Mortgage Loans, Home Loans, Bad Credit Home Loans

A top up in the FHOG offered by the Victorian Government has contributed to Victoria leading the country in new building projects during April 2010.

The sale of new homes increased by six per cent in April due to strong growth in Victoria, which recorded a 27.6 per cent increase to make it a clear leader, a Housing Industry Association (HIA) report shows.

Victoria saw an increase in sales of multi-units of 8% after a couple of slow months earlier in the year.

Over the three months to April 2010, new detached house sales were up 19 per cent in Victoria and 1 per cent in South Australia.

But they were down 6 per cent in NSW, 4 per cent in Queensland and 2 per cent in Western Australia.

Detached new home sales increased by 27.6 per cent in Victoria and 4.3 per cent in SA in April.

Meanwhile sales figures for detached dwellings fell 9.6 per cent in NSW, 4.5 per cent in Queensland, and 8.2 per cent in WA.

HIA chief economist Harley Dale said the new home sales report of Australia’s major residential builders showed new home building in Victoria defied higher interest rates due to the state government’s first home buyer top-up grant for new dwellings.

However at this stage it is not clear how long such an increase is likely to continue.  Auction clearance rates over the last couple of weeks are significantly down.

Non-Bank lender and Mortgage Manager, Mortgage EZY has announced it will acquire Great Pacific Finance’s $375 million loan book in a bid to build up its loan portfolio.

The non-bank lender’s executive chairman and founder Peter James said the purchase substantiates the company’s strong financial position in the market.

According to Mr James, MortgageEzy  has had several offers to purchase other loan books in recent months, however, the company wanted to wait till the timing was just right.

“Timing is imperative and this was the most tactically significant and sensible one for Mortgage EZY now however, tomorrow is always another day,” he said.

Under the terms of this acquisition Trail obligations to  the Great Pacific Introducers would be honoured.

The acquisition comes hot on the heels of the company’s recently launched uQUIT variable term loan, which slashed 20 basis points off standard wholesale pricing.

According to Mortgage Insurer Genworth, Mortgage demand is down approximately 20%. Despite this the company is fairly positive about future outlook.

Certainly the demand for high LVR products insured by Genworth is probably down by as much as 30%.

But even with the 30 per cent slump in demand, Genworth continues to perform well and expected further improvement in the second half of the year.

The overall mortgage market environment is such that both consumers and lenders are more cautious and this has the affect of reducing the number of mortgage deals going to a Mortgage Insurer.

During 2009 historically low interest rates had helped home affordability, while the boosted first home owner’s grant had lifted credit demand, leading to higher premium income for Genworth.

Most Home Owners lack the knowledge and experience to choose the correct home loan for their financial circumstances and requirements.  Many people are making their choice incorrectly and are paying for it dearly.

Some home Owners only care to know that their home loan is with a large bank, others only focus on interest rate quoted, but few take into account loan features.

When home loans are discussed, interest rates are often given more weight than is sensible. Everyone seems to have a strong opinion on the best lender and home loan, with their prior experience often seen as expertise. Too often, a potential borrower doesn’t shop around, believing there is little difference between lenders, loan product suites and/or that one lender is much more secure than another.

According to a recent survey of Home Owners  by Mortgage Choice,  only 22 percent of Australians base their choice of lender on the fact that it was ‘the cheapest all-round’. This means  that majority of borrowers do not do so. How much money do these borrowers waste by not looking at all the facts and figures?

While the interest rate that you pay on your home loan is important,  potential borrowers shouldn’t look at that aspect alone before choosing a lender and loan product. Home Loan fees should also be carefully considered as should features such as offset accounts and redraw facilities. Service quality is another element.”

It is all too easy to approach the lender where you already hold your bank accounts – but they do not necessarily offer the best fit product.

“Although it is tempting to make life changing decisions based on the opinion of people closest to us, taking out a home loan is a very important financial commitment that often has ramifications if executed incorrectly. Take the time to choose wisely!”

According to a new survey, Australian Mortgage Brokers are amongst the most satisfied in the world.

Smartline Personal Mortgage Advisors and Mortgage Choice took out the top two spots in the recent bi-annual survey of more than 2,000 franchisees.

A survey was compiled by 10 Thousand Feet, and assesses each franchise based on set criteria including renewal, recommendation, rewards, passion and support.

Smartline Home Loans have come out first for a second year in a row.

Mortgage Choice took out the second spot, having increased its satisfaction rating among its franchisees by 22 per cent.

In March 2010, the number of monthly seasonally adjusted housing finance commitments for owner occupation decreased by 12.1% in the Territory and by 3.4% nationally. Nationally, this is the sixth consecutive monthly decrease whereas it is the second consecutive decrease in the Territory. Declining commitments reflect the impact on affordability of strong growth in housing prices across Australia over the past year, four increases in interest rates by the RBA between October 2009 and March 2010 and the cessation of the First Home Owners Boost (FHOB) on 31 December 2009.

Home Loan Numbers

In seasonally adjusted terms, there were 370 housing finance commitments in the Territory for owner occupation in March 2010, a decrease of 12.1% from the previous month and a decrease of 29.9% since March 2009.

In the year to March 2010, a more stable measure of annual growth, the number of Home Loans in the Territory increased by 8.2% to 5565. Nationally, the number of housing finance commitments increased by 9.8%.

Home Loan Commitments

In March 2010, the value of seasonally adjusted housing finance commitments for owner occupation in the Territory decreased by 18.3% compared to the previous month. In the year to March 2010, the value of housing finance commitments increased by 20.7% in the Territory and by 18.7% nationally. In the year to March 2010, the average loan size in the Territory increased by 12.4% to $279 950 and by 8.5% to $272 725 nationally.

First Home Buyers

In March 2010, the number of mortgages taken out by first home buyers in the Territory decreased by 33.9% (in original terms) from the previous month to 41. Nationally, first home owner buyer commitments increased by 2.6% in March 2010. Compared to March 2009, first home buyer commitments declined by 66.4% in the Territory and by 52.7% nationally. In year on year terms, first home buyer commitments in the Territory declined by 6.2% in March 2010 (see chart 3).This reflects the impact on affordability of strong growth in housing prices across the Territory over the past year, four increases in interest rates by the RBA between October 2009 and March 2010 and the cessation of the FHOB on 31 December 2009.

The HIA chief economist has spoken out about the housing shortage in Australia, saying that an urgent housing reform is required to ensure that people have a place to live.

According to Mr Dale, reducing the supply side obstacles that stand in the way of boosting Australia’s new housing stock represents one of the primary challenges facing policymakers in 2010.

“Issues related to land supply, planning systems, infrastructure taxes and charges, credit restrictions, and skilled labour shortages are all artificially restraining the ability of a highly efficient new home building sector from meeting the housing requirements of Australia’s growing population,” Mr Dale said.

While government does understand that urgent action is required with respect to housing, things are not happening fast enough.

Given that we are currently approx. 110,000 dwellings short, unless urgent and extreme action is taken, the figure could escalate to just under 500,000 by the year 2020.

Property Auction clearance rates have improved somewhat all around the country last week.

Based on information provided by RP Data, results are still significantly weaker than in the first part of this year.  Clearly several interest rate increases in a row have had the desired affect of slowing down the property market.

Nationwide, the weighted average clearance rate was recorded at 64.6 per cent last week.

While Sydney’s clearance rate improved to 65.5 per cent, Melbourne saw a decrease to 73.5 per cent, one of its lowest results this year.

Brisbane and Tasmania both rated 26.7 per cent, while Perth and Adelaide rated 33.3 per cent and 51.3 per cent respectively.

Other than the increase in interest rates the changes to laws in relation to property acquisition by overseas residents have undoubtedly also had a slowing affect on the market.

The Reserve Bank of Australia has come out against allegations in the media that Australia is in the midst of a housing bubble.  RBA is confident that this is not the case.  To ensure that our market is healthy, RBA has called on both lenders and borrowers to be prudent in taking on financial obligations.

Fears of a property bubble emerged after the Australian Bureau of Statistics house price index rose 20 per cent in the year to March.

But RBA head of financial stability Luci Ellis said Australian house prices have merely recovered some of the losses experienced during 2008.  Merely quoting the 20% increase without reference to the price drop during 2008 is irresponsible.

Ms Ellis said recent data suggested Australia does “not have a credit-fuelled speculative boom on our hands”.  Our Property prices are a reflection of supply and demand.

“It”It will therefore be important for lenders to remain prudent in their standards.

“It will be equally important for prospective borrowers to have realistic expectations, and not to rely on a hoped-for capital gain in order to service their debts.” As lending in Australia is based on income not assets, borrowers need to be able to qualify for the  home loan they are taking with their income.

She told a residential property conference housing prices have been under upward pressure in Australia, with most short-term drivers coming from the demand side following the increased first home-buyers grant, low interest rates and lower than expected unemployment.

In fact the housing shortage in Australia is one of the main drivers for property value growth.

“Some of that pick-up in construction does seem to be happening.”

She said the supply of housing was always going to be quite “sluggish”.

The more that housing prices rise, the more some people might feel they must stretch their finances to afford a home, she said.

She also said fewer households had bought their homes without debt.  Most people do need to apply for a home loan in order to purchase their home or an investment property.

Across the mortgage market, lending standards were now a little tighter than they were a few years ago and the fraction of low doc loans was now lower than it was two years ago for both owner occupiers and investors, she said.

As well, only a minority of recent home loan borrowers started with a loan to value ratio above 90 per cent, she said.  In prior years we had lenders offering 100% home loans - these are now not available.

Ms Ellis also revealed the RBA has been carefully watching lending standards in the important first-home buyer market segment.