Homeowners and home buyers can rejoice with no interest rate rises on the horizon

Low inflation rate should keep mortgage interest rates on hold and is good news for for homeowners and first time home buyers
Australia's inflation rate rose just 0.1 per cent in the March 2007 quarter, or 2.4 per cent over the year, well below expectations, and taking pressure off home loan interest rates.
The number is good for Australian households as it eases pressure on the Reserve Bank to raise interest rates this year. The RBA sets interest rates to keep inflation below 3 per cent.
The Australian dollar tumbled on the surprisingly low number, as bets eased on a rate rise. At noon, the dollar was quoted at $US0.8256, down from $US0.8322 early today.
Economists had expected the consumer price index (CPI) to rise 0.6 per cent over the March quarter or 2.9 per cent over the year.
The low number means borrowers can breathe a sigh of relief as the central bank sits back and lets last year's three interest rate rises hold back spending and inflation.
Treasurer Peter Costello predicted inflation would be below 2 per cent next quarter.
"This shows that inflation in Australia is moderate and families will welcome the fact that prices hardly rose at all in the March quarter."
Banana effectThe most significant price falls keeping inflation down in the quarter were fruit (down 33.8 per cent), with banana prices returning to the levels of March quarter 2006.
Falls in overseas travel and accommodation costs (down 2.2 per cent) and audio, visual and computing equipment (down 2.4 per cent) also helped keep the inflation rate down.
The most significant price rises in the March quarter were for pharmaceuticals (up 12.8 per cent), house purchase (up 1.0 per cent), secondary education fees (up 7.1 per cent) and rents (up 1.4 per cent).
Over the year to March quarter 2007, health costs rose 4.4 per cent, well above the inflation rate, mainly due to an increase in net hospital and medical services ( up 5.9 per cent).
Foods costs trend up, despite quarterly dip While food prices were down 2.3 per cent over the quarter, food prices were well up over the year.
Over the twelve months to the March 2007 quarter, food prices jumped 4.6 per cent, mainly due to increases in fruit costs (up 14.9 per cent) and take away and fast foods (up 4.0 per cent).
Perth, Darwin lead the packThrough the year to March quarter 2007, inflation rose in all capital cities with the increases ranging from just 1.8 per cent in Adelaide to 4.0 per cent in Darwin and 3.5 per cent in Perth.
The higher result for Darwin was largely due to an 8.5 per cent rise in housing costs, more than double the 3.5 per cent increase for the nation.
Perth also recorded a strong rise for housing costs (up 6.9 per cent) that was almost double the national average.
Through the year to March quarter 2007, rents jumped (up 4.4 per cent), house purchase (up 2.9 per cent) and property rates and charges (up 5.6 per cent).
Source: NEWS.com.au

For those that want to know how mortgage brokers work

A lot of people sak me "So, if you don't charge me for your services, how can you run a business?"
This article goes some way in answering this question, from the beginning.
A mortgage broker offers loans from a panel of financial institutions, including banks and non-banks. In Australia now, there are literally hundreds of lenders with many, many more options than was traditionally available in the past. Competition for additional customers is fierce and new home loan products are available every day.
Banks, like other businesses want to grow their customer base, and having an off the payroll entity provide these is a cost effective way to acquire new customers.
So the bank gets an ongoing customer relationship out of the arrangement and they see that as a major benefit.
In fact, having a mortgage broker channel is now an essential part of gaining new clients for the banks.
And as far as the homeowner or home buyer is concerned, having someone scouring the market for the right home loan for them is better than trying to do it themselves.
In simple terms, brokers evaluate your situation against the 20 or 30 lenders on their panel for the best deal.
Banks and other mortgage lenders have changed
In Australia, along with the well known banks and lenders there are now a whole range of specialist lenders offering increasingly compeititve products to first home buyers, self employed and business people, retirees, new Australians and immigrants, previous bankrupts and people with a bad or poor credit history. One of the great advantages of using a good mortgage broker is that they have access to many of these lenders and their products.
How can a mortgage broker service be free?Brokers usually run their own businesses. Lenders work with mortgage brokers because they effectively give the lender a bigger "shop front" without carrying a traditional employee or "bricks and mortar" overhead. Some lenders like Citibank, ING, Macquarie Bank and HSBC have few or no branches and partly rely on mortgage brokers to represent their products.
Other lenders like Colonial CBA, Westpac, ANZ, NAB and St George have their own branch networks, but simply extend their access to Customers through the mortgage broker network. The lender pays the broker fees or commissions for your business. Just as if you were dealing with a bank manager or lender, these fees do not change the interest rate you pay on a home loan. To be sure you are being recommended to the right lender, just ask your broker to show you all the lenders on their panel, and what your loan options would be, against each lender's criteria.
What a Broker should do for youWhen you first meet with a broker, they should always start by asking you to explain your entire finance situation, including future plans. Little things can make a big difference to making sure you get the right home loan for your situation now and with flexibility for future changes. Have your key documents on hand to refer to when meeting with the broker so you can give the most accurate details to ensure you get the right homeloan. Your broker should:
Discuss and confirm loan options in writing Explain all documents of the loan application and help you to complete them Explain the loan process, from application to closing Explain all associated costs and fees of the loan application Explain the disbursements Communicate with you throughout the loan process in a timely manner Follow up the lender for you from application through conditional and on to unconditional approval Negotiate with their lender/s to achieve the best deal How do I know a mortgage broker is any good? Establishing that a broker is right for you and has experience and qualifications, as well as being committed to the industry code of practice, is vital to ensure you're getting the best loan for your needs. Here is a step-by-step checklist that will help you know if your broker is on the level.
For residential loans, all of the broker's services should be free i.e. is the whole service of giving you information in relation to home loans, negotiating the loan for you and handling the paperwork through to approval The right broker will take the time to really understand your entire finance situation, both now and into the future Your broker should have a range of home loans from a wide variety of lenders, e.g. banks and non-banks, conforming and non-conforming Ensure your broker is not just an agent for one lender Check the qualifications and experience of your broker, even ask for references from previous borrowers Are they a member of the professional mortgage association (MIAA/FBAA)? Make sure your broker discloses all commission and payments received so you can judge whether a particular loan recommendation is being influenced by how much the broker will be paid Ask your broker to show you on their computer how the loans they offer compare for your situation. Good brokers should have the appropriate software and be able to clearly outline their criteria and logic Ask your broker how they comply with the Privacy Act to ensure the security of your personal and financial details Your broker should have appropriate insurances A good broker should be able to explain the most complex loans in plain English It is up to you, but it really helps if you actually like your broker as well!
Specialised Software The sheer amount of lenders in the market, coupled with the enormous numbers of products on offer, means that most good brokers use specialised software to access and keep up to date with the entire range of loans on offer from their lenders. Apart from complexity, with changes potentially occurring somewhere daily, it really does require the assistance of technology to analyse options effectively. When you meet with a mortgage broker, they should be happy to work through these options with you on their computer.
More InformationThe home loan market is very competitive. There are literally thousands of home loan options to choose from and the fastest way to get to the best decision for you is to get assistance. Make an appointment or talk to a local mortgage broker before making a final decision. If you have any questions about your loans or how brokers work, please call at any time on 13 XINC (13 9462) or contact us via email and we will return your call within 2 business hours.

Baby Boomers cashing out their home equity

Seniors borrowed $560 million in reverse mortgages in 2006
Older Australians took out $560 million in reverse mortgages in 2006 - a lift of 80 per cent over 2005 , according to a study released yesterday.
Despite what appeared to be rapid growth, Keiren Dell, executive director of the Senior Australian Equity Release Association of Lenders (SEQUAL), said it was at the lower end of his expectation.
"I had expected growth to be at least 100 per cent," he said, adding that the volume of lending in reverse mortgages could easily double in the next two years.
"The first baby-boomers reached 60 a couple of years ago and some had started to take out equity from their home for renovation or buy a new car."
Funding retirementIn fact, the fastest-growing segment (albeit from a low base) was the 60-69 age group, said Trowbridge Deloitte partner James Hickey, who led the reverse mortgage study for SEQUAL. However, the largest group of borrowers were in their 70s.
"We estimated 1 to 1.5 per cent of seniors in Australia use reverse mortgage," said Mr Hickey.
The total number of households taking out reverse mortgage is 27,000. They took out an average of $54,200.
Mr Hickey said they borrowed 70 to 75 per cent of what they could borrow on their homes.
While lump sums remained popular, Mr Hickey said about 20 per cent of the loans were taken out as "income streams" in regular drawdowns.
Mr Dell said variable rates were the most popular type of loan currently used.
But 25 per cent of new loans were written at a fixed rate, up from 22 per cent in 2005.
With new entrants - including Bluestone, Macquarie Bank, ABN AMRO and Australian Seniors Finance - Mr Hickey said the market was set to grow.
Lending is based on the age of the borrowers and the value of the property, ranging from between 10 and 15 per cent of equity for those aged 60, to 40 per cent for people over 80.
NSW leads borrowingThe study found that 41 per cent of reverse mortgages were taken out in NSW, compared with 20 per cent each in Victoria and Queensland.
It said that 80 per cent of the loans were made to borrowers living in capital cities and that houses made up 80 per cent of assets used in the transactions.
Source: The Australian

Aggressive lenders blamed as bankruptcies rise with interest rates

Aggressive lending practices by lenders with loose credit standards, compounded by rising interest rates have led to a huge increase in the number of people in NSW filing for bankruptcy.
Total insolvencies soared by more than 20 per cent in the first quarter of the year to 2859 cases, according to the Insolvency and Trustee Service Australia.
There were 2404 new bankruptcies in NSW in the March quarter, a rise of 21.54 per cent, 446 debt agreements (up 31.56 per cent) and nine personal insolvencies (up 28.57 per cent).
"This is an alarming reflection of the NSW property crash that people don't want to acknowledge," said insolvency partner and trustee at Hall Chadwick, Geoff McDonald.
"This is a real reflection of what has happened to people who dabbled in the investment property market and who have been horribly burned when the market turned," he said.
"Many of these people have fallen victim to peer group pressure, have decided to go for an investment property and try to make a quick buck."
Source: The Daily Telegraph