Mortgage Loans, Home Loans, Bad Credit Home Loans

AFTER a year of significant property price growth there appears to be some stalling in the real-estate market.  Australia’s median house price rose 3 per cent in the March 2010 quarter — down from nearly 5 per cent growth in the previous three months.

According to reports by APM, five interest rate rises by the Reserve Bank, in combination with the  expiry of the first-home owners grant boost has finally had a dampening impact on property prices.

In Melbourne — Australia’s hottest property market — the median house price has grown to $549,980, up 6.8 per cent for the March quarter, The Australian reported.

Melbourne’s house prices jumped 27 per cent over the past 12 months, double that of Sydney, where house prices increased by 14.7 per cent.

Brisbane was the only capital to record a fall, with house prices slipping 0.1 per cent in the March quarter, but up 9.1 per cent for the year to a median of $451,388.

In Perth, house prices rose 1.1 per cent for the quarter and 9.4 per cent for the year to a median of $519,526, according to APM. The rapid recovery of the top end of the residential market, which is less sensitive to interest rates, is dragging up median prices

AMP economist Matthew Bell said the price growth for houses in the most expensive half of the market was nearly double that of the more affordable suburbs.

In Melbourne, the top half of the city’s suburbs showed price growth of 38 per cent for the year, compared with the bottom half at a still strong 21 per cent. Sydney’s top half of suburbs grew at 21 per cent and the bottom half at 10 per cent, according to APM.

Apartment prices around the country also showed some growth but not at the pace of houses, capital city figures varying between a fall of 4.5 per cent for Hobart and a rise of 13.7 per cent in Melbourne. Mr Bell said while overall price growth was positive in most markets, the market would slow this year.

More and More Australians are looking for a better mortgage deal and are refinancing their mortgage.

According to Aussie Home Loans, the level of inquiries to the mortgage broker from homeowners has spiked 50 per cent in the last three weeks.  Most people are looking for a lower home loan rate with lower monthly fees.  Fixed rate home loans are very popular as a result of market anticipation of more rate rises.

Aussie’s founder and executive chairman John Symond said it is great to see home owners get off “their bums and take a good hard look at their finances”.

“It shouldn’t take five rate rises in the last six months for people to shake off their apathy, but it has,” Mr Symond said.

Mr Symond said now was a good time for mortgage brokers to encourage their customers to refinance their home loan, before the RBA meets again next week.  Media speculation suggests that rates will be going up again next week.  The main driving force behind this is the growing inflation figures.

The new lending laws to take effect from July 2010 will allow the banks to analyse in detail the spending habits of loan applicants. They will have visibility of and can question you on why you have withdrawn an amount from your account and where did that amount go.  Some believe such review powers are excessive.

The idea behind greater access to borrower information is to identify applicants with problems and hidden debts.

Even if you have sufficient income to service the Home Loan your lender may take objection to your weekly visit to a TAB.

Giving a loanto somebody after having seen they have a gambling habit could be a difficult position to defend under the new laws.

Being Pregnant could potentially result in a loan being declined.;.

We are entering a very dangerous area here. It seems a gross invasion of privacy, yet it’s what the regulations require.

The new National Consumer Credit Protection Act laws will apply to all forms of credit – mortgages, personal loans and credit cards.

Some banks are already clamping down to comply with the new regulations, insisting on more bank statements with credit applications and quizzing customers about large cash withdrawals.

Lenders will also have greater insight into our spending habits from next year with new legislation on credit scoring.

This will allow banks to see debt repayment histories on credit cards, personal loans and mortgages, penalising those who have been late making repayments by just one day.

Getting a mortgage will become easier and cheaper for some, and more expensive and difficult for others depending on the risk profile that is established for you by a lender

Heavy Penalties will be imposed on  banks  and mortgage brokers who break the new rules, with up to two years in prison.

The new credit licensing laws being introduced in Australia are already producing differing interpretations by various Mortgage Broker Groups.

One of the Mortgage Aggregators, the First Folio Group is expecting it’s brokers to operate as it’s credit representatives.  First Folio has approx 1000 loan brokers on board.

Firstfolio CEO,  Mark Forsyth said he still had legal advisers on the case looking at the best outcome, but his feeling is that most brokers will decide that holding a licence is too much of an administrative burden and would prefer to have a credit representative status.

Vow executive Tony Newcombe said he expected that most of the 900 loan writers in the group would be licensed “because they want their independence”.

Vow had a launch party in Sydney last night. The group, which is backed by 20 per cent equity holder Macquarie Group, is the product of the merger of The Mortgage Professionals, National Brokers Group and The Brokerage.

Mortgage Brokers who chose to work as credit representatives rather than obtain their own credit license would naturally be limited to only mortgage products that are offered through their Aggregator group.

A new report issued by The Knight Frank Global Company , suggests that property price growth in Australia is number four amongst  47 listed countries.

It is clear that our economy has benefited from China’s rapid recovery from the global financial crisis and the Australia’s house prices increased by 13.6%, with particularly strong growth of 5.2% in the final quarter of 2009,

The only world property markets that showed greater growth than Australia during 2009 were  Hong Kong, Mainland China and Israel

The UK property market came in at 15th with just 3.4% growth while the US, still in the grips of the Global Recession, came in 28th place with a contraction of 3.1%. Dubai was one of the hardest hit countries, with property prices dropping a huge 42.1%.

A recent survey of home-buyers conducted by the Loan Market Group, has identified some interesting facts.

Majority of borrowers believe holding a savings account with a bank will result in an automatic interest rate discount when they apply for  a home loan with the same bank.

This belief has resulted in many borrowers being disappointed in the lack of flexibility and competitiveness of their own bank.

Most people do not understand the Home Loan market.  They do not understand for example that:

(i)  Some deposit is always required;

(ii) Bad Credit applicants can not borrow more than 80%;

(iii) A paid default leaves you with Bad Credit for a number of years;

(iv) Low Doc Home Loan still requires some documentation to prove you income;

“A lot of borrowers also believe that if they are a current client of a bank that they will automatically get a bigger discount when they apply for a home loan, but that is not the case.”

Mr Rushton said another misconception from borrowers was that the bank they have accounts with will automatically lend them as much as any other bank or lending institution has offered.

Most people feel that they have been pre-approved when all the bank has done for them was check their serviceability (ie. can they afford the mortgage).

Going forward, ANZ has decided that it’s credit assessment will be performed by it’s New Zealand arm.  This is a second outsourcing decision made by the bank, following on from a recent move to to have it’s mortgage settlemet function performed by Perpetual.

ANZ is intending to employ 15 mortgage credit assessors in New Zealand, taking the total such positions to 30. The bank said this was a 15 per cent increase in home loan credit assessment positions over the last six to nine months. Rising demand for new loans led ANZ to hire 200 additional credit staff.
In September 2009, the bank operated a small pilot in the use of credit assessors based outside Australia  These people were given the responsibility for processing loan applications in Australia.   The bank has recruited the first batch of 15 credit officers in February 2010.

ANZ believes that this move will enable the bank to access more suitably qualified staff and grow credit assessment capability more quickly.

The main reason for choosing New Zealand in preference to other countries is to ensure that the process is seamless and no loss in quality of service is experienced.

Outsourcing can introduce additional challenges to controlling quality and timeliness. After outsourcing mortgage settlement tasks to Perpetual last year ANZ customers experienced some delays.

Apart from mortgage assessors, ANZ currently has around 100 seats in a Wellington contact centre that supports the Australian call centres.

First Home Buyers are no match for cashed up investors in the Australian Property game.  More and more First home buyers are finding that they do not have the funds reserves to compete with investors, and are consequently regularly priced out.

Buoyant economy and strong jobs prospects have spurred established home owners to invest in property or upgrade their homes as house prices continue to rise.  Additionally overseas investors currently have a strong presence in Australia.

Official data released this week show that finance provided for housing fell in February for the fifth straight month.

Demand for home loans continued to drop, even before interest rate increases in March and April, with just 50,287 mortgages granted to owner-occupiers in February, Australian Bureau of Statistics (ABS) figures showed on Monday.

Loans were down by a seasonally-adjusted 1.8 per cent compared to January, which was more than 1.0 per decline that economists had forecast.

It brought the number of owner-occupied home loan approvals to a 16-month low, 22 per cent below their peak in September last year.

Average home loans are now 40% higher than in 2005, although the number of loans had not increased greatly.

A great contributor to the increase in property prices is the nationwide shortage of homes for sale.

First home buyers, on average, now put 40 to 45 per cent of their income aside for mortgage repayments while established owners were paying between 25 and 30 per cent.

The latest ABS figures show that a mild upwards trend in the value of loan approvals to investors was reversed in February, but the value of lending to investors still was well above the crisis levels of a year ago, by 26 per cent.

Three interest rate rises and an end to the federal government’s more generous first homebuyer grant at the end of 2009 were blamed for the steady drop-off in mortgage demand.

Unless the Federal government reconsiders returning to a more effective FHOG scheme, we will continue to see fewer and fewer First Home buyers in the property market.

Mortgage holders with plenty of equity in their properties are still looking to upgrade to a more expensive home despite rising interest rates.

Loan Market Group’s chief operating officer Dean Rushton said the brokerage had received a 38 per cent increase in the level of enquiries from owner occupiers wanting to upgrade their property.

“Around 60 per cent of our customers are considering selling to then upgrade to a bigger property,” Mr Rushton said.

“They mostly have a high level of equity in their existing home – sometimes as much as 75 per cent – and are wishing to upgrade into the next price bracket.”

Despite the RBA’s decision to lift the cash rate for the fifth time in six meetings earlier this month, Mr Rushton said rates were still below traditional average levels and the previous four increases had not had an overly adverse impact on the residential property market.

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An economic and property snapshot produced by PRDnationwide reveals a healthy property market, increased business confidence, and continued population growth.

Figures published in PRDnationwide’s Quarterly Economic & Property Report show business confidence hit a sixteen year high.

According to the report’s author, Aaron Maskrey, consumer sentiment grew 10 per cent in Queensland, 2.6 per cent in South Australia and 0.3 per cent in New South Wales throughout March.

“The successive rises in the cash rate has lead consumers to act conservatively – consumers are now more likely to use savings to reduce their debt, rather than to spend,” he said.

The report found that numbers of new dwellings increased in the fourth quarter by 13.8 per cent – or 5,096 new homes across Australia.

“Commencements have been increasing since the March 2009 quarter, which brings a much needed boost to the property industry,” Mr Maskrey said.

“However early figures coming through from the ABS for January have building approvals softening for the first time in five months. Possibly a result of the Federal stimulus package being wound back at the end of 2009,” he said.

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