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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Friday, April 27, 2007
Mortgage interest rates should remain stable after suprisingly low inflation figures delight the finance markets
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.
Print Email
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.
Print Email
Wednesday, April 25, 2007
How to spot an honest mortgage broker to source your home loan
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
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
Saturday, April 21, 2007
Housing prices tipped to rise
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
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
Monday, April 16, 2007
Calls to scrap mortgage comparison rates as they are not understood and open to lender abuse
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
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
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