Mortgage Loans, Home Loans, Bad Credit Home Loans

According to a survey of Australian Mortgage Holders, majority believe that interest rates will increase at least one more time this year.

Over three quarters of  borrowers believe rates will go up, the study shows, and 45 per cent are concerned that a rate rise would significantly affect the household budget.

The survey results are certainly indicative of the presence of mortgage stress amongst mortgage holders. It suggests one in five householders with a mortgage would need to cut their grocery bills if rates were to go up by half a percentage point.

The poll was conducted by Beat Home Loans.

The results of the poll are a concern given a very good chance that lenders may be looking to lift interest rates outside of increases by the RBA.

While, analysts widely expect the Reserve Bank board will not change the official rate when it meets tomorrow and will keep it on hold until November, the Beat Home Loans survey found 37 per cent of home loan customers expect mortgage rates to climb by 50 basis points, or half a percentage point, by the end of the year.

A further one in four believe rates will soar 100 basis points – an increase that would add about $200 a month to the repayment on a typical $300,000 mortgage.

One in three said they would most likely cut spending on clothes if interest rates climbed by half a percentage point.

Beat Home Loans general manager Kelly Humphreys said the figures showed home loan customers were “already at the boundaries of their ability to service loans“.

“We’re not talking about a luxury item here. We’re talking about everyday living – putting a meal on the table,” Ms Humphreys said.

“We’re coming off the back of a number of years now at historically low interest rates so borrowers who have entered into a loan recently are only used to those really low rates.”

As a consequence, the higher interest rate environment had the potential to have a more significant effect on consumers and their budgets than ever before, she said.

Reserve Bank data shows the average standard variable rate fell to its lowest level in almost 40 years during the global financial crisis as the central bank aggressively cut the official cash rate.

Since then, increases in the base rate – coupled with extra mortgage rate increases by some banks – have seen the average standard variable rate bounce from 5.75 per cent in May last year to 7.4 per cent now.

Of home loan customers aged 25 to 34, around 20% spend over half of their income on mortgage repayments.

About 15 per cent of home loan customers also said they planned to by an appliance such as a refrigerator or washing machine over the next year, and 13 per cent expected to buy a new car but two in five said they would change their mind about on those purchases if rates rose 50 basis points.

According to a report in the Financial Review the big four are expecting to see a drop in demand for both mortgages and business loans over the next half a year.

Information provided by the Australian Bureau of Statistics suggests that demand for home loans had increased by just 0.5 per cent in August 2010, indicative of a drop in demand from home buyers as well as investors.

Banks are also worried about the erosion of profit margins in finance and how their profitability will be affected by a drop in demand in the coming months.

Margins are being squeezed because banks are being forced to pay higher interest on savings accounts.

In addition, the cost of funds is ever increasing. It seems that home loan funders will be looking to recoup their costs by interest rate increases irrespective of any decisions by the RBA.  At this stage the market is confident that the RBA will not announce any changes to the interest rates in their meeting next week.

First Home Buyers are likely to line up for a new home loan offer by the Yellow Brick Road, introduced by Mark Bouris the founder of Wizard Home Loans.  The new mortgage product is specifically for the first home buyers market segment. This loan will enables first time borrowers to bypass the genuine savings requirements.

The new First Step home loan, introduced today, allows first time buyers to source a home loan deposit from a range of sources including family gifts, an inheritance or a tax return.

The chairman of Yellow Brick Road, Mark Bouris, said the major banks’ savings requirements were making home loans very prohibitive to the vast numbers of First Home Buyers.

“The big banks often require a borrower to show that their deposit is the result of a savings plan, which can make it much harder for people to buy their first home,” he said.

Saving histories in their own right are not a good indicator of a borrower’s ability to save and meet repayments. People’s circumstances and choice made do change over time.

“More important factors are their income and their credit history, not the origin of their deposit,” he said.

The banks are insisting on a demonstration of a savings history for their own reasons. The main  reason being that such a policy is helping the banks to collect a large amount of depositor funds.

Yellow Brick Road will offer the First Step home loan via its partnership with Gateway Credit Union which currently administers its home loan range launched in December last year.

The product will offer a LVR of up to 95 per cent with a variable interest rate of 6.59 per cent.

According to George Livermore, group executive of Core Logic, Australia is not facing a house price bubble, rather a severe housing affordability crisis.

George Livermore said that the US property market faced a burst bubble during the GFC when mortgage holders preferred to default on their home loans because of the dip in unemployment and the non-recourse mortgage trend.

“Some markets, like in Arizona, Florida and California, suffered a big price drop because underlying demand was never really there, so prices fell to where the underlying demand was,” he said.

US had gone through a decade of overbuilding, over four million too many houses and unfortunately it’s going to take some time to correctly match up demand with supply.

Unlike the US market, Mr Livermore said Australia’s issue was more about average Australians being unable to buy into the property market because of a lack of supply.

“Affordability is not the same issue as a housing bubble,” he said.

“I hear talk about a housing bubble but I don’t think Australia is facing one.

“The Australian government needs to address the issue of affordability through further supply,” he said

If the supply issue is addressed then the current price pressure on housing will be alleviated.

According to main players in Australian real estate, investors are showing a lot of interest in off the plan apartments with expectations of substantial price growth over the coming years.

Ray White is seeing a 6 per cent increase in investor interest in property as shares weaken and with the end last year of the boosted first-home buyer’s grant.

Analyst Michael Matusik predicts that Australian investment properties will flood the market in the near term, leading prices to soften.

An Australian Housing and Urban Research Institute report this month said 80 per cent of investors buy for long-term gain, but at least half sell within five years because of cashflow problems or disappointing capital growth. One in four investors sells within 12 months.

Developers in Sydney are reporting strong demand for new residential developments as a result of stamp duty concession introduced by the NSW government in 2010.

Tim Casey of St Hilliers Group says his company has had 650 people interested in apartments at the Caritas site in inner Sydney’s Forbes Street, for which marketing begins this week.

And Harry Triguboff’s Meriton Apartments reports strong interest for proposed apartments at the former Seven Network site at Epping, with more than 300 applications.

As there is still a shortage of housing in Australia, the property market crash predicted by some experts is unlikely to occur.  However a slowdown in price growth is quite possible.

With the 2010 federal election being tomorrow, the Coalition has announced a “Plan for Real Housing”.

Both the Real Estate Institute of Australia (REIA) and Housing Industry Association (HIA) have welcomed the release after criticising the major campaigning parties for failing to acknowledge housing throughout the election campaign. Australia is in the midst of a housing crisis with a real shortage of available housing and no relief in sight.

“The REIA supports the Coalition’s proposal to encourage states, territories and local government to release land, cut red tape, improve planning processes and reduce charges,” REIA president David Airey said yesterday.

Under the Coalition’s plans, states and territories would have to set targets for land release and dwelling approvals and would risk missing out on Federal funding if targets were not met. This proposal would certainly encourage all states to act swiftly in ensuring that Australia’s housing demands are met.

HIA’s chief executive Graham Wolfe said a cooperative approach between the different levels of government was an essential ingredient for delivering “long overdue improvements” in the supply of new housing but he stressed it would “take leadership and ownership of the components that inhibit supply”.

HIA also expressed a view that the government should establish a Federal Housing and Development Ministry, separate from social housing. This ministry should focus on addressing the country’s housing shortage as well as the issues of housing becoming unaffordable to First Home Buyers.

The Federal Housing and Development Ministry should take responsibility for coordinating Commonwealth, State/Territory and local government regulations and policies, and for cross portfolio collaboration with the view of increasing housing supply and improving housing affordability.

The ever-increasing home values and the growing costs of borrowing have generated a housing affordability decline by more than 30 per cent over the past year.

According to the latest HIA-CBA Housing Affordability Report, affordability declined by 9.1 per cent in the June quarter across all Australian capital cities and 6.7 per cent in regional areas.

The index in question calculates home affordability by combining interest rates, household incomes and home prices . The results came in 32% down on same time last year.

“As housing affordability slips away, so too does the chance for many Australians to realise their dream of owning a home,” HIA chief economist Harley Dale commented yesterday.

It is imperative that the Federal Government makes this issue a priority.

“There has been a marked lack of commitment and attention in the current federal election campaign given to  the significant hurdles prospective First Home Buyers face. Helping Australians afford a roof over their head is surely a fundamental responsibility of government,” Harley Dale added.

According to the HIA-CBA Index, the largest drops in housing affordability were recorded in Sydney (-9.1 per cent), Regional Victoria (-9.0 per cent), Regional Tasmania (-8.8 per cent), and Adelaide (-8.7 per cent). “Key federal policy priorities need to include a program to reduce new housing costs such as inequitable taxes and charges, better planning approvals systems, and a dedicated federal housing and development ministry to coordinate policy across all sectors and levels of government,” Mr Dale said. The systems currently in place are slow and cumbersome.  They do no encourage further development and the creation of additional housing at affordable prices.

According to a Sydney development lobby, the low levels of new home construction in NSW is pushing rents up more than nine times the rate of inflation.

Based on quarterly figures compiled by the Real Estate Institute, the average Sydney rents rose by $10 a week in the past three months, and by $20 a week in the past year.

According to Urban Taskforce Australia, which represents property developers, the median weekly rent for a two bedroom home in inner-city Sydney suburbs is now $540 a week – $25 more than what it was three months ago.

A three-bedroom in the same region on average sets renters back $725 a week – up $25 in three months.

These increases are now at levels which are more than nine times the rate of inflation.

One bedroom homes at Willoughby, North Sydney and Mosman command average weekly rents of $400, while at Waverley and Woollahra, in Sydney’s east, one bedroom homes are, on average, $420 a week.

It is clear that the high rents and the fast levels at which rentals are growing are due to a lack of housing and low levels of construction.

While there is a shortfall in all states the Sydney market appears to be the hardest hit.

“No Australian capital city approves less new homes per head of population than Sydney.

In the past financial year, Mr Gadiel said 15,000 apartments and townhouses had been approved in Melbourne, compared to 11,000 in Sydney.

Urgent government action is required to remedy this situation.

HOME buyers looking to enter the property market for the first time should wait until spring to to make their move according to real estate experts. There is an expectation that prices will begin to move south as the weather warms up.

According to a report in the Australian, Sydney, Melbourne and Adelaide have all recorded reasonably healthy auction clearance rates this weekend, with Brisbane – where private sales outweigh auctions – the only exception.

Australian Property Monitors are reporting that In Sydney, 61.3 per cent of the 384 homes listed were sold at auction, an increase of 5.3 percentage points on last week’s 56 per cent clearance. In Melbourne, 60.8 per cent of the 555 homes listed were sold, a drop of 6.5% compared with last week’s 67.3 per cent.

The most expensive sale  in Sydney was a four-bedroom, 873sqm property at Vaucluse, which sold for $3.7m.

Melbourne, had it’s most expensive sale in Malvern East which was a four-bedroom, three-bathroom, 1920s residence , selling for $3.4m.

Managing director of SQM Research Louis Christopher said property prices would begin to slide as early as next month.

“Because winter is a traditionally slow period, we’ve not felt the full extent of the struggles in our market to date,” Mr Christopher said.

“We’re seeing a drop in total sales . . . sellers should seriously consider their options if they’re planning to trade up over the next 12 months, but for buyers it will be a great time to buy.”

New Brand of home loan products is to be marketed online  with the name of Once Home Loans. The products are funded via Firstfolio’s wholesale home loan distribution platform Bloom. Once home loans is a partnership venture between Firstfolio who will design and build Once’s online presence and branded product range, and handle processing and settlement of mortgage applications received, and the Once Group.

The Once Group who already own some substantial online businesses such as Infochoice.com.au,  will handle the marketing and lead generation, specifically via advertising and with Infochoice, the finance comparison website.

The announcement follows the addition to the platform of  LJ Hooker less than two weeks ago, after the real estate agency decided to re-launch its house branded home loan product via the Bloom platform.

Once launched its Once Home Loans website – www.oncehomeloans.com.au – last month, and joins Medibank Private, AV Jennings and Virgin Money – as well as LJ Hooker – as the fifth partner to sign onto Bloom.

Forsyth recently told Australian Broker he did not see Bloom as being in competition with the third party channel. “The fact of the matter is it’s just competition,” he said. “Brokers are providing a value-added service which is personal, in your face, at home, in your time, one-on-one. A lot of the brands we represent have their own brand identity, the clients that go to them wouldn’t necessarily use a broker, so it’s a multi-brand channel strategy.”

Once Home Loans is a part of the Once Group, which also owns Once Life, Bid My Loan, and InfoChoice. Under the agreement, Firstfolio will also act as a fulfilment arm for enquiries on BidMyLoan.com.au.