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| Home buyers want home savings |
Home Savings has become the new investment. If you are buying a mortgage, that is what your should be looking for, and if you are a mortgage broker, that is what you should be selling and delivering today.
Home buyers spending money like there was no tomorrow is becoming a distant memory. I suspect that this behavior will return, but not anytime soon. So don't hold your breath.
Remember when the real estate frenzy drove everyone to buy, regardless of the price, because they assumed that prices would always go up? Well, that bubble burst years ago, and home buyers are beginning to see the light now, 5 years on. They are also getting angry with banks.
Real Estate Prices flat
Real estate will probably be flat [again] at least for the next year, so if you are buying a home, best to test the bottom of the market, rather than pay too much for a depreciating asset.
The RBA Drops mortgage rates .75% in recent months, but nobody is interested in new loans.
Interest rate have fallen, and will fall further
We have had two interest rate drops in recent months totaling three-quarters of a percent drop to the base interest rates, but nobody seems to care, because home savings have not been fully passed through. Not to shoppers in credit card interest and not home buyers in mortgage rate reductions. It's even hard to get duped bank customers interested. The idea in dropping interest rates was to give consumers a reason to open their wallets and use their credit cards more often, but the banks grabbed a big slice of that action for themselves. The result was disinterest by the consumer, and a little anger towards the banks.
Australia: Saving Nation Number one
The result is the spending switch is still locked in the off position. And Australians are becoming addicted to saving, instead of spending. Like all habits, they become addictive as having money in the bank and no debt on your credit cards can be very empowering.
It was not always the case. Aussies have gone from zero to hero in just twenty years, thanks to Paul Keating's push to have a compulsory superannuation plan.
A Change in consumer behavior towards interest rates?
Like well-trained flees, consumers know when they are being manipulated for someone else's benefit. Do they really care that retailers are suffering, and that business bankruptcies are up? When you use people's hip pockets to control their behavior, don't be surprised if that behavior carries the secondary gain trap.
People have been switched off spending so long that they are rusted on to home savings. And the savings habit can be become entrenched.
The second problem is that only people with big mortgages and credit card debts are interested in low-interest rates.
There are people who want higher interest rates. Oh yeh, who you might be asking? The savers. Savers get more for their money when interest rates are high.
And the savings epidemic is creating more and more people who want higher interest rates. Can you remember when interest rates were 12%? I can, and people with savings were easy to sell to.
That's what the ANZ bank CEO said recently, that more of his customers wanted higher interest rates, than wanted lower interest rates.
Mortgage shoppers give the banks no respect. Non bank mortgage lenders on the rise, because they offer savings
Instead of being milking cows for the banks, consumers are becoming interest rate shoppers.
They are paying out their credit cards and using only the interest free element.
At the height of the GFC, home buyers switched to big bank home loans in droves.
Australia's savings rock. The compulsory superannuation Scheme
There is a rock that is bolstering Australia's economic strength, that is growing and gaining strength.
Its called "super" and it will be the foundation of Australian wealth for the future.
Super has zoomed past $1 trillion dollars and will soon reach $2 trillion, simply on the basis that your first trillion is always the hardest one to make. When you then add of the magic of compound interest, let alone more people in the system, then higher participation of the population, and more people putting in extra cash, and than a proposed higher rate of superannuation contributions, you can see the snowball is becoming a mountain of cash to be invested in Australia.
Savings in the form of Superannuation will be Australia's great stabilizer and provide the fuel for the investment engine to drive growth for the future. The big picture is looking wonderful for Australia, and it's because we are all forced to save for the future. That is catching on in a secondary saving boom, in direct savings of personal income, retaining of profits in companies, and budgets of surpluses by the governments.
How to sell mortgages in 2012? Sell savings!
Right now you might be thinking, how will that help me as a home buyer, or if I am a mortgage broker?
Well this will mean lower interest rates into the future, so that has to help everyone home buyers to qualify to buy a home,homeowners pay their mortgages, and mortgage brokers to sell their home loans. So if you are worried about the mortgage business in this climate, you would be right if you look at the big picture. The big picture is looking bright for Australia.
But what about selling mortgage loans today? Go with the flow!
The answer is if you want to sell anything, it's easier to sell what people really want.
Selling money is what mortgage brokers have always done. Now they have to sell a different type of money. More money for you. Its time to sell savings.
People don't want a mortgage. There! I've said it. Right now people want savings. They are buying savings. So sell savings that are in your mortgage products.
Savings in fees and charges on their home loans. Savings on switching fees between mortgage lenders. Savings on home loan interest rates. Savings on mortgage broker commissions.
Whatever it takes to demonstrate you are offering exactly what the customer wants. Home buyers want home savings!
Mortgage brokers, like retailers should not be holding onto false hope that the cautious consumers will thaw out and will return to spending again anytime soon. Better to assume that this is new normal and prosper from that assumption. The assumption that home savings is what customers are looking to buy.
Hope this helps.
Rick Adlam Mr Mortgage
