Low inflation rate should keep mortgage interest rates on hold and is good news for for homeowners and first time home buyers
Australia's inflation rate rose just 0.1 per cent in the March 2007 quarter, or 2.4 per cent over the year, well below expectations, and taking pressure off home loan interest rates.
The number is good for Australian households as it eases pressure on the Reserve Bank to raise interest rates this year. The RBA sets interest rates to keep inflation below 3 per cent.
The Australian dollar tumbled on the surprisingly low number, as bets eased on a rate rise. At noon, the dollar was quoted at $US0.8256, down from $US0.8322 early today.
Economists had expected the consumer price index (CPI) to rise 0.6 per cent over the March quarter or 2.9 per cent over the year.
The low number means borrowers can breathe a sigh of relief as the central bank sits back and lets last year's three interest rate rises hold back spending and inflation.
Treasurer Peter Costello predicted inflation would be below 2 per cent next quarter.
"This shows that inflation in Australia is moderate and families will welcome the fact that prices hardly rose at all in the March quarter."
Banana effectThe most significant price falls keeping inflation down in the quarter were fruit (down 33.8 per cent), with banana prices returning to the levels of March quarter 2006.
Falls in overseas travel and accommodation costs (down 2.2 per cent) and audio, visual and computing equipment (down 2.4 per cent) also helped keep the inflation rate down.
The most significant price rises in the March quarter were for pharmaceuticals (up 12.8 per cent), house purchase (up 1.0 per cent), secondary education fees (up 7.1 per cent) and rents (up 1.4 per cent).
Over the year to March quarter 2007, health costs rose 4.4 per cent, well above the inflation rate, mainly due to an increase in net hospital and medical services ( up 5.9 per cent).
Foods costs trend up, despite quarterly dip While food prices were down 2.3 per cent over the quarter, food prices were well up over the year.
Over the twelve months to the March 2007 quarter, food prices jumped 4.6 per cent, mainly due to increases in fruit costs (up 14.9 per cent) and take away and fast foods (up 4.0 per cent).
Perth, Darwin lead the packThrough the year to March quarter 2007, inflation rose in all capital cities with the increases ranging from just 1.8 per cent in Adelaide to 4.0 per cent in Darwin and 3.5 per cent in Perth.
The higher result for Darwin was largely due to an 8.5 per cent rise in housing costs, more than double the 3.5 per cent increase for the nation.
Perth also recorded a strong rise for housing costs (up 6.9 per cent) that was almost double the national average.
Through the year to March quarter 2007, rents jumped (up 4.4 per cent), house purchase (up 2.9 per cent) and property rates and charges (up 5.6 per cent).
Source: NEWS.com.au
Saturday, April 28, 2007
Home buyers going for low or even no deposit mortgages in home affordability crisis
The home affordability crisis is driving first-time home buyers to seek out low deposit or even no deposit mortgage lenders to break into homeownership.
Average deposits for first-time buyers have shrunk to between three and six per cent in recent years compared with the traditional 10 to 20 per cent, Raine and Horne Financial Services said.
"Very few applicants have a 20 per cent deposit," said Gary Lees who is the general manager of Raine & Horne Financial Services.
Shrinking deposits highlight how housing affordability is increasingly out of reach for more people across Australia.
Would-be buyer are tapping a growing supply of mortgages that require little or no deposit in return for higher interest rates at a time when slumping vacancy rates are driving up rents.
"For many, especially those who are renting, this is a hopelessly difficult target," Mr Lees said.
Median house prices climbed 1.2 per cent in Sydney to $526,158 during the fourth quarter of 2006 compared with the previous three months, according to Australian Property Monitors.
By comparison the median price in Melbourne was $366,415 in the fourth quarter - up 1.4 per cent. The popularity for low and no-deposit loans may also be a driven by the supply of the loans as well as impatience among young or the so called Generation Y who don't want to take the time to save.
"There has been a real explosion of those type of products over the last couple of years," said Paul Lahiff, who is the managing director for mortgage broker Mortgage Choice.
"Gen Ys are 'I want it now'.
"They want to do everything and they want to do it yesterday.
Mr Lahiff says that he has not seen a higher rate of delinquency on low or no-deposit mortgages.
Even so, three interest rate rises last year has sparked record bankruptcies after some people got too heavily in debt buying properties during the last property bubble that ended in 2003.
Trouble is some areas to the west and south of Sydney have seen prices slide since then.
Bankruptcies surged 9.5 per cent since the final three months of 2006 to 6585, the highest since the June quarter of 1998, according to data this month from Insolvency and Trustee Service Australia .
In NSW bankruptcies rose 7.1 per cent to 2404, while in Victoria they were up 7.8 per cent 1491 - both records.
The growing preference for low and no deposit home loans are not limited to lower income buyers, Raine & Horne's Lees said.
"Even in Sydney's more affluent areas like the eastern suburbs, a large percentage of first homebuyers are using no deposit home loans," he said. Source: AAP
Average deposits for first-time buyers have shrunk to between three and six per cent in recent years compared with the traditional 10 to 20 per cent, Raine and Horne Financial Services said.
"Very few applicants have a 20 per cent deposit," said Gary Lees who is the general manager of Raine & Horne Financial Services.
Shrinking deposits highlight how housing affordability is increasingly out of reach for more people across Australia.
Would-be buyer are tapping a growing supply of mortgages that require little or no deposit in return for higher interest rates at a time when slumping vacancy rates are driving up rents.
"For many, especially those who are renting, this is a hopelessly difficult target," Mr Lees said.
Median house prices climbed 1.2 per cent in Sydney to $526,158 during the fourth quarter of 2006 compared with the previous three months, according to Australian Property Monitors.
By comparison the median price in Melbourne was $366,415 in the fourth quarter - up 1.4 per cent. The popularity for low and no-deposit loans may also be a driven by the supply of the loans as well as impatience among young or the so called Generation Y who don't want to take the time to save.
"There has been a real explosion of those type of products over the last couple of years," said Paul Lahiff, who is the managing director for mortgage broker Mortgage Choice.
"Gen Ys are 'I want it now'.
"They want to do everything and they want to do it yesterday.
Mr Lahiff says that he has not seen a higher rate of delinquency on low or no-deposit mortgages.
Even so, three interest rate rises last year has sparked record bankruptcies after some people got too heavily in debt buying properties during the last property bubble that ended in 2003.
Trouble is some areas to the west and south of Sydney have seen prices slide since then.
Bankruptcies surged 9.5 per cent since the final three months of 2006 to 6585, the highest since the June quarter of 1998, according to data this month from Insolvency and Trustee Service Australia .
In NSW bankruptcies rose 7.1 per cent to 2404, while in Victoria they were up 7.8 per cent 1491 - both records.
The growing preference for low and no deposit home loans are not limited to lower income buyers, Raine & Horne's Lees said.
"Even in Sydney's more affluent areas like the eastern suburbs, a large percentage of first homebuyers are using no deposit home loans," he said. Source: AAP
Mortgage rate threat hits home builders and new housing market
The mere hint of a mortgage interest rate rise has stumped a recovery in the housing market, an industry group said today.
The Housing Industry Association (HIA) survey showed new home sales were flat in March, holding level at 8191 dwellings.
Private detached house sales increased by a 0.2 per cent in the month, while the sale of multi-units fell by two per cent.
Sales in the first quarter of 2007 were 16 per cent lower than in the three months to March 2006.
HIA said speculation of an interest rate increase had discouraged would-be buyers and investors, and any upward momentum in new home sales had now stalled.
HIA chief economist Harley Dale said higher levels of home buyer interest, usually seen early in the year, were already giving way in 2007 to the large gap between the desire for home ownership and the ability to afford it.
Insufficient state and federal government action to address low housing affordability were preventing a sustained recovery in the housing sector, Mr Dale said.
"The recent threat of higher interest rates has only served to reinforce the urgency required in addressing the hefty structural barriers to home ownership," he said.
New home sales rose in December, January and February.
The sales tally for March is below the level of a year earlier when about 10,000 dwellings were sold.
HIA's new home sales survey is compiled from a sample of the largest 100 residential builders. Source: AAP
The Housing Industry Association (HIA) survey showed new home sales were flat in March, holding level at 8191 dwellings.
Private detached house sales increased by a 0.2 per cent in the month, while the sale of multi-units fell by two per cent.
Sales in the first quarter of 2007 were 16 per cent lower than in the three months to March 2006.
HIA said speculation of an interest rate increase had discouraged would-be buyers and investors, and any upward momentum in new home sales had now stalled.
HIA chief economist Harley Dale said higher levels of home buyer interest, usually seen early in the year, were already giving way in 2007 to the large gap between the desire for home ownership and the ability to afford it.
Insufficient state and federal government action to address low housing affordability were preventing a sustained recovery in the housing sector, Mr Dale said.
"The recent threat of higher interest rates has only served to reinforce the urgency required in addressing the hefty structural barriers to home ownership," he said.
New home sales rose in December, January and February.
The sales tally for March is below the level of a year earlier when about 10,000 dwellings were sold.
HIA's new home sales survey is compiled from a sample of the largest 100 residential builders. Source: AAP
Credit card debt worries too hard to swallow for homeowners
Soaring credit card debt levels spurred by recent interest rate rises are creating financial difficulties for many Australian families.
Leading economist Craig James, of CommSec, said the situation could worsen before it improved.
"If there is a further interest rate rise next month, most people would still get by. But many marginal borrowers using credit cards would be getting much closer to their limits and would need to start making some hard decisions quickly about their budget and personal spending habits," he said
Mr James said that while people were prepared for the first interest rate rise in May last year, the second and third increases by the Reserve Bank had taken most people by surprise.
He said this had tightened many people's cash flow and made them hold more debt on their credit cards for longer.
The average credit card balance is just under $3000, with a total outstanding debt of $28.54 billion on all credit cards in Australia.
In February, cardholders had a record 38.2 per cent of available credit -- the highest amount since records began in 1985.
Australians have taken to the credit card with a relish few other countries can match. .
In 1997, there were 7.5 million credit card accounts in Australia. Today there are 13.4 million. Source: Sunday Herald
Leading economist Craig James, of CommSec, said the situation could worsen before it improved.
"If there is a further interest rate rise next month, most people would still get by. But many marginal borrowers using credit cards would be getting much closer to their limits and would need to start making some hard decisions quickly about their budget and personal spending habits," he said
Mr James said that while people were prepared for the first interest rate rise in May last year, the second and third increases by the Reserve Bank had taken most people by surprise.
He said this had tightened many people's cash flow and made them hold more debt on their credit cards for longer.
The average credit card balance is just under $3000, with a total outstanding debt of $28.54 billion on all credit cards in Australia.
In February, cardholders had a record 38.2 per cent of available credit -- the highest amount since records began in 1985.
Australians have taken to the credit card with a relish few other countries can match. .
In 1997, there were 7.5 million credit card accounts in Australia. Today there are 13.4 million. Source: Sunday Herald
Thursday, April 26, 2007
More mortgage legs in baby boomer generation
There seems to be an emerging new mortgage market as seniors borrowed $560 million in reverse mortgages in 2006 to spend their children's inheritance.
Older Australians took out $560 million in reverse mortgages in 2006 - a lift of 80 per cent over 2005 , according to a study released yesterday.
Despite what appeared to be rapid growth, Keiren Dell, executive director of the Senior Australian Equity Release Association of Lenders (SEQUAL), said it was at the lower end of his expectation.
"I had expected growth to be at least 100 per cent," he said, adding that the volume of lending in reverse mortgages could easily double in the next two years.
"The first baby-boomers reached 60 a couple of years ago and some had started to take out equity from their home for renovation or buy a new car."
Funding retirementIn fact, the fastest-growing segment (albeit from a low base) was the 60-69 age group, said Trowbridge Deloitte partner James Hickey, who led the reverse mortgage study for SEQUAL. However, the largest group of borrowers were in their 70s.
"We estimated 1 to 1.5 per cent of seniors in Australia use reverse mortgage," said Mr Hickey.
The total number of households taking out reverse mortgage is 27,000. They took out an average of $54,200.
Mr Hickey said they borrowed 70 to 75 per cent of what they could borrow on their homes.
While lump sums remained popular, Mr Hickey said about 20 per cent of the loans were taken out as "income streams" in regular drawdowns.
Mr Dell said variable rates were the most popular type of loan currently used.
But 25 per cent of new loans were written at a fixed rate, up from 22 per cent in 2005.
With new entrants - including Bluestone, Macquarie Bank, ABN AMRO and Australian Seniors Finance - Mr Hickey said the market was set to grow.
Lending is based on the age of the borrowers and the value of the property, ranging from between 10 and 15 per cent of equity for those aged 60, to 40 per cent for people over 80.
NSW leads borrowingThe study found that 41 per cent of reverse mortgages were taken out in NSW, compared with 20 per cent each in Victoria and Queensland.
It said that 80 per cent of the loans were made to borrowers living in capital cities and that houses made up 80 per cent of assets used in the transactions.
Source: The Australian
Older Australians took out $560 million in reverse mortgages in 2006 - a lift of 80 per cent over 2005 , according to a study released yesterday.
Despite what appeared to be rapid growth, Keiren Dell, executive director of the Senior Australian Equity Release Association of Lenders (SEQUAL), said it was at the lower end of his expectation.
"I had expected growth to be at least 100 per cent," he said, adding that the volume of lending in reverse mortgages could easily double in the next two years.
"The first baby-boomers reached 60 a couple of years ago and some had started to take out equity from their home for renovation or buy a new car."
Funding retirementIn fact, the fastest-growing segment (albeit from a low base) was the 60-69 age group, said Trowbridge Deloitte partner James Hickey, who led the reverse mortgage study for SEQUAL. However, the largest group of borrowers were in their 70s.
"We estimated 1 to 1.5 per cent of seniors in Australia use reverse mortgage," said Mr Hickey.
The total number of households taking out reverse mortgage is 27,000. They took out an average of $54,200.
Mr Hickey said they borrowed 70 to 75 per cent of what they could borrow on their homes.
While lump sums remained popular, Mr Hickey said about 20 per cent of the loans were taken out as "income streams" in regular drawdowns.
Mr Dell said variable rates were the most popular type of loan currently used.
But 25 per cent of new loans were written at a fixed rate, up from 22 per cent in 2005.
With new entrants - including Bluestone, Macquarie Bank, ABN AMRO and Australian Seniors Finance - Mr Hickey said the market was set to grow.
Lending is based on the age of the borrowers and the value of the property, ranging from between 10 and 15 per cent of equity for those aged 60, to 40 per cent for people over 80.
NSW leads borrowingThe study found that 41 per cent of reverse mortgages were taken out in NSW, compared with 20 per cent each in Victoria and Queensland.
It said that 80 per cent of the loans were made to borrowers living in capital cities and that houses made up 80 per cent of assets used in the transactions.
Source: The Australian
Mortgage home loans to become a lifelong commitment
Housing affordability is at a record low so mortgage lenders are devising new loan products to bridge the gap for first-time home buyers eager to get a start.
Yesterday Savings & Loan Credit Union started to offer 40 year home loans to customers, taking us one step closer to Japan's multi-generation property loans.
And the appearance of shared equity loans such as that offered by Adelaide Bank/Rismark is another attempt to bridge the affordability gap for potential home buyers at a time when rents are also soaring.
Sceptics claim that the housing market will quickly absorb any affordability short cuts, much as the first home owners grant quickly resulted in prices inflating by a similar amount.
The first independent analysis of shared equity loans disagrees with this idea.
Financial researcher Cannex found that shared equity products are unlikely to have any effect on property prices unless they become very widespread.
Even then, the effects are likely to be modest "because by using this form of loan a borrower with affordability issues has quite different needs from a property upgrader who can suddenly afford one more bedroom.''
The shared equity loan lowers the bar for home ownership by funding 20 per cent of the house with an interest free equity finance mortgage (EFM).
A conventional home loan and deposit covers the remaining 80 per cent of the house value.
The catch is that the issuer of the EFM gets to keep up to 40 per cent of the capital growth on the house.
Surprisingly, Cannex found this sort of a deal can work in the home owner's favour, particularly in times of low to moderate house price growth.
The first saving is in mortgage insurance, which might otherwise have been required if a very large proportion of the property price was being borrowed.
Using historic prices, Cannex found that buyers who used a shared equity loan would have been ahead in the muddling main markets of Sydney, Melbourne and Brisbane but way behind in the faster growing markets like Perth and Darwin.
So the trick is to only used shared equity in markets which are unlikely to experience sharp price growth.
Savings & Loans chief Greg Connor said the new 40-year loans came after requests from members who could not break into the property market.
He said they would reduce the minimum payment on a $250,000 loan by as much as $95.21 a month.
"We see extended terms as a stepping stone for most borrowers who can move to a standard length mortgage after becoming established,'' said Mr Connor.
Of course the price of a 40-year loan term is that it takes a lot longer to start making a dent in the loan principal and you pay interest for a lot longer.
Source: The Herald Sun
Yesterday Savings & Loan Credit Union started to offer 40 year home loans to customers, taking us one step closer to Japan's multi-generation property loans.
And the appearance of shared equity loans such as that offered by Adelaide Bank/Rismark is another attempt to bridge the affordability gap for potential home buyers at a time when rents are also soaring.
Sceptics claim that the housing market will quickly absorb any affordability short cuts, much as the first home owners grant quickly resulted in prices inflating by a similar amount.
The first independent analysis of shared equity loans disagrees with this idea.
Financial researcher Cannex found that shared equity products are unlikely to have any effect on property prices unless they become very widespread.
Even then, the effects are likely to be modest "because by using this form of loan a borrower with affordability issues has quite different needs from a property upgrader who can suddenly afford one more bedroom.''
The shared equity loan lowers the bar for home ownership by funding 20 per cent of the house with an interest free equity finance mortgage (EFM).
A conventional home loan and deposit covers the remaining 80 per cent of the house value.
The catch is that the issuer of the EFM gets to keep up to 40 per cent of the capital growth on the house.
Surprisingly, Cannex found this sort of a deal can work in the home owner's favour, particularly in times of low to moderate house price growth.
The first saving is in mortgage insurance, which might otherwise have been required if a very large proportion of the property price was being borrowed.
Using historic prices, Cannex found that buyers who used a shared equity loan would have been ahead in the muddling main markets of Sydney, Melbourne and Brisbane but way behind in the faster growing markets like Perth and Darwin.
So the trick is to only used shared equity in markets which are unlikely to experience sharp price growth.
Savings & Loans chief Greg Connor said the new 40-year loans came after requests from members who could not break into the property market.
He said they would reduce the minimum payment on a $250,000 loan by as much as $95.21 a month.
"We see extended terms as a stepping stone for most borrowers who can move to a standard length mortgage after becoming established,'' said Mr Connor.
Of course the price of a 40-year loan term is that it takes a lot longer to start making a dent in the loan principal and you pay interest for a lot longer.
Source: The Herald Sun
Mortgage home loans to become a lifelong commitment
Housing affordability is at a record low so mortgage lenders are devising new loan products to bridge the gap for first-time home buyers eager to get a start.
Yesterday Savings & Loan Credit Union started to offer 40 year home loans to customers, taking us one step closer to Japan's multi-generation property loans.
And the appearance of shared equity loans such as that offered by Adelaide Bank/Rismark is another attempt to bridge the affordability gap for potential home buyers at a time when rents are also soaring.
Sceptics claim that the housing market will quickly absorb any affordability short cuts, much as the first home owners grant quickly resulted in prices inflating by a similar amount.
The first independent analysis of shared equity loans disagrees with this idea.
Financial researcher Cannex found that shared equity products are unlikely to have any effect on property prices unless they become very widespread.
Even then, the effects are likely to be modest "because by using this form of loan a borrower with affordability issues has quite different needs from a property upgrader who can suddenly afford one more bedroom.''
The shared equity loan lowers the bar for home ownership by funding 20 per cent of the house with an interest free equity finance mortgage (EFM).
A conventional home loan and deposit covers the remaining 80 per cent of the house value.
The catch is that the issuer of the EFM gets to keep up to 40 per cent of the capital growth on the house.
Surprisingly, Cannex found this sort of a deal can work in the home owner's favour, particularly in times of low to moderate house price growth.
The first saving is in mortgage insurance, which might otherwise have been required if a very large proportion of the property price was being borrowed.
Using historic prices, Cannex found that buyers who used a shared equity loan would have been ahead in the muddling main markets of Sydney, Melbourne and Brisbane but way behind in the faster growing markets like Perth and Darwin.
So the trick is to only used shared equity in markets which are unlikely to experience sharp price growth.
Savings & Loans chief Greg Connor said the new 40-year loans came after requests from members who could not break into the property market.
He said they would reduce the minimum payment on a $250,000 loan by as much as $95.21 a month.
"We see extended terms as a stepping stone for most borrowers who can move to a standard length mortgage after becoming established,'' said Mr Connor.
Of course the price of a 40-year loan term is that it takes a lot longer to start making a dent in the loan principal and you pay interest for a lot longer.
Source: The Herald Sun
Yesterday Savings & Loan Credit Union started to offer 40 year home loans to customers, taking us one step closer to Japan's multi-generation property loans.
And the appearance of shared equity loans such as that offered by Adelaide Bank/Rismark is another attempt to bridge the affordability gap for potential home buyers at a time when rents are also soaring.
Sceptics claim that the housing market will quickly absorb any affordability short cuts, much as the first home owners grant quickly resulted in prices inflating by a similar amount.
The first independent analysis of shared equity loans disagrees with this idea.
Financial researcher Cannex found that shared equity products are unlikely to have any effect on property prices unless they become very widespread.
Even then, the effects are likely to be modest "because by using this form of loan a borrower with affordability issues has quite different needs from a property upgrader who can suddenly afford one more bedroom.''
The shared equity loan lowers the bar for home ownership by funding 20 per cent of the house with an interest free equity finance mortgage (EFM).
A conventional home loan and deposit covers the remaining 80 per cent of the house value.
The catch is that the issuer of the EFM gets to keep up to 40 per cent of the capital growth on the house.
Surprisingly, Cannex found this sort of a deal can work in the home owner's favour, particularly in times of low to moderate house price growth.
The first saving is in mortgage insurance, which might otherwise have been required if a very large proportion of the property price was being borrowed.
Using historic prices, Cannex found that buyers who used a shared equity loan would have been ahead in the muddling main markets of Sydney, Melbourne and Brisbane but way behind in the faster growing markets like Perth and Darwin.
So the trick is to only used shared equity in markets which are unlikely to experience sharp price growth.
Savings & Loans chief Greg Connor said the new 40-year loans came after requests from members who could not break into the property market.
He said they would reduce the minimum payment on a $250,000 loan by as much as $95.21 a month.
"We see extended terms as a stepping stone for most borrowers who can move to a standard length mortgage after becoming established,'' said Mr Connor.
Of course the price of a 40-year loan term is that it takes a lot longer to start making a dent in the loan principal and you pay interest for a lot longer.
Source: The Herald Sun
For those that want to know how mortgage brokers work
A lot of people sak me "So, if you don't charge me for your services, how can you run a business?"
This article goes some way in answering this question, from the beginning.
A mortgage broker offers loans from a panel of financial institutions, including banks and non-banks. In Australia now, there are literally hundreds of lenders with many, many more options than was traditionally available in the past. Competition for additional customers is fierce and new home loan products are available every day.
Banks, like other businesses want to grow their customer base, and having an off the payroll entity provide these is a cost effective way to acquire new customers.
So the bank gets an ongoing customer relationship out of the arrangement and they see that as a major benefit.
In fact, having a mortgage broker channel is now an essential part of gaining new clients for the banks.
And as far as the homeowner or home buyer is concerned, having someone scouring the market for the right home loan for them is better than trying to do it themselves.
In simple terms, brokers evaluate your situation against the 20 or 30 lenders on their panel for the best deal.
Banks and other mortgage lenders have changed
In Australia, along with the well known banks and lenders there are now a whole range of specialist lenders offering increasingly compeititve products to first home buyers, self employed and business people, retirees, new Australians and immigrants, previous bankrupts and people with a bad or poor credit history. One of the great advantages of using a good mortgage broker is that they have access to many of these lenders and their products.
How can a mortgage broker service be free?Brokers usually run their own businesses. Lenders work with mortgage brokers because they effectively give the lender a bigger "shop front" without carrying a traditional employee or "bricks and mortar" overhead. Some lenders like Citibank, ING, Macquarie Bank and HSBC have few or no branches and partly rely on mortgage brokers to represent their products.
Other lenders like Colonial CBA, Westpac, ANZ, NAB and St George have their own branch networks, but simply extend their access to Customers through the mortgage broker network. The lender pays the broker fees or commissions for your business. Just as if you were dealing with a bank manager or lender, these fees do not change the interest rate you pay on a home loan. To be sure you are being recommended to the right lender, just ask your broker to show you all the lenders on their panel, and what your loan options would be, against each lender's criteria.
What a Broker should do for youWhen you first meet with a broker, they should always start by asking you to explain your entire finance situation, including future plans. Little things can make a big difference to making sure you get the right home loan for your situation now and with flexibility for future changes. Have your key documents on hand to refer to when meeting with the broker so you can give the most accurate details to ensure you get the right homeloan. Your broker should:
Discuss and confirm loan options in writing Explain all documents of the loan application and help you to complete them Explain the loan process, from application to closing Explain all associated costs and fees of the loan application Explain the disbursements Communicate with you throughout the loan process in a timely manner Follow up the lender for you from application through conditional and on to unconditional approval Negotiate with their lender/s to achieve the best deal How do I know a mortgage broker is any good? Establishing that a broker is right for you and has experience and qualifications, as well as being committed to the industry code of practice, is vital to ensure you're getting the best loan for your needs. Here is a step-by-step checklist that will help you know if your broker is on the level.
For residential loans, all of the broker's services should be free i.e. is the whole service of giving you information in relation to home loans, negotiating the loan for you and handling the paperwork through to approval The right broker will take the time to really understand your entire finance situation, both now and into the future Your broker should have a range of home loans from a wide variety of lenders, e.g. banks and non-banks, conforming and non-conforming Ensure your broker is not just an agent for one lender Check the qualifications and experience of your broker, even ask for references from previous borrowers Are they a member of the professional mortgage association (MIAA/FBAA)? Make sure your broker discloses all commission and payments received so you can judge whether a particular loan recommendation is being influenced by how much the broker will be paid Ask your broker to show you on their computer how the loans they offer compare for your situation. Good brokers should have the appropriate software and be able to clearly outline their criteria and logic Ask your broker how they comply with the Privacy Act to ensure the security of your personal and financial details Your broker should have appropriate insurances A good broker should be able to explain the most complex loans in plain English It is up to you, but it really helps if you actually like your broker as well!
Specialised Software The sheer amount of lenders in the market, coupled with the enormous numbers of products on offer, means that most good brokers use specialised software to access and keep up to date with the entire range of loans on offer from their lenders. Apart from complexity, with changes potentially occurring somewhere daily, it really does require the assistance of technology to analyse options effectively. When you meet with a mortgage broker, they should be happy to work through these options with you on their computer.
More InformationThe home loan market is very competitive. There are literally thousands of home loan options to choose from and the fastest way to get to the best decision for you is to get assistance. Make an appointment or talk to a local mortgage broker before making a final decision. If you have any questions about your loans or how brokers work, please call at any time on 13 XINC (13 9462) or contact us via email and we will return your call within 2 business hours.
This article goes some way in answering this question, from the beginning.
A mortgage broker offers loans from a panel of financial institutions, including banks and non-banks. In Australia now, there are literally hundreds of lenders with many, many more options than was traditionally available in the past. Competition for additional customers is fierce and new home loan products are available every day.
Banks, like other businesses want to grow their customer base, and having an off the payroll entity provide these is a cost effective way to acquire new customers.
So the bank gets an ongoing customer relationship out of the arrangement and they see that as a major benefit.
In fact, having a mortgage broker channel is now an essential part of gaining new clients for the banks.
And as far as the homeowner or home buyer is concerned, having someone scouring the market for the right home loan for them is better than trying to do it themselves.
In simple terms, brokers evaluate your situation against the 20 or 30 lenders on their panel for the best deal.
Banks and other mortgage lenders have changed
In Australia, along with the well known banks and lenders there are now a whole range of specialist lenders offering increasingly compeititve products to first home buyers, self employed and business people, retirees, new Australians and immigrants, previous bankrupts and people with a bad or poor credit history. One of the great advantages of using a good mortgage broker is that they have access to many of these lenders and their products.
How can a mortgage broker service be free?Brokers usually run their own businesses. Lenders work with mortgage brokers because they effectively give the lender a bigger "shop front" without carrying a traditional employee or "bricks and mortar" overhead. Some lenders like Citibank, ING, Macquarie Bank and HSBC have few or no branches and partly rely on mortgage brokers to represent their products.
Other lenders like Colonial CBA, Westpac, ANZ, NAB and St George have their own branch networks, but simply extend their access to Customers through the mortgage broker network. The lender pays the broker fees or commissions for your business. Just as if you were dealing with a bank manager or lender, these fees do not change the interest rate you pay on a home loan. To be sure you are being recommended to the right lender, just ask your broker to show you all the lenders on their panel, and what your loan options would be, against each lender's criteria.
What a Broker should do for youWhen you first meet with a broker, they should always start by asking you to explain your entire finance situation, including future plans. Little things can make a big difference to making sure you get the right home loan for your situation now and with flexibility for future changes. Have your key documents on hand to refer to when meeting with the broker so you can give the most accurate details to ensure you get the right homeloan. Your broker should:
Discuss and confirm loan options in writing Explain all documents of the loan application and help you to complete them Explain the loan process, from application to closing Explain all associated costs and fees of the loan application Explain the disbursements Communicate with you throughout the loan process in a timely manner Follow up the lender for you from application through conditional and on to unconditional approval Negotiate with their lender/s to achieve the best deal How do I know a mortgage broker is any good? Establishing that a broker is right for you and has experience and qualifications, as well as being committed to the industry code of practice, is vital to ensure you're getting the best loan for your needs. Here is a step-by-step checklist that will help you know if your broker is on the level.
For residential loans, all of the broker's services should be free i.e. is the whole service of giving you information in relation to home loans, negotiating the loan for you and handling the paperwork through to approval The right broker will take the time to really understand your entire finance situation, both now and into the future Your broker should have a range of home loans from a wide variety of lenders, e.g. banks and non-banks, conforming and non-conforming Ensure your broker is not just an agent for one lender Check the qualifications and experience of your broker, even ask for references from previous borrowers Are they a member of the professional mortgage association (MIAA/FBAA)? Make sure your broker discloses all commission and payments received so you can judge whether a particular loan recommendation is being influenced by how much the broker will be paid Ask your broker to show you on their computer how the loans they offer compare for your situation. Good brokers should have the appropriate software and be able to clearly outline their criteria and logic Ask your broker how they comply with the Privacy Act to ensure the security of your personal and financial details Your broker should have appropriate insurances A good broker should be able to explain the most complex loans in plain English It is up to you, but it really helps if you actually like your broker as well!
Specialised Software The sheer amount of lenders in the market, coupled with the enormous numbers of products on offer, means that most good brokers use specialised software to access and keep up to date with the entire range of loans on offer from their lenders. Apart from complexity, with changes potentially occurring somewhere daily, it really does require the assistance of technology to analyse options effectively. When you meet with a mortgage broker, they should be happy to work through these options with you on their computer.
More InformationThe home loan market is very competitive. There are literally thousands of home loan options to choose from and the fastest way to get to the best decision for you is to get assistance. Make an appointment or talk to a local mortgage broker before making a final decision. If you have any questions about your loans or how brokers work, please call at any time on 13 XINC (13 9462) or contact us via email and we will return your call within 2 business hours.
Saturday, April 21, 2007
Baby Boomers cashing out their home equity
Seniors borrowed $560 million in reverse mortgages in 2006
Older Australians took out $560 million in reverse mortgages in 2006 - a lift of 80 per cent over 2005 , according to a study released yesterday.
Despite what appeared to be rapid growth, Keiren Dell, executive director of the Senior Australian Equity Release Association of Lenders (SEQUAL), said it was at the lower end of his expectation.
"I had expected growth to be at least 100 per cent," he said, adding that the volume of lending in reverse mortgages could easily double in the next two years.
"The first baby-boomers reached 60 a couple of years ago and some had started to take out equity from their home for renovation or buy a new car."
Funding retirementIn fact, the fastest-growing segment (albeit from a low base) was the 60-69 age group, said Trowbridge Deloitte partner James Hickey, who led the reverse mortgage study for SEQUAL. However, the largest group of borrowers were in their 70s.
"We estimated 1 to 1.5 per cent of seniors in Australia use reverse mortgage," said Mr Hickey.
The total number of households taking out reverse mortgage is 27,000. They took out an average of $54,200.
Mr Hickey said they borrowed 70 to 75 per cent of what they could borrow on their homes.
While lump sums remained popular, Mr Hickey said about 20 per cent of the loans were taken out as "income streams" in regular drawdowns.
Mr Dell said variable rates were the most popular type of loan currently used.
But 25 per cent of new loans were written at a fixed rate, up from 22 per cent in 2005.
With new entrants - including Bluestone, Macquarie Bank, ABN AMRO and Australian Seniors Finance - Mr Hickey said the market was set to grow.
Lending is based on the age of the borrowers and the value of the property, ranging from between 10 and 15 per cent of equity for those aged 60, to 40 per cent for people over 80.
NSW leads borrowingThe study found that 41 per cent of reverse mortgages were taken out in NSW, compared with 20 per cent each in Victoria and Queensland.
It said that 80 per cent of the loans were made to borrowers living in capital cities and that houses made up 80 per cent of assets used in the transactions.
Source: The Australian
Older Australians took out $560 million in reverse mortgages in 2006 - a lift of 80 per cent over 2005 , according to a study released yesterday.
Despite what appeared to be rapid growth, Keiren Dell, executive director of the Senior Australian Equity Release Association of Lenders (SEQUAL), said it was at the lower end of his expectation.
"I had expected growth to be at least 100 per cent," he said, adding that the volume of lending in reverse mortgages could easily double in the next two years.
"The first baby-boomers reached 60 a couple of years ago and some had started to take out equity from their home for renovation or buy a new car."
Funding retirementIn fact, the fastest-growing segment (albeit from a low base) was the 60-69 age group, said Trowbridge Deloitte partner James Hickey, who led the reverse mortgage study for SEQUAL. However, the largest group of borrowers were in their 70s.
"We estimated 1 to 1.5 per cent of seniors in Australia use reverse mortgage," said Mr Hickey.
The total number of households taking out reverse mortgage is 27,000. They took out an average of $54,200.
Mr Hickey said they borrowed 70 to 75 per cent of what they could borrow on their homes.
While lump sums remained popular, Mr Hickey said about 20 per cent of the loans were taken out as "income streams" in regular drawdowns.
Mr Dell said variable rates were the most popular type of loan currently used.
But 25 per cent of new loans were written at a fixed rate, up from 22 per cent in 2005.
With new entrants - including Bluestone, Macquarie Bank, ABN AMRO and Australian Seniors Finance - Mr Hickey said the market was set to grow.
Lending is based on the age of the borrowers and the value of the property, ranging from between 10 and 15 per cent of equity for those aged 60, to 40 per cent for people over 80.
NSW leads borrowingThe study found that 41 per cent of reverse mortgages were taken out in NSW, compared with 20 per cent each in Victoria and Queensland.
It said that 80 per cent of the loans were made to borrowers living in capital cities and that houses made up 80 per cent of assets used in the transactions.
Source: The Australian
CommBank says earnings on track
Australia's second largest bank Commonwealth Bank of Australia Ltd says it remains on track to deliver cash earnings per share (EPS) growth that meets or exceeds the average of its peers.
In a third quarter trading update the bank said trading conditions and underlying credit growth remained favourable.
"The earnings momentum of the first half has been maintained in the third quarter of the group's 2007 financial year," it said.
During the quarter, CBA said trading conditions in its retail bank business had remained relatively strong, supported by steady housing growth and continuing favourable credit quality.
"In Australia, the retail bank continued to target profitable growth in each of its key products," it said.
Home lending balance growth has been in line with market.
In credit cards, recent growth rates had also been in line with market even though the bank continued to avoid zero rate balance transfer offers.
"Retail deposit growth, which has been influenced by normal seasonal factors, has been in line with system with continuing strong inflows into Netbank Saver," it added.
"Consumer credit quality has remained sound."
CBA said there had been some seasonal increase in arrears.
"Loss rates in unsecured lending - which includes credit cards - are trending slightly below expectations," it added.
The bank also said its institutional banking business had delivered strong balance growth with stable margins and that the global markets and treasury units had performed well.
"The local business banking market remained competitive, however margins have been stable," it said.
"Overall credit quality in the corporate book remains good, although there has been a slight increase in the level of impaired assets."
The wealth management business continued to benefit from a positive investment environment and strong retail funds flows.
Funds under management at March 31 totalled $130.8 billion, up 10.2 per cent for the nine months and two per cent for the quarter.
"It is pleasing to see that our focus on profitable growth is continuing to deliver results," chief executive Ralph Norris said.
"Not only have we maintained the earnings momentum from the first half, but we are continuing to make good progress with our key strategic initiatives.
"With good underlying credit growth and sound credit quality, I remain positive about the outlook and am confident in the ability of the group to again deliver strong earnings per share growth for the full year."
Source : AAP
In a third quarter trading update the bank said trading conditions and underlying credit growth remained favourable.
"The earnings momentum of the first half has been maintained in the third quarter of the group's 2007 financial year," it said.
During the quarter, CBA said trading conditions in its retail bank business had remained relatively strong, supported by steady housing growth and continuing favourable credit quality.
"In Australia, the retail bank continued to target profitable growth in each of its key products," it said.
Home lending balance growth has been in line with market.
In credit cards, recent growth rates had also been in line with market even though the bank continued to avoid zero rate balance transfer offers.
"Retail deposit growth, which has been influenced by normal seasonal factors, has been in line with system with continuing strong inflows into Netbank Saver," it added.
"Consumer credit quality has remained sound."
CBA said there had been some seasonal increase in arrears.
"Loss rates in unsecured lending - which includes credit cards - are trending slightly below expectations," it added.
The bank also said its institutional banking business had delivered strong balance growth with stable margins and that the global markets and treasury units had performed well.
"The local business banking market remained competitive, however margins have been stable," it said.
"Overall credit quality in the corporate book remains good, although there has been a slight increase in the level of impaired assets."
The wealth management business continued to benefit from a positive investment environment and strong retail funds flows.
Funds under management at March 31 totalled $130.8 billion, up 10.2 per cent for the nine months and two per cent for the quarter.
"It is pleasing to see that our focus on profitable growth is continuing to deliver results," chief executive Ralph Norris said.
"Not only have we maintained the earnings momentum from the first half, but we are continuing to make good progress with our key strategic initiatives.
"With good underlying credit growth and sound credit quality, I remain positive about the outlook and am confident in the ability of the group to again deliver strong earnings per share growth for the full year."
Source : AAP
Property investors are the growth market in mortgage finance
A record one in three new mortgages were sold to property investors, figures reveal.
The AFG Mortgage Index for March shows there is "rapidly increasing confidence in property", says AFG sales and operations general manager Mark Hewitt.
While good news for investors, the figures are likely to add weight to speculation that the Reserve Bank of Australia will raise interest rates next month.
In NSW, 34.4 per cent of new mortgages were sold to investors, a level not reached since May 2005.
"While one should be cautious about reading too much into a single month's data, it would seem that we're at last seeing the long-awaited return of confidence to the NSW property sector," Mr Hewitt said.
"Even Victoria is coming out of the gloom.
"If this trend continues over the next few months, we could be in the golden scenario where property markets, coast to coast, are powering forward."
In Western Australia, 46 per cent of all new mortgages were for investment purposes in March, while in Queensland the figure was 31.2 per cent.
Victoria, at 25.5 per cent, was well below the national average (of 32.9 per cent) but significantly up on its March 2006 rate of just 18.9 per cent.
In South Australia, 27.4 per cent of new mortgages were sold to investors.
The AFG Mortgage Index revealed that the average new mortgage, nation-wide, now stands at $308,038 - up slightly on the previous high of $307,665 in November 2006.
The average mortgage in NSW is $370,161, representing 66.9 per cent of the property's value.
The second-most expensive mortgages are in WA, with an average of $345,440, representing 56.8 per cent of the property's value.
While AFG's index is not definitive, it is usually strongly indicative of more comprehensive figures released later each month by other institutions.
© 2007 AAP Brought to you by Mr Mortgage
The AFG Mortgage Index for March shows there is "rapidly increasing confidence in property", says AFG sales and operations general manager Mark Hewitt.
While good news for investors, the figures are likely to add weight to speculation that the Reserve Bank of Australia will raise interest rates next month.
In NSW, 34.4 per cent of new mortgages were sold to investors, a level not reached since May 2005.
"While one should be cautious about reading too much into a single month's data, it would seem that we're at last seeing the long-awaited return of confidence to the NSW property sector," Mr Hewitt said.
"Even Victoria is coming out of the gloom.
"If this trend continues over the next few months, we could be in the golden scenario where property markets, coast to coast, are powering forward."
In Western Australia, 46 per cent of all new mortgages were for investment purposes in March, while in Queensland the figure was 31.2 per cent.
Victoria, at 25.5 per cent, was well below the national average (of 32.9 per cent) but significantly up on its March 2006 rate of just 18.9 per cent.
In South Australia, 27.4 per cent of new mortgages were sold to investors.
The AFG Mortgage Index revealed that the average new mortgage, nation-wide, now stands at $308,038 - up slightly on the previous high of $307,665 in November 2006.
The average mortgage in NSW is $370,161, representing 66.9 per cent of the property's value.
The second-most expensive mortgages are in WA, with an average of $345,440, representing 56.8 per cent of the property's value.
While AFG's index is not definitive, it is usually strongly indicative of more comprehensive figures released later each month by other institutions.
© 2007 AAP Brought to you by Mr Mortgage
Monday, April 16, 2007
Banks boost lending rates ahead of RBA official interest rises
Aussie retail banks are getting ahead of the Reserve Bank of Australia and are raising fixed lending rates as financial markets price in an interest-rate rise this week.
Major financial institutions are already starting to anticipate a rate hike from the central bank on Wednesday and have marginally shifted fixed lending rates.
Since last week ANZ has moved the one to five-year fixed rate up 0.1 per cent, while ING also raised its three to five-year products by the same amount.
NAB added an extra 2 to 7 basis points to its fixed rates and BankWest and Bank of Queensland have moved higher.
The increases were ordered after the three-year money market rates rallied 18 basis points over the past month on interest rate expectations.
Aussie dollar soars to 10-year highMeanwhile, the Australian dollar has reached a 10-year high as domestic financial markets raise expectations that a stronger economic outlook will prompt the Reserve Bank to tighten monetary policy today.
The prospect of the central bank lifting the cash rate to 6.5 per cent has soared to 65 per cent, after higher retail sales numbers and building approvals spiked sharply.
The 0.9 per cent monthly increase in national spending was interpreted as the possible trigger for the central bank to adjust rates when it meets today.
The dollar shot up following the news and last night was trading at US81.45c, just off its intraday high. The dollar's level has prompted some strategists to extend their forecasts as to how long the currency can stay high.
Overnight, the dollar traded between a low of $US0.8134 and a high of $US0.8180.
BT chief economist Chris Caton said the Reserve Bank would be concerned that higher spending, coupled with greater credit borrowing, would lift inflation.
"The news adds to the impression that the Australian economy is still travelling quite well," Dr Caton said, "although it is not clear to what extent one should allow one's view to be affected by a freak rise in multi-unit dwelling approvals."
Stocks could take a hitThe share prices of the major banks were weaker on the market yesterday, in anticipation of the interest rate rise and the implication it would have for borrowing levels.
The concerns about a possible trade stoush between China and the US injected a fresh bout of nerves into the Australian stock market.
Grange Securities chief economist Stephen Roberts said the share market, at the current heights, was susceptible to potentially negative news from around the world.
"It is a risk to global economic growth," Mr Roberts said of the US situation.
"At the moment it is no more than that."
Source: The Australian
Major financial institutions are already starting to anticipate a rate hike from the central bank on Wednesday and have marginally shifted fixed lending rates.
Since last week ANZ has moved the one to five-year fixed rate up 0.1 per cent, while ING also raised its three to five-year products by the same amount.
NAB added an extra 2 to 7 basis points to its fixed rates and BankWest and Bank of Queensland have moved higher.
The increases were ordered after the three-year money market rates rallied 18 basis points over the past month on interest rate expectations.
Aussie dollar soars to 10-year highMeanwhile, the Australian dollar has reached a 10-year high as domestic financial markets raise expectations that a stronger economic outlook will prompt the Reserve Bank to tighten monetary policy today.
The prospect of the central bank lifting the cash rate to 6.5 per cent has soared to 65 per cent, after higher retail sales numbers and building approvals spiked sharply.
The 0.9 per cent monthly increase in national spending was interpreted as the possible trigger for the central bank to adjust rates when it meets today.
The dollar shot up following the news and last night was trading at US81.45c, just off its intraday high. The dollar's level has prompted some strategists to extend their forecasts as to how long the currency can stay high.
Overnight, the dollar traded between a low of $US0.8134 and a high of $US0.8180.
BT chief economist Chris Caton said the Reserve Bank would be concerned that higher spending, coupled with greater credit borrowing, would lift inflation.
"The news adds to the impression that the Australian economy is still travelling quite well," Dr Caton said, "although it is not clear to what extent one should allow one's view to be affected by a freak rise in multi-unit dwelling approvals."
Stocks could take a hitThe share prices of the major banks were weaker on the market yesterday, in anticipation of the interest rate rise and the implication it would have for borrowing levels.
The concerns about a possible trade stoush between China and the US injected a fresh bout of nerves into the Australian stock market.
Grange Securities chief economist Stephen Roberts said the share market, at the current heights, was susceptible to potentially negative news from around the world.
"It is a risk to global economic growth," Mr Roberts said of the US situation.
"At the moment it is no more than that."
Source: The Australian
Mortgage loans become lifelong interest
40-year home loans being offered.
With housing affordability officially at record lows, financial engineering is reaching out to close the gap for first-time home buyers eager to get a start.
Yesterday Savings & Loan Credit Union started to offer 40 year home loans to customers, taking us one step closer to Japan's multi-generation property loans.
And the appearance of shared equity loans such as that offered by Adelaide Bank/Rismark is another attempt to bridge the affordability gap for potential home buyers at a time when rents are also soaring.
Sceptics claim that the housing market will quickly absorb any affordability short cuts, much as the first home owners grant quickly resulted in prices inflating by a similar amount.
The first independent analysis of shared equity loans disagrees with this idea.
Financial researcher Cannex found that shared equity products are unlikely to have any effect on property prices unless they become very widespread.
Even then, the effects are likely to be modest "because by using this form of loan a borrower with affordability issues has quite different needs from a property upgrader who can suddenly afford one more bedroom.''
The shared equity loan lowers the bar for home ownership by funding 20 per cent of the house with an interest free equity finance mortgage (EFM).
A conventional home loan and deposit covers the remaining 80 per cent of the house value.
The catch is that the issuer of the EFM gets to keep up to 40 per cent of the capital growth on the house.
Surprisingly, Cannex found this sort of a deal can work in the home owner's favour, particularly in times of low to moderate house price growth.
The first saving is in mortgage insurance, which might otherwise have been required if a very large proportion of the property price was being borrowed.
Using historic prices, Cannex found that buyers who used a shared equity loan would have been ahead in the muddling main markets of Sydney, Melbourne and Brisbane but way behind in the faster growing markets like Perth and Darwin.
So the trick is to only used shared equity in markets which are unlikely to experience sharp price growth.
Savings & Loans chief Greg Connor said the new 40-year loans came after requests from members who could not break into the property market.
He said they would reduce the minimum payment on a $250,000 loan by as much as $95.21 a month.
"We see extended terms as a stepping stone for most borrowers who can move to a standard length mortgage after becoming established,'' said Mr Connor.
Of course the price of a 40-year loan term is that it takes a lot longer to start making a dent in the loan principal and you pay interest for a lot longer.
Source: The Herald Sun
With housing affordability officially at record lows, financial engineering is reaching out to close the gap for first-time home buyers eager to get a start.
Yesterday Savings & Loan Credit Union started to offer 40 year home loans to customers, taking us one step closer to Japan's multi-generation property loans.
And the appearance of shared equity loans such as that offered by Adelaide Bank/Rismark is another attempt to bridge the affordability gap for potential home buyers at a time when rents are also soaring.
Sceptics claim that the housing market will quickly absorb any affordability short cuts, much as the first home owners grant quickly resulted in prices inflating by a similar amount.
The first independent analysis of shared equity loans disagrees with this idea.
Financial researcher Cannex found that shared equity products are unlikely to have any effect on property prices unless they become very widespread.
Even then, the effects are likely to be modest "because by using this form of loan a borrower with affordability issues has quite different needs from a property upgrader who can suddenly afford one more bedroom.''
The shared equity loan lowers the bar for home ownership by funding 20 per cent of the house with an interest free equity finance mortgage (EFM).
A conventional home loan and deposit covers the remaining 80 per cent of the house value.
The catch is that the issuer of the EFM gets to keep up to 40 per cent of the capital growth on the house.
Surprisingly, Cannex found this sort of a deal can work in the home owner's favour, particularly in times of low to moderate house price growth.
The first saving is in mortgage insurance, which might otherwise have been required if a very large proportion of the property price was being borrowed.
Using historic prices, Cannex found that buyers who used a shared equity loan would have been ahead in the muddling main markets of Sydney, Melbourne and Brisbane but way behind in the faster growing markets like Perth and Darwin.
So the trick is to only used shared equity in markets which are unlikely to experience sharp price growth.
Savings & Loans chief Greg Connor said the new 40-year loans came after requests from members who could not break into the property market.
He said they would reduce the minimum payment on a $250,000 loan by as much as $95.21 a month.
"We see extended terms as a stepping stone for most borrowers who can move to a standard length mortgage after becoming established,'' said Mr Connor.
Of course the price of a 40-year loan term is that it takes a lot longer to start making a dent in the loan principal and you pay interest for a lot longer.
Source: The Herald Sun
Aggressive lenders blamed as bankruptcies rise with interest rates
Aggressive lending practices by lenders with loose credit standards, compounded by rising interest rates have led to a huge increase in the number of people in NSW filing for bankruptcy.
Total insolvencies soared by more than 20 per cent in the first quarter of the year to 2859 cases, according to the Insolvency and Trustee Service Australia.
There were 2404 new bankruptcies in NSW in the March quarter, a rise of 21.54 per cent, 446 debt agreements (up 31.56 per cent) and nine personal insolvencies (up 28.57 per cent).
"This is an alarming reflection of the NSW property crash that people don't want to acknowledge," said insolvency partner and trustee at Hall Chadwick, Geoff McDonald.
"This is a real reflection of what has happened to people who dabbled in the investment property market and who have been horribly burned when the market turned," he said.
"Many of these people have fallen victim to peer group pressure, have decided to go for an investment property and try to make a quick buck."
Source: The Daily Telegraph
Total insolvencies soared by more than 20 per cent in the first quarter of the year to 2859 cases, according to the Insolvency and Trustee Service Australia.
There were 2404 new bankruptcies in NSW in the March quarter, a rise of 21.54 per cent, 446 debt agreements (up 31.56 per cent) and nine personal insolvencies (up 28.57 per cent).
"This is an alarming reflection of the NSW property crash that people don't want to acknowledge," said insolvency partner and trustee at Hall Chadwick, Geoff McDonald.
"This is a real reflection of what has happened to people who dabbled in the investment property market and who have been horribly burned when the market turned," he said.
"Many of these people have fallen victim to peer group pressure, have decided to go for an investment property and try to make a quick buck."
Source: The Daily Telegraph
Big growth in seniors cashing out mortgge equity
The value of Australia's reverse mortgage settlements grew almost two thirds last year as retirees tapped home equity to supplement income, a study showed.
Settlements of new loans grew to $520 million as of December 31 compared with $315 million a year earlier, according to a reverse mortgage study co-authored by actuarial and consulting firm Trowbridge Deloitte.
Some 27,500 reverse mortgages, where lenders make advance payments to owners against the value of a property, were made last year in a market now worth some $1.5 billion, according to the study.
The results highlight how a growing number of product providers and distribution channels has helped the loans gain wider acceptance, said James Hickey, a partner at Trowbridge Deloitte.
"This growth coincides with an increase in the number of product providers, providing improved product flexibility and wider distribution channels," he said.
Brokers boost lendingThe study showed use of mortgage brokers to secure the loans was growing.
While 72 per cent of all outstanding loans sales were still direct with the lender, some 46 per cent of loans made in 2006 were through brokers. That was up from 38 per cent a year earlier.
The average age of borrowers was steady at 74, while the average age of new borrowers last year was 72, the study showed.
Lump sum advances made up 80 per cent of loans with regular draw downs accounting for the remainder.
That shows many home owners are using reverse mortgages to supplement pensions, said Kieren Dell, executive director of Senior Australian Equity Release Association of Lenders (SEQUAL) which co-sponsored the study.
"An increasing number of Australian retirees are recognising the benefits of reverse mortgages," Mr Dell said.
"The increasing use of regular draw downs indicates that these seniors are using the funds more and more to supplement their pensions rather than using their equity for one-off spending."
Source: AAP
Settlements of new loans grew to $520 million as of December 31 compared with $315 million a year earlier, according to a reverse mortgage study co-authored by actuarial and consulting firm Trowbridge Deloitte.
Some 27,500 reverse mortgages, where lenders make advance payments to owners against the value of a property, were made last year in a market now worth some $1.5 billion, according to the study.
The results highlight how a growing number of product providers and distribution channels has helped the loans gain wider acceptance, said James Hickey, a partner at Trowbridge Deloitte.
"This growth coincides with an increase in the number of product providers, providing improved product flexibility and wider distribution channels," he said.
Brokers boost lendingThe study showed use of mortgage brokers to secure the loans was growing.
While 72 per cent of all outstanding loans sales were still direct with the lender, some 46 per cent of loans made in 2006 were through brokers. That was up from 38 per cent a year earlier.
The average age of borrowers was steady at 74, while the average age of new borrowers last year was 72, the study showed.
Lump sum advances made up 80 per cent of loans with regular draw downs accounting for the remainder.
That shows many home owners are using reverse mortgages to supplement pensions, said Kieren Dell, executive director of Senior Australian Equity Release Association of Lenders (SEQUAL) which co-sponsored the study.
"An increasing number of Australian retirees are recognising the benefits of reverse mortgages," Mr Dell said.
"The increasing use of regular draw downs indicates that these seniors are using the funds more and more to supplement their pensions rather than using their equity for one-off spending."
Source: AAP
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