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