Mortgage Loans, Home Loans, Bad Credit Home Loans

Internet Finance comparison service. Ratecity. believe that 2012 will bring with it renewed demand for home loans with volumes going up.

Property prices have come down significantly making them more affordable to potential purchasers. Interest rates are on their way down with further decreases projected during 2012.

Consequently there is an expectation of more people looking to make a purchase and apply for home loans. Also property owners are likely to be fairly active seeking out good mortgage refinance deals.

Although we’re yet to see the strong numbers of home buyers from five years ago, lenders are likely to see business improving this year as borrowers react to lower prices and interest rates.

Home buyers started to pick up towards the end of 2011, with almost 51,000 home loans financed in November, according to the latest (original) figures from the Australian Bureau of Statistics (ABS) released last week (January 16, 2012).

This is the most significant number of home loans financed as recorded by the ABS for two years. The actual dollar value of these home loans was almost $15 billion in November alone.

As a result of 2 interest rate cuts announced by the RBA late last year, the Australian Home Loan industry has experienced a boost in activity with significantly more inquiries received with respect to home loan refinance.

According to the Australian Bureau of Statistics the year to November 2011 has seen an increase in  home loan refinance applications nationally of 17%.

Major industry players expect this trend to continue into 2012.

It is not only that variable rates have began to come down with more decreases expected, fixed rates are at historically low levels with numerous lenders now offering fixed home loans at rates under 6%.

The key driver for home loan refinance is the expectation of getting a cheaper home loan, access to more funding and an overall better home loan deal.

The currently experienced increase in refinancing may be indicative of a trend of homeowners choosing to stay put rather than upgrade. A recent RP Data report has suggested a massive increase in the time homes are staying on market for many capital city council areas, and Mortgage Choice spokesperson Belinda Williamson said homeowners will have to weigh carefully whether upgrading is feasible in a stagnant housing market.

According media reports the Japanese banks are getting ready to enter the Australian home loan market in a serious way.

Industry players believe that international banks have the capacity to provide significant competition to local lenders especially if they decide to full pass on rate cuts to their home loans. Australian banks have already made it clear last year that future rate cuts may not be passed on to borrowers in full in order to absorb increases to funding costs.

According to Mr Bouris from Yellow Brick Road, at least three big banks, the $62 billion Mitsubishi UFJ Financial Group, $42 billion Sumitomo Mitsui Financial Group and $35 billion Mizuho Financial Group, are said to be considering operating on Australian shores.

But while Mr Bouris is bullish about what the Japanese banks can achieve in the Australian mortgage market, RESI’s Lisa Montgomery is not convinced.

Ms Montgomery believes that Japanese banks just as local banks are affected by the increase to the cost of home loan funds and will not be able to significantly undercut the interest rates offered on home loans by Australian lenders.

Statistics suggest that there has been a significant shift in the home loan space with a larger number of home loans taken up by First Home Buyers than at any time since December 2009.

According to data from the Australian Bureau of Statistics the number of home loan applications from first home buyers increased by 18 per cent in November compared to October – adding more than $2.86 billion in home loans activity – the largest volume since December 2009.

These statistics spell positive news to those working in home loans or property.

“November delivered the largest number of borrowers entering the property market in almost two years and it was the fourth consecutive month with rising numbers of dwellings financed by first home buyers. It’s significant because it pre-dates the second interest rate cut in December,” he said.

However a significant contributor to the First Home Buyer figures was the state of NSW. In NSW alone, close to 4000 first home buyers took out home loans in November – a significant jump of 34 per cent up from the previous month. By comparison, the number of first home buyers in Victoria and Queensland rose by just 5 per cent and 8 per cent respectively, in the same period.

Many home purchases in NSW were effectively ‘brought forward’ to meet the stamp duty concession deadline before rulings changed on January 1, 2012.

Is seems that the Commonwealth Bank of Australia has more than doubled the money it makes on home loans since the period of the global financial crisis.

And, while the CBA and other banks/lenders continue to complain of having to pay depositors higher rates for the funds they lend out, RBA statistics point to the fact that the gap between deposit rates and the RBA cash rate is decreasing.

Certainly figures provided by the RBA suggest that the cost of home loans is nowhere near as high as is alleged by the banks.

Of particular note, figures from the recent Commonwealth Bank profit announcement show net home loan incomes jumped more than 130 per cent since the height of the global financial crisis, to more than $2.6 billion, The Daily Telegraph reported.

Despite this most of Australia’s larger banks have in fact made comments to the media that they are unlikely to pass on in full future rate cuts announced by RBA due to higher costs of wholesale funds.

The World Bank yesterday slashed its global growth forecasts, warning the world is on the edge of a new financial crisis, more damaging than the one that followed the collapse of Lehman Brothers in 2008.

A number of analysts have suggested the impact of rising costs of wholesale funding have been exaggerated by the banks, particularly as the sector can access other sources for cheaper funding.

Since interest rates on home loans have began to drop late last year, many borrowers are using the lower rates as an opportunity to reduce their home loans by repaying as much as they can off their principal.

PRD national has conducted a poll of existing property owners which has identified that 68% of existing home owners are taking advantage of November and December cash rate reductions by putting any extra savings toward their home loans.

Another 18% of respondents planned to save the difference, while 8% will spend on discretionary items.

Almost 6% of the respondents intend to spend the money saved through home loan rate reduction on day to day expenses suggesting that a number of home and property owners are struggling to meet their home loan repayments as well as afford to buy basic essentials.

Most experts believe that interest rates will come down again in February.

According to Loan Market, Home Loan approvals in Australia are expected to continue to increase during 2012 .

Following an RBA cash rate reduction first in November and then again in early December,most mortgage brokers and lenders have seen an increase in demand for home loans.

“The consecutive growth seen in the second half of 2011 should continue while consumers act upon repeated rate cuts by the RBA in November and December,“ Rushton said.

Home loan approval figures for November released by the ABS showed the eighth consecutive month of growth for housing finance, which Ruston said was indicative of the continued trend.

There is good reason to expect that borrowers will remain positive and demand for home loans strong, given that the market is anticipating future rate cuts.

Loan Market said it had seen significant demand brought forward in NSW due to the 2011 stamp duty exemption deadline for first homebuyers, which passed on 1 January this year.

The ANZ bank has conducted it’s first out of cycle interest rate pricing assessment, and has decided to at this stage leave its standard variable rate for home loans and business loans unchanged.

Last month the bank management announced that they will be conducting monthly reviews of their home loans rates and may decide to initiate out of cycle rate changes rather than in response to the Reserve Bank monthly announcement.

“Bank funding costs are now largely unrelated to movements in the Reserve Bank’s official cash rate,” ANZ CEO Philip Chronican said.

“By reviewing key variable lending rates each month we can more accurately reflect the sustained changes in funding costs we incur through the interest we pay to customers for their deposits and to investors in wholesale money markets.”

Even though your lender will run a series of checks to make sure that you are able to afford the home loan you are applying for, you yourself need to also make sure that you are happy with the level of repayment obligations you are taking upon yourself.

Your home loan provider or mortgage broker will ask you for proof of income and information about your current repayment obligations before qualifying you for the home loan. It is important that you yourself consider personal plans such as :

- family planning;

- change of jobs;

- extended leave;

- business expansion etc. before deciding on the level of loan repayment that you are comfortable with.

One of the biggest disasters for any property owner would be defaulting on their home loan repayments and having the property repossessed by a lender. If you take the right precautions before making a commitment for a home loan, then this problem can be avoided.