Mortgage Loans, Home Loans, Bad Credit Home Loans

While low doc home loans are still very much available for genuine low doc applicants, what has changed is their availability for the borrowers who are dishonest about their financial position.

Mortgage Brokers and lenders were always responsible for ensuring that the home loans they provide are affordable to the borrowers. Prior to the introduction of the National Credit Code, borrowers could lie about their income and about being self employed whereas now this is somewhat more difficult.

Essentially genuine self-employed applicants whose tax returns are unavailable but who are able to provide some evidence for their business trading position and income, can still apply and qualify for a low doc home loan. However with the new rules, borrowers who are dishonest will be prevented from making a low doc home loan application as they will not have the required supporting documentation such as BAS statements, trading accounts etc.

As demand for home loans is in decline, banks and other lenders are doing their utmost to encourage new borrowers to take up their discounted home loan offers.

Fixed rates for popular home loans have been discounted  by up to 0.65 of a percentage point over the past couple of months as CBA, Westpac, NAB and ANZ are on the lookout for extra business.

Some variable rates fell by up to 0.15 of of a percentage point, according to Canstar Cannex calculations, based on $250,000  home loans.

According to statistics provided by Ratecity, Australia has seen 40,000 fewer buyers in the past 12 months, translating to a decline in demand for home loans to the tune of $11 billion.

Consequently lenders are jumping over each other trying to win a customer.

Customers with big deposits, or home loans in excess of $500,000, are perceived as premium customers and usually got the best deals.

Westpac is the latest to up the ante, yesterday announcing further fixed-rate reductions of up to 0.2 of a percentage point.

It is also offering a limited-time 20 per cent discount on the first year of new home and contents insurance with Premier Advantage packages.

Commonwealth recently vowed to beat any rate advertised by its big rivals until the end of this month on fixed or variable interest loans worth at least $100,000.

Currently the interest rates on fixed-rate home loans are well below variable rates and offer borrowers locked in stability, however borrowers who chose to fix now may find that they miss out on future rate cuts.

An army of over 23,000 Australians have voted for Australia’s best bank in the 2011 People’s Choice Awards.

The awards, hosted by Mozo, an Australian financial comparison website, requested that Aussies rate 201 financial providers on their service, savings and home loans.

ING DIRECT was voted Australia’s Best Bank for the second year in a row for its great value services such as savings accounts, and home loans. ING Direct was also picked as Australia’s most trusted bank, over CBA, Westpac, ANZ and the like.

Greater Building Society and ME Bank, who were voted as the providers of Australias Best Home Loans .

Borrowers were impressed with both lenders for not increasing their interest rates above the 25 basis points increased by RBA last year – consequently offering borrowers well priced home loans, without gimmicks an misleading advertising.

National Australia Bank took out the top gong for Australia’s best big bank.

It seems that CBA home loans are not as popular with us as are home loan offered by the smaller Australian lenders.

CBA’s home loans rating declined to 5.9 points, out of 10, from 6.7 points in the latest people’s choice survey conducted by independent financial services comparison website Mozo.

The decline follows the bank’s decision late last year to lift its rates on its variable home loans by 45 basis points well in excess of the 25 basis point increase at that time by the RBA

ANZ ranked the best of the big four home lenders, scoring 6.7 points, while National Australia Bank scored 6.4 and Westpac 6.2.

Greater Building Society was named Australia’s home loan provider of choice, scoring 9.4 out of 10, followed by ME Bank (8.8) and CUA (8.2).

In overall customer satisfaction, NAB’s high profile break-up advertising campaign appeared to reap rewards, helping the bank beat its big four rivals with a score of 7.1.

Westpac was second with 6.9, followed by Commonwealth and ANZ, which both scored 6.8.Smaller players again dominated in the overall satisfaction stakes, with Greater Building Society topping the list on 9.2 points.

ING Direct was selected as the best bank, most trusted bank and most recommended bank, while ME Bank was recognised as offering the best customer service.

Recent statistics provided by a number of lenders suggest that borrower demand for fixed home loans has doubled over the past few months.

Undoubtedly the discounts being offered by most lenders on their fixed rate home loans are being seen by many home owners and potential purchasers as great opportunities to obtain a cheap home loan. Some of the fixed rates are up to 1.5% cheaper than the lender variable rates.

Lenders have been forecasting the RBA to lower the official rate from the current level of 4.75 per cent in response to the volatile international economic climate and sluggish domestic consumer confidence.

“Despite the prospect of a long overdue cash rate cut, consumers have been taking a close look at these highly attractive fixed rate packages on offer,as it will take some time and a multitude of cash rate reductions before the variable home loans come anywhere close to the deals being offered on the fixed rate loans.

Every week we are seeing a new lender roll out a highly competitive and lower fixed rate package.

A QUARTER of Australian homeowners are struggling mortgage stress. Options are limited as it also remains difficult to find suitable rental properties. Higher interest rates, rising costs and a shortage of rental properties in many metropolitan areas are contributing to the higher cost of Australian housing overall.

National Consumer Confidence index suggests that over a third of respondent think now is a good time to make a home purchase.

According to figures provided by mortgage insurer Genworth, the number of homeowners facing mortgage stress has escalated to 25 per cent from 21 per cent in June.

Rental vacancies slipped to 1.8 per cent from 1.9 per cent in the previous month and below the equilibrium 3 per cent rate, according to data from SQM Research.

Homebuyer confidence fell 2 per cent from March, while 36 per cent think now is a good time to buy a home.

About 85 per cent of borrowers are still managing to meet their set home loan repayments on time, and more than 45 per cent have overpaid their home loans over the past year.

Many are cutting back on luxuries and various lifestyle costs in order to afford repayments.

Despite the decline, the report  found homebuyer confidence was three per cent higher than levels recorded during the 2008 global financial crisis.

Meanwhile, Australian homes cost 6.1 times gross annual household income, the highest among English-speaking nations, compared with 3 times in the US, US consulting company Demographia,

With the coming of the new regulations under the National Credit Code in Australia – lending rules have seen some significant changes, however there are still true low doc home loans available for borrowers who take the time to research the home loan market.

Over the next year, more people will require bad credit home loans as well as low doc home loans than ever before. The debt levels in the community are growing and more and more people are finding out that their credit history is not quite right, although their income levels are healthy and they should any non-conforming brokers have walked away from this industry with the implementation of additional rules under NCCP, however the demand for such loans is still there and growing.

“There are less brokers there and less re-entering the space. Subsequently, brokers who jump in now are getting a type of ‘first-mover’ advantage, notwithstanding the market has been around for a long while,” he said.

As the Australian home loan market is becoming more and more competitive, banks seem to have relaxed their lending criteria as they are competing of home loan costs as well as size of required borrower deposit.

Potential borrowers are sitting back and doing nothing. Aussies are attempting to save more before entering the property market. Where the market is today, prices are falling and fewer people are applying for home loans.

Just under 70 per cent of home loans now offer up to 95 per cent of the purchase price – the highest level in 2 1/2 years and up from 49 per cent 12 months ago.

“The home loan market is declining just as are other sectors of the Australian economy. Consequently lenders are trying really hard to win over new customers.

Australian banks have plenty of money to lend as investors have pulled money out of the stockmarket and placed it into bank term deposits. However now that money is plentiful, demand for home loans is just not there.

The Australian Prudential Regulation Authority, the banks’ regulator, recently warned mortgage lenders not to return to the risky lending practices engaged in before the global financial crisis.

But a Sunday Telegraph investigation uncovered that many banks were still happy to lend borrowers more than they could afford.

Based on a $50,000 deposit and a gross annual income of $77,000, St George and Westpac both offered to lend our reporter $465,000.

With an interest rate of 7 per cent, the monthly repayments of $3094 would eat up more than 60 per cent of their after-tax monthly salary. According to the RBA borrowers spending more than 30% of their disposable income on home loans are technically financially stressed.

ANZ offered $463,000 with a rate of 6.95 per cent over 30 years. Monthly repayments would be $3065.

Commonwealth Bank said it would lend $455,000, which, at the quoted rate of 7.06 per cent, repayments would be $3058 a month.

Mortgage originator Mortgage Port said they would lend our reporter $470,000, including a secure credit card worth $20,000. With a rate of 6.8 per cent, monthly repayments would be $3064.

Mortgage broker Aussie Homeloans said they could secure a $470,000 loan from ING, which would result in monthly repayments of just under $3000.

NAB offered the smallest home loan at only $420,000 and was the only lender to ask about living expenses.

Smaller lenders are keen to take back some of the home loan market share currently held by the big four banks.

Homeloans’ general manager third party distribution Tony Carn and Intouch chief executive Paul Ryan both expressed their views that non-banks have some of the best home loan products available in Australia today, and are formidable opponents

Non-nanks have been behind some of the more innovative products available to borrowers today. However they are also keen to compete with the large banks on home loan pricing and customer service.

“Homeloans has a variable rate starting at 6.79 per cent and a three year fixed rate starting at 6.59 per cent, with a 100 per cent offset account. So not only are we competitively priced, but our fixed rate product is also very innovative,” Mr Carn said.

In recent months Australian home loans have seen a lot of transformation with abolition of exit fees and more transparency of costs to the consumer.

Mr Ryan agreed and said, in many instances, non-bank lenders offer products that are between 40 and 60 basis points cheaper than the majors.

“We are now on a level playing field with the majors and we intend to fight for greater market share,” he said.

Choice, consumer advocate offering impartial advice on anything from kettles to cleaning products is now keen to have a hand in advising borrowers on home loans and other financial products.

It seems that Choice is not at all impressed with the quality of financial advice in Australia.
While Choice is adamant that borrowers need advice that they can trust – it may be difficult for Choice to appear completely impartial while they have commercial arrangements in place with funders and mortgage brokers.

Only last month Choice had made its first move into Mortgage Broking public when it started promoting it’s involvement with the Big Switch Venture, a commercial venture in the home loan sector with One Big Switch, a firm that is seeking to negotiate the refinancing of thousands of home loans on behalf of Choice subscribers. The request for proposal from banks on that initiative closed three weeks ago.
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The ACA trades under the name of Choice and may have some difficulty adapting that name in the home loan broking space where Choice Home Loans, eChoice and Mortgage Choice are all established brands.