Mortgage Loans, Home Loans, Bad Credit Home Loans

It seems that NAB has increased its home loans market share over 2011 by 1.4%. The lender believes that it’s “break up with your lender” marketing campaign as well as its lower than the other big 3 variable rate home loans have contributed to its success.

According to RFi’s latest Mortgages Market Wrap, NAB was the only lender to see an increase in its market share over the year.

CBA has seen its market share slip by 1.4 per cent in the 12 months to December, while Westpac and ANZ saw declines of 0.6 per cent and 0.3 per cent respectively.

The cheap home loans offered by NAB through its UBANK brand have had much to do with the bank’s growing market segment share.

In October 2011 the big four, together with their subsidiaries, held 87.1 per cent of bank-held owner-occupier home loans.

Bank competition for the cheapest provider of home loans continues with St George cutting further their fixed home loans rates yesterday.

The bank announced it would cut the rate on their one year fixed home loans to 6.14 per cent, its two year rate to 5.99 per cent and three year fixed rate to 6.09 per cent.

St George management have confirmed that the bank had cut their fixed rates seven times over the past 6 months.

The bank’s three year fixed rate is lower than the four major banks and St George is also giving the other banks a ‘run for their money’ with their one and two year fixed rate home loans.

Now is a good time for customers to review their home loans. Fixed loans give customers the assurance of locking in their repayments for a fixed period, or customers can split their home loan between fixed and variable rates,” said Rob Chapman from St George Bank.

St George’s move comes just days after Citibank announced it would cut the interest on its suite of fixed rate products, with the lender now boasting a three year fixed rate of 5.75 per cent.

The lender’s head of broker distribution, mortgages Aaron Milburn told The Adviser that fixed rates had never been so compelling.

“I think now is a good time to fix. Fixing now will give borrowers a bit of certainty in these uncertain times. Also, brokers are constantly telling me that any fixed rate that starts with a five is a really good rate,” Mr Milburn said.

As the European debt crisis takes hold, it is reasonable to expect that more and more borrowers will opt for the certainty of fixed home loans.

Most banks have significantly reduce the interest rates on their fixed home loans, and despite the projections of future rate cuts by the RBA, the fixed home loans offer a very attractive and stable alternative for the struggling borrower.

The other alternative is to fix a major portion of the home loan to ensure that interest rate fluctuations do not have a significant impact on the set repayments.

Some lenders are offering fixed rates in the mid 5’s and this still makes fixed home loans a very viable alternative.

Even if RBA makes several rate cuts next year it is unlikely that the full amount of rate cuts will be passed on to the variable home loans rates.

According to the latest report from the Fitch Ratings agency, fewer Australians are defaulting on their home loans.

The latest Fitch Ratings report on residential mortgages shows that home loan arrears have dropped by nearly a quarter in September 2011, down to 1.42 per cent of loans from a high in March of 1.77 per cent.

All the states and territories of Australia had experienced lower rates of home loan arrears as a result of stable or falling interest rates.

Fairfield-Liverpool in Sydney’s west remain the worst performing region in Australia in terms of mortgage arrears, however  the number of borrowers who are one month or more behind in their home loans has declined.

Melbourne’s northern suburbs were the most reliable home loan payers with only 0.54 per cent of borrowers in arrears of 30 days or more.

‘‘Sydney’s south-western suburbs and the Central Coast; the Gold Coast in Queensland and the south west region of Western Australia continue to experience above-average arrears,’’ Mr Zanesi said.

Queensland was still the worst-performing state in Australia in terms of mortgage performance, the result of last year’s Christmas spending, socio-economic variables and natural disasters, Fitch said.

The ratings agency did note that tourist type destinations tend to have a worse home loan repayment track record than regular residential suburbs.

All indications received in recent weeks from the big four banks suggest that while lenders have in the past passed on the full rate cuts announced by the RBA (or at least most of the time) – this will not be the case necessarily in 2012.

Cost of funding required for home loan has gone up for the big banks as funding overseas is now more expensive. Therefore we can reasonably expect that in the new year, any cash rate reductions offered by the RBA will only partially, if at all, be passed on to the home loan borrower.

This will create far more competition in the home loans market-place. Smaller lenders may look to pass on the full cash rate reduction and this may result in more borrowers refinancing from the big banks to the smaller lenders. Given that home loan refinance is quite affordable in Australia today as home loan exit fees are now non-existent on variable home loans, more borrowers will choose to refinance their current home loans from the big four to the cheaper home loan providers. This will in turn result in borrowers staying with their current home loan providers fro shorter periods of time.

Lenders will need to revise their “assumed value of client” to a shorter time frame as borrowers will seek out better value home loans.

AUSTRALIA’S generation Ys do not wish to waste cash and are keen to get into property ownership as soon as possible despite the complications associated with applying for home loans and the generally low consumer confidence at the moment.

A recent survey conducted for LJ Hooker Finance, included the opinions of 1017 people and found among those intending to buy a property in the next two years, 78 per cent were aged 20 to 30, or in generation Y.

Thirty per cent of 20 to 30-year-olds believe that property is still a strong investment while more than half of the survey respondents said that they would look to put some funds aside towards a home deposit over the coming year.

Only eight per cent said they would spend spare cash on shopping or holidays.

Generation Y often have the reputation of wasting money and having no long term commitment mindset – their desire to get into property investment and lack of fear of home loans certainly contradicts this..

First home buyers believe that saving for a deposit is one of the most significant barriers to home ownership.

“In the greater Sydney region, where the median property price is around $550,000, it’s not surprising that affordability is one of the biggest hurdles,” Mr Hooker said.

“But many would-be buyers don’t have a clear idea of their financial position or strategy.”

The newly created Bank of Melbourne has come out vowing to beat any home loan offer from one of the big four banks, in an effort to compete for the very lucrative home loans business.

The Westpac subsidiary intends to match the advertised price of any comparable home loan from the big four both in the fixed and variable home loans categories, as well as term deposits and some savings accounts.

This is a new promotion being offered through the end of February, and a Bank of Melbourne spokesperson told Australian BrokerNews the offer is to only be offered to Bank of Melbourne customers, and does not apply across St. George and BankSA.

Bank of Melbourne is trying to take all home loans customers out of the market – they do not need to shop around as they can be sure of getting the cheapest home loan deal with the bank.

According to recent data provided by the Loan Market Group, the number of home loan refinance inquiries received by the broker over the past 12 months is very significant.

The latest official home loan approval figures for October 2011 from the Australian Bureau of Statistics show a 17 per cent rise in refinancing activity compared to the year ending October 2010.

Last quarter, refinance of home loans was up by 5%.

“With the credit market in general being somewhat weak and the level of inquiries for new loans being at a 10 year low this past year, it’s refinancing of home loans has kept the mortgage broking industry alive.

Given the predictions in the marketplace that we will see future rate reductions in the early part of 2012, there is hope that nest year mortgage brokers will continue to be kept busy with home loan refinance as well as new home loans applications.

Mr Rushton said Loan Market’s own enquiries for refinancing had risen 15 per cent in the six weeks since the Reserve Bank lowered the cash rate on Melbourne Cup day.

“The RBA rate cuts in November and December have brought forward queries of those looking to refinance and also first home buyers, particularly in New South Wales,” he said.

“These latest ABS figures predate the back-to-back cuts in official interest rates so we will see the impact of those in the coming months.”

The average size of a new Australian home loan is down 2% on the amount of a year ago. This represents the most significant decline in a decade and can be largely attributed to borrower debt aversion.

Furthermore, official figures released yesterday indicate that the average size of investment loans is also down.

The Australian Bureau of Statistics said the average home loan in October was $282,100 – which is down 2 per cent since October last year.

But, in a ray of positive news for the other property market, the number of new home loans offered to owner-occupiers went up by, 0.7 per cent to 51,981 on a seasonally-adjusted basis.

The ABS said the total value of all housing finance offered to homebuyers fell 2.5 per cent from September to October, to $20.46 billion.

The figures are indicative of a troubled housing market.

Borrowers are more cautious, looking to borrow less and purchase for less.

Recent data, including the national accounts figures released last week, have highlighted the weakness of the housing sector.

One of the nation’s leading property developers, Lang Walker, told BusinessDaily he was confident the market would turn next year as interest rate cuts revived confidence

Walker Corporation has about 35,000 lots across Australia at varying stages of development and Mr Walker, chairman of the group, said the cuts had already stimulated interest.

“There’s still a lot of uncertainty out there but the thing that’s going to override that is a couple of interest rate cuts,” he said.

“I’m quietly confident that in 2012 we’ll start seeing it tick up again.”

Lenders have expressed  concerns that official figures are a little softer than expected. Most believe that the housing market will recover next year.

Mortgage stress has been a problem for many Australian families for quite some time now. In recent times this problem has been aggravated by the declining property prices and poor economic conditions.

Borrowers holding large home loans, investments loans as well as credit cards, car loans etc – are caving in under the pressure of huge debts. Unfortunately property values are down and those who would like to seek stress relief through debt consolidation, find that they are unable to qualify for a mortgage refinance because they no longer hold the equity in their property that they did some years earlier.

A popular definition of mortgage stress is when your home loan repayments take up more than a third of your disposable income, although some financial experts see things differently.

Over the first 10 months of 2011, there was little movement on interest rates, however economic conditions were poor with many borrowers loosing employment and consequently being unable to pay their mortgages.

Australian Bankers’ Association chief executive Steven Munchenberg disagrees with the third of disposable income theory.

“At some levels it may be appropriate, but a lot of high-income earners will have more than 33 per cent of their disposable income paying for their big fancy houses, but they’re certainly not in mortgage stress and not doing it tough,” he says.

Measuring mortgage stress and defining it is difficult because individual circumstances vary so much, Munchenberg says.

“Someone whose mortgage is fine may be going out getting a pile of credit cards and not telling everybody the full story. They can be carrying a huge credit card debt, so their total debt is a problem.” Therefore sometimes debt position overall is a bigger problem than just the home loan.

The Australian Bankers’ Association has just launched a website, doingittough.info, which helps people who feel they are losing control of their finances. It has information about dealing with financial hardship, legal rights, a budgeting tool, a financial health check and details about applying for help from your bank if the debts become too much.