If you suspect at any time that you are he victim of credit card fraud, you need to take immediate action.
It's vital to call your card issuer immediately - all banks will have 24-hour emergency phone lines for this purpose - and explain what's happened and why you feel you have been defrauded.
Also inform the police as this could speed up refunds for any unauthorised use.
If someone else makes a purchase with your card before you inform your bank, the most you will be liable to pay is a token fee. The bank will wear the cost.
However, most banks may waive this fee.
On the otherhand, if you have acted negligently - for example, you've stored details of your PIN in the wallet holding your card - your bank may not refund the money.
Friday, July 28, 2006
Credit cards. Safe ways to withdraw cash from your card
Credit card owners must remain vigilant with ATM fraud.
Cash-machine fraud was down in 2005. However, the experts agree it's still a substantial problemas the fraudsters' techniques improving.
Typically a fraudster attaches a card reader to the outside of the slot into which you put your card - these devices can be hard to spot as they look like part of the machine.
This is a robbery that you never realise has taken place.
The details can lead to a new, fraudulent card with a fresh signature being made, which can then be maxed out to its limit.
Many fraudsters will now be out to get your PIN too, and they don't need to be standing looking over your shoulder to do this; they can rely instead on a pin-hole camera that records the PIN you enter on the keyboard.
Pin-hole cameras have a lens as small as a full stop.
If one of these is installed into a cash machine, it's unlikely you'll see it, but you may be able to see the card reader.
So, when approaching a machine that has other ones beside it, check if all the machines look the same.
What does a card reader look like?
One type of card reader is a flat, flexible piece of plastic that the fraudster will slot into the machine, coming back to pull it out and plug it into a computer.
The more common type is an external reader. The slot on the face of a machine that has one of these attached to it will be raised and possibly a different colour to the rest of the parts of the machine.
The external reader is glued on to the front of the slot and copies your card as it passes through. Most banks machines have smooth-fronted card slots, not raised, so this is a good indicator to look out for.
Also, be particularly wary if adjoining cash points have 'out-of-order' signs on them, as this can be a ploy to divert customers to the machine that has been tampered with.
This also goes for the out-of-order sign on the screen, as a criminal will break a machine that they cannot get a camera or card copier into to get you to use one that they have been able to crack into.
To get round pin-hole cameras it's also worth shielding the keyboard with your spare hand as you enter your PIN.
The safest methods of withdrawing cash with your credit card.
ATMs inside bank branches are very often a safer bet, but one of the safest ways to withdraw cash from your account is to get cashback at the supermarket. Many supermarkets are open 24 hours a day, and the best bit is that the card never leaves your sight.
But take note of what's happening around you, never share your account details with anyone and never let your card out of your sight.
Cash-machine fraud was down in 2005. However, the experts agree it's still a substantial problemas the fraudsters' techniques improving.
Typically a fraudster attaches a card reader to the outside of the slot into which you put your card - these devices can be hard to spot as they look like part of the machine.
This is a robbery that you never realise has taken place.
The details can lead to a new, fraudulent card with a fresh signature being made, which can then be maxed out to its limit.
Many fraudsters will now be out to get your PIN too, and they don't need to be standing looking over your shoulder to do this; they can rely instead on a pin-hole camera that records the PIN you enter on the keyboard.
Pin-hole cameras have a lens as small as a full stop.
If one of these is installed into a cash machine, it's unlikely you'll see it, but you may be able to see the card reader.
So, when approaching a machine that has other ones beside it, check if all the machines look the same.
What does a card reader look like?
One type of card reader is a flat, flexible piece of plastic that the fraudster will slot into the machine, coming back to pull it out and plug it into a computer.
The more common type is an external reader. The slot on the face of a machine that has one of these attached to it will be raised and possibly a different colour to the rest of the parts of the machine.
The external reader is glued on to the front of the slot and copies your card as it passes through. Most banks machines have smooth-fronted card slots, not raised, so this is a good indicator to look out for.
Also, be particularly wary if adjoining cash points have 'out-of-order' signs on them, as this can be a ploy to divert customers to the machine that has been tampered with.
This also goes for the out-of-order sign on the screen, as a criminal will break a machine that they cannot get a camera or card copier into to get you to use one that they have been able to crack into.
To get round pin-hole cameras it's also worth shielding the keyboard with your spare hand as you enter your PIN.
The safest methods of withdrawing cash with your credit card.
ATMs inside bank branches are very often a safer bet, but one of the safest ways to withdraw cash from your account is to get cashback at the supermarket. Many supermarkets are open 24 hours a day, and the best bit is that the card never leaves your sight.
But take note of what's happening around you, never share your account details with anyone and never let your card out of your sight.
Credit card smart. How to use your credit card safely
Nobody plans to be a victim of credit card fraud. But criminals have other ideas, so its important to be mindful of using best practices to minimise the chances of having your credit card account maxed out by others. In particular do the following.
- Sign any new cards as soon as you receive them.
- Use different PINs for different cards.
- Memorise your PINs and do not write them down.
- Never give anyone else your PIN details or any other account information.
- Remember that your bank will NEVER request details of your PIN or whole passwords, by email or letter or over the phone.
- Destroy copies of any receipts that detail your card details.
- Regularly check your cards to ensure none have gone missing
Credit card Chip and PIN initiative cuts fraud in the UK
Nobody can deny that the Chip and PIN initiative has been worth it. According to the APACS, the UK payments association, UK card fraud losses fell by £65 million in 2005 to £439.4 million. Counterfeit fraud - where cards are either skimmed or cloned - fell by 25% to £96.8 million as the chip embedded in new cards offers a higher level of protection. Fraud on a card stolen before the genuine cardholder receives it (which is known as 'mail non-receipt') enjoyed an even sharper reduction in 2005, down by 45% to £40 million, as it has become more difficult for fraudsters to use stolen cards without the PIN.
These changes are long overdue. The UK had been reluctant to adopt Chip and PIN and had acquired the dubious title of 'Fraud Capital of the World'.
However, we can't afford to be complacent. Petrol giant Shell recently suspended Chip and PIN at 600 UK petrol stations after more than £1 million was siphoned from customers' cards. Criminals posing as technicians are thought to have hidden devices to capture PINs inside terminals. The information has then been used to create cloned cards which were used to withdraw the cash.
CNP fraud
Given how long Chip and PIN has been established in Europe, the fraudsters have had plenty of time to investigate alternative options. For example, while the headline figures from APACS are impressive, 'card-not-present' (CNP) fraud (where goods are purchased online, over the phone and by mail order) actually rose by £32.4 million - a rise of 21%.
CNP fraud is a difficult area to manage, as credit cards were never designed to be used in the way that they are being used today, with neither card nor the cardholder present.
So, despite the introduction of Chip and PIN, there are still many other sophisticated ways of getting hold of your credit card details currently being employed by the criminal fraternity. Likewise, there are also plenty of unsophisticated ways for fraudsters to obtain sufficient personal details to obtain credit in your name - for example, by stealing important documents like your passport or driving licence and rifling through your bins.
Online security
The next significant step in further protecting these non-face-to-face transactions will be to use Chip and PIN security for online transactions. This could, for example, involve customers using a Chip and PIN card inserted into a small handheld reader and tapping in their PIN to generate a one-off number to verify each transaction.
Meanwhile, customers must remain vigilant by ensuring that they keep all their account information secret, so that it does not fall into the wrong hands, and to alert their bank immediately if they suspect fraud. It's also worth ensuring your PC is protected with a firewall and antiviral software if you're shopping online.
ATM fraud
By the end of 2005, cash-machine fraud was also down by 12% to £65.8 million. However, the experts agree it's still a substantial problem throughout Europe. Not only are the fraudsters' techniques improving, but there are still many ATMs out there that can't recognise chips and so still rely on the magnetic strip on the back of your card.
The fraudster attaches a card reader to the outside of the slot into which you put your card - these devices can be hard to spot as they look like part of the machine. This is a robbery that you never realise has taken place. The details can lead to a new, fraudulent card with a fresh signature being made, which can then be maxed out to its limit. Many fraudsters will now be out to get your PIN too, and they don't need to be standing looking over your shoulder to do this; they can rely instead on a pin-hole camera that records the PIN you enter on the keyboard.
Pin-hole cameras have a lens as small as a full stop. If one of these is installed into a cash machine, it's unlikely you'll see it, but you may be able to see the card reader. So, when approaching a machine that has other ones beside it, check if all the machines look the same. This works best if you go to the bank that your account is with to withdraw cash, as all the machines for that bank should look the same. Look for any wires or cords coming out of the machine slot.
Card readers
One type of card reader is a flat, flexible piece of plastic that the fraudster will slot into the machine, coming back to pull it out and plug it into a computer. The more common type is an external reader. The slot on the face of a machine that has one of these attached to it will be raised and possibly a different colour to the rest of the parts of the machine. The external reader is glued on to the front of the slot and copies your card as it passes through. Most banks machines have smooth-fronted card slots, not raised, so this is a good indicator to look out for.
Also, be particularly wary if adjoining cash points have 'out-of-order' signs on them, as this can be a ploy to divert customers to the machine that has been tampered with. This also goes for the out-of-order sign on the screen, as a criminal will break a machine that they cannot get a camera or card copier into to get you to use one that they have been able to crack into. To get round pin-hole cameras it's also worth shielding the keyboard with your spare hand as you enter your PIN.
ATMs inside bank branches are very often a safer bet, but one of the safest ways to withdraw cash from your account is to get cashback at the supermarket. Many supermarkets are open 24 hours a day, and the best bit is that the card never leaves your sight. But take note of what's happening around you, never share your account details with anyone and never let your card out of your sight.
What to do if you suspect you are a victim of card fraud
It's vital to call your card issuer immediately - all banks will have 24-hour emergency phone lines for this purpose - and explain what's happened. Also inform the police as this could speed up refunds for any unauthorised use. If someone else makes a purchase with your card before you inform your bank, the most you will be liable to pay is £50. However, according to Cardwatch.org.uk, most banks and building societies will overlook this and refund the total amount. Do remember, however, that if you have acted negligently - for example, you've stored details of your PIN in the wallet holding your card - your bank may not refund the money.
How to use your card safely and securely
1. Sign any new cards as soon as you receive them.
2. Use different PINs for different cards.
3. Memorise your PINs and do not write them down.
4. Never give anyone else your PIN details or any other account information.
5. Remember that your bank will NEVER request details of your PIN or whole passwords.
6. Destroy copies of any receipts that detail your card details.
7. Regularly check your cards to ensure none have gone missing
These changes are long overdue. The UK had been reluctant to adopt Chip and PIN and had acquired the dubious title of 'Fraud Capital of the World'.
However, we can't afford to be complacent. Petrol giant Shell recently suspended Chip and PIN at 600 UK petrol stations after more than £1 million was siphoned from customers' cards. Criminals posing as technicians are thought to have hidden devices to capture PINs inside terminals. The information has then been used to create cloned cards which were used to withdraw the cash.
CNP fraud
Given how long Chip and PIN has been established in Europe, the fraudsters have had plenty of time to investigate alternative options. For example, while the headline figures from APACS are impressive, 'card-not-present' (CNP) fraud (where goods are purchased online, over the phone and by mail order) actually rose by £32.4 million - a rise of 21%.
CNP fraud is a difficult area to manage, as credit cards were never designed to be used in the way that they are being used today, with neither card nor the cardholder present.
So, despite the introduction of Chip and PIN, there are still many other sophisticated ways of getting hold of your credit card details currently being employed by the criminal fraternity. Likewise, there are also plenty of unsophisticated ways for fraudsters to obtain sufficient personal details to obtain credit in your name - for example, by stealing important documents like your passport or driving licence and rifling through your bins.
Online security
The next significant step in further protecting these non-face-to-face transactions will be to use Chip and PIN security for online transactions. This could, for example, involve customers using a Chip and PIN card inserted into a small handheld reader and tapping in their PIN to generate a one-off number to verify each transaction.
Meanwhile, customers must remain vigilant by ensuring that they keep all their account information secret, so that it does not fall into the wrong hands, and to alert their bank immediately if they suspect fraud. It's also worth ensuring your PC is protected with a firewall and antiviral software if you're shopping online.
ATM fraud
By the end of 2005, cash-machine fraud was also down by 12% to £65.8 million. However, the experts agree it's still a substantial problem throughout Europe. Not only are the fraudsters' techniques improving, but there are still many ATMs out there that can't recognise chips and so still rely on the magnetic strip on the back of your card.
The fraudster attaches a card reader to the outside of the slot into which you put your card - these devices can be hard to spot as they look like part of the machine. This is a robbery that you never realise has taken place. The details can lead to a new, fraudulent card with a fresh signature being made, which can then be maxed out to its limit. Many fraudsters will now be out to get your PIN too, and they don't need to be standing looking over your shoulder to do this; they can rely instead on a pin-hole camera that records the PIN you enter on the keyboard.
Pin-hole cameras have a lens as small as a full stop. If one of these is installed into a cash machine, it's unlikely you'll see it, but you may be able to see the card reader. So, when approaching a machine that has other ones beside it, check if all the machines look the same. This works best if you go to the bank that your account is with to withdraw cash, as all the machines for that bank should look the same. Look for any wires or cords coming out of the machine slot.
Card readers
One type of card reader is a flat, flexible piece of plastic that the fraudster will slot into the machine, coming back to pull it out and plug it into a computer. The more common type is an external reader. The slot on the face of a machine that has one of these attached to it will be raised and possibly a different colour to the rest of the parts of the machine. The external reader is glued on to the front of the slot and copies your card as it passes through. Most banks machines have smooth-fronted card slots, not raised, so this is a good indicator to look out for.
Also, be particularly wary if adjoining cash points have 'out-of-order' signs on them, as this can be a ploy to divert customers to the machine that has been tampered with. This also goes for the out-of-order sign on the screen, as a criminal will break a machine that they cannot get a camera or card copier into to get you to use one that they have been able to crack into. To get round pin-hole cameras it's also worth shielding the keyboard with your spare hand as you enter your PIN.
ATMs inside bank branches are very often a safer bet, but one of the safest ways to withdraw cash from your account is to get cashback at the supermarket. Many supermarkets are open 24 hours a day, and the best bit is that the card never leaves your sight. But take note of what's happening around you, never share your account details with anyone and never let your card out of your sight.
What to do if you suspect you are a victim of card fraud
It's vital to call your card issuer immediately - all banks will have 24-hour emergency phone lines for this purpose - and explain what's happened. Also inform the police as this could speed up refunds for any unauthorised use. If someone else makes a purchase with your card before you inform your bank, the most you will be liable to pay is £50. However, according to Cardwatch.org.uk, most banks and building societies will overlook this and refund the total amount. Do remember, however, that if you have acted negligently - for example, you've stored details of your PIN in the wallet holding your card - your bank may not refund the money.
How to use your card safely and securely
1. Sign any new cards as soon as you receive them.
2. Use different PINs for different cards.
3. Memorise your PINs and do not write them down.
4. Never give anyone else your PIN details or any other account information.
5. Remember that your bank will NEVER request details of your PIN or whole passwords.
6. Destroy copies of any receipts that detail your card details.
7. Regularly check your cards to ensure none have gone missing
Suicide Loans?: Piggyback Mortgages Default by up to 50%PR
Consumer Advocate and International Mortgage Reduction Expert, Harj Gill cautions,
"This is precisely what I have been warning the public about. It's the first sign of the tsunami of defaults and foreclosures that are coming," Gill, who is also the Founder, President and CEO of American Mortgage Educators, Inc., has been on a one-man crusade warning homeowners of the risks associated with exotic mortgages and urging them to take immediate action to avoid going into default.
According to Gill, piggyback mortgages, which are a combination of two loans packaged together and closed simultaneously, represent just one of many non-traditional mortgages that have put homeowners at risk of losing their homes.
Typically for people with little or no down payment, the amount for the first mortgage is set so it does not exceed 80% of the homes value. This allows the borrower to avoid paying Mortgage Insurance (MI). The remaining loan amount is financed as a second mortgage by way of a Home Equity Loan or a Home Equity Line of Credit (HELOC) and "piggybacked" onto the first.
"I have always said this is a good solution to avoid MI, but a terrible long term strategy," said Gill.
Gill's assertion is supported by the latest analysis by Standard & Poor's, an influential Wall Street ratings agency, which analyzed nearly 640,000 piggyback first-lien mortgages in bond pools. S&P discovered that first-lien mortgages connected with piggyback loans are 43% more likely to go into default than stand-alone first mortgages of comparable size. The default rate increases to a whopping 50% for borrowers with a FICO credit score of 660 or less.
According to SMR Research, lenders and mortgage brokers whose commissions are based on loan size, have aggressively promoted these loans because the first-lien portion of piggybacks tends to be larger than standard first mortgages.
Gill warns that borrowers with these loans should be ultra concerned because they are concentrated in metropolitan areas with the greatest risk of experiencing a fall in housing prices.
"If borrowers start to go into default in a declining property market, they will be committing financial suicide by having their credit destroyed and still being burdened with a debt well after they lose their homes," said Gill.
A 2005 SMR Research study confirmed that many of the largest U.S. counties in population and mortgage market size have huge portions of home loans as piggybacks, some by as much as 62%. These include California, Washington, Colorado, Virginia, Arizona, Nevada, Oregon, Illinois, Georgia, Massachusetts, North Carolina, Utah, Florida, Texas, and Missouri.
The danger, according to Gill, is that unlike standard mortgages with fixed-interest rates, borrowers with adjustable rate piggybacks are not prepared for rate hikes that increase their payments.
Gill's recommendation is for borrowers to immediately reduce their interest payments and get a forecasting tool to determine the critical interest rate at which they are likely to go into default.
He says those with HELOCs can use a little known Banking Principle to reduce their interest payments.
"Interest on your HELOC is calculated on the Daily Balance. So instead of having your income sitting in a checking account earning no interest, borrowers should 'park' those funds in their HELOC to immediately reduce the daily balance and thereby reduce the amount of interest they pay," advised Gill.
Of course borrowers need to ensure they have a HELOC with the right features and proper setup to take advantage of this strategy. For those without a HELOC, Gill recommends refinancing the second mortgage into one with features that enables this.
"By asking the right questions, you should be able to refinance the second mortgage at almost no cost," advises Gill.
To assist borrowers, he has prepared a Critical Report explaining how to apply this strategy and refinance the second mortgage on his Consumer Information Center http://www.mortgagefreeusa.com/
"I expect every mortgage broker, loan officer, lender and real estate agent that knowingly put a client into a piggyback mortgage to contact them and tell them to read this Critical Report," said Gill.
"Not doing this truly shows that you were only in it for the money and not to help your clients."
American Mortgage Educators, Inc. CONTACT: American Mortgage Educators, Inc., 800-605-4718
"This is precisely what I have been warning the public about. It's the first sign of the tsunami of defaults and foreclosures that are coming," Gill, who is also the Founder, President and CEO of American Mortgage Educators, Inc., has been on a one-man crusade warning homeowners of the risks associated with exotic mortgages and urging them to take immediate action to avoid going into default.
According to Gill, piggyback mortgages, which are a combination of two loans packaged together and closed simultaneously, represent just one of many non-traditional mortgages that have put homeowners at risk of losing their homes.
Typically for people with little or no down payment, the amount for the first mortgage is set so it does not exceed 80% of the homes value. This allows the borrower to avoid paying Mortgage Insurance (MI). The remaining loan amount is financed as a second mortgage by way of a Home Equity Loan or a Home Equity Line of Credit (HELOC) and "piggybacked" onto the first.
"I have always said this is a good solution to avoid MI, but a terrible long term strategy," said Gill.
Gill's assertion is supported by the latest analysis by Standard & Poor's, an influential Wall Street ratings agency, which analyzed nearly 640,000 piggyback first-lien mortgages in bond pools. S&P discovered that first-lien mortgages connected with piggyback loans are 43% more likely to go into default than stand-alone first mortgages of comparable size. The default rate increases to a whopping 50% for borrowers with a FICO credit score of 660 or less.
According to SMR Research, lenders and mortgage brokers whose commissions are based on loan size, have aggressively promoted these loans because the first-lien portion of piggybacks tends to be larger than standard first mortgages.
Gill warns that borrowers with these loans should be ultra concerned because they are concentrated in metropolitan areas with the greatest risk of experiencing a fall in housing prices.
"If borrowers start to go into default in a declining property market, they will be committing financial suicide by having their credit destroyed and still being burdened with a debt well after they lose their homes," said Gill.
A 2005 SMR Research study confirmed that many of the largest U.S. counties in population and mortgage market size have huge portions of home loans as piggybacks, some by as much as 62%. These include California, Washington, Colorado, Virginia, Arizona, Nevada, Oregon, Illinois, Georgia, Massachusetts, North Carolina, Utah, Florida, Texas, and Missouri.
The danger, according to Gill, is that unlike standard mortgages with fixed-interest rates, borrowers with adjustable rate piggybacks are not prepared for rate hikes that increase their payments.
Gill's recommendation is for borrowers to immediately reduce their interest payments and get a forecasting tool to determine the critical interest rate at which they are likely to go into default.
He says those with HELOCs can use a little known Banking Principle to reduce their interest payments.
"Interest on your HELOC is calculated on the Daily Balance. So instead of having your income sitting in a checking account earning no interest, borrowers should 'park' those funds in their HELOC to immediately reduce the daily balance and thereby reduce the amount of interest they pay," advised Gill.
Of course borrowers need to ensure they have a HELOC with the right features and proper setup to take advantage of this strategy. For those without a HELOC, Gill recommends refinancing the second mortgage into one with features that enables this.
"By asking the right questions, you should be able to refinance the second mortgage at almost no cost," advises Gill.
To assist borrowers, he has prepared a Critical Report explaining how to apply this strategy and refinance the second mortgage on his Consumer Information Center http://www.mortgagefreeusa.com/
"I expect every mortgage broker, loan officer, lender and real estate agent that knowingly put a client into a piggyback mortgage to contact them and tell them to read this Critical Report," said Gill.
"Not doing this truly shows that you were only in it for the money and not to help your clients."
American Mortgage Educators, Inc. CONTACT: American Mortgage Educators, Inc., 800-605-4718
Sunday, July 16, 2006
Homeowners don't have to accept the new rate rise
Homeowners do not have to accept the latest rate rise.
Home owners with mortgages do not have to accept last week's 0.25 percentage point rate increase. There are cheaper options for those prepared to look.
A home owner with a $300,000, 25-year mortgage can expect to pay about $50 a month more after the Reserve Bank increased interest rates to 5.75 per cent, the highest the cash rate has been since February 2001.
For those with mortgages of $500,000 the rate rise will add $81 to monthly repayments.
The effect of the rise is most immediately felt through the hip pockets of those with variable rate mortgages.
The standard variable rate is largely irrelevant because banks are discounting their variable rates, especially for consumers with larger loans.
He also says some of the "basic" loans offered by non-bank lenders have variable rates of about 6 per cent .
Basic loans were originally "no frills" loans, but are now quite flexible, but are designed for borrowers who only want to do is make the minimum monthly repayment.
Most people will probably be able to absorb the rate rise without too much trouble although it comes at a time of high petrol prices ($1.40 a litre and likely to go higher) and rising health insurance costs, well in excess of inflation. And it is not just mortgage debt that becomes more expensive - interest rates on credit card debt and all other debt such as personal loans and business loans increase.
CommSec's chief equities economist, Craig James, says: "There is no doubt that Aussie consumers will have to tighten their budgets, spend less at the shopping mall and attempt to pare back existing debt.
However, Craig James says the case for last week's increase was not overwhelming and any further lift in rates would create the risk of the economy going backwards.
A FALTERING RECOVERYProperty analysts say the 0.25 percentage point interest rate rise will dampen the recovery in residential property prices that has been under way since the end of last year.
Property prices in Sydney and Melbourne have not been rising but analysts say improvements in auction clearance rates and sales turnover were suggesting the worst was past. But the rate rise may put an end to that.
"The recovery that we were seeing is now going to stall and we think that the median house price in Sydney could fall by up to 5 per cent over this year and that prices in Melbourne will be flat over the year," says Louis Christopher, the general manager of Australian Property Monitors, which is owned by Fairfax, the publisher of this newspaper.
He thinks the price of units in the two cities will move in line with house prices.
John Edwards, the chief executive at Residex, says the Sydney property market is the "most fragile of the lot and is the most likely market to suffer" from the rate rise.
Edwards is not portending disaster, but rather that the rise will "put a hole in the upward trend that we have been seeing in the numbers in Sydney". He says the people most likely to suffer are those who entered the property market in the past year but were not careful about what they paid for their property.
Christopher says that when investors believe there is unlikely to be any capital gains (and rental yields are low), they are inclined to shift their sights elsewhere such as the booming sharemarket, where share prices have almost trebled over the past three years.
Borrowers do not have to accept the rate rise.
Home owners with mortgages do not have to accept last week's 0.25 percentage point rate increase. There are cheaper options for those prepared to look.
A home owner with a $300,000, 25-year mortgage can expect to pay about $50 a month more after the Reserve Bank increased interest rates to 5.75 per cent, the highest the cash rate has been since February 2001.
For those with mortgages of $500,000 the rate rise will add $81 to monthly repayments.
The effect of the rise is most immediately felt through the hip pockets of those with variable rate mortgages. But InfoChoice general manager Denis Orrock says it is not too late to take out a fixed rate loan for those worried their household budgets are coming under strain.
In October last year, the big banks were offering three-year fixed rates at 6.5 per cent. They have now risen to about 7 per cent, but that is still more than half a percentage point below the standard variable rate of 7.57 per cent.
Orrock points out that the standard variable rate is largely irrelevant because banks are discounting their variable rates, especially for consumers with larger loans.
He also says some of the "basic" loans offered by non-bank lenders have variable rates of about 6 per cent (see InfoChoice table for what you would pay for a 25-year mortgage). Basic loans were originally "no frills" loans, but are now quite flexible. However, Orrock says some have big exit fees for those leaving the loans within the first few years. Most basic loans will not allow extra repayments. "But if all you want to do is make the minimum monthly repayment these loans can be a good option," Orrock says.
Most people will probably be able to absorb the rate rise without too much trouble although it comes at a time of high petrol prices ($1.40 a litre and likely to go higher) and rising health insurance costs, well in excess of inflation. And it is not just mortgage debt that becomes more expensive - interest rates on credit card debt and all other debt such as personal loans and business loans increase.
CommSec's chief equities economist, Craig James, says: "There is no doubt that Aussie consumers will have to tighten their budgets, spend less at the shopping mall and attempt to pare back existing debt."
Source: Sydney Morning Herald
Home owners with mortgages do not have to accept last week's 0.25 percentage point rate increase. There are cheaper options for those prepared to look.
A home owner with a $300,000, 25-year mortgage can expect to pay about $50 a month more after the Reserve Bank increased interest rates to 5.75 per cent, the highest the cash rate has been since February 2001.
For those with mortgages of $500,000 the rate rise will add $81 to monthly repayments.
The effect of the rise is most immediately felt through the hip pockets of those with variable rate mortgages.
The standard variable rate is largely irrelevant because banks are discounting their variable rates, especially for consumers with larger loans.
He also says some of the "basic" loans offered by non-bank lenders have variable rates of about 6 per cent .
Basic loans were originally "no frills" loans, but are now quite flexible, but are designed for borrowers who only want to do is make the minimum monthly repayment.
Most people will probably be able to absorb the rate rise without too much trouble although it comes at a time of high petrol prices ($1.40 a litre and likely to go higher) and rising health insurance costs, well in excess of inflation. And it is not just mortgage debt that becomes more expensive - interest rates on credit card debt and all other debt such as personal loans and business loans increase.
CommSec's chief equities economist, Craig James, says: "There is no doubt that Aussie consumers will have to tighten their budgets, spend less at the shopping mall and attempt to pare back existing debt.
However, Craig James says the case for last week's increase was not overwhelming and any further lift in rates would create the risk of the economy going backwards.
A FALTERING RECOVERYProperty analysts say the 0.25 percentage point interest rate rise will dampen the recovery in residential property prices that has been under way since the end of last year.
Property prices in Sydney and Melbourne have not been rising but analysts say improvements in auction clearance rates and sales turnover were suggesting the worst was past. But the rate rise may put an end to that.
"The recovery that we were seeing is now going to stall and we think that the median house price in Sydney could fall by up to 5 per cent over this year and that prices in Melbourne will be flat over the year," says Louis Christopher, the general manager of Australian Property Monitors, which is owned by Fairfax, the publisher of this newspaper.
He thinks the price of units in the two cities will move in line with house prices.
John Edwards, the chief executive at Residex, says the Sydney property market is the "most fragile of the lot and is the most likely market to suffer" from the rate rise.
Edwards is not portending disaster, but rather that the rise will "put a hole in the upward trend that we have been seeing in the numbers in Sydney". He says the people most likely to suffer are those who entered the property market in the past year but were not careful about what they paid for their property.
Christopher says that when investors believe there is unlikely to be any capital gains (and rental yields are low), they are inclined to shift their sights elsewhere such as the booming sharemarket, where share prices have almost trebled over the past three years.
Borrowers do not have to accept the rate rise.
Home owners with mortgages do not have to accept last week's 0.25 percentage point rate increase. There are cheaper options for those prepared to look.
A home owner with a $300,000, 25-year mortgage can expect to pay about $50 a month more after the Reserve Bank increased interest rates to 5.75 per cent, the highest the cash rate has been since February 2001.
For those with mortgages of $500,000 the rate rise will add $81 to monthly repayments.
The effect of the rise is most immediately felt through the hip pockets of those with variable rate mortgages. But InfoChoice general manager Denis Orrock says it is not too late to take out a fixed rate loan for those worried their household budgets are coming under strain.
In October last year, the big banks were offering three-year fixed rates at 6.5 per cent. They have now risen to about 7 per cent, but that is still more than half a percentage point below the standard variable rate of 7.57 per cent.
Orrock points out that the standard variable rate is largely irrelevant because banks are discounting their variable rates, especially for consumers with larger loans.
He also says some of the "basic" loans offered by non-bank lenders have variable rates of about 6 per cent (see InfoChoice table for what you would pay for a 25-year mortgage). Basic loans were originally "no frills" loans, but are now quite flexible. However, Orrock says some have big exit fees for those leaving the loans within the first few years. Most basic loans will not allow extra repayments. "But if all you want to do is make the minimum monthly repayment these loans can be a good option," Orrock says.
Most people will probably be able to absorb the rate rise without too much trouble although it comes at a time of high petrol prices ($1.40 a litre and likely to go higher) and rising health insurance costs, well in excess of inflation. And it is not just mortgage debt that becomes more expensive - interest rates on credit card debt and all other debt such as personal loans and business loans increase.
CommSec's chief equities economist, Craig James, says: "There is no doubt that Aussie consumers will have to tighten their budgets, spend less at the shopping mall and attempt to pare back existing debt."
Source: Sydney Morning Herald
Borrowers do not have to accept the latest rate rise.
Home owners with mortgages do not have to accept last week's 0.25 percentage point rate increase. There are cheaper options for those prepared to look.
A home owner with a $300,000, 25-year mortgage can expect to pay about $50 a month more after the Reserve Bank increased interest rates to 5.75 per cent, the highest the cash rate has been since February 2001.
For those with mortgages of $500,000 the rate rise will add $81 to monthly repayments.
The effect of the rise is most immediately felt through the hip pockets of those with variable rate mortgages. But InfoChoice general manager Denis Orrock says it is not too late to take out a fixed rate loan for those worried their household budgets are coming under strain.
In October last year, the big banks were offering three-year fixed rates at 6.5 per cent. They have now risen to about 7 per cent, but that is still more than half a percentage point below the standard variable rate of 7.57 per cent.
Orrock points out that the standard variable rate is largely irrelevant because banks are discounting their variable rates, especially for consumers with larger loans.
He also says some of the "basic" loans offered by non-bank lenders have variable rates of about 6 per cent (see InfoChoice table for what you would pay for a 25-year mortgage). Basic loans were originally "no frills" loans, but are now quite flexible. However, Orrock says some have big exit fees for those leaving the loans within the first few years. Most basic loans will not allow extra repayments. "But if all you want to do is make the minimum monthly repayment these loans can be a good option," Orrock says.
Most people will probably be able to absorb the rate rise without too much trouble although it comes at a time of high petrol prices ($1.40 a litre and likely to go higher) and rising health insurance costs, well in excess of inflation. And it is not just mortgage debt that becomes more expensive - interest rates on credit card debt and all other debt such as personal loans and business loans increase.
CommSec's chief equities economist, Craig James, says: "There is no doubt that Aussie consumers will have to tighten their budgets, spend less at the shopping mall and attempt to pare back existing debt."Competition means cheaper home loansEmail Print Normal font Large font Related coverageGo basic and save AdvertisementAdvertisementBy John CollettMay 10, 2006Page 2 of 2 Borrowers do not have to accept the rate rise.
Home owners with mortgages do not have to accept last week's 0.25 percentage point rate increase. There are cheaper options for those prepared to look.
A home owner with a $300,000, 25-year mortgage can expect to pay about $50 a month more after the Reserve Bank increased interest rates to 5.75 per cent, the highest the cash rate has been since February 2001.
For those with mortgages of $500,000 the rate rise will add $81 to monthly repayments.
The effect of the rise is most immediately felt through the hip pockets of those with variable rate mortgages. But InfoChoice general manager Denis Orrock says it is not too late to take out a fixed rate loan for those worried their household budgets are coming under strain.
In October last year, the big banks were offering three-year fixed rates at 6.5 per cent. They have now risen to about 7 per cent, but that is still more than half a percentage point below the standard variable rate of 7.57 per cent.
Orrock points out that the standard variable rate is largely irrelevant because banks are discounting their variable rates, especially for consumers with larger loans.
He also says some of the "basic" loans offered by non-bank lenders have variable rates of about 6 per cent (see InfoChoice table for what you would pay for a 25-year mortgage). Basic loans were originally "no frills" loans, but are now quite flexible. However, Orrock says some have big exit fees for those leaving the loans within the first few years. Most basic loans will not allow extra repayments. "But if all you want to do is make the minimum monthly repayment these loans can be a good option," Orrock says.
Most people will probably be able to absorb the rate rise without too much trouble although it comes at a time of high petrol prices ($1.40 a litre and likely to go higher) and rising health insurance costs, well in excess of inflation. And it is not just mortgage debt that becomes more expensive - interest rates on credit card debt and all other debt such as personal loans and business loans increase.
CommSec's chief equities economist, Craig James, says: "There is no doubt that Aussie consumers will have to tighten their budgets, spend less at the shopping mall and attempt to pare back existing debt."
InfoChoice's Orrock says for people with an investment property who have paid off the house they live in, the effects of the rate rise should be muted. That is because investors tend to like the certainty of fixed-rate loans and claim the interest on the mortgage as a tax deduction.
There may be even a little upside for property investors.
Craig James says the higher rates will mean fewer apartments and units will be built. That may well exacerbate the increases in rents and, therefore, lift rental property yields.
The economists, as always, are divided on whether there will be another rate rise this year.
Tracey McNaughton, a senior economist at BT Financial Group, anticipates another by the end of September because there remains the risk that domestic inflation will rise too high as a result of robust global economic growth.
However, Craig James says the case for last week's increase was not overwhelming and any further lift in rates would create the risk of the economy going backwards.
A FALTERING RECOVERYProperty analysts say the 0.25 percentage point interest rate rise will dampen the recovery in residential property prices that has been under way since the end of last year.
Property prices in Sydney and Melbourne have not been rising but analysts say improvements in auction clearance rates and sales turnover were suggesting the worst was past. But the rate rise may put an end to that.
"The recovery that we were seeing is now going to stall and we think that the median house price in Sydney could fall by up to 5 per cent over this year and that prices in Melbourne will be flat over the year," says Louis Christopher, the general manager of Australian Property Monitors, which is owned by Fairfax, the publisher of this newspaper.
He thinks the price of units in the two cities will move in line with house prices.
John Edwards, the chief executive at Residex, says the Sydney property market is the "most fragile of the lot and is the most likely market to suffer" from the rate rise.
Edwards is not portending disaster, but rather that the rise will "put a hole in the upward trend that we have been seeing in the numbers in Sydney". He says the people most likely to suffer are those who entered the property market in the past year but were not careful about what they paid for their property.
Christopher says that when investors believe there is unlikely to be any capital gains (and rental yields are low), they are inclined to shift their sights elsewhere such as the booming sharemarket, where share prices have almost trebled over the past three years.
Borrowers do not have to accept the rate rise.
Home owners with mortgages do not have to accept last week's 0.25 percentage point rate increase. There are cheaper options for those prepared to look.
A home owner with a $300,000, 25-year mortgage can expect to pay about $50 a month more after the Reserve Bank increased interest rates to 5.75 per cent, the highest the cash rate has been since February 2001.
For those with mortgages of $500,000 the rate rise will add $81 to monthly repayments.
The effect of the rise is most immediately felt through the hip pockets of those with variable rate mortgages. But InfoChoice general manager Denis Orrock says it is not too late to take out a fixed rate loan for those worried their household budgets are coming under strain.
In October last year, the big banks were offering three-year fixed rates at 6.5 per cent. They have now risen to about 7 per cent, but that is still more than half a percentage point below the standard variable rate of 7.57 per cent.
Orrock points out that the standard variable rate is largely irrelevant because banks are discounting their variable rates, especially for consumers with larger loans.
He also says some of the "basic" loans offered by non-bank lenders have variable rates of about 6 per cent (see InfoChoice table for what you would pay for a 25-year mortgage). Basic loans were originally "no frills" loans, but are now quite flexible. However, Orrock says some have big exit fees for those leaving the loans within the first few years. Most basic loans will not allow extra repayments. "But if all you want to do is make the minimum monthly repayment these loans can be a good option," Orrock says.
Most people will probably be able to absorb the rate rise without too much trouble although it comes at a time of high petrol prices ($1.40 a litre and likely to go higher) and rising health insurance costs, well in excess of inflation. And it is not just mortgage debt that becomes more expensive - interest rates on credit card debt and all other debt such as personal loans and business loans increase.
CommSec's chief equities economist, Craig James, says: "There is no doubt that Aussie consumers will have to tighten their budgets, spend less at the shopping mall and attempt to pare back existing debt."
InfoChoice's Orrock says for people with an investment property who have paid off the house they live in, the effects of the rate rise should be muted. That is because investors tend to like the certainty of fixed-rate loans and claim the interest on the mortgage as a tax deduction.
There may be even a little upside for property investors.
Craig James says the higher rates will mean fewer apartments and units will be built. That may well exacerbate the increases in rents and, therefore, lift rental property yields.
The economists, as always, are divided on whether there will be another rate rise this year.
Tracey McNaughton, a senior economist at BT Financial Group, anticipates another by the end of September because there remains the risk that domestic inflation will rise too high as a result of robust global economic growth.
However, Craig James says the case for last week's increase was not overwhelming and any further lift in rates would create the risk of the economy going backwards.
A FALTERING RECOVERYProperty analysts say the 0.25 percentage point interest rate rise will dampen the recovery in residential property prices that has been under way since the end of last year.
Property prices in Sydney and Melbourne have not been rising but analysts say improvements in auction clearance rates and sales turnover were suggesting the worst was past. But the rate rise may put an end to that.
"The recovery that we were seeing is now going to stall and we think that the median house price in Sydney could fall by up to 5 per cent over this year and that prices in Melbourne will be flat over the year," says Louis Christopher, the general manager of Australian Property Monitors, which is owned by Fairfax, the publisher of this newspaper.
He thinks the price of units in the two cities will move in line with house prices.
John Edwards, the chief executive at Residex, says the Sydney property market is the "most fragile of the lot and is the most likely market to suffer" from the rate rise.
Edwards is not portending disaster, but rather that the rise will "put a hole in the upward trend that we have been seeing in the numbers in Sydney". He says the people most likely to suffer are those who entered the property market in the past year but were not careful about what they paid for their property.
Christopher says that when investors believe there is unlikely to be any capital gains (and rental yields are low), they are inclined to shift their sights elsewhere such as the booming sharemarket, where share prices have almost trebled over the past three years.
Home owners with mortgages do not have to accept last week's 0.25 percentage point rate increase. There are cheaper options for those prepared to look.
A home owner with a $300,000, 25-year mortgage can expect to pay about $50 a month more after the Reserve Bank increased interest rates to 5.75 per cent, the highest the cash rate has been since February 2001.
For those with mortgages of $500,000 the rate rise will add $81 to monthly repayments.
The effect of the rise is most immediately felt through the hip pockets of those with variable rate mortgages. But InfoChoice general manager Denis Orrock says it is not too late to take out a fixed rate loan for those worried their household budgets are coming under strain.
In October last year, the big banks were offering three-year fixed rates at 6.5 per cent. They have now risen to about 7 per cent, but that is still more than half a percentage point below the standard variable rate of 7.57 per cent.
Orrock points out that the standard variable rate is largely irrelevant because banks are discounting their variable rates, especially for consumers with larger loans.
He also says some of the "basic" loans offered by non-bank lenders have variable rates of about 6 per cent (see InfoChoice table for what you would pay for a 25-year mortgage). Basic loans were originally "no frills" loans, but are now quite flexible. However, Orrock says some have big exit fees for those leaving the loans within the first few years. Most basic loans will not allow extra repayments. "But if all you want to do is make the minimum monthly repayment these loans can be a good option," Orrock says.
Most people will probably be able to absorb the rate rise without too much trouble although it comes at a time of high petrol prices ($1.40 a litre and likely to go higher) and rising health insurance costs, well in excess of inflation. And it is not just mortgage debt that becomes more expensive - interest rates on credit card debt and all other debt such as personal loans and business loans increase.
CommSec's chief equities economist, Craig James, says: "There is no doubt that Aussie consumers will have to tighten their budgets, spend less at the shopping mall and attempt to pare back existing debt."Competition means cheaper home loansEmail Print Normal font Large font Related coverageGo basic and save AdvertisementAdvertisementBy John CollettMay 10, 2006Page 2 of 2 Borrowers do not have to accept the rate rise.
Home owners with mortgages do not have to accept last week's 0.25 percentage point rate increase. There are cheaper options for those prepared to look.
A home owner with a $300,000, 25-year mortgage can expect to pay about $50 a month more after the Reserve Bank increased interest rates to 5.75 per cent, the highest the cash rate has been since February 2001.
For those with mortgages of $500,000 the rate rise will add $81 to monthly repayments.
The effect of the rise is most immediately felt through the hip pockets of those with variable rate mortgages. But InfoChoice general manager Denis Orrock says it is not too late to take out a fixed rate loan for those worried their household budgets are coming under strain.
In October last year, the big banks were offering three-year fixed rates at 6.5 per cent. They have now risen to about 7 per cent, but that is still more than half a percentage point below the standard variable rate of 7.57 per cent.
Orrock points out that the standard variable rate is largely irrelevant because banks are discounting their variable rates, especially for consumers with larger loans.
He also says some of the "basic" loans offered by non-bank lenders have variable rates of about 6 per cent (see InfoChoice table for what you would pay for a 25-year mortgage). Basic loans were originally "no frills" loans, but are now quite flexible. However, Orrock says some have big exit fees for those leaving the loans within the first few years. Most basic loans will not allow extra repayments. "But if all you want to do is make the minimum monthly repayment these loans can be a good option," Orrock says.
Most people will probably be able to absorb the rate rise without too much trouble although it comes at a time of high petrol prices ($1.40 a litre and likely to go higher) and rising health insurance costs, well in excess of inflation. And it is not just mortgage debt that becomes more expensive - interest rates on credit card debt and all other debt such as personal loans and business loans increase.
CommSec's chief equities economist, Craig James, says: "There is no doubt that Aussie consumers will have to tighten their budgets, spend less at the shopping mall and attempt to pare back existing debt."
InfoChoice's Orrock says for people with an investment property who have paid off the house they live in, the effects of the rate rise should be muted. That is because investors tend to like the certainty of fixed-rate loans and claim the interest on the mortgage as a tax deduction.
There may be even a little upside for property investors.
Craig James says the higher rates will mean fewer apartments and units will be built. That may well exacerbate the increases in rents and, therefore, lift rental property yields.
The economists, as always, are divided on whether there will be another rate rise this year.
Tracey McNaughton, a senior economist at BT Financial Group, anticipates another by the end of September because there remains the risk that domestic inflation will rise too high as a result of robust global economic growth.
However, Craig James says the case for last week's increase was not overwhelming and any further lift in rates would create the risk of the economy going backwards.
A FALTERING RECOVERYProperty analysts say the 0.25 percentage point interest rate rise will dampen the recovery in residential property prices that has been under way since the end of last year.
Property prices in Sydney and Melbourne have not been rising but analysts say improvements in auction clearance rates and sales turnover were suggesting the worst was past. But the rate rise may put an end to that.
"The recovery that we were seeing is now going to stall and we think that the median house price in Sydney could fall by up to 5 per cent over this year and that prices in Melbourne will be flat over the year," says Louis Christopher, the general manager of Australian Property Monitors, which is owned by Fairfax, the publisher of this newspaper.
He thinks the price of units in the two cities will move in line with house prices.
John Edwards, the chief executive at Residex, says the Sydney property market is the "most fragile of the lot and is the most likely market to suffer" from the rate rise.
Edwards is not portending disaster, but rather that the rise will "put a hole in the upward trend that we have been seeing in the numbers in Sydney". He says the people most likely to suffer are those who entered the property market in the past year but were not careful about what they paid for their property.
Christopher says that when investors believe there is unlikely to be any capital gains (and rental yields are low), they are inclined to shift their sights elsewhere such as the booming sharemarket, where share prices have almost trebled over the past three years.
Borrowers do not have to accept the rate rise.
Home owners with mortgages do not have to accept last week's 0.25 percentage point rate increase. There are cheaper options for those prepared to look.
A home owner with a $300,000, 25-year mortgage can expect to pay about $50 a month more after the Reserve Bank increased interest rates to 5.75 per cent, the highest the cash rate has been since February 2001.
For those with mortgages of $500,000 the rate rise will add $81 to monthly repayments.
The effect of the rise is most immediately felt through the hip pockets of those with variable rate mortgages. But InfoChoice general manager Denis Orrock says it is not too late to take out a fixed rate loan for those worried their household budgets are coming under strain.
In October last year, the big banks were offering three-year fixed rates at 6.5 per cent. They have now risen to about 7 per cent, but that is still more than half a percentage point below the standard variable rate of 7.57 per cent.
Orrock points out that the standard variable rate is largely irrelevant because banks are discounting their variable rates, especially for consumers with larger loans.
He also says some of the "basic" loans offered by non-bank lenders have variable rates of about 6 per cent (see InfoChoice table for what you would pay for a 25-year mortgage). Basic loans were originally "no frills" loans, but are now quite flexible. However, Orrock says some have big exit fees for those leaving the loans within the first few years. Most basic loans will not allow extra repayments. "But if all you want to do is make the minimum monthly repayment these loans can be a good option," Orrock says.
Most people will probably be able to absorb the rate rise without too much trouble although it comes at a time of high petrol prices ($1.40 a litre and likely to go higher) and rising health insurance costs, well in excess of inflation. And it is not just mortgage debt that becomes more expensive - interest rates on credit card debt and all other debt such as personal loans and business loans increase.
CommSec's chief equities economist, Craig James, says: "There is no doubt that Aussie consumers will have to tighten their budgets, spend less at the shopping mall and attempt to pare back existing debt."
InfoChoice's Orrock says for people with an investment property who have paid off the house they live in, the effects of the rate rise should be muted. That is because investors tend to like the certainty of fixed-rate loans and claim the interest on the mortgage as a tax deduction.
There may be even a little upside for property investors.
Craig James says the higher rates will mean fewer apartments and units will be built. That may well exacerbate the increases in rents and, therefore, lift rental property yields.
The economists, as always, are divided on whether there will be another rate rise this year.
Tracey McNaughton, a senior economist at BT Financial Group, anticipates another by the end of September because there remains the risk that domestic inflation will rise too high as a result of robust global economic growth.
However, Craig James says the case for last week's increase was not overwhelming and any further lift in rates would create the risk of the economy going backwards.
A FALTERING RECOVERYProperty analysts say the 0.25 percentage point interest rate rise will dampen the recovery in residential property prices that has been under way since the end of last year.
Property prices in Sydney and Melbourne have not been rising but analysts say improvements in auction clearance rates and sales turnover were suggesting the worst was past. But the rate rise may put an end to that.
"The recovery that we were seeing is now going to stall and we think that the median house price in Sydney could fall by up to 5 per cent over this year and that prices in Melbourne will be flat over the year," says Louis Christopher, the general manager of Australian Property Monitors, which is owned by Fairfax, the publisher of this newspaper.
He thinks the price of units in the two cities will move in line with house prices.
John Edwards, the chief executive at Residex, says the Sydney property market is the "most fragile of the lot and is the most likely market to suffer" from the rate rise.
Edwards is not portending disaster, but rather that the rise will "put a hole in the upward trend that we have been seeing in the numbers in Sydney". He says the people most likely to suffer are those who entered the property market in the past year but were not careful about what they paid for their property.
Christopher says that when investors believe there is unlikely to be any capital gains (and rental yields are low), they are inclined to shift their sights elsewhere such as the booming sharemarket, where share prices have almost trebled over the past three years.
Late mortgage repayments not widespread
Mortgage rates are rising, home prices are stalling in parts of the country, lots of people are taking out alternative home loans that barely existed five years ago and inflation seems to be picking up.
Guess which of the following scenarios is happening to homeowners:
A. They are falling behind in their mortgage payments. The delinquency rate -- in other words, the proportion of homeowners who are at least 30 days past due on their house payments -- is skyrocketing. Foreclosures are going up, too, but not as rapidly.
B. Homeowners actually are making fewer late payments than they were at the end of 2005. They're making more late payments than a year ago, but only because of Hurricane Katrina.
The correct answer is B, according to the Mortgage Bankers Association. The proportion of homeowners making late payments fell in the first three months of this year, compared to the last three months of 2005. The foreclosure rate dropped a teensy bit.
Welcome to Housing Market, U.S.A.
To visualize what's happening, imagine a town that represents the U.S. housing market. The town has exactly 10,000 owner-occupied homes with mortgages. In the first three months of this year, 441 of those homeowners were at least 30 days past due on their house payments, compared to 470 homeowners in the last three months of 2005. In other words, the delinquency rate fell to 4.41 percent from 4.7 percent.
In the same town, 98 homes were somewhere in the foreclosure process in the first three months of 2006, compared to 99 homes in similar straits in the final quarter of 2005. The foreclosure inventory fell to 0.98 percent from 0.99 percent.
In the unlikely event that you had been pondering delinquencies and foreclosures, you probably didn't think they were declining in number. A lot of news coverage has speculated that the combination of rising interest rates, alternative loans and falling home prices could force homeowners into foreclosure. But spikes in delinquencies and foreclosures haven't happened. Don't congratulate yourselves too much, America -- this isn't a sign that you've suddenly become more responsible.
Factors behind the drop in late payments include:
• Job growth.
• The recent vintage of many mortgages.
• The run-up in home prices over the last five years.
Source: BankRate.com
Guess which of the following scenarios is happening to homeowners:
A. They are falling behind in their mortgage payments. The delinquency rate -- in other words, the proportion of homeowners who are at least 30 days past due on their house payments -- is skyrocketing. Foreclosures are going up, too, but not as rapidly.
B. Homeowners actually are making fewer late payments than they were at the end of 2005. They're making more late payments than a year ago, but only because of Hurricane Katrina.
The correct answer is B, according to the Mortgage Bankers Association. The proportion of homeowners making late payments fell in the first three months of this year, compared to the last three months of 2005. The foreclosure rate dropped a teensy bit.
Welcome to Housing Market, U.S.A.
To visualize what's happening, imagine a town that represents the U.S. housing market. The town has exactly 10,000 owner-occupied homes with mortgages. In the first three months of this year, 441 of those homeowners were at least 30 days past due on their house payments, compared to 470 homeowners in the last three months of 2005. In other words, the delinquency rate fell to 4.41 percent from 4.7 percent.
In the same town, 98 homes were somewhere in the foreclosure process in the first three months of 2006, compared to 99 homes in similar straits in the final quarter of 2005. The foreclosure inventory fell to 0.98 percent from 0.99 percent.
In the unlikely event that you had been pondering delinquencies and foreclosures, you probably didn't think they were declining in number. A lot of news coverage has speculated that the combination of rising interest rates, alternative loans and falling home prices could force homeowners into foreclosure. But spikes in delinquencies and foreclosures haven't happened. Don't congratulate yourselves too much, America -- this isn't a sign that you've suddenly become more responsible.
Factors behind the drop in late payments include:
• Job growth.
• The recent vintage of many mortgages.
• The run-up in home prices over the last five years.
Source: BankRate.com
Home builders slide in soft market
Shares of
The Dow Jones U.S. Home Construction Index, a barometer for home-building stocks, was 4.9 percent down at 570.02. It hit a two-year low and has lost half its value since peaking a year ago.
Yet, the drop came as no surprise to investors, who had for the past few years resisted awarding home-builder stocks higher valuations, despite pleas from the companies themselves.
"This means that investors have anticipated that earnings for the companies would come down," said Victory Capital Management analyst Michael Koskuba.
For about the past three years, as they repeatedly turned in double-digit profit growth,
And over the past two years, the average P/E of large
"Essentially investors thought that earnings would come down for these companies," Koskuba said.
The large, publicly traded home builders argued they were no longer cyclical stocks. They said they had grown so big that when the market soured, they could increase their earnings by taking market share away from the smaller private builders.
But investors didn't buy the theory.
"Although they were posting extremely high growth for that five-year period, they were not afforded market multiples because in the back of investors' minds was always the fact that home building was cyclical," Koskuba said.
Because investors never pumped up the P/Es, the fall hasn't been as dramatic, and the average for the top home builders is now about 4.85.
Horton shares fell as much as 11 percent to a two-year low, and were down 7.2 percent at $21.21 in late Friday trading. It was among the top losers on a down day for
Following Horton's announcement late on Thursday, on Friday morning the
Among
In the options market, defensive trading is being seen throughout the housing sector, with increasing put volume in Toll Brothers Inc.(TOL.N: Quote, Profile, Research), Beazer, The Ryland Group Inc.(RYL.N: Quote, Profile, Research) and Pulte, said Frederic Ruffy, analyst at Optionetics, a California-based options education firm.
Investors often turn to equity puts, which give the right to sell the stock at a preset price and time, to protect existing stock holdings or bet on further weakness in a stock.
"At some point they will be attractive again," Koskuba said. "But as long as the numbers keep going down, investors are still scared of going back in."
Source: Reuters New York
Thursday, July 13, 2006
One in ten have an investment property
Australian Investors still prefer property over other assets such as shares.
Property investment may be in the low ebb right now, and may spell a good time for new investors to enter the market that mortgage brokers need to take avantage of.
In May 2004, the Reserve Bank said that 10.3 per cent of Australian households had an investment property. Some believe that is now around 12 percent [one in eight households.]
So why do people buy property as opposed to shares or other investment prospects?
The simple answer is leverage. By using mortgage finance with tax incentives investors can leverage a bigger investment and manage to hold that for longer. And its time that makes any investment work. Mortgage brokers should be more active in this area.
As an example, $400,000 is a common price to pay for property. If it appreciates at 5%pa that $20,000 a year, compounding.
If people bought shares then a $30,000 investment would seem large, and with a 5% capital growth it would only deliver $1,500 yield.
Also a lot happens to a share price, and this volatility can make people nervous and leave the market at the wrong time. Property on the other hand is largely a sleeper; noone knows what its worth till its sold, and growth happens gradually, and then in spurts in boom years.
When this happens the investor can make a lot of money in a short time if you are holding a few properties.
Mortgage brokers need to realise that property investors can become repeat customers as they accumulate their portfolios and as they tend to hold one to the property for a long time, upfront commissions are secure and trail commissions continue longer.
Prime candidates for purchasing investment properties these days tend to fall into two groups. Not surprisingly, the first is the baby boomers, who have considerable equity in their homes, tend to have their finances sorted and have five to 15 working years left. Many are conscious they need to do something outside of superannuation to boost their retirement income.
An emerging group are single females aged between 20 and 30. Many female "generation Ys" are getting the saving habit and getting into the market early.
A recent Citibank survey showed that 21 per cent of people who have a mortgage see it as something that will supplement their retirement income.
This presents another opportunity for mortgage brokers to satisfy this market with reverse mortgages and other similar products.
How much mortgage can you afford? How to quickly figure your buying power.
Whenever interest rates rise, much of the media coverage focuses on the rise in home loan repayments and the potential slide in property values.
So a rate rise can also present opportunities to find property bargains.
Particularly for first home buyers with strong, steady incomes, this could be a time to look seriously at the property market.
Buying well can make an enormous difference to a property's investment performance. If you are buying a home to live in, please remeber that its also an investment because at some time you are likely to sell and move on.
When determining your purchasing power the old rule of thumb was that repayments on the mortgage should not exceed 30 per cent of your gross income. That's moved up to 40% now.
A way to "guesstimate" the size of the total mortgage you can afford [as determined by the lender, not you] is to multiply your income by four. This is a rough guide only for average income earners, and could be higher if your joint salaries are higher than the average.
Whenever interest rates rise, much of the media coverage focuses on the rise in home loan repayments and the potential slide in property values.
So a rate rise can also present opportunities to find property bargains.
Particularly for first home buyers with strong, steady incomes, this could be a time to look seriously at the property market.
Buying well can make an enormous difference to a property's investment performance. If you are buying a home to live in, please remeber that its also an investment because at some time you are likely to sell and move on.
When determining your purchasing power the old rule of thumb was that repayments on the mortgage should not exceed 30 per cent of your gross income. That's moved up to 40% now.
A way to "guesstimate" the size of the total mortgage you can afford [as determined by the lender, not you] is to multiply your income by four. This is a rough guide only for average income earners, and could be higher if your joint salaries are higher than the average.
Credit card signatures 'should be PINs'
Credit card signatures need to be replaced by a PIN system in Australia to protect against fraud, a parliamentary committee has found.
The House of Representatives economics' committee also wants EFTPOS cards that can be used for internet purchases - just like their credit card counterparts - and the introduction of chip technology.
It follows an inquiry by the committee into credit card changes in recent years, including the overhaul that has enabled merchants to charge customers a surcharge if they use a credit card.
The committee found Australia has fallen well behind other countries in terms of the safety mechanisms available to protect against credit card fraud.
It found in the not too distant future, Australian shoppers overseas may find they cannot use their credit cards because some countries are going towards PIN-identification, ditching the back-of-the-card signature altogether.
"While credit card fraud is comparatively low in Australia, this does not mean steps should not be taken to prevent it," it found.
"The committee considers that a move to PIN-based authorisation would be highly desirable in terms of fraud prevention."
There are also concerns that credit cards are more flexible for shoppers than low-cost EFTPOS cards.
Other countries have gone to systems that enable EFTPOS cards to be used online. In Australia, credit cards are effectively the only internet payment system.
The committee found there was no good reason why EFTPOS cards should not be enabled to let them be used for online shopping.
The advance of chip technology, which can protect cards even better than PIN numbers, was also backed by the committee.
The inquiry rejected claims by banks the reason they had not improved the safety features of credit cards was that they were getting less in so-called interchange fees from merchants.
"The committee does not accept this proposition," it found.
"In the US, technology is even further behind but interchange revenues are three times as high.
"Conversely, technology is more advanced in some debit systems where interchange fees are zero."
Source: AAP, Canberra Australia
The House of Representatives economics' committee also wants EFTPOS cards that can be used for internet purchases - just like their credit card counterparts - and the introduction of chip technology.
It follows an inquiry by the committee into credit card changes in recent years, including the overhaul that has enabled merchants to charge customers a surcharge if they use a credit card.
The committee found Australia has fallen well behind other countries in terms of the safety mechanisms available to protect against credit card fraud.
It found in the not too distant future, Australian shoppers overseas may find they cannot use their credit cards because some countries are going towards PIN-identification, ditching the back-of-the-card signature altogether.
"While credit card fraud is comparatively low in Australia, this does not mean steps should not be taken to prevent it," it found.
"The committee considers that a move to PIN-based authorisation would be highly desirable in terms of fraud prevention."
There are also concerns that credit cards are more flexible for shoppers than low-cost EFTPOS cards.
Other countries have gone to systems that enable EFTPOS cards to be used online. In Australia, credit cards are effectively the only internet payment system.
The committee found there was no good reason why EFTPOS cards should not be enabled to let them be used for online shopping.
The advance of chip technology, which can protect cards even better than PIN numbers, was also backed by the committee.
The inquiry rejected claims by banks the reason they had not improved the safety features of credit cards was that they were getting less in so-called interchange fees from merchants.
"The committee does not accept this proposition," it found.
"In the US, technology is even further behind but interchange revenues are three times as high.
"Conversely, technology is more advanced in some debit systems where interchange fees are zero."
Source: AAP, Canberra Australia
Bank of Japan look to raise interest ates for first time in six years
The Bank of Japan will probably raise interest rates for the first time in almost six years this week as the world's second-biggest economy emerges from a decade-long battle with deflation.
Governor Toshihiko Fukui and his policy-board colleagues will increase the key overnight rate between banks by 0.25 percentage point on July 14, according to all 16 economists surveyed by Bloomberg News.
Japanese companies including Matsushita Electric Industrial Co. have completed the job cuts, factory closures and debt reorganization that followed the bursting of the bubble economy in the early 1990s and now plan to increase investment at the fastest pace in 16 years. Fukui said last month he's concerned that prolonging the zero-rate policy could promote unnecessary investment and kindle inflation.
"The ending of zero rates will be testament that Japan's long struggle with excess is now over and that the economic cycle is back to normal,'' said Glenn Maguire, chief Asia economist at Societe Generale in Hong Kong. ``We look for the economy to enter a sweet spot as it fully transits from deflation to inflation.''
Sixteen central banks raised interest rates in June, including the U.S. Federal Reserve, the European Central Bank and those of South Korea and India.
Japan's largest companies plan to increase investment this year at the fastest pace since 1990, the Bank of Japan's Tankan business confidence survey showed last week.
Consumer Prices
Matsushita, the world's-biggest consumer electronics maker, is building the world's biggest plasma display factory to increase production. Honda Motor Co. said in May it would build its first car plant in Japan in 30 years.
Other evidence supports the bank's contention that economic growth will be sustained as companies divert rising profit to expansion rather than debt repayment.
Japan's consumer prices rose for a seventh month in May when the unemployment rate fell to an eight-year low of 4 percent, and in June bank lending climbed the most in a decade, recent reports showed.
"Companies are cranking up spending plans and it's hard to anticipate that momentum will slow any time soon,'' said Akio Makabe, professor of economics at Shinshu University. ``A recovery of the job market will help boost household spending.''
The yen rose to a four-week high this week on speculation an interest-rate increase will lure investors to yen-denominated assets. The Nikkei 225 Stock Average has rebounded more than 8 percent since June 13, when it set a seven-month low amid concern a spate of global interest-rate increases would stunt world economic growth.
Business Support
The government's opposition to an interest-rate increase has eased. The Cabinet Office on July 7 said the gross domestic production deflator, a broad measure of price changes in the economy, will turn positive in 2006 for the first year in eight.
Prime Minister Junichiro Koizumi on July 4 said the bank should make its own decision on interest rates, dropping previous calls for the bank to act cautiously.
The government opposed the bank's last rate increase in August 2000. Seven months later, the bank had to cut rates back to near zero as an Internet-led global economic boom faltered, allowing the government to accuse it of making a policy mistake.
Businesses are getting used to the idea of higher borrowing costs. Only 3.6 percent of companies polled by the Mainichi Newspaper said they consider a rate increase this week would be too soon, according to a July 9 poll, and 89.9 percent said a rate increase would be acceptable as long as the bank exercised appropriate judgment.
Second Rate Increase
"The necessary economic conditions mentioned by the Bank of Japan for a rate hike are taking shape,'' Fujio Mitarai, head of the Japan Business Federation and chairman of Canon Inc., said on July 10.
The central bank will keep rates low even after a first rate increase because the pace of economic expansion will slow next year and inflation will be subdued, economists said.
Nine of the 15 surveyed economists said the bank won't make an additional increase this year. Eight said the key rate will be capped at 0.75 percent or below by the end of next year.
"The Bank of Japan will likely attempt a second rate hike this year, but there is no guarantee that upcoming economic data will justify such a move,'' said Teizo Taya, advisor to the Daiwa Institute of Research and a former central bank policy board member.
The bank will this week also raise its discount rate, with which it makes overnight loans directly to financial institutions, and cap a gain in the interbank overnight loan rate to between 0.4 percent and 0.5 percent from 0.1 percent, the surveyed economists said.
Source: Bloomberg
Governor Toshihiko Fukui and his policy-board colleagues will increase the key overnight rate between banks by 0.25 percentage point on July 14, according to all 16 economists surveyed by Bloomberg News.
Japanese companies including Matsushita Electric Industrial Co. have completed the job cuts, factory closures and debt reorganization that followed the bursting of the bubble economy in the early 1990s and now plan to increase investment at the fastest pace in 16 years. Fukui said last month he's concerned that prolonging the zero-rate policy could promote unnecessary investment and kindle inflation.
"The ending of zero rates will be testament that Japan's long struggle with excess is now over and that the economic cycle is back to normal,'' said Glenn Maguire, chief Asia economist at Societe Generale in Hong Kong. ``We look for the economy to enter a sweet spot as it fully transits from deflation to inflation.''
Sixteen central banks raised interest rates in June, including the U.S. Federal Reserve, the European Central Bank and those of South Korea and India.
Japan's largest companies plan to increase investment this year at the fastest pace since 1990, the Bank of Japan's Tankan business confidence survey showed last week.
Consumer Prices
Matsushita, the world's-biggest consumer electronics maker, is building the world's biggest plasma display factory to increase production. Honda Motor Co. said in May it would build its first car plant in Japan in 30 years.
Other evidence supports the bank's contention that economic growth will be sustained as companies divert rising profit to expansion rather than debt repayment.
Japan's consumer prices rose for a seventh month in May when the unemployment rate fell to an eight-year low of 4 percent, and in June bank lending climbed the most in a decade, recent reports showed.
"Companies are cranking up spending plans and it's hard to anticipate that momentum will slow any time soon,'' said Akio Makabe, professor of economics at Shinshu University. ``A recovery of the job market will help boost household spending.''
The yen rose to a four-week high this week on speculation an interest-rate increase will lure investors to yen-denominated assets. The Nikkei 225 Stock Average has rebounded more than 8 percent since June 13, when it set a seven-month low amid concern a spate of global interest-rate increases would stunt world economic growth.
Business Support
The government's opposition to an interest-rate increase has eased. The Cabinet Office on July 7 said the gross domestic production deflator, a broad measure of price changes in the economy, will turn positive in 2006 for the first year in eight.
Prime Minister Junichiro Koizumi on July 4 said the bank should make its own decision on interest rates, dropping previous calls for the bank to act cautiously.
The government opposed the bank's last rate increase in August 2000. Seven months later, the bank had to cut rates back to near zero as an Internet-led global economic boom faltered, allowing the government to accuse it of making a policy mistake.
Businesses are getting used to the idea of higher borrowing costs. Only 3.6 percent of companies polled by the Mainichi Newspaper said they consider a rate increase this week would be too soon, according to a July 9 poll, and 89.9 percent said a rate increase would be acceptable as long as the bank exercised appropriate judgment.
Second Rate Increase
"The necessary economic conditions mentioned by the Bank of Japan for a rate hike are taking shape,'' Fujio Mitarai, head of the Japan Business Federation and chairman of Canon Inc., said on July 10.
The central bank will keep rates low even after a first rate increase because the pace of economic expansion will slow next year and inflation will be subdued, economists said.
Nine of the 15 surveyed economists said the bank won't make an additional increase this year. Eight said the key rate will be capped at 0.75 percent or below by the end of next year.
"The Bank of Japan will likely attempt a second rate hike this year, but there is no guarantee that upcoming economic data will justify such a move,'' said Teizo Taya, advisor to the Daiwa Institute of Research and a former central bank policy board member.
The bank will this week also raise its discount rate, with which it makes overnight loans directly to financial institutions, and cap a gain in the interbank overnight loan rate to between 0.4 percent and 0.5 percent from 0.1 percent, the surveyed economists said.
Source: Bloomberg
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