Reverse Mortgages; Attorney General cautions seniors about using reverse mortgages

Reverse Mortgages are about to become popular with seniors as a way of funding their retirements, but are they all they are cracked up to be?

Reverse Mortgages supplement incomes

The South Dakota Attorney General's Office is reminding seniors to be cautious if considering reverse mortgage offers.

A reverse mortgage is a loan for homeowners 62 years or older that uses a portion of the home's equity as collateral. Through the terms of the agreement, eligible homeowners are usually promised an upfront cash payout with no obligation to repay the loan, and once they pass away or permanently leave their home the property then belongs to the lender.
In that scenario, the lender can reclaim the loan, fees and interest by selling the home after it is vacated.

Attorney General Marty Jackley encourages seniors to examine all requirements of the reverse mortgage and seek further assistance in making such a significant decision.

"Before entering into a reverse mortgage seniors should understand the types of reverse mortgages that are available, know the costs and fees associated with reverse mortgages, and understand any additional obligations for these mortgages," Jackley said in a news release.

The Attorney General's Office recommends the following tips to protect seniors:

• Consult with an independent financial adviser to find out what reverse mortgage package best suits your financial situation and needs.
• If you do not have a financial advisor, discuss your situation with a counselor approved by the US Department of Housing & Urban Development (HUD); HUD-approved counseling agencies are available to assist you with your reverse mortgage questions. You can call 1-800-569-4287 to find a counselor in your area.
• Make sure you understand all the costs and fees associated with the reverse mortgage.
• Find out whether the reverse mortgage you are considering is federally-insured. This will protect you when the loan comes due.
• Find out whether your repayment obligation is limited to the value of your home at the time the loan becomes due.
• Be wary of anyone who tries to pressure you into a decision that you are not completely comfortable with, such as investing the payments from your reverse mortgage into an annuity, insurance policy, or other investment product, or pressuring you into receiving a lump-sum payment over monthly payments.
• Obtain several offers from different reverse mortgage lenders in order to compare different options.
If you would like additional information about these types of offers, contact the Attorney General's Consumer Protection Division at 1-800-300-1986 or by email at comsumerhelp@state.sd.us.

Source: Mr Mortgage

New Home Buyers Grants for all, not just First Time Home Buyers

Second home buyers get a bite of the grants cherry with first home buyers 

In a new twist to stimulating the sale of new homes, the NSW Government has expanded the First home owners grant:

1. To get first time home buyers double the grant [from $7,000 to $15,000]
2. Give a new home buyers grant of $5,000 to anyone that builds or buys a new home, including second and subsequent home buyers that build or buy new housing.

This had to be good news for the home construction industry and the second home buyers, who typically could not afford new when they bought their first home. 

 The changing demographics of new home buyers

With more young people are seeking higher education and putting off making commitments with partners:

• Young adults are staying at home much longer [turning Japanese]
• or living in larger group homes [aping sit coms like Friends and New Girl?] 
• So the first home buyer is getting older, and older, and maybe a little more savvy and cautious. So the age lines between first home buyers and second home buyers is getting blurred.

After all, Blind Freddie can see that house houses are going nowhere or maybe backwards where they live, unless they are living in a mining town or close to one.

Somewhere in the last few years we hit a nexus between the lowest mortgage interest rates on record, the maximum lending multiples on record, the laxest lending policies on record, the highest immigration, and the lowest unemployment we have seen for decades. It was never going to get any better than it was in that period. And that combination is never likely to happen again in the next 30 years.

The glass is full for new home builders, but its a different type of full.

So RBA Governor Mr Glen Stevens was right when he told business people to get used to the new environment. You have to work with what you have. we should not expect the glory days to roll on for ever.
So yes I get that the glass looks "half empty" to those in the housing industry that saw the glass when it was brimming full. That brimming fullness cannot return anytime soon is all Mr Stevens was saying in my view. Turn your perspective to that the glass is half full, and you have to be the difference in making it fuller. Stop expecting Government handouts. Its been my experience that the biggest whiners about the welfare state, are the people that benefit most from the fact that we don't allow people to slip into abject poverty like some other Nations have of late, and yet these same whiners want the Government to bring the gravy train right by their front door.

What I would do if I were young?

 If I were young and unattached, [now there's a glass that's half empty] I would be thinking of how I could Get a better paying job.
Well the slow route seems to be education, and the fast track is heading for a mining job.
You see in my day there was a perception that you die before you get old, and that you only ever went to school the once. If you missed the boat you were destined for something else.
Well this never was the case, and certainly does not apply today.
Most of the young may live past 90 years of age. And they can have many careers. So go get the training to get big money early, learn how to invest the surplus. Then if you have a fancy to, go get the formal education. Don't forget one thing. That all knowledge is transferrable. What you learn doing work can apply to your higher learning, especially if its in the same area of endeavour.
The exception to this is if you have a burning desire to do something. Then do that.

So I would be making that my wealth decision, not buying or building a home. The other problem is that the stimulus concessions are revenue neutral for the NSW Government. In other words, the cost is the same to buy a home, its just that they have made it appear cheaper. Are home buyers that dumb? Maybe not. 

The Sydney property boom may have peaked nearly a decade ago, but has it bottomed yet? Too many things say it hasn't.

• The Greeks are caught in the revolving door. Was it their fault that their Politicians lied, or that the Euro club wanted to believe those lies that got them cheap money?
• The Spanish property market is going even lower, 
• The Chinese and Indian housing markets are going south, and 
• The US has the lowest interest rates ever, people living in Tent cities, and buying a home is still on the nose even after property fell 40% in value. 

Clearly the "101 monkeys" communication are operating here. And "monkey see, monkey do" is what is effecting our homebuyers, even if we have a different environment.

The real problem for new home buyers and why it can't be fixed easily

The real problem is that land prices in Australia are too high. They need to be half what they are to make building a new home make sense.
It can't be fixed because that price is mostly because Local and State Governments are addicted to the revenues they get from home sales and residential land development.
So besides developers paying too much for the land in the first place, big chunks of the cost of land development and building a new home are direct Government and council gouging. And home buyers are beginning to realise it. Would you want part the mortgage on your home to pay for the future infrastructure of the State. I thought that that was State Governments expense, but no, its new home buyers that pay.
If we can fix that problem we will be OK.

Source: Mr Mortgage

Mortgage Interest rates: RBA lowers rates .5%, but banks drag heels on delivering lower rates

More for me. The Banks get stingy with mortgage interest rate drops.

Yesterday, the Bank of Queensland (BOQ) was the first Australian bank to announce it will cut its standard variable home loan rate and its variable business loan rates by only 0.35 percent, when the Reserve Bank had earlier reduced the official cash rate by 0.50%. I call that stingy, if not greedy.

The BOQ has been financially troubled in recent times.

Its rare in Australia for banks to make loses, and that is what the BOQ has done in recent times. Not because of home loans or mortgage interest rates cuts, but their other risky lending policies.

Mr Stuart Grimshaw the Managing Director of the Bank of Queensland said that "continued economic uncertainty" had influenced their decision to hold back 15 basis points this month. Hope this does not mean "continued flawed lending practices." Because the bank has under performed in recent times they have suffered from “Increased competition" in retail term deposits continues to put upward pressure on the Bank’s cost of funds." More like the BOQ is out of favour with fund-raisers? My question is, did anyone at the bank get sacked for their poor lending judgements? If not, maybe its time to sack the board?

The BOQ was the bank that sacked mortgage brokers

If you are a mortgage broker who were duped by the BOQ when they closed the mortgage brokers channel, you might be guilty of rejoicing every time the BOQ hits bad times.

Shareholders will always come before mortgage customers with the bank

If you need proof of this, here is what Mr Grimshaw said. “When making decisions on rates we consider the needs of our customers and those of our shareholders. It is a difficult balancing act, but we believe passing on a 35 basis point cut is the responsible course of action this month,” he said. The treasurer's plea to pass on interest rate cuts goes unheard. The announcement follows federal treasurer Wayne Swan announcing his expectation that banks will pass on the cut. Mr Wayne Swan, the Federal Treasurer said, "The banks have the capacity to pass through, "given the fact that" they are very profitable, [The BOQ is the exception here.] "Their customers will be very, very angry with them if they do not pass through this rate cut." Well that is true of most banks, but the BOQ is the exception here I'm afraid. Money talks, but will interest rate jilted mortgage holders walk? "If Australians are unhappy with the approach of their bank in these circumstances, they should walk down the road and get a better deal." This is the storyline that the Treasurer has been giving to encourage Australians to switch banks to save money on mortgage interest rates.

The Bank of Queensland to hang on to the rate cute for now

Not only is the BOQ stingy, its also tardy, and will hang on to the rate cut all to itself for as long as they can.The BOQ will cut its standard variable rate by 35 basis points as of 11 May 2012, bringing its standard variable rate home loan to 7.11 per cent.

My recommendations. Give the Bank of Queensland a wide berth.

Don't even think about using the BOQ for a loan till 2015. They made many blunders with business loans and they might try to touch you for the shortfall. I recommend that you move to a non bank mortgage lender, and they have better interest rates than the BOQ and will pass on all or most of the rate reductions. If you are with the BOQ, or any other bank, [except for maybe the NAB], I would switch banks, or switch to a non bank lender. You will save heaps. Hope this helps you save big on mortgage interest rates. Rick Adlam: Mr Mortgage

Interest rates: Which way for RBA to go on interest rates.

The RBA meets tomorrow to decide on interest rate levels in Australia

In the twelve months to March 2012 inflation has fallen below 2%, and this is seen by many to be a good indicator that the RBA will reduce interest rates by .25%

Australia has the luxury of the ability to reduce rates at least two percent if the need arose to kick-start the economy, and some are saying that the time to act is now.

The "Goldilocks inflation rate band" in Australia is 2.0% to 2.8%. Last month recorded it fell to just 0.1% [for February].

The RBA would be reluctant to move on interest rates anytime inflation is in the Goldilocks band, Between 25% and 2.8%. Now that the inflation rate has moved below that hopes are rising in the mortgage belts of Australia that the rate will be reduced, at least to compensate for the big bank rate hikes in recent weeks to fill the profit gap squeezed by Government Policies that banned many bank fees and charges.

The inflation rate was just .1% for February and that may be a trigger to get the PBA to take action.

Market view is a hold on Interest rates

On the other-hand the market view is that the RBA is more likely to stay put on interest rates, and leave the cash rate at 4.25 per cent when it meets tomorrow.
With unemployment low at at steady 5.2%, and many believing that the RBA views house prices as needing to fall further to make housing more affordable, a hold on rates is the most likely income.

So the pinch on mortgage repayments looks to continue.

If you are feeling the pinch, maybe you should look at the great mortgage rates on offer at non bank lenders. That way you will get a reduction in home loan repayments regardless on what the Reverse bank decides.
Some lenders are offering rates near 1.0% below the banks, and they don't have shareholders to satisfy

Australian Mortgages in 2011 review & 2012 prediction

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?

1. 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.
2. 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. 
3. 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?

1. Be a good Saver. Don't throw money around like a drunken sailor.
2. Keep your mortgage on variable rates, as interest rates may be lower in 2012.
3. Credit may become hard to get. Get in now if you have a strong source of income.
4. 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

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?

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?

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

1. 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.
2. 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

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

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

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.

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

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?

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?

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

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

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?

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?

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

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.