVR) of 8.07 per cent.
If you haggle hard enough and trade lenders off against each other, you'll probably get a better deal than if you simply went to one lender and asked for the best deal.
Step 2: Fix your mortgageloan
Fixed rates on home loans currently sit well below the standard variable rate (SVR) of 8.07 per cent.
Three-year and five-year fixed rate home loans are priced below the 8.07 per cent standard variable rate.
Locking in your home loan could provide also good security against a rate rise. With today's strong economy, there's a chance we'll get another rate rise this year or next after three in 2006.
But the risk of fixing is that if interest rates fall, you might miss out on a cut in official interest rates. You're stuck with the rate you locked in at for the duration of your fixed loan. And the loan might limit extra repayments so check this.
Step 3: Make more mortgage repayments
One of the easiest ways to cut your interest costs is to repay in fortnightly instalments rather than monthly.
You'll save thousands of dollars each year on your loan repayments and you'll be surprised by the numbers.
There are 26 fortnights in one year but only 12 months. If you split your monthly repayment into two, paying fortnightly means you would effectively be making 13 monthly repayments each year.
If your loan is worth $200,000 and you repaid in fortnightly instalments at an interest rate of 8.07 per cent rather than monthly, you'd save almost $100,000 in interest costs over 30 years (or $99,647 to be exact).
If you borrowed $400,000, you'd save almost $200,000 in interest costs over the life of your loan, or $193,295 to be exact.
Step 4: Go for a basic home loan
Most lenders offer basic loans with few frills. Interest rates start from about 7 per cent and for that, you might get a simple principal and interest loan on which you make monthly repayments.
Some lenders offer loans online without the personal support and some just offer cheaper no-frills loans, especially the non-bank lenders. These loans may suit you if you've got a tight budget and can't afford to make extra repayments and simply want the lowest cost home loan.
But there might be traps here so watch out. Some basic home loans limit extra repayments and redrawing, which allow you to save interest.
Some simple loans don't allow fortnightly repayments, only monthly, so what you save in up-front interest costs you may lose in flexibility which allows you to limit interest costs over the longer run.
Step 5: Repay extra on your mortgage
If you've got extra money and you don't need it, put it straight onto the home loan and save money. The more of the principal you repay, the more you'll save, especially if you repay extra earlier on in your home loan when interests costs suck up most of your mortgage repayments.
Take an example. If you've got a home loan of $200,000 taken over 30 years at a rate of 8.07 per cent, you can save almost $50,000 in interest costs simply by putting an extra $50 on your loan each month, or $47,965 to be exact. You'll also reduce your loan term by 3 years and 5 months. So you'll also be free of debt sooner.
Step 6: Use an offset account with your mortgage
Offset accounts are great strategies to reduce your. Offset accounts into which you put your salary and surplus cash link your home loan to a savings or transaction account.
The balance in the savings account is then used to offset the home loan balance, thus reducing interest costs. As interest is calculated daily on a home loan, the benefit to borrowers accrues as soon as there is cash in the transaction account.
Using a credit card to pay for expenses allows you to keep your money in the offset account for any interest-free period given by the card.
There are tax benefits to an offset account. Tax is not paid on interest credited to your savings account because the interest is not actually being earned, but it instead offsets the home loan interest.
These accounts are ideal for people who don't want to pay off their home loan so they can use the money, but who want to reduce their interest bill.
Step 7: Check with non-bank lenders mortgages
Non-bank lenders have lower overheads and their main aim is to grab market share from the big banks.
Lately, many lenders have been missing out to banks. So if you're in the market for a cheaper interest rate, check with the non-bank lenders, including building societies and credit unions.
These lenders price their variable loans to undercut the banks and they may even negotiate their advertised rates lower to win your business.
Bank lending now accounts for about 70 per cent of home loans taken by borrowers. In June 2002 the banks only held around 60 per cent of new home loan approvals. So the banks are moving onto the turf held by non-bank lenders and they aren't happy about this. So check what they can do for you.
Step 8: Reduce your mortgage loan term
When you've got a home loan, time means money. So the quicker off you pay your loan, the less interest you'll pay off.
Take two scenarios. You take a $200,000 loan over 30 years. At an interest rate of 8.07 per cent, you'll pay $331,828 in interest costs over the life of the loan if you repaid in monthly instalments. But if you repaid the loan over 20 years, you'd pay $203,585 in interest.
So that is a saving of $128,243 if you repaid your loan 10 years earlier. So if you have the funds, it's a great option and effective in reducing your borrowing costs by getting rid of it earlier.
Step 9: Know your loan costs
In today's competitive market, many lenders are waiving establishment fees on loans and other start-up fees such as valuation costs and legal fees. So ask them to waive your up-front fees and you could save hundreds of dollars.
Don't forget to ask about any ongoing fees on the loan such as monthly account keeping fees or transaction fees. Check whether early-repayment and other common fees apply such as redraw costs and break fees associated with ending the loans.
These fees aren't picked up by the loan's comparison interest rate on the loan so ask about them. And it's how the banks make money. So don't hand over your cash too freely.
Step 10: Save a bigger mortgage home loan deposit
The fact is, time is money. The more you borrow, the more you will repay in interest. So, if you are saving for your first home, save as much as you can before you buy.
Start making the sacrifices before you buy your home and get the mortgage and life will be a little easier. Make sure you claim the first home owner's grant and any other subsidies your state government offers.
Source: NewsCorp

Homeowners stuck with higher mortgage repayments according to Labor treasury.

2007-07-15T01:00:00.000-07:00

Mortgage repayments have soared in New South Wales since 2001 thanks to eight interest rate rises under the Coalition Government, Federal Opposition treasury spokesman Wayne Swan said.
Census data released today shows the number of households paying more than 30 per cent of their income to mortgage repayments has nearly doubled across the state in the five years to 2006, Mr Swan said.
In 2001, 106,044 households had mortgages over the 30 per cent repayment mark.
That number increased to 203,569 in 2006, which equals a 92 per cent increase.
In metropolitan Sydney, the increase over the same period went from 64,510 to 127,384 households - a jump of 97 per cent, Mr Swan said.
Outside the metropolitan areas of NSW the five year increase to 2006 of homeowners paying over 30 per cent of their income to mortgage repayments rose by 83 per cent.
Mortgage holders in Prime Minister John Howard's electorate of Bennelong have seen the figure jump 101 per cent, Mr Swan said.
The Opposition treasury spokesman said the census data shows neither Mr Howard nor Federal Treasurer Peter Costello can be trusted to look after the interests of Australian mortgage holders. Source: AAP

Easy home mortgage finance with no physical home appraisals

2007-07-13T22:18:00.000-07:00

Mortgage lenders are approving home loans without inspecting properties, forking out to applicants without a deposit and encouraging clients to shoulder debts far beyond their means.
More than half of all standard mortgage applications are now done without an onsite inspection and lending competition is encouraging banks and other institutions to extend loans quickly and cheaply, Fairfax reports today.
Banks are also urging people to take on debts which swallow up to half their income.
One-quarter of loans to people with bad or incomplete credit histories had been approved without on-site inspections, relying instead on a drive-by or statistical analysis of local sales data.
The average loan-to-value ratio of new loans in NSW has risen from 51 per cent in 2003 to 75 per cent this year.
Australian Property Institute president Gregory Preston said borrowers were at risk.
"If they get caught out and are forced to sell the borrower is sort of out on a limb," Mr Preston said.
Source: AAP

Housing crisis concerns as Treasurer Costello orders Commonwealth audit to find housing development land

2007-07-09T01:41:00.000-07:00

Peter Costello will "audit" all commonwealth-owned land to identify areas that should be released for new housing as he tries to blunt Labor's winning housing affordability campaign.

The Treasurer has called on the states to work with him to identify all land that could be released for development to address the housing affordability crisis.

But Labor claims that Mr Costello's effort will not work, arguing that high interest rates are the main cause of housing unaffordability.

Mr Costello said high property prices were affecting first homebuyers and one way to balance prices was to release more land for development.

"It's not a demand problem, it's a supply problem - you've got to boost the supply of housing," Mr Costello said. [It is a demand problem, that needs to be solved by increasing supply of housing stock.]

"We should do an audit of all land, particularly in outer suburban areas, that should be released for new housing."

Mr Costello called on the states to work in conjunction with the commonwealth on the audit. "We will ask the states to look at any land that they have that could be released for housing," he told the ABC's Insiders program.

Queensland Premier Peter Beattie welcomed the move, but NSW Acting Premier John Watkins said his Government's land release program was sufficient to meet demand.

"We've got a plan to release properties throughout southwest and northwest and western Sydney because of the needs of this city," Mr Watkins said.

"We're releasing that land as appropriately and as quickly as we can to cater for the needs of this growing city.

"I think anyone that is critical of that actually doesn't know the level of detail or the level of land release that is occurring."

Documents obtained under Freedom of Information last week embarrassed the federal Government when they revealed that the impact of land release on housing affordability had been overstated.

"While better land release and land-use policies by the states and territories are likely to improve affordability to some extent, the various reports probably overstate this effect," the document read.

Kevin Rudd said a national audit ignored the fact that high interest rates were making mortgage repayments unaffordable. "Mr Costello's response today was simply to talk around the edges of this debate," the Opposition Leader said.

"What this shows is that after 11 years, Mr Howard's Government has gone stale and has lost touch with working families across Australia who are doing it tough meeting their mortgage repayments."

Labor Treasury spokesman Wayne Swan said the typical first homebuyer was paying the highest percentage of their disposal income in mortgage repayments in history.

Source: The Australian

Savings plan for first time home buyers

2007-07-07T02:33:00.000-07:00

In a new savings plan from the Labor Party, families would be able to divert some of their pre-tax earnings into special accounts to save for a home deposit in a similar fashion to top-up superannuation, under a plan being considered by Kevin Rudd.

Signalling housing affordability as a major election issue, Labor says it is examining a range of options to help first-home buyers.

John Howard remains under pressure from backbench MPs to offer solutions to the housing affordability crisis but has ruled out doubling the $7000 first-home buyers' grant on the grounds it would only increase prices.

The Opposition Leader will today unveil a plan under consideration by Labor to allow new home deposit savings vehicles, with the potential higher returns than an ordinary deposit account and tax advantages that could help young families to save the deposit required to buy their first home.

"Government policies could create the financial framework for such accounts, running it in the same way superannuation works – as a low-tax, low-overheads savings vehicle," Mr Rudd said yesterday.

The accounts are intended to have a concessional rate of tax like super accounts.

But decisions about when tax would be applied still have to be determined. Exit taxes on superannuation payment for people over 60 were abolished by the Howard Government yesterday.

Mr Rudd said the accounts would help young Australians see the benefits of their financial sacrifices and would help create a new culture of saving.

"Savings accrued in these accounts could only be withdrawn to purchase a first home," he said.

"Federal Labor is considering innovative policies to help young Australians save for a home and reduce the mortgage burden – as part of a debate on declining housing affordability."

Labor says that first and foremost it is committed to using macroeconomic management principles to keep downward pressure on interest rates, but there other ways of helping Australians realise the "dream of home ownership".

"The decline in affordability and shortage of homes is the result of a lack of leadership and innovation over the last 11 years at the federal level by the Howard Government," Mr Rudd said.

"One of the greatest challenges facing first-home buyers in Australia now and into the future is saving a deposit – particularly for those caught in the rental trap."

Those saving for a home now use accounts that pay low interest taxed at the account holder's marginal tax rate. For most, this results in 31.5 to 41.5 per cent of interest being lost in tax.
Source: The Australian

Housing sector rebound with a stronger rise that predicted

2007-06-05T02:40:00.000-07:00

A stronger than expected rise in building approvals could be the foundation of a housing sector recovery, economists say.

Signs are emerging that the effect of last year's three interest rate rises is starting to fade.

The more stable private sector housing component posted strong gains, while building construction activity is starting to pick up.

Australian building approvals rose 8.1 per cent to 12,858 units in April, seasonally adjusted, from an upwardly revised 11,898 units in March, the Australian Bureau of Statistics (ABS) said today.

Economists had expected approvals to rise by 2.5 per cent in April.

In the year to April, building approvals went up by 4.5 per cent.

Reactions

Grange Securities chief economist Stephen Roberts said the housing sector would continue to grow strongly in the second quarter of 2007.

"All told, the April home building approvals figures are consistent with signs of recovery in housing activity and add to the run of economic readings that point to accelerating economic growth continuing into the early part of the second quarter," he said.

Most of the rise in building approvals during April came from a 19 per cent jump, seasonally adjusted, in the "other sector" for private sector dwellings, which includes volatile apartment projects.

Rental shortage

The more stable private sector houses tally rose by a seasonally adjusted 3.3 per cent to 8734 new dwellings, which HSBC chief economist John Edwards said was an indication of a recovery in the housing sector.

"Sharp increases in rents, low vacancy rates and recent anecdotal reports of increased house prices would be consistent with this," Dr Edwards said.

Nonetheless, most of the increase in new building approvals was in Queensland, which experienced a 31.6 per cent seasonally-adjusted rise in total new dwellings and a 24.9 per cent gain in private sector houses.

QLD leading the way

"The approvals gains were almost entirely in Queensland, however, with New South Wales and Victoria seeing further decline.

"If there is indeed recovery, it is still very patchy."

Commonwealth Bank of Australia senior economist Michael Workman said it was difficult to be negative about the housing construction outlook.

Forecast

"The strong underlying fundamentals of firm jobs, population and income growth, and low vacancy rates are expected to drive the gradual rise in national dwelling construction over 2007 and 2008," he said.

Mr Workman said construction companies still had healthy order books, with activity likely to flow at high levels into next year for the non-residential sector.

But JPMorgan economist Helen Kevans said the Reserve Bank of Australia's (RBA) decision to raise rates last year was still slowing residential construction activity.

"Indeed, the building approvals series is volatile, failing to indicate any clear trend emerging in the property market," she said.

"Still, the impact of the RBA's three quarter point rate hikes last year are likely still feeding through the residential construction sector, which continues to battle with rising material costs; this suggests there may be further correction in the sector to come."

Most economists expect interest rates to remain on hold for the rest of 2007.
Source: AAP

Banks fee grab slows due to competition as it hits $10bn

2007-05-27T21:52:00.000-07:00

Australia's banks milked $9.8 billion in fees in the 2005-06 year from account holders, with households accounting for $4 billion with many more Australians paying penalty fees on credit cards.

Total domestic fee income earned by banks grew by 6 per cent in 2006, to a whopping $9.8 billion.

While businesses paid $5.7 billion in fees, banks’ fee income from households jumped 10 per cent to $4.0 billion in 2006.

“The growth in fee income appears to have been mainly the result of an increase in the use of banking services rather than higher unit charges,” the RBA said today.

Credit card fees jumpTotal fees paid by households on credit cards jumped 13 per cent in 2006 to $1.02 billion.

Account-servicing and transaction fees on credit cards increased by 9 per cent, which was roughly in line with the growth in the number of credit card accounts and the value of cash advances.

Other credit card fees – which are mainly penalty fees, over-limit fees and foreign currency conversion fees – rose by 21 per cent.

Strong home loan competition
Fee income from housing loans grew by 6 per cent to $800 million, slower than the growth in the number of housing loan approvals.

“This development reflects strong competition among banks for new housing lending in recent years, which has seen banks discounting or waiving loan establishment fees,” the RBA said.

Fee income from personal loans rose by 15 per cent to $500 million, consistent with the strong growth of personal credit in 2006.

The largest component of banks’ fee income from households was fees on deposit accounts, accounting for more than 40 per cent of the total at $1.62 billion.

"Fee income from this segment grew by 9 per cent in 2006, mainly reflecting the growth in the number of accounts and transactions," the RBA said.

The latest survey by the Reserve Bank of Australia (RBA), relating to banks’ 2006 financial year, covered 18 banks which accounted for more than 90 per cent of the total assets of the banking sector in Australia.

A banker's viewThe Australian Bankers Association said today rising transaction numbers was driving bank fee growth.

It own analysis shows that actual unit costs - that is, the cost of each transaction to consumers - was declining.

ABA chief executive David Bel said the RBA figures told a "double good story'' for consumers.

The results showed fees were coming down and interest margins - the difference between the interest rates on bank loans and deposits - were also being squeezed.

In a report commissioned by the ABA, Macquarie University academic Kim Hawtrey found the average unit cost of banking to consumers fell in 2006 and over the past five years had dropped by 5 per cent.

Source: AAP

Strong economy holds up property values and keeping a lid on mortgage rates

2007-05-21T16:06:00.000-07:00

As US mortgage default rates hit an all-time high, the Australian situation is 'different' - Costello
Australians should not be concerned about rising interest rates fuelled by a surge in mortgage defaults in the US, Treasurer Peter Costello has said.
US mortgage default rates hit an all-time high in the first quarter of 2007.
Mr Costello said he would continue to closely monitor developments in the US, but the Australian situation was different.
"There's been a large default (rate) in the United States and it's of concern to the Americans,'' Mr Costello told Macquarie Regional Radio today.
"The default rate in Australia is much, much lower than it is in the United States ... In fact, we have one of the lowest default rates in the world. But we do watch what happens in the American economy.
"It's the world's biggest economy and it can have effects here.''
Mr Costello said his primary concern in Australia was keeping unemployment and inflation down.
"We do like to keep an eye on the international developments but the important thing for us, really, is to keep inflation low, keep the prices down, make sure that we run strong economic management ... consistent with keeping people in jobs and people in homes and businesses successful,'' he said. "That's what we like to see.'' AAP

Sheikh rules in $1.2 trillion Muslim mortgage and money market

2007-05-04T19:28:00.000-07:00

SHEIKH Nizam Yaquby is the gatekeeper to the $US1 trillion ($1.2 trillion) market for managing Muslim wealth. Yaquby, who lives in Bahrain, says he's on advisory boards of 40 finance companies, and tells Citigroup, American International Group and HSBC Holdings which insurance policies, accounts and bonds they can sell to devout Muslims. Just as Wall Street turned to Nobel Prize winner Myron Scholes in the 1980s to help make derivatives the fastest growing financial market, banks can't find enough scholars steeped in the teachings of Muhammad to accommodate the demand for new bonds that conform to Shariah law.
Without men like Yaquby to bless the borrowings, none of the $US70 billion of Islamic debt outstanding can be traded and companies would have been unable to sell any of the $US17 billion in new offerings last year, according to Standard & Poor's and Bloomberg.
"The credibility of institutions comes from the stature of the Shariah boards they have," said Afaq Khan, head of Islamic banking at Standard Chartered in Dubai, the world's second biggest underwriter of Islamic bonds. "Transactions can get shot down at the structuring stage if scholars don't allow them."
Yaquby sits on more company advisory boards than any of the 20 top scholars who tell banks which bonds meet the requirements of Shariah law, according to London-based Euromoney Institutional Investor's Internet Securities.
The advisers say they can earn as much as $US1 million a year for providing their expertise.
Shariah requires that investors profit only from transactions based on the exchange of assets, not money alone, so interest is banned. Bankers sell Islamic bonds, or sukuk, by using property and other assets to generate income equivalent to interest they would pay on conventional debt. The money can't be used to finance gambling, guns or alcohol.
The world's top five banks by assets - Zurich-based UBS, HSBC and Barclays in London, Paris-based BNP Paribas and Citigroup in New York - have Islamic units. CIMB Group in Kuala Lumpur is the biggest underwriter of sukuk this year followed by Standard Chartered in London, Barclays and Citigroup.
Sales of sukuk grew nine times faster than international corporate bonds last year and twice as fast as the US market for debt with ratings below investment grade, according to Bloomberg data. The assets managed under Islamic rules will almost triple by 2015 to $US2.8 trillion, according to the Islamic Financial Services Board, an association of central banks based in Kuala Lumpur.
International banks, mostly in London, use the same scholars for religious rulings, or fatwas, says Rushdi Siddiqui, who runs Islamic indexes for Dow Jones in New York.
"Unfortunately people think we are overpaid but this isn't true," Yaquby, dressed in a traditional white ghutra headcloth and ankle-length dishdasha robe, said in an interview in Dubai last month. "They don't look at what bankers and lawyers are being paid. Yet the CEO of an Islamic bank can't take a decision without the scholar."
Yaquby says the biggest international banks pay scholars annual retainers of $US20,000 to $US50,000. Mohamed Ma'sum Billah, a scholar in Selangor, Malaysia, sits on about 20 boards. Fees are as high as $US100,000, up sevenfold from 2002, he says.
Advisers also receive $US1000 to $US3000 each time they meet a client, says Mohammed Daud Bakar in Kuala Lumpur, who works for HSBC, BNP Paribas and Frankfurt-based Deutsche Bank. Monzer Kahf, a scholar based in Westminster, California, says the total works out at $US200 to $US500 an hour, or as much as $US1 million a year for a 45-hour working week.
While there are more than 20 Islamic scholars, the international banks want the top names, says Majid Dawood, chief executive officer of Yasaar Ltd, a Dubai-based consultant that advises Paris-based Societe Generale, Royal Bank of Scotland in Edinburgh and Dublin-based Bank of Ireland. "Everyone wants the star scholars but you can't have Brad Pitt in every film," Dawood says. "Scholars are overstretched," says Abdallah Kubursi, regional vice-president in Dubai for AIG, the world's biggest insurance company. New York-based AIG started a Bahrain-based Islamic insurance unit in October to target 300 million customers.
Getting approval from scholars takes a minimum of two weeks, says Hissam Kamal, head of Islamic finance for HSBC Saudi Arabia in Riyadh.
"For an established issuer that could tap the conventional bond market in just a few days, there's a significant extra lead time for Shariah compliance," Kamal says. "You can't complete documentation and a fatwa in a week. It will be two or three weeks at best."
The process can take six months, says Ruggiero Omar Lomonaco, head of Islamic investor products in Dubai for ABN Amro.
"Every day, at all times, I have to receive calls and emails and deal with them," says Muhammad Imran Usmani, a 37-year-old Pakistani who advises Amsterdam-based ABN and Credit Suisse Group in Zurich. "The problem is we have a limited number of scholars who are working internationally," he said in an interview in Dubai, while keeping one eye on his BlackBerry.
Credit Suisse and New York-based Merrill Lynch are among 29 firms that seek advice from Mohammed Elgari in Saudi Arabia, according to Euromoney. Thirty-five firms share Saudi scholar Abdul Sattar Abu Ghuddah.
The Shariah finance industry, born in the 1970s after a 12-fold jump in oil prices, is expanding with crude prices near record highs enriching Islamic nations.
Billionaire Maan al-Sanea, the second biggest shareholder in HSBC, plans to use property in eastern Saudi Arabia to raise as much as $US5 billion for his Saad Trading, Contracting & Financial Services Co. He will create a trust company called Golden Belt 1 Sukuk Co, which will lease the land to Saad Trading. Golden Belt will pass on the rent paid by Saad Trading to bond holders, thus avoiding interest.
"The land's value or what's built on it isn't hugely relevant to the sukuk," says Philip Lotter, a corporate finance analyst at Moody's Investors Service in Dubai.
"Its purpose is to provide an asset that Saad Trading can pay rent on," he says.
UK Treasury Minister Ed Balls last month said the Government might sell Islamic bonds, following the German state of Saxony-Anhalt and Texas-based East Cameron Gas Co.
The Japan Bank for International Co-operation plans to sell as much as $US300 million of sukuk in Malaysia. Tokyo-based Aeon Credit Service Co in January became the first Japanese company to sell Islamic bonds.
Nakheel PJSC, the Dubai developer building islands in the shape of palm trees for luxury homes in the Persian Gulf, raised $US3.52 billion in November in the biggest sukuk sale. Nakheel increased the amount from an initial $US2.5 billion target after the underwriters received orders for $US6.25billion.
Shariah scholars need to be experts on the Koran, commercial law and finance. Yaquby has a degree in comparative religion and economics from McGill University in Montreal, according to his profile on HSBC's website. He learned Shariah in Bahrain, Saudi Arabia, Egypt, India and Morocco, according to Calyx Financial, a New York-based asset management firm that includes Yaquby among its advisers.
Scholars find it hard to make a living when they start, says Yaquby. Fees for advisers to local Islamic banks begin at about $US3000 a year, according to Billah in Malaysia.
"Most scholars are paid about the amount an investment banker would leave as a tip after dinner," says Siddiqui at Dow Jones Indexes. The high earners are like "rock 'n' roll superstars".
Professors Fischer Black and Scholes in 1973 created the mathematical model to value options that is now the cornerstone of a market with an underlying value of $US115 trillion. They led a stream of PhDs dubbed "quants" to Wall Street to work on derivatives, contracts whose value is derived from underlying assets, including stocks, bonds, currencies and commodities, and events such as changes in interest rates and the weather.
Bloomberg

Mortgage interest rates should remain stable after suprisingly low inflation figures delight the finance markets

2007-04-27T22:49:00.001-07:00

The Australian Industry Group (AiG) says official interest rates can remain on hold for an extended period after yesterday's better-than-expected inflation figures.
The Reserve Bank's decision at the beginning of this month not to raise interest rates surprised some analysts.
But after yesterday's inflation numbers, the outcome from next week's central bank board meeting is viewed as a foregone conclusion.
At 2.4 per cent, annual inflation is at a two-year low, while underlying measures are also back comfortably within the officially-targeted range.
The AiG says the Reserve Bank will be able to take an extended "wait and see" approach.
It also hopes reduced interest rate speculation will take some of the heat out of the Australian dollar.
But after dropping almost one cent on the figures yesterday, the dollar has climbed 0.4 cents overnight to 82.76 US cents.
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Mortgage interest rates should remain stable after suprisingly low inflation figures delight the finance markets

2007-04-27T22:49:00.000-07:00

How to spot an honest mortgage broker to source your home loan

2007-04-25T15:10:00.000-07:00

Specialist mortgage sellers still have a lot of work to do to rehabilitate their image.
Seeking to change perceptions that some mortgage brokers are nothing more than commission-driven salespeople, the Mortgage and Finance Association of Australia has released the results of a shadow shop that shows its members in a more positive light.
Market researcher brandmanagement conducted the secret survey where real shoppers made 104 visits to brokers throughout Australia. The shadow shop was restricted to MFAA members, which paid for the study.
"Brokers were rated above average across all areas of the services they provide, performing particularly highly when it came to customer focus, knowledge of products and honesty and integrity," says MFAA chief executive Phil Naylor.
"The mystery shop also confirmed brokers are living up to their reputation for providing a friendly and personable service, with consumers giving high performance ratings to these soft skills."
He says perceptions of brokers not disclosing commissions are challenged by the shadow shop. Under the MFAA's code of practice, members must disclose their commissions to the borrower.
None of the shadow shoppers entered into a contract with the broker to act on their behalf and so, under the association's rules, the brokers were not required to disclose commissions but 62 per cent did so anyway.
However, brandmanagment managing director Andrew Inwood says the study shows there is plenty of room for improvement.
He says brokers who disclosed commissions tended to minimise their impact. "They talk it down; they still feel uncomfortable talking about how they are paid," Inwood says.
He also says that where shoppers were expecting the broker to present them with a choice of suitable mortgages, in 24 per cent of shadow shops, they were recommended only one mortgage.
When the shoppers discussed interest rates and repayment amounts, two-thirds of shoppers said there was no discussion using comparison rates. These are calculated after adding fees and charges to the lender's advertised rate so that the true cost of loans can be compared.
Consumers often approach mortgage brokers because of the complexity of products and anxiety about debt, in the hope they will find the best loans.
In only 5 per cent of face-to-face meetings were the shoppers given details of the Credit Ombudsman, which is where the shoppers go if they have a complaint against a broker.
Inwood says in about one third of the shadow shops, the shoppers felt that the broker was recommending they take out larger loans than they needed.
Brandmanagement has conducted numerous shadow shops of the financial services industry. Inwood says brokers are rated more highly by consumers than bank staff or financial planners. He suspects that one of the reasons for that is mortgage brokers are giving advice that is more straightforward and limited than financial planners. He says when consumers go to a bank they may be offered only the mortgage package the bank is promoting at the time and follow-ups on consumer enquiries can be slow. Brokers, however, have very good response times.
Nick Coates, finance spokesman at consumers' association Choice, says the brandmanagement study does not evaluate the appropriateness of the mortgages recommended to the shoppers.
Choice released the results of its own shadow shop of mortgage brokers in February. The findings showed the advice brokers gave on reverse mortgages was riddled with "glaring deficiencies".
Choice found most brokers, who garner commissions based on the size of the loan, provided a poor standard of advice.
Concerns have also been growing over brokers marketing "mortgage reduction" services, which are pitched at those consumers who are finding it hard to make ends meet. While the brokers say they have strategies to eliminate mortgage debt quickly, consumers often end up with larger debts because of the fees and higher-cost loans.
Coates says a further area of concern is the sale of "no doc, low doc" loans sold by some brokers. Low documentation loans are taken out by people who have a chequered credit history or the self-employed who fail to meet the usual lending criteria.
All these dangers areas for consumers were outside of the scope of the brandmanagement study.
It was mostly about the shadow shoppers' perception of the brokers' "soft" skills such as friendliness, and service aspects such as the time it took for the broker to respond to an enquiry and some compliance issues.
The results of a shadow shop of financial planners and the advice they gave on switching superannuation funds, conducted by the Australian Securities & Investments Commission and released in 2005, showed consumers are poor judges of the quality of the financial advice they receive.
Coates suspects consumers are also likely to be poor judges of the recommendations they receive from mortgage brokers.
He says no amount of codes of practices obviates the need for a national regulatory framework through which brokers have to be licensed and where the licences can be taken away from brokers not acting in consumers' interests.
The MFAA supports and continues to lobby for a national regulatory regime. Brokers are covered under the credit laws of each state and territory. In 2003, the federal, state and territory governments agreed to produce uniform regulation.
The NSW Government has released details of pending reforms which are regarded as the best template for national regulation.
They require mortgage brokers to be licensed or registered, to undergo probity checks, be members of an approved dispute resolution scheme and have compensation arrangements. But a national approach to effective consumer-friendly regulation is still a long way off.
Source: The Age

Housing prices tipped to rise

2007-04-21T03:35:00.000-07:00

The rich will get even richer this year as the nation approaches another massive property boom, a property expert has tipped.
Michael Yardney - who runs buyers' advocacy service Metropole Property Investment Strategists - says that despite the record low in affordability, there was no doubt the great divide would keep growing, with the more affluent suburbs set to be the strongest performers in 2007.
"I think, looking at the stage of the cycle we are in in SA, this is a year where the rich are going to get richer," Mr Yardney said.
He said Australia was on the cusp of one last momentous real estate boom caused by strong immigration, a lack of land and an increasing proportion of single-person households. As the price climb continued, home ownership levels would also continue to fall, he said.
The Australian Housing and Urban Research Institute has predicted that by 2011, the number of renters across the country will have risen 12 per cent, to 40 per cent of the population.
"Now that is just an amazing figure," Mr Yardney said. The property commentator predicts Adelaide's median house price will be $13.5 million in less than 40 years.
Recent State Government figures peg Adelaide's median house price at $300,000, up from $110,000 in 1996.
He said while such a rise seemed unimaginable, he pointed to countries like the United Kingdom, where house prices were beyond the reach of average people.
Source: The Advertiser

Calls to scrap mortgage comparison rates as they are not understood and open to lender abuse

2007-04-16T04:17:00.000-07:00

A lack of awareness of comparison rates and how they work has prompted calls for them to be scrapped. A finance industry group has described them as costly, complex and open to abuse.
And a recent study found that since 2003, when mandatory comparison rates were introduced, only about a third of people have found out what they are and only about one in 10 could define them accurately.
Most people said they found the wide range of choice in the consumer credit market confusing, a situation that was not helped much by comparison rates.
The Mortgage & Finance Association of Australia, which represents mortgage brokers, says state governments are maintaining a costly system that has not served consumers well. Its attack on comparison rates comes in response to the Queensland Government's introduction of a bill to extend the life of the mandatory comparison rate regime, scheduled to lapse in July this year, to 2009.
Comparison rates are loan interest rates calculated after adding fees and charges to the lender's advertised rate. The idea is to express the full cost of the loan in the rate and also provide a basis for comparing one loan with another.
The mandatory comparison rate rules are part of the Uniform Consumer Credit Code, which governs consumer lending. This is uniform state legislation first passed in Queensland and then taken up by the other states.
The code was introduced in 1994, with the mandatory comparison rate following in 2003. The comparison rate scheme has a sunset clause, put in place to allow the states to review the effectiveness of the comparison rates before making them a permanent part of the code.
Calvert Duffy, head of legal and compliance with the brokers' association, says: "Having the ability to compare like with like is a brilliant idea. But the execution is difficult and consumers struggle with the concept."
There has been a proliferation of "off-book" fees and charges since 2003. Items such as third party valuations and legal fees do not go into the comparison rate, nor do the increasingly common and expensive deferred establishment fees.
Lenders say these fees cannot form part of the comparison rate because they do not apply to all borrowers equally and may not apply at all. Duffy says to leave them out means understating the real cost of the loan but putting them in creates inaccuracies. Either way, the comparison rate is unhelpful.
The system, though widely held to be flawed, still has its fans. Mara Bun, a senior executive of the banking industry research group Cannex, says the idea of comparison rates is a good one and the problems in the current arrangement can be fixed. "Deferred establishment fees and other exit charges are the big problem," Bun says. "The states need to look at how the [credit code] can capture those costs."
Duffy says such a project is not worth doing, even if it means better comparison rates, because consumers are not using them.
In a study published last year, researchers from the Institute for Social Research at Swinburne University of Technology found a low level of awareness in the focus groups they ran. Only 37 per cent recognised the term "comparison rate" and only 12.5 per cent could define it correctly. Among those who knew about comparison rates, the majority found them helpful but the message did not appear to be getting out widely.
Respondents said the most important factor in choosing a credit product was the interest rate, followed by fees and charges - a finding that makes the lack of awareness of comparison rates surprising.
The Swinburne report says: "The majority of people interviewed did not feel educated about the credit market. Confusing, complex and mind-boggling were words frequently used to describe credit searches."
The researchers said that similar studies in New Zealand, Britain and US also found low levels of awareness of comparison rates.
Source. The Age

Mortgage interest rate speculation is forcing up the Aussie dollar

2007-03-31T05:47:00.000-07:00

Speculation of the chance of an interest rate rise as early as next month has now strengthened to at least 40 per cent, as futures market momentum propels the dollar.
The dollar is expected to trade above the US80c barrier for at least a week, driven by aggressive new short positions, but a fresh bout of "risk aversion" has now emerged in some forecasts.
And the greenback was markedly weaker in most of the big swaps yesterday, as fears grew over the future of the world's largest economy.
Economists are now speculating that the Reserve Bank of Australia will raise rates to 25 basis points to 6.5 per cent when it meets in April.
Financial markets were taken aback last week by the RBA's surprise move to effectively warn that interest rate pricing was too low.
The 40 per cent likelihood is a substantial increase on last week's pricing, which had it set at less than 3 per cent.
Investment bank JP Morgan has put it at almost 50 per cent that the cash rate will be shifted to 6.5 per cent in April.
"The most likely triggers are the May budget, which almost certainly will include sweeteners, given that the Government trails the Opposition in opinion polls and is desperate to catch up, another rise in credit growth, and more evidence that wage pressure is building," chief economist Stephen Walters said.
The dollar shot as high as US80.33c in international trade yesterday morning, before the start of local equities trading.
The domestic currency then retreated, but the marginal softening allowed active traders to take on new positions.
Last night the dollar was hovering at US79.96c as most analysts predicted the currency would push back through the next benchmark.
It has touched US80c twice in the past 18 months, but its peak yesterday was the highest in more than 10 years.
The currency, according to the Reserve Bank, has spent just 5 per cent of its trading time above US80c in the past 22 years.
The number of long-term contracts being taken out on the dollar is starting to be rebuilt after a marked reduction as a result of the stock market jitters.
Westpac currency strategist Jonathan Cavenagh said the dollar momentum was being provided by short traders chasing the yields.
Hedge funds are understood to have been active buyers yesterday on the interest rate speculation while the carry trading has been reset.
The dollar, along with the New Zealand dollar, has been the target of active buying as investors borrow in the low-rate Japanese yen and buy into the high-yield currencies.
"The people who are in the short-term plays are potentially speculating that the RBA may hike rates," Mr Cavenagh said.
"There's still upside risk in the dollar from here.
The effect of the dollar movement was seen in the market yesterday, especially as building company stocks were punished.
Economists said retailers stood to benefit from the currency, as imports were made cheaper and profit margins could be inflated.
The US Federal Reserve is expected to announce that it will leave rates on hold at 5.25 per cent following its meeting overnight.
Source: The Australian

Mortgage interest rates and not stamp duty deter home buyers say Labor

2007-03-29T02:51:00.000-07:00

First time home buyers are more concerned about the risk of another interest rate rise than whether the states should end stamp duty on house purchases the Federal Opposition said today.
Financial markets are betting on another interest rate rise this year following comments by a central bank official last Friday suggesting that the four interest rate rises since 2004 have yet to kill-off inflation pressures completely.
"If you look at the impact of those interest rate rises, they've added $88,000 to the cost of a home in Sydney of $450,000, and of course that's a home in Sydney where a first home owner wouldn't be paying any stamp duty at all," Labor treasury spokesman Wayne Swan said.
Treasurer Peter Costello is putting pressure on states to get rid of stamp duty, a tax that should have been removed with the introduction of GST in 2000.
"So what we've got out there this morning is the same old Peter Costello playing the same old blame game because he won't put up his hand and accept responsibility for the fact that inflation is driving up interest rates over time," Mr Swan said.
"The impact of four interest rate rises since the last election when he promised to keep them at record lows is causing housing stress, particularly in western Sydney."
Mr Swan said housing affordability is a complex problem.
"The first problem is the level of interest rates at the moment and certainly many home owners out there would not be welcoming another interest rate rise. That's number one," he said.
"There's a whole host of factors, at the state level, local government level, a whole host of factors that if we had some political leadership from the Federal Treasurer, who accepted some responsibility for just once in his life, then we could consider all of those things together."
Source: AAP

Falling house prices are a natural correction according to Prime Minister John Howard

2007-03-28T01:47:00.000-07:00

Prime Minister John Howard says a fall in house prices was a natural correction to an overheated market.
House prices have fallen in Sydney with higher interest rates but risen dramatically in Perth as the West Australian economy powers along on a resources boom.
"The housing market in sections of the country did get overheated and there did need to be some correction," Mr Howard told CNBC television.
"I think that's occurred without big damage being done to borrowers and big damage being done to the industry and that's beginning to come back."
Mr Howard refused to comment on speculation the Reserve Bank will lift interest rates next month.
"As for speculation about interest rates, I won't engage in that. That's a matter for the central bank [Reserve Bank of Australia] to determine," he said.
Source: AAP

Gold Coast betters Brisbane as the hottest Property Market in Australia

2007-02-23T20:14:00.000-08:00

Gold Coasters can take some comfort from estimates showing this city has the hottest property market in Australia.
Queensland property prices rose fastest at 3 per cent in the December quarter and it is believed the Gold Coast is doing even better than Brisbane.
The surge of the value of Gold Coast housing is not unexpected, given that it flat-lined for almost 10 years before the turn of the century and was constantly in the shadow of Sydney and Brisbane markets.
But then it found a life of its own and in recent years prospered while Sydney's market actually shrank.
So for investors and first-time buyers who were lucky enough to hitch a ride on the Gold Coast market, it's been a great journey.
Not so lucky are thousands of young people who could only watch as the possibility of home ownership slipped from their grasp and drifted well out of reach.
They may be the first generation that will not be able to afford the Great Australian Dream of a family house on a suburban block.
There are plenty of banks willing to lend them money, but the burden of a mortgage loan is just too heavy for many of them.
Their wages simply won't sustain repayments of between $600 and $800 -- or more -- each week
Their confidence is further weakened by high accounting fees for small savers and by the HECS fees many of them have to repay when they are starting out.
And, it must be said, the stability that young people need to build a solid financial base is not what it used to be.
They enter adult life with the brutal truths that one in three marriages or partnerships is destined to fail and that severe financial hardship often accompanies the fracturing of marriage bonds.
For men there is the perception that an anti-male bias in the Family Court system will cause them to be financially burned in the event of a marriage breakdown.
No wonder many people are timid about the 'c' word -- commitment -- when the time comes to buy a house.
So with a bag of disincentives swung their way when the possibility of a housing loan arises, many members of the X and Y generation simply opt out. They either go overseas working casual jobs, submit themselves to the rental market for life or even go back to live with their parents.
The only way many of them will know what home ownership is all about is when their parents die and they are left an estate.
Politicians, lending institutions and developers should be considering ways to solve the housing affordability for the rising generation. There has to be a way -- through a combination of stamp duty relaxation, new styles of housing estates, larger home loan grants, tax breaks and partially deferred repayments -- to get these young people into their dream houses.
Source: Gold Coast Bulletin

Rent relief for tenants, pressure to release more building land and property investment support possible as Australia caught in a housing shortgage

2007-02-22T13:46:00.000-08:00

The Federal Government is considering assistance for people struggling with the rising cost of renting homes.
Prime Minister John Howard said today that he was "conscious that rents have got up in different parts of the country ".
"I am aware of that, and I know there is some additional pressure because of the very strong economic conditions," Mr Howard said.
"Other people have put views to me about rental assistance ... we are considering those things."
Some observers have blamed changes to superannuation for turning investors away from property, causing a rental shortage.
But Mr Howard said the slow release of land around the country had contributed to the housing shortage that was pushing up rents.
"In some parts of the country, state governments have been far too slow at releasing land and that has contributed to the shortages.
"The other thing that governments generally around Australia have got to do is to make sure the level of land releases is adequate."
Mr Howard said rising rental prices underlined the "folly" of people who advocated the abolition of negative gearing for housing investors.

Source: AAP

Property vultures critised for going for easy pickings in the property investment market

2007-02-21T13:57:00.000-08:00

The Nsw Department of Fair Trading will investigate a controversial property scheme that capitalises on the misery struggling homeowners in Sydney's mortgage belt in the property downturn.
Property Secrets buys "bargain" properties in Sydney's struggling outer-west suburbs that have been repossessed by banks during the property slump, and former housing commission properties, on behalf of investor clients.
The group then undertakes renovations on the properties and obtains rproperty valuations that come in well above the investor's outlay, encouraging clients to reinvest the difference in more depressed properties.
"Fair Trading Minister Diane Beamer has looked into the scheme to see if there are any breaches of the Fair Trading Act or any acts relating to property purchases," said a spokesman yesterday. "On the surface it seems that while it may not be illegal, there are moral questions you have to ask about this."
Property Secrets operates twice-weekly property investment tours of depressed suburbs such as Mount Druitt in Sydney's struggling western growth corridor, where home owners have been squeezed by the double-whammy of rising interest rates and plummeting house prices.
Property Secrets founder Paul Giezekamp would not respond to questions from The Australian yesterday. In a written statement the group said the company's conduct was in "strict compliance" with the Fair Trading Act.
"It is true that Property Secrets intends to purchase cheap properties in a depressed market from motivated sellers, but there is no public utility served by Property Secrets and investor clients staying away," the group said.
"The result is a rejuvenation of some of Sydney's poorest and most disadvantaged suburbs."
During a Property Secrets tour on Tuesday, attended by The Australian, Property Secrets consultant Jennifer Reeves told potential investors: "Nobody works out here so there's nothing else to do except breed and rent houses."
After Ms Reeves made the remark, The Australian was approached by a fellow Property Secrets consultant and told not to publish the statement.
Ms Reeves's comments, published yesterday, sparked debate on talkback radio, with Ms Beamer also weighing in on the controversy.
"As minister for Western Sydney I was extremely offended by the quotes attributed to this gentleman's property consultant," Ms Beamer said yesterday.
In a written statement from Property Secrets, Ms Reeves denied making those statements.
Later during Tuesday's Property Secrets tour - as printed in The Australian - Ms Reeves also said to investors: "Okay, so out here we put our blinkers on - we might not like what we see but it's okay, we're not living here and we get a nice tenant to move in."
Real estate consumer advocate Neil Jenman said buying properties for less than they had sold for was simply "opportunistic" and wise investing.
Source: The Australian

Housing Construction activity slows for the fourth month straight

2007-02-07T02:08:00.000-08:00

Building activity in Australia's construction sector deteriorated last month, underpinned by a reduction in new business, but stable interest rates this year should provide some support to the housing sector.

The Australian Industry Group/Housing Industry Association (HIA) performance of construction index (PCI) fell 3.7 points to a reading of 48.4 in January, below the 50.0 points level separating expansion from contraction.

Ai Group economic and research associate director Tony Pensabene said the reduction in new business is consistent with reports by companies of a decline in customer enquiries and fewer invitations to tender.

"With new orders having now fallen for four straight months, weakness in the industry is set to continue, pushing any recovery out to at least the second half of 2007," he said.

"On top of this, interest rate uncertainty, low housing affordability and land supply shortages are among the factors having negative influences on demand.

"Under these conditions, industry needs stability in the interest rate environment."

Of the sectors surveyed, only commercial construction expanded in January, having risen seven consecutive months.

The house building and apartment sectors remained in decline, while work on engineering construction projects fell for the first time since April 2006.

The result follows the moderate growth in total construction activity recorded in December 2006.

HIA housing and economics executive director Simon Tennent said the combined effect of the three interest rate rises of 2006 had taken the wind out of the sails for Australia's builders.

"It is hoped, however, that with the inflation cycle now easing, and with house prices still edging up and rental markets tightening, housing demand will return in 2007," Mr Tennent said.

AAP

War babies fade into history as the bay boomers bloom

2007-02-06T00:40:00.000-08:00

In many respects they are the forgotten generation. They were born in the years between Wall Street's implosion and Hiroshima's explosion. Some know them as Depression kids; to others they are war babies; to others again they are the silent generation.Their birthplace is the rarely explored windward side of the baby boomer mountain. This generation claims, and is afforded, no defining letter of the alphabet. They are most popularly known as the diminutive pre-boomer generation, where "diminutive" refers to their number rather than to the scale of their cultural contribution. And yet, of all God's generations it is the pre-boomers who have perhaps most profoundly shaped today's Australia, especially at the political level.
Much of this generation was too young to participate in World War II and the Korean War; by Vietnam they were too old.
Either through skilful navigation or by damn good luck these kids, born after and before calamitous events, morphed in the 1950s into the world's first teenagers.
The first incarnation of this bold new life form is thought to have been the "bobby-soxer" - girl fans of Frank Sinatra who in the late 40s boogied and bebopped dressed in full skirts and short white socks and with hair in ponytails.
Richie Cunningham was a teenager from the pre-boomer generation. But then so too were James Dean, Elvis Presley and Prime Minister John Howard. (Although - and there is no firm evidence to support this theory - I suspect John Howard as a teenager was much closer to Richie Cunningham than to James Dean.)
Not that pre-boomers were white-bread teenagers.
Perhaps in anticipation of the youth revolution that would follow in the 1960s, pre-boomers invented primitive forms of teenage counter-culture. There were beatniks and bodgies; the latter manifested in a uniquely female form known, delightfully, as widgies. (The 1950s widgie should not be confused with the contemporary wedgie, which you may be assured is a different concept altogether.)
Maynard G.Krebs, subject of the popular television series The Many Loves of Dobie Gillis (1959-1963), was a self-styled beatnik who, interestingly enough, would later inspire the Gen-Y cartoon character Shaggy in Scooby Doo.
Yoko Ono was arguably the first global beatnik; even today at the age of 74 she remains proudly and defiantly beatnikesque in her fashion and demeanour. (I am sure I have seen recent pictures of Yoko in a black beret.)
Unlike modern genres of urban sub-culture, such as "Goths", the highest and purest form of beatnikism was never defined by youth. While young Goths look cool, Goths who are middle-aged, let alone geriatric, are frankly a bit of a worry.
The pre-boomer generation delivered this nation two prime ministers: John Howard and Paul Keating. The brash baby-boomer generation, for all the big talk of changing the world, has yet to catapult anyone beyond leader of the opposition. (Baby boomers are such political teasers.)
But the fertile generational brine that delivered our most recent prime ministers also yielded colourful mutations: teddy boys, mods and rockers were, with perfect 20-20 hindsight, the necessary building blocks upon which stronger, sharper and edgier sub-groups would be later based.
Academics enjoy musing deferentially about "standing on the shoulders of giants", but then so too must London's late-1970s punks, who could not have manufactured their in-your-face subculture without a rebel heritage stretching back to the bobby-soxers. After all, the punk Mohican hairstyle is surely nothing more than an erect pony tail.
Beyond their teenage years the pre-boomers tackled the 1960s with a style and panache that was, well, decidedly 1960s. Those pesky baby boomers were culturally impotent; they were epitomised at this time by the hapless Theodore (Beaver) Cleaver in Leave it to Beaver (1964).
Fashion and form quickly evolved around pre-boomer tastes. This was the era forensically spoofed by Mike Myers as Austin Powers. Austin's shagadelic world delivered slim ties, popularised the Watusi and the now-famous faux sophistication of "Bond, James Bond".
But the pre-boomer's grip on youth culture came crashing down in the northern summer of 1967. The boomers would wait not a moment longer for their summer of love. Pre-boomers, perhaps content with their lusty fling with cultural power, retreated to the background, happy to watch on as long-haired hippies slogged it out with the frugal establishment over the following decade.
From there the pre-boomers morphed into middle age, where they once again blossomed. By the mid-1980s pre-boomers were at the peak of their corporate power and once again they set the cultural agenda.
The messianic Gordon Gekko delivered what would turn out to be the pre-boomer's parting shot: "greed is good". And at that time greed did indeed seem good. The shoulder pads were big and the hair was even bigger. Conspicuous consumption by middle-aged pre-boomers delivered the perfect antidote to a Depression-ravaged and war-rationed childhood.
Actors Joan Collins and Larry Hagman in Dynasty and Dallas served up, and spiced up, a heady mix of materialism and Machiavellian manipulation to a pre-crash world awash with pre-boomer ideals.
But the pre-boomer's shooting star fizzled out in the late 1980s. It was at this time that circling, cawing, carnivorous boomers swooped and seized control, just as they did with youth culture in that single northern summer more than two decades earlier.
From that point onwards the pre-boomers hunkered down into retirement, where they remain today passively observing and quietly remembering a time when the Watusi ruled the world.
Now aged between 61 and 76 this generation has either actually or virtually seachanged; many are, in either case, wistfully musing on the merits of a wanderlust life as a grey nomad.

Author Bernard Salt, a KPMG Partner in Australia
bsalt@kpmg.com.au

Australian Governments urges States to cut property taxes

2007-01-27T22:43:00.000-08:00

The Australian Commonwealth Government is urging states to cut property taxes to ease the pain for first home buyers, as a new global study rated Australian housing affordability among the world's worst.
But there was some good news on the interest rate front for existing home buyers, or those rich enough to jump on the property ladder, with a government report showing business inflation pressures are easing.
Producer prices rose at their slowest quarterly pace in two years, largely as the result of falling oil prices.
"First home buyers can mark off the tame producer price result as the first step to the Reserve Bank leaving interest rates unchanged at the February board meeting," said Craig James, chief economist at Commonwealth Securities.
However, the Annual Demographia survey, released today by the US-based Wendell Cox Consultancy, rated every Australian city as "seriously" or "severely" unaffordable in a global study of 159 cities, with Sydney, Melbourne, Perth and Hobart among the worst 25 cities.
The survey looks at housing markets in Australia, New Zealand, Canada, Ireland, the UK and the US.
It rates housing "seriously unaffordable" when the median house price passes four times median household income and "severely unaffordable" when it passes five times median household income.
The least affordable Australian city is Sydney - where median prices are 8.5 times median income - even worse than London at 8.3 times income and New York at 7.2 times income. Perth was 8.0 times income.
Acting Treasurer Peter Dutton called on state governments to cut stamp duties on conveyancing and to release new land for development to make housing affordability easier for first home buyers.
His comments followed a report released yesterday by Australia's peak building body, the Housing Industry Association (HIA), that showed housing affordability had fallen to at least a 22-year low.
It also showed for the first time that Perth housing for first-home buyers is now less affordable than Sydney.
Mr Dutton said that in 2005/06 the states collected $10.8 billion in stamp duties, more than double the amount they collected in 2000/01.
This was despite record amounts of GST going to the states and territories.
"I call on all the state Labor governments to cut stamp duty on conveyancing now and make housing a whole lot more affordable for first home buyers," he said.
Source: AAP

Cost of Housing rising as homeownership affordability falls

2007-01-24T20:57:00.000-08:00

Housing affordability in Australia is falling to be among the worst in the world, a further sign that many state and local government polices are inappropriate, the Residential Development Council said.
It said today's release of the Annual Demographia survey rated every Australian city as "seriously" or "severely" unaffordable in a global study of 159 cities, with Sydney, Melbourne, Perth and Hobart among the worst 25 cities.
The Residential Development Council, the residential policy arm of the Property Council of Australia, said Australia's poor result was proof that the current policy mix was a toxic cocktail for housing affordability.
"We have four of our cities in the worst 25 when it comes to affordability – surely the message must get through?" said RDC Executive Director Ross Elliott.
The Demographia Survey, released by the US-based Wendell Cox Consultancy, attributes restrictive land release policies and excessive regulatory and zoning controls, combined with high housing taxes, for the Australian problem.
The Demographia survey rates housing "unaffordable" when the median house price passes three times median household incomes.
Housing is "seriously unaffordable" when it passes four times median household incomes and "severely unaffordable" when it passes five times median household incomes.
The least affordable Australian city is Sydney – where median prices are 8.5 times median incomes – even worse than London at 8.3 times incomes and New York at 7.2 times incomes.
"We have maintained that there are three things largely responsible for the worsening housing affordability in this country. Inappropriate land release policies, excessive housing taxes and unfair infrastructure charges, and dysfunctional systems of development assessment," Mr Elliott said.
"This report now confirms the magnitude of the problem in this country – where with abundant land, there is no excuse for our housing crisis other than bad public policy."

Source: The Herald

Homeowners cope with mortgage repayments as interest rates climb

2006-12-18T22:32:00.000-08:00

Australian homeowners could cope with higher interest rates and a downturn in the economy, the nation's top banker forecast last night.
Reserve Bank governor Glenn Stevens blamed the housing bubble, which has burst in some states, on banks giving away mortgages too cheaply.
Three interest rate rises this year, ordered by the Reserve Bank, are expected to knock some confidence out of the market which has started to return to health. There is speculation a fourth rate rise could hit as early as February. Mr Stevens said easier and cheaper access to loans was a prime reason for the skyrocketing prices of Australia's 8 million existing dwellings.
However, he said while some households had too much debt, there would not be great damage if the economy began to decline. The prediction was based on a Reserve Bank analysis, which tipped people would trim their spending habits rather than lose their house. Economists are now punting that the Reserve Bank could order yet another rates rise in a bid to cool the economy. Slower economic growth could halt that move but the jobs market in Australia remains red-hot. Mr Stevens gave no clear direction on the future movements of interest rates.
However, there was a hint that the central bank thought Australian households could cope with higher rates -- particularly through the indication that people would reduce their spending. Mr Stevens said the higher level of debt people had built up made them vulnerable to small changes in the economy. "A very large change in the household sector's balance sheets has made households more sensitive to changes in their circumstances,'' he said.
The RBA has tipped that if there was an economic downturn, it would be businesses which would be hit the hardest. Businesses supplying into discretionary consumer markets would feel the effect quite quickly, Mr Stevens said.

Source: Herald Sun

Mortgage brokers rise to Australia's first choice according to survey

2006-12-10T01:35:00.000-08:00

Mortgage brokers are becoming the first choice for home buyers when they're arranging a loan, a survey shows.
The Mortgage Industry Association of Australia(MIAA)/BankWest home finance survey released today showed more than 41 per cent of recent or intending homebuyers would go to a mortgage broker.
That figure compares with 37.5 per cent who regarded banks as their first preference.
MIAA chief executive Phil Naylor said the figures showed a rise in the public acceptance of brokers. "Public awareness of brokers is now more than 90 per cent," he said.
It is the first time the survey has shown homebuyers prefer arranging their loan through a broker rather than going straight to a bank.
BankWest's head of broker sales, Phil Colton said the research highlighted that banks really couldn't afford to ignore the broking industry.
The research shows that borrowers preferred brokers mainly because they did all the legwork for customers, but also because they could offer a range of loan options from different lenders. The MIAA/Bank West survey is conducted twice a year.
Source: AAP

Lower home loan demand won't affect interest rates

2006-12-10T01:33:00.000-08:00

A fall in applications and approvals for housing loans in August was unlikely to have an effect on [reducing] interest rates, economists said today.
Housing finance commitments for owner-occupied housing fell 1 per cent in August, seasonally adjusted, to 63,217, the Australian Bureau of Statistics said.
Total housing finance by value fell 1.3 per cent in August, seasonally adjusted, to $19.852 billion.
Housing finance by value for owner occupation fell 1.3 per cent, adjusted, to $13.956 billion.
Economists had been looking for a 1 per cent fall in the number of housing finance commitments for owner-occupiers.
Macquarie Bank senior economist Brian Redican said the data was in line with the Reserve Bank of Australia's (RBA) interest rate hike to 6.0 per cent in August.
"It's really not surprising given that the Reserve Bank was raising interest rates in August and that there were some more dire warnings about the housing market there," Mr Redican said.
"But this kind of decline after some healthy months won't pose any concerns for policy makers so I don't think it will have any influence on the current policy debate."
Commonwealth Bank senior economist Michael Workman said the modest fall indicated there was still some underlying strength in the housing market.
"If anything, this is still one of those things indicating that the economy still has a fair bit of momentum," Mr Workman said.
"And it's just one of those issues that would easily stack into this view there are no signs of weakness that could delay a rate rise."
Citigroup director and strategist Stephen Halmarick said the RBA would be pleased with the results, with the August rate hike appearing to have softened the market.
"I think the data so far from the August rate hike has shown there is a little bit of reduction in momentum in the household part of the economy, but it's not dramatic," he said.
However, he said new RBA governor Glenn Stevens would likely signal a continuing tightening bias in his speech tonight at the Australian Business Economists' annual forecasting conference.
"But that bias remains a patient one," he said.
He said the RBA would likely watch further developments before making another rate move.
He said Citigroup did not expect rates to rise again this year, although the tightening bias was expected to remain into next year.
Source: AAP

Australian Home sales bounce back

2006-12-03T16:53:00.000-08:00

New home sales in Australia rose last month thanks to strong improvements in housing markets in New South Wales, Victoria and Queensland markets, figures show.
The latest Housing Industry Association's (HIA) new home sales survey shows sales of new homes and units by Australia's largest builders and developers rose by 1.3 per cent in October to 7434 dwellings.
That followed a fall of 3 per cent to a 21 month low of 7342 dwellings in September.
The survey also found that new house sales increased by 4.6 per cent in October while sales of multi-unit fell by 16 per cent.
HIA executive director of economics and housing Simon Tennent said the results reflected the dual nature of the nation's economic growth and housing affordability across the states.
"New home sales were resilient in the eastern states as house prices continue to grow in line with consumer prices," he said.
New South Wales, Victoria and Queensland detached housing sales were up strongly, while the accelerating house prices and land constraints in Western Australia meant the new home sales market continued to struggle, he said.
In October, detached house sales fell by 21.9 per cent in WA and 0.9 per cent in South Australia but rose by 16.7 per cent in NSW, 15 per cent in Victoria and 8.5 per cent in Queensland.
"The real test will be in the first quarter of 2007 when the combined affect of three interest rate rises start to squeeze household budgets, particularly in the resource-poor states," Mr Tennent said.
The Reserve Bank of Australia lifted interest rates this month by 25 basis points to 6.25 per cent.
That followed hikes by the same amount in May and August.
Economists say it is not likely that the RBA will lift rates again at the first board meeting of the year in February as the RBA will want to see how the three hikes have trickled through the economy.
Source: AAP

Mortgage shoppers tipped that rents to skyrocket

2006-10-30T16:52:00.000-08:00

Mortgage shoppers and first time home buyers have been warned that rents will skyrocket over the next five years due to a housing shortage across the country, an economic forecaster said.
Research firm BIS Shrapnel said it expects national building commencements to fall for a third straight year, dropping five per cent to 142,500 new homes in 2006/07 following a four per cent drop in 2005/06.
BIS Shrapnel senior project manager Jason Anderson said such a result would inflame the country's already tight rental market, which is meeting increased demand from a growing population. "Rental markets throughout Australia are as tight as a drum, with vacancy rates in all capital cities below 2.5 per cent as at June 2006," he said. "With the supply of new dwellings decreasing, rental markets are set to tighten even further in 2007 and 2008."
Mr Anderson said strong population growth supported by increased overseas migration would push demand for new homes, particularly for rental property use, up to about 165,000 in 2006/07, leaving a shortfall of about 22,500 homes.
As a result, rents in Sydney are forecast to rise five per cent this year and by as much as 40 per cent in the next five years."
The extreme undersupply in the Sydney market will trigger a substantial and extended adjustment to residential rentals," he said. New housing starts are expected to fall in all states across the country as a result of limited land supply for new housing development and a predicted rise in interest rates.
Housing starts are tipped to drop nine per cent in both Victoria and South Australia, eight per cent in the Northern Territory, six per cent in Tasmania, five per cent in the ACT, four per cent in Western Australia, and three per cent in both NSW and Queensland.
But while the shortage of housing will squeeze those in the rental market, Mr Anderson said a rise in rents, particularly in Sydney, is needed to encourage investors back into the market. "A very large increase in rents is required to improve yields on residential property in order to draw investors back into the market and push up the number of new dwellings back towards underlying demand," he said.

Source: AAP

Mortgage Shoppers benefit as major home loan lenders drop home loan rates for new mortgage business.

2006-10-22T12:38:00.000-07:00

Major home loan lenders dramatically lower effective interest rates to compete for mortgage shoppers home loan business. As the big mortgage players slashing margins to lower the effective mortgage interest rates to attract home buyers and mortgage refinance business, the smaller home loan lenders plan to join in.
Consumer finance research firm Cannex said that lenders had reported cuts to 54 fixed rate mortgages since the beginning of October.
Cannex financial analyst Harry Senlitonga said now may be a good time to consider a fixed rate loan with competition for customers in the increasingly popular fixed market driving lenders to cut rates.
"We are expecting to see more lenders follow in the next few weeks," he said.
Mr Senlitonga said rates had fallen an average 0.12 per cent in three-year fixed mortgages, while the five-year fixed rate category had dropped an average 0.17 per cent.
Fixed rate mortgages have gained popularity since the Reserve Bank of Australia (RBA) raised interest rates in May and August this year, bringing the official interest rate to 6.0 per cent.
Following the latest move, the number of fixed rate loans taken out by owner-occupiers jumped to 20.4 per cent in August from 16.2 per cent in July, according to Australian Bureau of Statistics (ABS) data.
As a result, lenders are now trying to capitalise on the increased demand for fixed rate loans as they scramble for customers in a shrinking market.
The ABS figures showed that both the number of mortgages taken out and the amount borrowed by consumers fell in August, dropping 1 per cent and 1.3 per cent respectively.
RESI Mortgage national consumer advocacy manager Lisa Montgomery said there were some great fixed rates because of the increased competition.
"We are actually seeing that there are a lot of good rates out there for consumers to fix into," Ms Montgomery said.
But she warned borrowers that fixing 100 per cent of their loan may not be the best financial move.
"There needs to be some caution displayed because when you do fix in - someone is going to lose - and it's either going to be the institution or it will be the consumer," she said.
While RBA governor Glenn Stevens said this week that the chances of another interest rate rise were high, most economists believe that rates have neared their peak and some even think rates may begin to come down next year.
"If you are looking to fix in, sit on the fence with perhaps 50 per cent of your loan and keep the other 50 per cent variable," Ms Montgomery said.
She said that by doing this, borrowers effectively had the comfort and piece of mind that came with a fixed rate but also the flexibility to make extra payments, which generally cannot be done with fixed mortgages.
As well, by only fixing part of the loan, borrowers could also take advantage of any potential falls in interest rates.
"So you're actually getting the best of both worlds," she said.
Source AAP

Sacked mortgage staff refuse to train their overseas replacements

2006-10-19T21:04:00.000-07:00

Regional mortgage lender St George Bank has hit union trouble in its bid to sack local IT specialists and repleace them with cheap overseas labour.
The Finance Sector Union (FSU) will meet St George Bank management today, after staff who are being made redundant refused to train their replacements yesterday.
FSU national secretary Paul Schroder says the jobs of 60 IT staff from Kogarah in Sydney are being outsourced.Mr Schroder says the staff voted to defy orders to train their replacements, who were flown in from overseas this week.“You can get people to work for less than $100 per week to do this work,” he said.“This bank is a profitable bank - it doesn’t need to do this but it is doing this to cut its own costs.“We think that’s the wrong decision for the whole economy and for the bank in particular.“But it’s particularly nasty to expect the people who are losing their jobs to train the people who are taking them.”St George Bank spokesman Jeremy Griffith says the workers do not have to train their replacements if they do not want to.The bank says it has invited staff to apply for jobs in other areas.
If you are a mortgage shopper we suggest that you consider your values when placing your business. After all the mortgage business is a local business, and should be using local people to service the community.

Property investment soars as Aussie investors look for overseas hotspots

2006-10-10T23:32:00.000-07:00

Australian property investors are sending huge amounts of investment offshore in search of higher returns and diversified portfolios.
Research by real estate money management firm Jones Lang LaSalle found that Australian investors poured $US5.3 billion ($7.06 billion) into overseas real estate in the first half of this year, up from only $US1.2 billion ($1.6 billion) in the first half of 2005.
Jones Lang LaSalle head of forecasting services John Sears said an increase in the amount of superannuation allocated to listed property trusts (LPT) was largely driving the flight overseas, with LPTs seeking to diversify their portfolios and capitalise on high overseas yields. "There's a huge amount of money flowing into LPTs and they need to find stock,'' he said. "Because there's so much money, there's a lack of stock available in Australia. "LPTs are traditionally seen as a high yielding asset ... So to get the yields, they have to look overseas.''
As a result, Australia is now the third largest international investor in property after the United States and the Middle East. The company's Australian head of research Kathryn Matthews said around 80 per cent of the funds spent overseas in the first half of 2006 were invested in countries outside the Asia Pacific region, particularly in the US. "The US received almost half of our overseas purchases, making Australians the third largest cross border investors in the US,'' she said.
However, Ms Matthews said Australians were increasingly interested in European markets. "Australians invested particularly heavily in Germany where they purchased around $US1 billion ($1.33 billion) worth of assets in the first half of 2006,'' she said. Germany accounted for 19 per cent of Australian offshore property investment in the first six months of this year, followed by Belgium with 6 per cent, the United Kingdom with 3 per cent, Poland and the Netherlands with 2 per cent each, and France with 1 per cent.
Mr Sears said the rising interest in investing in Germany was a result of the county's relatively high yields for the European region coupled with low interest rates, which made borrowing money to invest in the country cheaper.
Source: AAP

The High price of lower mortgage repayments with interest only home loans

2006-09-02T14:31:00.000-07:00

With Mortgage finance there is no such thing as a free lunch. Home buyers and homeowners scrambling to lower their mortgage repayments need to think about all the implications for they change to an interest only home loan.
Because there is a high price to pay, eventually, for interest-only mortgage home loans.

The latest interest rate rise has seen many borrowers scrambling for strategies to make their home loan repayments more affordable.

Options include extending the loan term, refinancing on a better rate, old-fashioned belt-tightening and, more controversially, opting for an interest-only product.

Cannex figures show only one in every 100 Australian owner-occupiers sign up for interest-only deals, but anecdotal evidence suggests more people are being tempted to cut growing repayments any way they can.

"I've had a number of clients asking about them recently [because] they're much cheaper than a principal and interest repayment loan," says Anna Mandoki, a financial counsellor with the Financial and Consumer Rights Council in Victoria.

However, she notes a pattern of emerging problems associated with these products: "I would caution people to really think carefully before they consider interest only repayments."

For borrowers suffering the pinch, the appeal of interest-only loans is obvious. Home buyers grappling with a typical $250,000, 25-year mortgage would save themselves $270 a month by abandoning attempts to chip away at the principal and resigning themselves to covering only the outstanding interest bill, according to Cannex calculations.

And those struggling to cover the cost of higher-priced properties in cities such as Sydney and Melbourne, the "savings" would be even more considerable, allowing them to get a toehold in the market at minimal cost.

For all these reasons, a product that was solely a property investor option now has strong appeal for cash-strapped owner-occupiers, says Lisa Montgomery, the national manager of marketing and consumer advocacy with Resi Mortgage Corporation.

But she warns that with the property boom over, home owners can no longer rely on capital gains to carry them through, and that the short-term relief associated with lower repayments can have serious long-term ramifications.

And as David Tennant, director of the Care Financial Counselling Service in Canberra, says, the proliferation of home loans that don't require people to put down deposits, or even stump up their borrowing costs, means many borrowers are already starting out behind the eight ball.

"It's just digging people further into crisis," he says. "It's quite conceivable that we could see situations which started out as negative equity get so much worse."

There's a high price to pay, eventually, for interest-only loans.

The latest interest rate rise has seen many borrowers scrambling for strategies to make their home loan repayments more affordable.

Options include extending the loan term, refinancing on a better rate, old-fashioned belt-tightening and, more controversially, opting for an interest-only product.

Cannex figures show only one in every 100 Australian owner-occupiers sign up for interest-only deals, but anecdotal evidence suggests more people are being tempted to cut growing repayments any way they can.

"I've had a number of clients asking about them recently [because] they're much cheaper than a proper principal repayment loan," says Anna Mandoki, a financial counsellor with the Financial and Consumer Rights Council in Victoria.

However, she notes a pattern of emerging problems associated with these products: "I would caution people to really think carefully before they [go ahead]."

For borrowers suffering the pinch, the appeal of interest-only loans is obvious. Home buyers grappling with a typical $250,000, 25-year mortgage would save themselves $270 a month by abandoning attempts to chip away at the principal and resigning themselves to covering only the outstanding interest bill, according to Cannex calculations.

And those struggling to cover the cost of higher-priced properties in cities such as Sydney and Melbourne, the "savings" would be even more considerable, allowing them to get a toehold in the market at minimal cost.

For all these reasons, a product that was solely a property investor option now has strong appeal for cash-strapped owner-occupiers, says Lisa Montgomery, the national manager of marketing and consumer advocacy with Resi Mortgage Corporation.

But she warns that with the property boom over, home owners can no longer rely on capital gains to carry them through, and that the short-term relief associated with lower repayments can have serious long-term ramifications.

And as David Tennant, director of the Care Financial Counselling Service in Canberra, says, the proliferation of home loans that don't require people to put down deposits, or even stump up their borrowing costs, means many borrowers are already starting out behind the eight ball.

"It's just digging people further into crisis," he says. "It's quite conceivable that we could see situations which started out as negative equity get so much worse."

In Britain, alarm bells are already ringing over the number of interest-only mortgages being taken out, with the regulator, the Financial Services Authority, sending a thinly veiled warning to lenders to get their house in order and putting such products at the top of its list of "emerging retail risks".

One in four borrowers are taking out the mortgages but many have little hope of paying off the capital sum at the end of the term, The Guardian newspaper reported recently.

"Many borrowers, particularly those who have remortgaged to a cheaper deal, may not even understand that they have a loan which, when it matures in 15, 20 or 25 years' time, will leave them with a huge bill," it reported.

"In the worst case, householders in their 50s and 60s could face repossession if they cannot stump up tens or even hundreds of thousands of pounds."

The Australian situation isn't so dire, but in a case which she describes as "the tip of the iceberg", Mandoki says she recently saw a client lose her house after she fell ill, and became unable to meet the repayments on an interest-only mortgage secured through a non-mainstream lender.

Ironically, with a different type of loan, the situation may have been salvageable through the Mortgage Relief Scheme that operates out of Victoria's Department of Human Services, Mandoki says. The scheme offers home owners short-term interest-free loans to help overcome difficulties with home-loan repayments resulting from an unavoidable change in circumstances, such as becoming sick or losing a job.

"But one of the conditions is that it can't be an interest-only loan," she says.

Yet even during affordability crunches, Phil Naylor, chief executive of the Mortgage Industry Association of Australia, says the Australian dream of home ownership is still alive, and recent research shows 90 per cent of borrowers want to pay off their loan sooner.

However, he notes that industry, governments and regulators, need to keep a close eye on trends in this area.

"As it's a time when house prices are high, savings are low, lifestyle compromises are minimal, and people are made to be more responsible for their finances for retirement, the use of these loans for owner-occupants, particularly first-home buyers, should not be encouraged," Naylor says.

Montgomery says that while financial institutions won't turf undisciplined borrowers out of their homes at the end of the term, opting for an interest-only deal means you can only postpone, rather than evade, the repayment of principal: "It must be paid back at some time or another," she says.

And while some suggest proceeding with caution when it comes to interest-only loans, Tennant advises borrowers not to even go there.

"If the only way you can get into the housing market is to take out an interest-only loan, then you can't afford it and you need to rethink your housing needs," he says.

In Australia, about 8.7 million individuals are affected by rate hikes.
Source: Sydney Morning Herald and Cannex

Mortgage shopper warning: Use caution at the real estate auction

2006-07-13T00:23:00.000-07:00

The key to buying wisely at a real estate auction is to establish what you want first and to decide on what you are prepared to pay for a property before the auction.
Its wise not to get carried away by the emotions that course in your veins at the typical auction. These emotions can include:

The urge to own.
The fear of loss.
The desire to win at all costs.
The need for fun and good cheer.
The fear of suffering loss of face.

It all happens at the auction, because auctions create a super hot sales environment where all of the above can fester and thrive. First they gather a lot of potential buyers all cashed up with money burning a hole in their pockets to bid on just one property. Then they create the illusion that the property can be bought for a song, where you can steal the property from the hapless, desperate seller.

The other illusion auctioneers want you to buy into , like all real estate agents is that they are on your [the buyers] side. Believing this is the biggest blunder that buyers can make. The Real Estate Agent is sworn to his or her fiduciary duty to look after the principal's best interest. The principal is the one who pays the agent the commission. At auctions, that is always the buyer! So, if the agent is ethical, he or she will take every last dollar that he can from you, the buyer, because that's what he or she is paid to do. So don't try to become friendly with the Auction agent, because he or she will only assume you are sucker that can be taken advantage of. Be warm, be civil, be polite, but be disinterested and vague. It could save you thousands.

Then the auctioneer removes from the buyer the time to think and ponder. You are forced to bid faster than you can think. A good auctioneer creates an avalanche effect and all the dreams of buying a bargain evaporate as the reality of what's happening sinks in. You don't want a bargain any more, you want to pocess this scarce property before you, you want to win at all costs. You are being worked by a master of psychology and he's winning, not you.

Finally the last two bidders slug it out as the early dreamers are tossed aside as also-rans. The auctioneer will spur the competitive spirit out of these last to drive bidders till one drops exhausted, beaten and ashamed he didn't have the resources at his disposal that the winner did. anyway he reasons, the guy had more money than sense.

The winner is then congratulated and can celebrate whilst the losers can do as they please.

Then when you think it couldn't get any worse, the last deep cut. No cooling off. You can suffer buyers remorse at your leisure. The auction system has removed all your consumer rights that Ralph Nader and others that followed him fought so hard to win for you.

Now you have been slapped into reality land, let's see what you can do to equalise the situation in your favour.

Here are some tips on how to do it:
After finding out how much you want to spend, make inquiries about the contract, what the property includes and be certain it's clear of major defects.
Have a building report and pest inspection done before the auction.
On auction day, make sure the contract has not been altered.
Arrive on time for the auction, never early.
Never introduce yourself to the auctioneer and let them know you are interested in the property. Stay out of his figuring. Auctioneers feed on this desire to big note yourself and know how to work it. Under no circumstances let the auctioneer know what price you are willing to pay.
Remember that the Auctioneer has to work in the best interest of the Vendor, not you.
That's your job, so do it well.
Never make the first bid. [The one's that do never finish up with the property, but do add to the price.]
Slow the bidding down, don't add to the feeding frenzy.
Never bid till you know that the property is "on the market."
Always look disinterested.
Always think before you bid. Tease the auctioneer and the other bidders.
Never allow the auctioneer to flatter you or bully you. He's in control of the auction, but you must in in control of you.
If he tries to squeeze you, relax and disassociate yourself. See it happening from a distance. Never take it personally.

Follow these simple rules and you won't get badly burned at the auction. If you find that you can't buy value at an auction, you now know why. All the bargaining chips have been snaffled by the one that set the rules. The auctioneer is master of his domain, so maybe you need to find another way to win.

Home Sellers shun real estate agents

2006-06-09T11:14:00.000-07:00

Real estate agents are defending the commissions they take from property sales as new figures show nearly a quarter of New Zealand home sellers are shunning their services.
Commission rates in New Zealand generally range from about 2 to 4 per cent – a gain for agents of about $6100 to $12,200 on the average $305,000 property.
Last year, 23.7 per cent of the 137,005 residential sales in New Zealand were made without a real estate agent.
The average house price in New Zealand hit a record high of $305,000 in April last year, but price growth is slowing.
Wanting to hold on to their capital gain, New Zealanders are selling their homes privately, negating real estate agents' commission.
Christchurch couple David and Rachael Houston have decided to sell their Halswell family home by advertising in the newspaper, rather than using an agent.
David Houston, a lawyer, said selling their $500,000 home privately would save them about $20,000 in agent's fees and commission.
They have so far spent only $70 on one advertisement and report plenty of interest.
Houston said that while there were some good agents, the huge increase in commission that agents were getting – just because house prices had gone up – was difficult to justify. He said private sales were a great option for those sellers confident enough to go it alone.
"There's some people out there who should absolutely use a real estate agent as they could get themselves into a lot of trouble," Houston said.
"If you've got the confidence to back yourself, there's no reason why you shouldn't try to sell it yourself for a couple of hundred dollars of ads."
Thousands of Kiwis are also wired for sales via the internet, with many listing their homes on the online auction site Trade Me. The site lists properties for just $49.95, which includes 20 photos.
Another popular sales option is a marketing company, which for a fee of about $400 to $500 will advertise a property but leave the negotiations up to the buyer and seller.
Ali Clarke, the managing director of HomeSell, which offers marketing services to real estate buyers and sellers, said more homeowners were selling privately to avoid paying commission and to have more control over their sale.
Clarke said that with present house prices, the commission could end up being thousands of dollars, and many homeowners saw that as a lost opportunity for other investments.

UK House prices to rise 7%

2006-06-09T10:40:00.000-07:00

First time home buyers in the UK may struggle to find affordable homes over the coming months as house prices are set to increase by seven per cent, predictions indicate.
The forecast from the Council of Mortgage lenders (CML) is more than triple the two per cent inflation expected at the start of the year.Lending is also likely to be more buoyant for those looking for a mortgage, reaching £310 billion rather than the £285 billion previously forecast.
Jim Cunningham, CML senior economist, said: "The immediate signs are that demand will remain robust over the next few months."
However, the CML expects that the strength of the housing market will cause interest rate rises, with interest forecast at 4.75 per cent at the end of the year.
The increases would be "likely to result in a modest fall in the level of transactions in the second half of this year", Mr Cunningham continued.
First time buyers should remain aware that higher interest rates may cause more people to fall behind with mortgage repayments, leading to more repossessions, according to CML predictions.
The trend of decreasing transactions predicted for the second half of the year was expected to continue into 2007.
For first time buyers, prospects look bright in 2008 when lower inflation may see interest rates reduce.

First time home buyers ignore mortgage rate increase

2006-06-09T10:14:00.000-07:00

Recent RBA induced mortgage rate increases are unlikely to stop first-home buyers from entering the housing market, with finance-boosting tax cuts helping to cushion the blow, according to analysts.
While last month's rate rise came as a surprise to many, it is not expected to significantly dent the confidence of prospective home buyers, with conditions continuing to prove favourable.Housing finance figures published earlier this week by the Australian Bureau of Statistics (ABS) showed the proportion of all home loans taken out by first home buyers rose to a four-year high of 19.1 per cent in April, from 18.4 per cent in March.
CommSec chief equities economist Craig James said while the latest rate rise would have scared some potential buyers off and caused others to redo their sums, for most it should not have had too much of an impact.
"In May, people would have weighed up the fact that rates have gone up, but there is also a tax cut coming through," he said.
"So in terms of servicing the debt, most probably it would have worked out as pretty much line-ball.
Advertisement:"I think we're going to see first home buyers as a proportion of the market continue to edge a little bit higher, holding in the order of 19 to 20 per cent of the market."In early May, the Reserve Bank of Australia lifted the cash rate by a quarter per cent to 5.75 per cent.
Recent stronger-than-expected data had led to renewed talk of another rate rise this year, but Mr James said potential first-home buyers would again do their sums.
"They'll factor in a quarter per cent rate hike, and provided that's affordable, then clearly their plans won't change," he said.
House prices in most capital cities had flattened out, income levels were rising and the jobs market was strong, meaning improved affordability and access to the housing market, he said.
The Mortgage Industry Association of Australia (MIAA) said the May rate rise was unlikely to have much of an effect on new home buyers when taken in context.
"In some areas of Australia we're seeing the pressure on housing prices dropping a bit, so that's making housing a little bit more affordable," MIAA chief executive Phil Naylor said.
"Especially with those tax cuts brought into the mix, provided people divert that into their mortgages rather than elsewhere, that should counteract any impact of the interest rate increase."
The trend in the proportion of all home loans taken out by first home buyers had been gradually rising in the few months to April and was likely to lift further, Mr Naylor said.
"It might bounce down a little bit if the impact of the interest rate increase comes in, but we think the trend will still continue upwards over the longer term," he said.
Source: News Corp

Home mortgage lending changes in non traditional loan products

2006-06-09T09:55:00.000-07:00

Rapid change in the home mortgage and home equity lending industry raises fundamental issues about fairness and levels of risk, Federal Reserve Governor Mark Olson said on Wednesday.
Olson did not address the outlook for the U.S. economy or interest rates in comments to a Federal Reserve Board public hearing on the home equity market.
The Chicago hearing will be the first of four to be staged over the next month, and Olson noted it has been four years since the Fed last held such hearings.

"In those four years it is hard to believe so much change has taken place in the industry," he said.
The growth in non-traditional loan products such as adjustable rate mortgages "certainly is the most significant change that has taken place in the marketplace and it has raised some real issues," Olson said.
The central banker said the rise of the secondary mortgage market has created a "voracious appetite" for loan products and that "it is not clear we have the same checks and balances, and that underwriting is done as carefully."
The fundamental asymmetry of knowledge between mortgage lender and recipient also creates "a real responsibility for mortgage lenders not to be abusive of that process," he said.
"Every time I have sat down to close my own mortgage loan I have felt at a disadvantage in terms of my understanding; so I can imagine what a first time buyer must feel," Olson said.
Source: Reuters

US Mortgage foreclosure rate ramps up following job losses.

2006-06-09T03:43:00.000-07:00

US home foreclosures on home mortgages are on the way up.
Nationally, foreclosures are up 38 percent, higher than in any quarter of last year, property tracker RealtyTrac Inc. said. The numbers are even grimmer in the Midwest. Michigan and Ohio, battered by automotive-related job losses, together recorded 45,000 mortgages entering some stage of foreclosure in the first quarter.
Those are increases of 91 percent and 39 percent, respectively, compared with last year's fourth quarter.
There are many reasons for the growing number of defaults, and there are suggestions that the foreclosure trend may soon worsen.
Layoffs attributable to corporate downsizings, health care issues, increasing debt levels and rising interest rates all are factors.
In addition, a growing number of homeowners are relying on adjustable-rate mortgages, catching some people by surprise when their monthly payment rises.
Significantly, some of those ARMs were offered with an initial three-year to five-year period in which the rate was fixed.
At the end of that period, the mortgages will be reset at prevailing rates, potentially upending borrowers because interest rates have been rising.
For many such people, that moment is approaching.
"The increases we've been seeing in foreclosures don't even reflect the worst-case scenario that could happen when the $2.7 trillion in adjustable-rate mortgages are reset over the next 18 months," said Rick Sharga, vice president of marketing at RealtyTrac.
Another factor is the impact of rising property values.
And in some cases people stretched to qualify for a mortgage only to be undone by higher utility and gasoline costs.
"During the refinancing boom people found themselves qualified for homes they might not have qualified for if the interest rates were higher," said Jeff Metcalf, chief executive of Record Information Services Inc., a Kaneville, Ill.-based collector of market data.
Losing jobs can and has triggered mortgage defaults.
Consider Archie Tolar, who said he once earned about $3,000 a month as a salesman at a suburban Chevrolet dealership.
Since losing his job in 2002, Tolar has struggled to make ends meet, relying mostly on $400 a month in disability payments.
"To go from $3,000 a month to $400 doesn't even cover the mortgage," the Harvey, Ill., resident said. ABN Amro Mortgage Group Inc. filed a mortgage foreclosure against him in April.
Although the numbers are higher, they are below where they have been during recessionary periods, said Alexis McGee, president of Foreclosures.com, another property tracker.
"It's a big jump, but from very, very low numbers on a historic basis," McGee said.
Source: Chicago Tribunal

Slower home market opens the door for investors

2006-06-09T03:21:00.000-07:00

The Mortgage Bankers Association reports that a growing number of homeowners are having a tough time making their mortgage payments, and rising interest rates are making refinances and quick sales difficult. Investors who specialize in foreclosures thrive in this climate, posting ads in poor neighborhoods with promises of speedy cash sales or weeding through court filings to locate distressed homeowners. While some investors offer enough money for homeowners to pay off the mortgage and pocket the difference, others persuade cash-strapped homeowners to sign over the title, remain in the home as a tenant, and possibly repurchase the property at a later date. However, some experts urge homeowners to obtain advice from a financial counselor or seek help from their lender instead, as some of these transactions result in the homeowner being evicted after signing the property over to the investor. Legislation has either been passed or is under consideration in several states--including Illinois--that would force foreclosure rescue companies to clearly disclose the terms of the deal and give homeowners a certain number of days to back out.
Source: Wall Street Journal

$300K is now the average mortgage

2006-06-09T02:50:00.000-07:00

Figures released by Australian Finance Group (AFG) reveal that the average new Australian mortgage broke through the $300,000 mark in May 06. The average new mortgage in May was $301,000; up from $264,000 in May 05. This represents an 11% increase in the past 12 months.
Driving the trend is Western Australia, where the average new mortgage rose to $319,000 - a 35% rise over the past year. AFG, the nation's largest mortgage broker, also recorded its biggest ever proportion of mortgages advanced to investors in WA, where 48% of new loans were for investment purposes.
Queensland figures also showed strong increases, with the average mortgage in that state sitting on $297,000, up from $243,000 in May 05.
Other states showed less dramatic increases, with NSW shifting from $367,000 in May 05 to $371,000 in May 06.
Victoria showed an upward trend from $248,000 last year to the current figure of $276,000.
The report also showed that for the first time, more than 20% of new borrowers are choosing fixed interest rate mortgages. This trend is not surprising as borrowers brace themselves against possible future rate hikes.
Overall, however, it appears that May's interest rate rise has had little impact on the nation's mortgage market.
"We had our best month ever in May, so there's no sign at all that the rate rise has had an impact on our business," said Malcolm Watkins, executive director of AFG. "While the $300,000 may not be a definitive figure, it's strongly indicative of what the market is doing, especially with the continuing resource boom driving WA."

Home loan approvals down in ACT as first home buyers re-enter the housing market

2006-06-07T04:08:00.000-07:00

The slowdown in the housing sector has been further confirmed, with figures showing a drop in home loans before the Reserve Bank last lifted interest rates.
The Australian Bureau of Statistics said the number of mortgage approvals fell 0.5 per cent to 59,459 during April. There was a 1.6-per-cent drop in home loans for the construction of dwellings, ahead of the May interest rate rise.
The Reserve Bank board is meeting today for the first time since that rise.
Home loans numbers for the purchase of new homes increased 0.7 per cent.
But mortgage loans for the purchase of established homes dropped 0.5 per cent, falling to 52,254.
The fall in mortgage loans was steepest in the ACT, where home loans were down 14.8 per cent (following a 31.7 per cent increase in March).
Mortgage home loans rose 6.6 per cent in Tasmania, 4 per cent in Western Australia, 2 per cent in NSW, 1 per cent in the Northern Territory and 0.6 per cent in Queensland.
However, mortgage approvals were down only 0.1 per cent in Victoria and the home loan market stayed steady in South Australia.

National Australia Bank lead credit rate increases

2006-06-07T01:54:00.000-07:00

The major banks and credit unions have increased credit card interest rates by up to four times the Reserve Bank's official rate rise, according to source research firm Cannex.
National Australia Bank passed on larger than official rate increases to its customers since the official rate rise.
On May 15, it raised its rates on gold rewards cards by 0.85 percentage points - more than three times the 0.25 percentage point rate rise on May 3.
Rates on other NAB cards, including standard Visa and Mastercards, were increased by 0.34 percentage points.
The country's big credit unions managed to get their rate rises in place in April before the RBA move, raising the rate on the national MyCard Mastercard by 1 percentage point.
St George, Westpac, ANZ and Commonwealth Bank have only introduced rate increases of 25 basis points in line with the official rate rise.
The news is better for Queensland consumers after Suncorp slashed 1.95 percentage points from the rate of its Suncorp Clear Options Standard Visa card on May 15. Bank of Queensland was in line with the RBA rise, but raised two of its products by only 20 basis points.
Australian Consumers' Association senior policy officer Nick Coates says those institutions raising rates above the official ones are "price gouging".
"We believe that when there is an official increase of one quarter per cent the banks and other card issuers should not be allowed to make higher increases," he says.
"This behaviour suggests that some banks are using credit card customers to claw back revenue they lost as a result of the RBA's recent clampdown on bank interchange fees."
NAB head of cards Andrew Maitland defended the rate rises on gold cardholders, asserting in a statement emailed to The Courier-Mail that rival products marketed by ANZ and Commonwealth Bank carried higher rates.
NAB spokeswoman Kerrina Lawrence says different percentage increases were passed on to cardholders depending on the competitive position of each product in the market.
"It takes into account the RBA's rate rise and NAB's competitive position," she says.
CUSCAL, which represents 85 per cent of Australian credit unions, yesterday distanced itself from the decision to raise rates on credit cards marketed by its members.
The head of public affairs at CUSCAL, Julie Sheather, says the move to increase rates was made by Citibank which is the official issuer of the MyCard product marketed by credit unions.
Since acquiring the CUSCAL credit card business in May 2004, Citibank has assumed control over interest rate decisions.
The ACA's Mr Coates queries the size of the rate hikes on credit union Mastercards.
"We would like to think that alternative financial institutions bring greater competition to the marketplace because they need to be able to break down some of the pricing structures existing between the banks."
The higher-than-expected rate increases come as banks' reputations are again under pressure.
Nielsen Media researches rolling survey says the average satisfaction reading for the four major banks slumped by 3 percentage points in the March quarter alone -- and higher fees and charges were to blame.
The average satisfaction reading for the four major banks has now fallen to its lowest in three years.
According to the Neilsen reputation survey, ANZ was the worst performer in the March quarter, falling 5.1 percentage points to a reading of 82.3 per cent.
In terms of poor performance for the quarter, it was followed by Westpac (which fell 3 percentage points to 77.8 per cent), Commonwealth Bank (down 2.8 percentage points to 72 per cent) and National Australia Bank (down 1.3 percentage points to 77.8 per cent).

Y Generation buy into the Australian Dream

2006-06-06T20:47:00.000-07:00

The Y generation buy into the Australian dream of home ownership Mortgage Shoppers in the Y generation [18 to 28] want to own their own home. And they want a house with a backyard more than they want a low maintenance apartment or townhouse. The notion that this generation are a surly bunch of lazy, free-loading spongers may be true for some, but a growing number want to leave the family home, where many enjoy rent free and even board free accommodation with Mum and Dad, for the independence and wealth creation of home ownership.In fact many are having to do what there parents had to do. Get a steady, well paying job, spend less, and buy in the less desirable end of town to get a foothold in the property market, and then move up as their incomes and equity in their home move upward.Property is certainly not as affordable as it was in times gone by, but with a savings plan, good money management and a solid work ethic, home ownership is still an achievable dream for the Y generation.