Dec 30

The Loan Market Loan Group has come out to say that mortgage brokers should use the holiday downtime to discuss Mortgage Health Checks with their clients.

Some experts are predicting that interest rates in Australia could go up by as much as one percent during 2011.  Borrowers who may be particularly vulnerable to future rate increases should review their current home loans and see if their need to either refinance their mortgage with a new loan/lender or simply fix some of the loan to protect themselves from expected rate increases.

A mortgage broker is best placed to review an individual home loan and determine whether any changes could be beneficial to their clients and therefore recommend these.

Home Loan health checks are free to the borrowers but could save them a lot of money and are therefore highly recommended.

Dec 23

To assist First Home Buyers with the genuine savings requirements, St George will now accept rental payments as evidence of genuine savings.

The requirement will be at least 12 months satisfactory rental payments through a property managing agent.

“This is a significant breakthrough for first home buyers and a move which could be a major boost to the home finance industry,” Loan Market chief operating officer Dean Rushton said.

First Home Buyers have been at a disadvantage for quite some time with both property prices and interest rates increasing significantly over 2010. Furthermore there has been an overall reduction in the amount of the First Home Owner Grant while lenders continue to insist on a deposit of at least 5%.

Up till now, all Australian lenders have required a percentage of the purchase price – normally five per cent minimum – to be saved for all loans.

“But if rental payments were taken into consideration as a factor in assessing genuine savings that would enable many people to pursue the dream of home ownership,” Mr Rushton said.

“St George has now moved to accept rental history as a form of genuine savings and they should be applauded for this decision as it will enable a lot more people to realise the great Australian dream of home ownership.”

Dec 22

The level of consumer satisfaction with CBA has significantly dropped as a result of the bank’s large interest rate increases during November 2010.

Satisfaction rankings among CBA’s home loan customers have dropped to the lowest level in five years, allowing long-time rival Westpac to catch up and share equal second spot among the big four.

A large number of CBA executives have pay bonuses linked to consumer satisfaction – these will clearly be affected.

The latest figures from Roy Morgan Research show CBA’s overall satisfaction rating fell to 74.4 per cent at the end of last month from 75.3 per cent in October.

Despite the fact that most of the other banks in Australia increases rates within only a few basis points of the CBA rise, their level of consumer satisfaction came in better than CBA.

The Roy Morgan figures provide the first official snapshot of satisfaction among retail banking customers since last month’s round of super-sized home loan rate increases.

CBA came under fire from customers and politicians when it lifted its standard mortgage rate by 45 basis points, almost double the increase in the cash rate announced by the Reserve Bank.

Only two months earlier, CBA was ranked behind ANZ, trailing the big-four leader by just 1.5 percentage points. The poor November performance widened the gap to 2.4 percentage points. Satisfaction with CBA among its non-home-loan customers also fell.

CBA is concerned about their drop in customer satisfaction and intend to invest more money in improving the bank’s technology with the view of offering a better consumer experience.

ANZ maintained its position as the leader among the big four, with a 76.8 per cent satisfaction rating overall. It was the best performer among home-loan and non-home-loan customers.

NAB, which has used discounted mortgages to win over customers, had the biggest jump in satisfaction ratings, surging 4.1 percentage points to 72.7 per cent in the year to the end of last month.

Dec 21

An analysis of home loan arrears of Australian borrowers by Fitch Ratings, demonstrates that as of September 2010 one per cent of borrowers were one month or more behind on their mortgage repayments, with the highest arrears numbers identified in Western Australia and Queensland.

Fitch also reports that borrowers who are in arrears tend to have larger home loan balances than average.
The data covers around $155 billion in home loans and around 13 per cent of the national mortgage market. This survey included a larger sample than earlier reports as it also includes the arrears data on the “internal securitisation” undertaken by banks as one of the responses to the financial crisis.

Fitch said Western Australia and Queensland experienced “a remarkable deterioration in performance over the last year”, with arrears of 30 days or more increasing to 1.97 per cent and 1.54 per cent respectively in September 2010 (and versus 1.37 per cent and 1.12 per cent in September 2009).
Those areas that normally do not do well financially still continue to to have the largest number of borrowers behind in their mortgage.

It further reported that South Western Sydney and the Central Coast north of Sydney, the Gold Coast in Queensland and the South West region in Western Australia are still experiencing delinquency rates far above the national average.

As in the past, Fairfield-Liverpool continues to be the worst performing region in Australia, with one delinquent mortgage out of 60 and a 30+ day delinquency rate of 2.81 per cent.

Nelson Bay, north of Newcastle, remains the worst performing postcode overall, recording a delinquency ratio of 8.0 per cent by dollar amount and 3.3 per cent by number of loans in arrears.

Other problematic suburbs include Budgewoi in Newcastle; Mandurah, south of Perth; Casuarina in Perth; Richmond in north-west Sydney and Helensvale in Queensland.

The above figures include both conforming and non-conforming mortgage arrears.

Dec 20

The banking industry changes proposed by the treasurer last week in an effort to introduced more competition to Australian lending does not worry the big banks. In fact after the proposed changes were announced bank shared jumped in a indication that the proposal aids rather than hinders the big banks.

In fact, the proposal to ban loan exit fees will only leave the smaller lenders bleeding.

The big four banks have already started to abolish these fees because they already take in so much money and carry such profit margins that they would not be affected in the least by the abolition of these fees.

For example, the standard variable rate among the big four currently sits between 7.67 per cent and 7.86 per cent, according to data from infochoice.com.au.

Compare this with some of the cheaper rates offered by non-bank lenders such as QuickDirect, HomeStar and Resi Mortgage Corporation. These rates are as low as 6.65 per cent and the majority are at least half a percentage point below the big banks.

Smaller lenders offer better deals on rates so they charge bigger exit fees, commonly called “deferred establishment fees” (a name that just confuses everybody).

These exit fees can be several thousand dollars because they aim to deter borrowers  from refinancing early before the smaller lenders get a chance to profit from the transaction.

Mortgage and Finance Association of Australia chief executive Phil Naylor sums it up nicely: “Non-bank lenders have been able to offer consumers very competitive interest rates by deferring some of the setup costs into deferred establishment fees which are paid only if there is an early termination of the loan”.

“Exit fees may in fact be replaced by establishment fees, making it harder for borrowers to get a loan,” Naylor says.

Or they may simply lead to non-bank lenders increasing their rates to be closer to those of the banks.

Removal of the exit fees is not at all in the interests of the consumers but rather is a tool to assist the already big and powerful at thew cost of the smaller players.

In a similar vein is the move to give the ACCC powers to prosecute banks “signalling” rate rises to each other.

The banks’ response to that law will be to simply shut up and say nothing at all about their views on interest rate movements, which will leave consumers less informed.

Dec 17

National Finance Club who were sold to Firstfolio last month are looking to implement strategies which will double their business by mid 2011.

Firstfolio will make it possible for NFC to offer customers a broader range of home loan products as well as a range of add-on services and networks.

NFC would like to capitalise on the increased borrower interest in taking their home loan business to a non-bank lender.

Certainly the turning tide against the banks, combined with NFC’s ability to offer competitive loans for the borrower backed by personal service for brokers, has helped the business to steadily increase  business month on month.

The National Finance Club loan volumes have increased by 17 per cent between June and September, which is 350 per cent more than loans written in January, 2010.

Volumes between September and December 2010 increased by 16 per cent – 400 per cent higher than January 2010.

Dec 16

If you are someone who is permanently looking around for a better mortgage deal, a cheaper interest rate, a cash refund, all the bells and whistles….you may be looking for a myth.

While it is important to be aware of the available finance deals to ensure that your mortgage offers you reasonable value relative to other available home loans, seeking a refinance in order to save 0.1% off your home loan is in most cases unwise.

All too often we talk to people who are looking for a cheaper home loan while the mortgage that they currently have could easily meet the description of  a ‘best home loan‘.  Under the new national credit legislation a lender is only supposed to accept a refinance application if the applicant will indeed benefit from the refinance. Refinancing to receive a cash incentive from a lender while staying with a fairly similar mortgage to the one you have today is not a good idea.

Frequently the difference between a best home loan and an average home loan is how the loan is used by the borrower. If your home loan already comes with a reasonably competitive interest rate youneed to ensure that your make the most of it by:

- increasing the frequency of your mortgage repayments;

- using your offset account correctly;

- being disciplined about your mortgage repayments;

- consolidating your more expensive unsecured debt into your mortgage;

Remember that at least 50% of the home loans in the Australian Market can be cheap home loans if you use them correctly. It is important to ensure that your mortgage works for you as hard as you do.

Dec 15

John Symond the founder of Aussie Home Loans has labelled the government’s moves to create a fifth pillar of banking a joke.

It seems that the government is looking to promote credit unions and building societies at the cost of other smaller lenders.

According to  Mr Symond,  the government has  simply ignored the contribution of non-bank lenders in sparking competition in the home loan market in the 1990s, and did not understand how they had contributed to competition in the past.  John Symond has told a Senate inquiry into banking in Sydney that there was nothing in the government’s reform package that would make any difference to the state of home loan competition in Australia.

Mr Symond claimed the non-deposit taking institutions were the ones responsible for introducing competition to the market in the 1990s.  He slammed the government’s reforms because they delivered “nothing” to those entities. If anything the abolition of exit fees will only hurt the smaller players and further reduce the number of affordable home loans available in Australia

“There’s nothing in these initiatives that helps those that brought competition to the market place. It wasn’t the banking sector that brought competition. It wasn’t the mutuals.

“I’m a fan of the mutuals. But to suggest that the mutuals can become the fifth force in banking quite frankly is a joke. They don’t have infrastructure, they don’t have technology, they don’t have the clout and reach.

The government needs to have a close look at who is currently offering the cheapest home loan deals – most of these are non deposit taking institutions. It is these lenders that need to be receiving government support and assistance to improve competition.

Mr Symond said the government’s banking reforms had confirmed his own view that “they don’t get it”.

“Why did they not consult the proven track record organisations who forced competition?

“I can’t see anything in there that will play any significant part in assisting competition.”

Removal of exit fees will simply lead to the introduction of other loan fees or higher interest rates.

Dec 14

As part of the proposed banking reforms it is expected that home loan borrowers will be provided a fact sheet to explain their mortgage.

The one-page document will set out the borrower’s monthly mortgage repayments as well as provide additional information to assist borrowers in obtaining a better home loan deal.

As part of the same reform proposal, mortgage exit fees will also be  made illegal from July 2011. Furthermore to prevent price fixing by the big four, ASIC   will be given the power to investigate price collusion among banks.

To assist non bank lenders to access funds for mortgages the federal government will be spending another four billion dollars on residential mortgage-backed securities.

Furthermore  in a bid to boost competition in the lending market credit unions and building societies will for the first time be allowed to issue covered bonds.

A study into how technology can be harnessed to make it easier for consumers to move between deposit accounts and mortgages will be conducted by the  former RBA governor BERNIE FRASER.

Dec 13

According to the Australian Bureau of Statistics, the value of Australian Home Loans has seen an increase of 2.8% in October, to a value of $14.1 billion.

The value of commercial loans has seen the most significant increase of 5.2 per cent to $29.6 billion in the same month.

All other loans and forms of finance have experienced a drop in demand during October 2010.  For example, personal loans fell 0.4 per cent in the month to $7.59 billion, seasonally adjusted,
Over the last few months there has been little price movement in the Australian Housing Market, as impact of interest rate rises earlier in the year has made borrowers far more careful with taking on any new loans.  The most recent interest rate increase has also significantly affected the real estate markets in the major Australian cities.

The levels of debt in Australia  remain very high with a record $1.01 trillion in the June quarter, according to the RBA, after nearly two decades of economic expansion and rising home prices.

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