Aussie Home Loans boss John Symond said yesterday he had presented Prime Minister John Howard with a solution to the problem because years of political buck passing had led to inaction at all levels of government.
Mr Symond's plan would give first-home buyers a tax deduction of up to $4725 a year for five years on annual home loan interest repayments of $15,000. That equates to a $400 monthly saving, reducing loan repayments from $1900 to $1500 on a $300,000 loan.
The maximum benefit would be available for new homes or units worth $200,000 to $500,000.
After getting on top of their mortgage repayments, borrowers would pay back half the benefit over the next five years - a maximum of $200 a month or $2362 a year.
"Housing affordability today, in all my 30 years in the business, is the worst it has ever been for first-home buyers," Mr Symond said yesterday.
"If we sit by and do nothing the crisis just deepens - that's what's happening at the moment."
Mr Symond met Mr Howard in Sydney for an hour on Tuesday to present him with the report and detail how the proposal would work.
Mr Howard yesterday told The Daily Telegraph he was interested in the proposal and would have a thorough look at it before releasing his own policy on housing affordability.
"I haven't made a decision, I'm not saying 'yes' or 'no' but I always look at something that John Symond puts forward," Mr Howard said.
"He's a very public-spirited man, he's contributed a lot and I always take his ideas seriously."
The scheme would cost the Federal Government $505 million per year and would be open only to people buying new dwellings - in an effort to stimulate construction and increase housing supply on city fringes.
Opposition housing spokeswoman Tanya Plibersek said the more that experts contributed to solve housing affordability the better.
"It's a very important issue for many Australians and the Government has been unwilling to propose any solutions of its own," she said.
The plan has been in development for the past four months in conjunction with economic analysts BIS Shrapnel, which yesterday predicted the Reserve Bank of Australia would raise its cash rate from 6.5 per to 7.3 per cent by 2011.
"Substantial interest rate rises in the next 12 months is unlikely but the risk is, if we've got strong construction activity, that they will rise significantly by 2010/11," BIS Shrapnel boss Robert Mellor said.
He estimated the number of Australians aged between 25 and 35 years - the average first home buyer age - would increase by 36,200 over the next five years.
Source: Daily Telegraph
Sunday, August 26, 2007
RAMS caught up in storm
Home mortgage lender RAMS is caught in the eye of an intensifying global financial storm, with its share price collapsing as it searches for billions of dollars in funding.
But the boss of the nation's biggest non-bank mortgage lender told The Australian last night that its customers had no cause for concern, and the business was not under threat.
"Yes, RAMS has some short-term funding issues to address, but that in no way affects our ability to continue to operate," chief executive Greg Kolivos said. "It's business as usual as far as we're concerned."
RAMS listed on the Australian Stock Exchange on July 27 in an $885 million float, enabling founder John Kinghorn to reap more than $600 million in cash by reducing his holding from 93 per cent to 20 per cent.
But investors who paid the $2.50 issue price were a long way under water yesterday after RAMS shares crashed again in response to the company's revelations about its funding problems.
The stock sagged 48.5c, or 36 per cent, to 85.5c, hitting an intra-day low of 55.5c. At the close of trading, the company was worth just $306 million, meaning Mr Kinghorn could buy it back with the cash he raised by selling shares into the float.
Other non-bank lenders, such as Bluestone, have also been hit by higher borrowing costs, which are likely to be passed on to customers in the form of higher mortgage rates. On Wednesday, Commonwealth Bank chief executive Ralph Norris said rates would inevitably rise across the industry.
Mr Kinghorn said on Tuesday, when the full extent of RAMS's problems surfaced, that "life was cool" until Thursday last week.
That was when France's biggest bank, BNP Paribas, triggered a new wave of global instability by suspending redemptions on several investment funds exposed to the US sub-prime mortgage crisis.
RAMS has no risky sub-prime exposure, but it relies on the evaporating short-term debt market in the US to raise money that it on-lends to Australian home buyers. The company has about 60,000 home loans to borrowers around the nation.
It passed on last week's 25-basis-point hike in official interest rates to new customers, while rates for existing borrowers went up 25-30 basis points. Despite the crisis, RAMS said on Tuesday it would not jack its rates up to offset the increase in its own funding costs.
In the US overnight on Wednesday, investors baulked when RAMS tried to roll over $600million in 30-day funding.
For the first time, an Australian company relied on a funding clause in the short-term debt market to extend its commercial paper, giving it a 180-day window to find alternative, longer-term funding for $6.17 billion of its $14.16 billion loan book.
RAMS told the stock exchange yesterday that the company's performance was not at fault.
"The current issues being experienced are as a result of the tightening in the global credit markets and not the performance of the company," it said in a statement. "The underlying business of the company continues to operate profitably."Source: The Australain
But the boss of the nation's biggest non-bank mortgage lender told The Australian last night that its customers had no cause for concern, and the business was not under threat.
"Yes, RAMS has some short-term funding issues to address, but that in no way affects our ability to continue to operate," chief executive Greg Kolivos said. "It's business as usual as far as we're concerned."
RAMS listed on the Australian Stock Exchange on July 27 in an $885 million float, enabling founder John Kinghorn to reap more than $600 million in cash by reducing his holding from 93 per cent to 20 per cent.
But investors who paid the $2.50 issue price were a long way under water yesterday after RAMS shares crashed again in response to the company's revelations about its funding problems.
The stock sagged 48.5c, or 36 per cent, to 85.5c, hitting an intra-day low of 55.5c. At the close of trading, the company was worth just $306 million, meaning Mr Kinghorn could buy it back with the cash he raised by selling shares into the float.
Other non-bank lenders, such as Bluestone, have also been hit by higher borrowing costs, which are likely to be passed on to customers in the form of higher mortgage rates. On Wednesday, Commonwealth Bank chief executive Ralph Norris said rates would inevitably rise across the industry.
Mr Kinghorn said on Tuesday, when the full extent of RAMS's problems surfaced, that "life was cool" until Thursday last week.
That was when France's biggest bank, BNP Paribas, triggered a new wave of global instability by suspending redemptions on several investment funds exposed to the US sub-prime mortgage crisis.
RAMS has no risky sub-prime exposure, but it relies on the evaporating short-term debt market in the US to raise money that it on-lends to Australian home buyers. The company has about 60,000 home loans to borrowers around the nation.
It passed on last week's 25-basis-point hike in official interest rates to new customers, while rates for existing borrowers went up 25-30 basis points. Despite the crisis, RAMS said on Tuesday it would not jack its rates up to offset the increase in its own funding costs.
In the US overnight on Wednesday, investors baulked when RAMS tried to roll over $600million in 30-day funding.
For the first time, an Australian company relied on a funding clause in the short-term debt market to extend its commercial paper, giving it a 180-day window to find alternative, longer-term funding for $6.17 billion of its $14.16 billion loan book.
RAMS told the stock exchange yesterday that the company's performance was not at fault.
"The current issues being experienced are as a result of the tightening in the global credit markets and not the performance of the company," it said in a statement. "The underlying business of the company continues to operate profitably."Source: The Australain
More mortgage pain ahead following credit issues in the US
The CBA says mortgage rates to rise even if no RBA rise Non-bank lenders' rates likely to rise the most Australian stocks slumped almost 3% last week.
The nation's biggest home lender has warned that home-owners' mortgage rates will rise as the fallout from the US housing crisis continues to spread through global financial markets.
As the Australian stock market suffered another $48 billion plunge in value yesterday - taking its losses in the past three weeks to almost 10 per cent - Commonwealth Bank chief executive Ralph Norris said mortgage rates were likely to rise even if the Reserve Bank did not lift official rates.
Non-bank lenders most affected
Mr Norris said non-bank lenders - companies such as Bluestone, Wizard and Aussie Home Loans - would be more significantly affected by the credit crunch triggered by the crisis among poor-quality sub-prime home loans in the US.
He said the Commonwealth had no plans to lift rates, "but the market is driven by supply and demand, and if funding costs increase significantly, then we pass that on".
"The fact of the matter is the price of credit in the market internationally has moved, so there will at some stage be some increase in rates," he said.
"In regard to the level of those increases, non-bank lenders are going to be in a situation where they're going to have to pass on significantly greater increases than a bank like us."
Bluestone rates already raised above RBA rate
The Australian reported this week that Bluestone, hit by the higher cost of borrowing money to on-lend to its customers, had been forced to raise mortgage rates by 17-55 basis points.
Other lenders, particularly those offering low-documentation loans to customers with poor credit histories, are also likely to pass on the higher costs.
Aussie Home Loans' John Symond has warned rates will rise by about 0.25 percentage points.
And Mr Norris warned home-owners that he expected official interest rates to rise further after the Reserve Bank's increase of 0.25 percentage points last week to 6.5 per cent.
The sub-prime crisis continues to hurt international stock markets, with the Australian market, which took its lead from a falling Wall St, slumping almost 3 per cent yesterday.
The benchmark S&P/ASX 200 index, which yesterday fell 176.8 points to 5788 points, is down 9.9 per cent - just shy of the technical correction point of 10 per cent - since its record high of 6422.3 on July 24.
Aussie stock market falls
The Australian stock market, bolstered by the strength of its resources stocks, has in recent months been able to avoid following the big falls on Wall St.
But the Dow Jones Industrial Average is down just 7 per cent since the sub-prime crisis first broke three weeks ago, and in the past two trading sessions, the Australian stock market has suffered bigger falls than its New York counterpart.
Failures by mortgage lenders in the US, most of which were dealing in the riskier end of the housing market, have kept the US share market on tenterhooks for close to a month, and every day that provides a new financial hardship story pushes that market down further.
Investors in Australia's worst-affected hedge fund, Basis Capital's Yield Fund, were told yesterday by the fund's Sydney-based manager that they were now likely to lose more than 80 per cent of their money because of the sub-prime meltdown. Source: The Australian
The nation's biggest home lender has warned that home-owners' mortgage rates will rise as the fallout from the US housing crisis continues to spread through global financial markets.
As the Australian stock market suffered another $48 billion plunge in value yesterday - taking its losses in the past three weeks to almost 10 per cent - Commonwealth Bank chief executive Ralph Norris said mortgage rates were likely to rise even if the Reserve Bank did not lift official rates.
Non-bank lenders most affected
Mr Norris said non-bank lenders - companies such as Bluestone, Wizard and Aussie Home Loans - would be more significantly affected by the credit crunch triggered by the crisis among poor-quality sub-prime home loans in the US.
He said the Commonwealth had no plans to lift rates, "but the market is driven by supply and demand, and if funding costs increase significantly, then we pass that on".
"The fact of the matter is the price of credit in the market internationally has moved, so there will at some stage be some increase in rates," he said.
"In regard to the level of those increases, non-bank lenders are going to be in a situation where they're going to have to pass on significantly greater increases than a bank like us."
Bluestone rates already raised above RBA rate
The Australian reported this week that Bluestone, hit by the higher cost of borrowing money to on-lend to its customers, had been forced to raise mortgage rates by 17-55 basis points.
Other lenders, particularly those offering low-documentation loans to customers with poor credit histories, are also likely to pass on the higher costs.
Aussie Home Loans' John Symond has warned rates will rise by about 0.25 percentage points.
And Mr Norris warned home-owners that he expected official interest rates to rise further after the Reserve Bank's increase of 0.25 percentage points last week to 6.5 per cent.
The sub-prime crisis continues to hurt international stock markets, with the Australian market, which took its lead from a falling Wall St, slumping almost 3 per cent yesterday.
The benchmark S&P/ASX 200 index, which yesterday fell 176.8 points to 5788 points, is down 9.9 per cent - just shy of the technical correction point of 10 per cent - since its record high of 6422.3 on July 24.
Aussie stock market falls
The Australian stock market, bolstered by the strength of its resources stocks, has in recent months been able to avoid following the big falls on Wall St.
But the Dow Jones Industrial Average is down just 7 per cent since the sub-prime crisis first broke three weeks ago, and in the past two trading sessions, the Australian stock market has suffered bigger falls than its New York counterpart.
Failures by mortgage lenders in the US, most of which were dealing in the riskier end of the housing market, have kept the US share market on tenterhooks for close to a month, and every day that provides a new financial hardship story pushes that market down further.
Investors in Australia's worst-affected hedge fund, Basis Capital's Yield Fund, were told yesterday by the fund's Sydney-based manager that they were now likely to lose more than 80 per cent of their money because of the sub-prime meltdown. Source: The Australian
Mortgage Broker sees credit crisis as an opportunity
Mortgage broker Mortgage Choice sees ongoing concerns in global credit markets as an opportunity, rather than a risk to its business, the company's managing director Paul Lahiff said today.
The Sydney-based mortgage broker today reported a 9.7 per cent increase in net profit to a record $19.59 million for 2006/07, underpinned by an expansion of its business in states other than NSW.
Mr Lahiff said the result was achieved despite challenging market conditions.
"This result clearly demonstrates the strength of our national model," Mr Lahiff said.
"We were less reliant on what is currently a variable NSW housing market to provide the performance we were after.
"By contrast, Western Australia and Queensland have continued their strong growth off the back of the resources boom, while Victoria and South Australia performed in line with longer term historical trends.
"The results achieved underline the fact that Mortgage Choice has an extremely high quality, proven business model - one that is capable of delivering a sound performance even in challenging market conditions."
Mr Lahiff said ructions in financial markets stemming from problems in the US sub-prime mortgage sector had not impacted Mortgage Choice.
"We don't manufacture, we don't fund, we don't service the loans - that's the responsibility of the lenders.
"We don't have our own mortgage products which means we have no balance sheet or funding risk ... so (there's been) absolutely no impact from the events of the past few weeks."
Mr Lahiff said the company's role as a mortgage broker, rather than a lender, meant it would remain well insulated from any further fallout in credit markets.
"We don't have a direct exposure there because we don't have any funding or manufacturing capabilities ... there will be some waves that flow out from that (which) will inevitably touch us in some shape or form (but) we don't believe those to be significant.
"We also believe that while (some) organisations may tend to batten down the hatches, we see a good opportunity to go forward."
Mr Lahiff said the portion of "non-conforming" loans - the equivalent of a sub-prime loan - originated by Mortgage Choice was "incredibly low".
"The latest set of data (shows) that of the total loans that we booked, 0.67 per cent were non-conforming ... it's not a major part of our business," he said.
And while the ongoing global credit crunch is likely to impact on lending rates in Australia, chiefly in the non-bank sector, chief financial officer Tony Crossley said Mortgage Choice was in a position to take advantage.
"Essentially, in the short term, there's certainly upward pressure on interest rates ... the extent to which it's passed on is really a judgement call for the lenders," Mr Crossley said.
"From our point of view we think we are reasonably well placed to take advantage of any of that because (of our ability) to shift from one type of lender to another."
Mr Lahiff said that given the current environment, the company would "be alert to acquisition opportunities" but that organic growth would remain its chief focus.
"In this market, visibility, strong brand values, quality, consistency and track record are the keys," Mr Lahiff said.
"Lenders are increasingly basing rewards on quality, sustainability and performance." "We are confident that Mortgage Choice is well placed to achieve profitable growth in the coming year.
"Improved broker recruitment, an increasing commercial and retail office presence and through our invest-to-grow strategy, the ability to scale up the business will continue to be important going forward."
Mortgage Choice declared a final fully franked dividend of 8.5 cents per share, bringing the total ordinary dividend for the year to 14 cents per share.
Source: AAP
The Sydney-based mortgage broker today reported a 9.7 per cent increase in net profit to a record $19.59 million for 2006/07, underpinned by an expansion of its business in states other than NSW.
Mr Lahiff said the result was achieved despite challenging market conditions.
"This result clearly demonstrates the strength of our national model," Mr Lahiff said.
"We were less reliant on what is currently a variable NSW housing market to provide the performance we were after.
"By contrast, Western Australia and Queensland have continued their strong growth off the back of the resources boom, while Victoria and South Australia performed in line with longer term historical trends.
"The results achieved underline the fact that Mortgage Choice has an extremely high quality, proven business model - one that is capable of delivering a sound performance even in challenging market conditions."
Mr Lahiff said ructions in financial markets stemming from problems in the US sub-prime mortgage sector had not impacted Mortgage Choice.
"We don't manufacture, we don't fund, we don't service the loans - that's the responsibility of the lenders.
"We don't have our own mortgage products which means we have no balance sheet or funding risk ... so (there's been) absolutely no impact from the events of the past few weeks."
Mr Lahiff said the company's role as a mortgage broker, rather than a lender, meant it would remain well insulated from any further fallout in credit markets.
"We don't have a direct exposure there because we don't have any funding or manufacturing capabilities ... there will be some waves that flow out from that (which) will inevitably touch us in some shape or form (but) we don't believe those to be significant.
"We also believe that while (some) organisations may tend to batten down the hatches, we see a good opportunity to go forward."
Mr Lahiff said the portion of "non-conforming" loans - the equivalent of a sub-prime loan - originated by Mortgage Choice was "incredibly low".
"The latest set of data (shows) that of the total loans that we booked, 0.67 per cent were non-conforming ... it's not a major part of our business," he said.
And while the ongoing global credit crunch is likely to impact on lending rates in Australia, chiefly in the non-bank sector, chief financial officer Tony Crossley said Mortgage Choice was in a position to take advantage.
"Essentially, in the short term, there's certainly upward pressure on interest rates ... the extent to which it's passed on is really a judgement call for the lenders," Mr Crossley said.
"From our point of view we think we are reasonably well placed to take advantage of any of that because (of our ability) to shift from one type of lender to another."
Mr Lahiff said that given the current environment, the company would "be alert to acquisition opportunities" but that organic growth would remain its chief focus.
"In this market, visibility, strong brand values, quality, consistency and track record are the keys," Mr Lahiff said.
"Lenders are increasingly basing rewards on quality, sustainability and performance." "We are confident that Mortgage Choice is well placed to achieve profitable growth in the coming year.
"Improved broker recruitment, an increasing commercial and retail office presence and through our invest-to-grow strategy, the ability to scale up the business will continue to be important going forward."
Mortgage Choice declared a final fully franked dividend of 8.5 cents per share, bringing the total ordinary dividend for the year to 14 cents per share.
Source: AAP
Sunday, August 12, 2007
Mortgage interest rate blame on states dumb says Treasurer
The New South Wales Treasurer, Michael Costa, says the Federal Government's attempt to blame individual state borrowing levels for the anticipated mortgage interest rate rise is absurd.
The Prime Minister says the states are borrowing $70 billion and plunging Australia into debt.
New South Wales has the biggest infrastructure plan, with expected spending of $50 billion over the next four years - 40 per cent of that will be borrowed.
But Michael Costa says there is no stress on that undertaking.
"We are seeing no pressure on our treasury corporation to offer greater returns for people to take on that debt," he said.
Mr Costa says the Federal government cannot inoculate itself from another interest rate rise after overselling its economic credentials and handing out tax cuts last year in a vote buying exercise.
"The Federal government is absolutely desperate - they take credit when the economy is going well - when they're in difficulty they want to blame the states."
Mr Costa says the NSW capital spending program can be slowed if interest rates rise.Source: ABC
The Prime Minister says the states are borrowing $70 billion and plunging Australia into debt.
New South Wales has the biggest infrastructure plan, with expected spending of $50 billion over the next four years - 40 per cent of that will be borrowed.
But Michael Costa says there is no stress on that undertaking.
"We are seeing no pressure on our treasury corporation to offer greater returns for people to take on that debt," he said.
Mr Costa says the Federal government cannot inoculate itself from another interest rate rise after overselling its economic credentials and handing out tax cuts last year in a vote buying exercise.
"The Federal government is absolutely desperate - they take credit when the economy is going well - when they're in difficulty they want to blame the states."
Mr Costa says the NSW capital spending program can be slowed if interest rates rise.Source: ABC
Mortgage interest rate rise has Labor and Liberals at loggerheads
The reality of mortgage interest rates increases for home-buyers and businesses have been left to count the cost after a rise in official interest rates.
The Reserve Bank of Australia this week put the cash rate up 0.25 per cent to 6.5 per cent, the highest level in over 10 years.
Economists say the mortgage rate rise will translate to a rise of nearly $40 a month for Australians holding a $250,000 mortgage.
The first election-year rise since the Reserve Bank became independent sparked a war of words between the Government and Opposition.
In a rare joint news conference, Prime Minister John Howard and Treasurer Peter Costello used the news to put pressure on Labor over its economic credentials. [deflecting any questions of him breaking promises to homeowners and home buyers that rates woul remain at record lows.
"What this decision does is to place economic management once again front and centre in the political debate in this country," Mr Howard said.
Mr Costello said mortgage rates would still be lower than at any time under the former government.
He said the standard variable mortgage rate of 8.3 per cent was 4.5 per cent lower than the average under former Labor prime ministers Bob Hawke and Paul Keating, and "less than half of the notorious 17 per cent".
"The official cash rate of 6.5 per cent is lower than it was when this Government was elected and that is after 11 years of growth and 2.1 million new jobs," he added.
But Opposition Leader Kevin Rudd accused the Government of being out of touch and said the rates rise was a worrying development for households across Australia.
He said households were also being squeezed by rising petrol prices and the high cost of groceries.
"Working families are already struggling to make ends meet, particularly when you count nine interest rate rises on the run," he said.
Mr Rudd sought to deflect criticism of Labor's economic credentials, promising that a Labor government would maintain a Budget surplus and make fewer spending commitments than the Howard Government.
His treasury spokesman Wayne Swan accused the Government of losing touch with the reality of working families.
"A lot of families will be sitting around the kitchen table tonight wondering how they're going to make ends meet," Mr Swan said.
"On a day when they should have been explaining why they broke their interest rates promise, they stood there patting their backs," he said of Mr Howard and Mr Costello.
Greens Leader Bob Brown blames the Prime Minister for the rates rise.
"John Howard has given the average income earner in this country increased interest rates, while the wealthy got the tax cuts and it's not a good bargain," he said.
Default warning
Meanwhile the rise sparked a warning that many Australian families will lose their homes as they fail to keep up with mortgage payments.
David Imber from the Australians for Affordable Housing lobby group says many people will now be forced to default on their mortgages.
"We've already seen default rates double across Sydney and we know that it's spreading right across the country," he said.
"Mortgage defaults is the absolute worst sign of the housing affordability crisis for people who own their home.
"But of course in the rental market we've got hundreds of thousands of Australians who can't even afford to make it up to that opportunity to be able to purchase their home and we're very worried for them."
Housing Industry Association spokesman Ron Silberberg says any contention that there is not widespread mortgage stress reveals a callous indifference to the plight of many people.
"Particularly first home buyers that came into the market when house prices were increasing very rapidly in the the belief that interest rates would be stable," he said.
House prices up
In another blow for new homebuyers, there has been an increase in house prices across the country.
Figures released by the Australian Bureau of Statistics show there was a 9.2 per cent rise in home prices over the year to June and a 3.2 per cent increase in the quarter.
Of the capital cities, Brisbane and Perth recorded the biggest rises over the year with prices increasing by more than 15 per cent.
Australians are also borrowing more for housing with a 9.2 per cent increase in the value of home loans for the month of June.
Loans to investors also increased at a much faster pace than loans to owner-occupiers.
Banks plan rises
The big banks are yet to say how they will pass on the official rate rise to customers.
ANZ Bank chief economist Saul Eslake says the Reserve Bank is trying to rein in consumer spending and keep inflation in check.
"For home borrowers, this announcement means an extra $16 a month for every $100,000 of mortgage outstanding," he said.
"So, for example, someone with a $250,000 mortgage would be looking at close to $40 a month by way of extra mortgage repayments."
ANZ spokesman Paul Edwards also says it is inevitable there is going to be a flow-on to home-lending rates.
"But we'll take a few days to digest the change and work out the flow-on to our various products," he said.
Westpac also says it is inevitable its lending rates will go up. The National Australia and Commonwealth Banks say their rates are under review.Source: ABC
The Reserve Bank of Australia this week put the cash rate up 0.25 per cent to 6.5 per cent, the highest level in over 10 years.
Economists say the mortgage rate rise will translate to a rise of nearly $40 a month for Australians holding a $250,000 mortgage.
The first election-year rise since the Reserve Bank became independent sparked a war of words between the Government and Opposition.
In a rare joint news conference, Prime Minister John Howard and Treasurer Peter Costello used the news to put pressure on Labor over its economic credentials. [deflecting any questions of him breaking promises to homeowners and home buyers that rates woul remain at record lows.
"What this decision does is to place economic management once again front and centre in the political debate in this country," Mr Howard said.
Mr Costello said mortgage rates would still be lower than at any time under the former government.
He said the standard variable mortgage rate of 8.3 per cent was 4.5 per cent lower than the average under former Labor prime ministers Bob Hawke and Paul Keating, and "less than half of the notorious 17 per cent".
"The official cash rate of 6.5 per cent is lower than it was when this Government was elected and that is after 11 years of growth and 2.1 million new jobs," he added.
But Opposition Leader Kevin Rudd accused the Government of being out of touch and said the rates rise was a worrying development for households across Australia.
He said households were also being squeezed by rising petrol prices and the high cost of groceries.
"Working families are already struggling to make ends meet, particularly when you count nine interest rate rises on the run," he said.
Mr Rudd sought to deflect criticism of Labor's economic credentials, promising that a Labor government would maintain a Budget surplus and make fewer spending commitments than the Howard Government.
His treasury spokesman Wayne Swan accused the Government of losing touch with the reality of working families.
"A lot of families will be sitting around the kitchen table tonight wondering how they're going to make ends meet," Mr Swan said.
"On a day when they should have been explaining why they broke their interest rates promise, they stood there patting their backs," he said of Mr Howard and Mr Costello.
Greens Leader Bob Brown blames the Prime Minister for the rates rise.
"John Howard has given the average income earner in this country increased interest rates, while the wealthy got the tax cuts and it's not a good bargain," he said.
Default warning
Meanwhile the rise sparked a warning that many Australian families will lose their homes as they fail to keep up with mortgage payments.
David Imber from the Australians for Affordable Housing lobby group says many people will now be forced to default on their mortgages.
"We've already seen default rates double across Sydney and we know that it's spreading right across the country," he said.
"Mortgage defaults is the absolute worst sign of the housing affordability crisis for people who own their home.
"But of course in the rental market we've got hundreds of thousands of Australians who can't even afford to make it up to that opportunity to be able to purchase their home and we're very worried for them."
Housing Industry Association spokesman Ron Silberberg says any contention that there is not widespread mortgage stress reveals a callous indifference to the plight of many people.
"Particularly first home buyers that came into the market when house prices were increasing very rapidly in the the belief that interest rates would be stable," he said.
House prices up
In another blow for new homebuyers, there has been an increase in house prices across the country.
Figures released by the Australian Bureau of Statistics show there was a 9.2 per cent rise in home prices over the year to June and a 3.2 per cent increase in the quarter.
Of the capital cities, Brisbane and Perth recorded the biggest rises over the year with prices increasing by more than 15 per cent.
Australians are also borrowing more for housing with a 9.2 per cent increase in the value of home loans for the month of June.
Loans to investors also increased at a much faster pace than loans to owner-occupiers.
Banks plan rises
The big banks are yet to say how they will pass on the official rate rise to customers.
ANZ Bank chief economist Saul Eslake says the Reserve Bank is trying to rein in consumer spending and keep inflation in check.
"For home borrowers, this announcement means an extra $16 a month for every $100,000 of mortgage outstanding," he said.
"So, for example, someone with a $250,000 mortgage would be looking at close to $40 a month by way of extra mortgage repayments."
ANZ spokesman Paul Edwards also says it is inevitable there is going to be a flow-on to home-lending rates.
"But we'll take a few days to digest the change and work out the flow-on to our various products," he said.
Westpac also says it is inevitable its lending rates will go up. The National Australia and Commonwealth Banks say their rates are under review.Source: ABC
Interest rates, unemployment will soar under Labor, says Liberal funded report on workplace reform by Labor arch rivals Australian Chamber of Commerce
A new report has warned that Labor's promise to abolish the Coalition's WorkChoices reforms if its wins government would push up mortgage interest rates and unemployment. Labor denies this as a false assumption, and the report is written by liberal pals ACC.
The Australian Chamber of Commerce and Industry (ACCI) commissioned the economic consultants Econtech to model the consequences if the industrial relations landscape of 1993 was restored.
Its study predicted that would result in a 1.3 per cent hike in inflation and interest rates would climb by 1.4 per cent, pushing up the average mortgage by $273 a month.
ACCI spokesman Peter Hendy says the axing of WorkChoices alone makes up a sizeable share of the predictions.
"You would see about a third of the results here, so a very, very significant impact on the Australian economy," he said.
Mr Hendy says the report also forecasts major job losses.
"If you reverse industrial relations reform, you will have a massive impact upon the job market," he said.
"There would be something like up to 316,000 jobs lost.
"We're sending a message to both major political parties that you cannot afford to roll back the industrial relations reforms we've had to date."
But deputy Opposition leader Julia Gillard has told Channel Nine the report does not make sense and is based on a false assumption.
"The key claim in it is that Labor's industrial relations system is somehow going to have pattern bargaining in it," she said.
The report is being officially released later today.
Source: ABC
The Australian Chamber of Commerce and Industry (ACCI) commissioned the economic consultants Econtech to model the consequences if the industrial relations landscape of 1993 was restored.
Its study predicted that would result in a 1.3 per cent hike in inflation and interest rates would climb by 1.4 per cent, pushing up the average mortgage by $273 a month.
ACCI spokesman Peter Hendy says the axing of WorkChoices alone makes up a sizeable share of the predictions.
"You would see about a third of the results here, so a very, very significant impact on the Australian economy," he said.
Mr Hendy says the report also forecasts major job losses.
"If you reverse industrial relations reform, you will have a massive impact upon the job market," he said.
"There would be something like up to 316,000 jobs lost.
"We're sending a message to both major political parties that you cannot afford to roll back the industrial relations reforms we've had to date."
But deputy Opposition leader Julia Gillard has told Channel Nine the report does not make sense and is based on a false assumption.
"The key claim in it is that Labor's industrial relations system is somehow going to have pattern bargaining in it," she said.
The report is being officially released later today.
Source: ABC
Major banks sales targets a debt burden on consumers, says finance union.
The Finance Sector Union (FSU) says banks are contributing to excessive levels of consumer debt through pressuring employees to sell mortgages and credit cards to customers who do not need them.
A survey of more than 1,800 FSU members has found the majority feel forced to push debt on customers who simply cannot afford it.
The national policy director of the FSU, Rod Masson, says most bank employees think the high-pressure selling is undermining lending standards.
"They are put on what they deem to be inappropriate sales targets that have a negative impact on their ability to provide responsible customer service," he said.
Mr Masson says pressure-selling techniques are contributing to excessive levels of debt in the community.
"The danger is that they're actually taking loans that they will not be able to repay and ultimately will fall over," he said.
"We've seen the knock-on impact already of the non-prime mortgage area in the US and what that can do to the whole of the economy."
The FSU will present its findings to a Federal Government round table today to consider ways of forcing banks to review their lending practices.
Source: ABC
A survey of more than 1,800 FSU members has found the majority feel forced to push debt on customers who simply cannot afford it.
The national policy director of the FSU, Rod Masson, says most bank employees think the high-pressure selling is undermining lending standards.
"They are put on what they deem to be inappropriate sales targets that have a negative impact on their ability to provide responsible customer service," he said.
Mr Masson says pressure-selling techniques are contributing to excessive levels of debt in the community.
"The danger is that they're actually taking loans that they will not be able to repay and ultimately will fall over," he said.
"We've seen the knock-on impact already of the non-prime mortgage area in the US and what that can do to the whole of the economy."
The FSU will present its findings to a Federal Government round table today to consider ways of forcing banks to review their lending practices.
Source: ABC
Three major banks raise mortgage interest rates
NAB, Westpac and ANZ are the three of Australia's "big four" banks that have announced changes to lending and deposit rates after Wednesday's increase in official rates.
ANZ is the latest to move, putting up its standard variable home loan rate to 8.32 per cent.
The bank says it recognises the increase in official rates [and its lifting mortgage rates in line] will be difficult for some customers.
Earlier today, Westpac announced it was passing on the full increase in official rates to its lending rates, while increasing some of its deposit rates by 0.3 per cent.
National Australia Bank announced changes to its mortgage interest rates late Thursday.
Source: ABC
ANZ is the latest to move, putting up its standard variable home loan rate to 8.32 per cent.
The bank says it recognises the increase in official rates [and its lifting mortgage rates in line] will be difficult for some customers.
Earlier today, Westpac announced it was passing on the full increase in official rates to its lending rates, while increasing some of its deposit rates by 0.3 per cent.
National Australia Bank announced changes to its mortgage interest rates late Thursday.
Source: ABC
Mortgage rate rise makes Australian Government defensive
The Reserve Bank of Australia this week put the cash rate up 0.25 per cent to 6.5 per cent.
As mortgage interest rates jump to 6.5pc the Federal Government has tried to cover its political difficulty over today's interest rate rise by accusing Kevin Rudd of being a Liberal.
As soon as the Reserve Bank of Australia (RBA) announced the fifth interest rate rise since the last election the Opposition started making political capital.
In Question Time Kevin Rudd reminded the Prime Minister of the 2004 Liberal Party advertisement promising to keep interest rates at record lows.
"What does the Prime Minister regret most, making the promise or breaking it?" Mr Rudd said.
Mr Howard distanced himself from the advertisement, saying he did not personally make that claim.
"The most definitive thing I said in the election campaign of 2004 was in answer to a question from Neil Mitchell - 'so you wouldn't be embarrassed to win the election and then to have an interest rate rise?', answer: well I don't seek to give guarantees/judgements about individual movements - my argument is that they will always be lower under our policies," Mr Howard said.
Treasurer Peter Costello hit back at Mr Rudd by mocking his claim to be a fiscal conservative.
"We have a leader of the Opposition whose dearest wish is to be a Liberal," Mr Costello said.
The Government says despite today's rise, rates are lower than the average under Labor.
Another rise tipped
It was the unexpectedly high June quarter Consumer Price Index (CPI) that sealed the case for higher interest rates, amid buoyant economic activity.
In raising the cash rate to 6.5 per cent, the RBA also played down the impact on the global economy of credit market problems in the US.
Pricing on local credit markets indicates a belief the central bank could move again by the end of the year.
The chief economist of nabCapital, Rob Henderson, agrees it is a risk.
"Possibly they need a more restrictive monetary policy setting than they have now," he said.
"But I don't think they'll know that until into 2008, or possibly very very late in this year."
Industry, union response
The Australian Chamber of Commerce and Industry (ACCI) says it hopes the increase will forestall the need for any more adjustments for the next year at least.
ACCI chief executive Peter Hendy doubts the rate rise will affect business confidence levels.
"We only yesterday put out our business expectation survey for the last quarter," he said.
"It had the highest business confidence levels for eight years and in fact, plant and equipment investment prospects were the highest for 14 years.
"Ironically, they're increasing interest rates because the economy is going so strongly.
But Australian Council of Trade Unions (ACTU) president Sharan Burrow says the rate rise makes today a frightening day for families.
"Working families know that the IR (industrial relations) laws already take away their job security, their income security," she said.
"This increased debt on top of everything else is just going to make people very frightened."
Housing affordability
Meanwhile, the National Affordable Housing Summit chairman says house prices across Australia are increasing at an unacceptable rate.
Professor Julian Disney says the figures are not surprising.
"They're just illustrating how low the manic boom of a few years ago has slowed down," he said.
"Prices are still going up much faster than is acceptable and a lot of people are going to be overcommitting themselves."
Source: ABC
As mortgage interest rates jump to 6.5pc the Federal Government has tried to cover its political difficulty over today's interest rate rise by accusing Kevin Rudd of being a Liberal.
As soon as the Reserve Bank of Australia (RBA) announced the fifth interest rate rise since the last election the Opposition started making political capital.
In Question Time Kevin Rudd reminded the Prime Minister of the 2004 Liberal Party advertisement promising to keep interest rates at record lows.
"What does the Prime Minister regret most, making the promise or breaking it?" Mr Rudd said.
Mr Howard distanced himself from the advertisement, saying he did not personally make that claim.
"The most definitive thing I said in the election campaign of 2004 was in answer to a question from Neil Mitchell - 'so you wouldn't be embarrassed to win the election and then to have an interest rate rise?', answer: well I don't seek to give guarantees/judgements about individual movements - my argument is that they will always be lower under our policies," Mr Howard said.
Treasurer Peter Costello hit back at Mr Rudd by mocking his claim to be a fiscal conservative.
"We have a leader of the Opposition whose dearest wish is to be a Liberal," Mr Costello said.
The Government says despite today's rise, rates are lower than the average under Labor.
Another rise tipped
It was the unexpectedly high June quarter Consumer Price Index (CPI) that sealed the case for higher interest rates, amid buoyant economic activity.
In raising the cash rate to 6.5 per cent, the RBA also played down the impact on the global economy of credit market problems in the US.
Pricing on local credit markets indicates a belief the central bank could move again by the end of the year.
The chief economist of nabCapital, Rob Henderson, agrees it is a risk.
"Possibly they need a more restrictive monetary policy setting than they have now," he said.
"But I don't think they'll know that until into 2008, or possibly very very late in this year."
Industry, union response
The Australian Chamber of Commerce and Industry (ACCI) says it hopes the increase will forestall the need for any more adjustments for the next year at least.
ACCI chief executive Peter Hendy doubts the rate rise will affect business confidence levels.
"We only yesterday put out our business expectation survey for the last quarter," he said.
"It had the highest business confidence levels for eight years and in fact, plant and equipment investment prospects were the highest for 14 years.
"Ironically, they're increasing interest rates because the economy is going so strongly.
But Australian Council of Trade Unions (ACTU) president Sharan Burrow says the rate rise makes today a frightening day for families.
"Working families know that the IR (industrial relations) laws already take away their job security, their income security," she said.
"This increased debt on top of everything else is just going to make people very frightened."
Housing affordability
Meanwhile, the National Affordable Housing Summit chairman says house prices across Australia are increasing at an unacceptable rate.
Professor Julian Disney says the figures are not surprising.
"They're just illustrating how low the manic boom of a few years ago has slowed down," he said.
"Prices are still going up much faster than is acceptable and a lot of people are going to be overcommitting themselves."
Source: ABC
Cusumer creit warning: National Australia Bank [NAB] forcing borrowers to the wall
Allegations: The Safetli family says it has been misled into grave debt by the NAB.
Source: AFP: Greg Wood)
NAB accused of unconscionable conduct.
Several banks, NAB in particular, face complaints of unscrupulous lending behaviour in cases in which customers claim they have been forced to the wall after being persuaded to sign complicated loan guarantees they could neither afford nor understand.
The lending practices of the big banks are also coming under increasing scrutiny, with two influential federal parliamentary committees and the corporate regulator, ASIC, all intensifying their inquiries.
The claims come as growing numbers of Australians sink further into debt, leading to what has been dubbed "mortgage stress".
The Safetli family knows what it is like to lose almost everything to the bank.
When NAB foreclosed on their loans, husband and father Haissem Safetli, even lost his grip on sanity.
"I completely lost the plot," Mr Safetli said. "I lost my mind, I lost everything. I lost all feelings that I have left in this world."
His wife, Amanda, says the successful businessman had a complete breakdown.
"He ended up in a mental health facility trying to take his own life," she said.Source: ABC
Before their financial ruin, the Safetlis thought they were building their wealth on solid foundations, but they now say NAB's banking practices brought it crashing down around them.
The question worrying authorities now is how many other Australians could be in the same situation?
$800,000 mistake
The Safetlis are in financial limbo. As their dispute with NAB has dragged, Mr Safetli has tried to make a living out of selling tyres from his home garage.
He says his troubles began when NAB itself overextended finance to his wholesale tyre company under an existing trade refinance and credit facility.
In its ultimate notice of termination and formal demand, the bank admits it made an $800,000 mistake.
But according to the Safetlis, that didn't stop the bank demanding immediate repayment.
The money had already been spent on new stock. The family's cash problems only got worse as the bank began seizing assets, triggering a cascading series of loan defaults.
"At any time, we could have sold assets and paid off the bank," Mr Safetli said. "The problem you have with the banks is when they grab you, that's it, you're finished."
Homes lost
It might have been just another of the scores of business collapses that occur every year but authorities are especially concerned about what happened next.
Mr Safetli's mother, Faouzia, and her daughter-in-law claim the family's bank manager asked them to come to his office to sign some routine documents.
"He put all the papers in front of me," Faouzia Safetli said. "'Sign here,' I sign, that's it. 'Thank you very much.' That's it."
Amanda Safetli says she has realised in hindsight she should have checked what they were signing.
"My mother-in-law has limited English, limited reading," she said. "You walk into the bank, they give you a wad of documents, say 100 pages, and the little tabs say, 'Sign here, sign here,' and you do it."
What both women claim they were never told is that they were in fact signing binding personal guarantees over the loans mistakenly made to Haissem Safetli's tyre business.
Those guarantees would shortly afterwards see them each lose their homes.
Faouzia Safetli says nobody told her to seek legal advice before signing the document.
"I end up with nothing. My son - he end up with nothing," she said. "We all end up with nothing - our kids, his kids."
ASIC concerned
An independent advocate who helps people like the Safetlis resolve disputes with the banks, Bruce Ford, says the claims raise very serious questions about NAB's internal practices.
"The NAB and all banks are obliged at law to provide consumers to obtain independent legal advice prior to granting a guarantee," Mr Ford said. "That wasn't followed through with Mrs Safetli."
The corporate watchdog, the Australian Securities and Investments Commission (ASIC), shares the concern, as it makes clear to the bank in this letter: "NAB's knowledge of Mrs Safetli's level of understanding and the lack of any opportunity afforded to Mrs Safetli to obtain legal advice raises concern about unconscionable conduct by NAB."
Perhaps more seriously for the bank, ASIC is also concerned about NAB providing false evidence about the matter.
The bank told the watchdog: "Statutory declarations which stated that she had received independent legal advice were ... false and known to be false by the NAB."
Track record
NAB likes to advertise itself as an organisation responsive to the needs of its customers but the bank's critics say it has a bad track record.
"They've been prosecuted four times previously," Mr Ford said. "This is the fifth time now that the bank is under scrutiny for those precise things."
In fact, in 2001, the Federal Court ruled that NAB had acted unconscionably in the case of a Tasmanian woman left in charge of her husband's business after he had suffered a serious head injury.
In his absence, she signed what the bank told her were "routine papers". They were anything but - what she signed was a personal guarantee over the home.
The Australian Competition and Consumer Commission (ACCC) took action, alleging in court the bank did not explain the consequences of the guarantee to her, nor did it reveal that her husband's business was already in serious financial difficulty.
The ACCC said that not long after, the bank told the woman she had to sell her house to meet the personal guarantee.
As a result of that case, NAB consented to orders it would in future ensure its customers had the opportunity to obtain legal advice before signing guarantees.
But Mr Ford says the Safetlis' claims are history repeating.
"There's got to be alarm bells ringing for the regulator to say, 'Why are we here again after the ACCC's prosecution for precisely the same thing?'" Mr Ford said.
More allegations
Sydney pharmacist Voula Amassah is also locked in dispute with NAB, again over an agreement that she claims was never properly explained to her.
Ms Amassah says she lost her family home and other assets after her husband arranged a loan from the bank.
"I discovered that the loan had actually been rejected and the only way that it had been passed was by putting it in joint names and using my properties as security," she said.
Mr Ford says she was asked to sign up to it under "a certain degree of duress or stress".
"But she had no knowledge of the joint loan in her name until she got to the bank," he said.
Ms Amassah has since separated from her husband but says she is still angry with the bank for keeping her in the dark.
"Basically, I went in to sign a loan document," she said. "I wasn't given a copy of that document. I wasn't even given any statements when the mortgage was put into place, and that ended up being a financial disaster for me, a complete financial disaster."
Senators worried
The chairman of the Federal Parliamentary Committee on Financial Services, Liberal Senator Grant Chapman, says such practice would be inappropriate.
The committee has been on the receiving end of complaints about the banks.
In a written response to one, Senator Chapman notes that the allegations of malpractice and unconscionable conduct suggest a number of banks continue to engage in practices that appear to be seriously flawed.
"We want ASIC to thoroughly investigate each of these cases, come back to us with the details of their findings and then we'll make some decisions from there," he said.
But Opposition committee members like Senator Nick Sherry are not as confident with ASIC's ability to bring the banks to task and have accused the regulator of dragging its feet.
"Basically, when has ASIC examined the operations of internal dispute processes in, let's say, the four major banks?" he said.
"I have raised this issue on ... two or three previous occasions. I don't seem to be getting anywhere with some very clear definitive statistical, factual response."
'Debts unknown'
A complaint common to many who have defaulted on their loans is that their banks won't provide them account statements with a precise figure on how much they owe. That's despite banks like NAB vowing in its advertisements to its customers to tell it how it is.
Mr Safetli says his family is still trying to find out from the bank how much it owes.
"Write them a blank cheque - that's what they want," he said.
The ABC approached NAB for its response to the claims being made about its lending practices, but the bank declined to comment, saying that to do so would breach the privacy of its customers.
However, a bank spokeswoman did say the bank makes every effort to work with customers to resolve any disputes, and it will cooperate fully with any inquiries that are launched into that process.
But for their part, the Safetlis remain unconvinced by those reassurances.
"They're the ones that tell everybody what to do," Mr Safetli said. "They can do anything they want, any time they want and it's about time somebody just put a stop to it."
Source: ABC
Source: AFP: Greg Wood)
NAB accused of unconscionable conduct.
Several banks, NAB in particular, face complaints of unscrupulous lending behaviour in cases in which customers claim they have been forced to the wall after being persuaded to sign complicated loan guarantees they could neither afford nor understand.
The lending practices of the big banks are also coming under increasing scrutiny, with two influential federal parliamentary committees and the corporate regulator, ASIC, all intensifying their inquiries.
The claims come as growing numbers of Australians sink further into debt, leading to what has been dubbed "mortgage stress".
The Safetli family knows what it is like to lose almost everything to the bank.
When NAB foreclosed on their loans, husband and father Haissem Safetli, even lost his grip on sanity.
"I completely lost the plot," Mr Safetli said. "I lost my mind, I lost everything. I lost all feelings that I have left in this world."
His wife, Amanda, says the successful businessman had a complete breakdown.
"He ended up in a mental health facility trying to take his own life," she said.Source: ABC
Before their financial ruin, the Safetlis thought they were building their wealth on solid foundations, but they now say NAB's banking practices brought it crashing down around them.
The question worrying authorities now is how many other Australians could be in the same situation?
$800,000 mistake
The Safetlis are in financial limbo. As their dispute with NAB has dragged, Mr Safetli has tried to make a living out of selling tyres from his home garage.
He says his troubles began when NAB itself overextended finance to his wholesale tyre company under an existing trade refinance and credit facility.
In its ultimate notice of termination and formal demand, the bank admits it made an $800,000 mistake.
But according to the Safetlis, that didn't stop the bank demanding immediate repayment.
The money had already been spent on new stock. The family's cash problems only got worse as the bank began seizing assets, triggering a cascading series of loan defaults.
"At any time, we could have sold assets and paid off the bank," Mr Safetli said. "The problem you have with the banks is when they grab you, that's it, you're finished."
Homes lost
It might have been just another of the scores of business collapses that occur every year but authorities are especially concerned about what happened next.
Mr Safetli's mother, Faouzia, and her daughter-in-law claim the family's bank manager asked them to come to his office to sign some routine documents.
"He put all the papers in front of me," Faouzia Safetli said. "'Sign here,' I sign, that's it. 'Thank you very much.' That's it."
Amanda Safetli says she has realised in hindsight she should have checked what they were signing.
"My mother-in-law has limited English, limited reading," she said. "You walk into the bank, they give you a wad of documents, say 100 pages, and the little tabs say, 'Sign here, sign here,' and you do it."
What both women claim they were never told is that they were in fact signing binding personal guarantees over the loans mistakenly made to Haissem Safetli's tyre business.
Those guarantees would shortly afterwards see them each lose their homes.
Faouzia Safetli says nobody told her to seek legal advice before signing the document.
"I end up with nothing. My son - he end up with nothing," she said. "We all end up with nothing - our kids, his kids."
ASIC concerned
An independent advocate who helps people like the Safetlis resolve disputes with the banks, Bruce Ford, says the claims raise very serious questions about NAB's internal practices.
"The NAB and all banks are obliged at law to provide consumers to obtain independent legal advice prior to granting a guarantee," Mr Ford said. "That wasn't followed through with Mrs Safetli."
The corporate watchdog, the Australian Securities and Investments Commission (ASIC), shares the concern, as it makes clear to the bank in this letter: "NAB's knowledge of Mrs Safetli's level of understanding and the lack of any opportunity afforded to Mrs Safetli to obtain legal advice raises concern about unconscionable conduct by NAB."
Perhaps more seriously for the bank, ASIC is also concerned about NAB providing false evidence about the matter.
The bank told the watchdog: "Statutory declarations which stated that she had received independent legal advice were ... false and known to be false by the NAB."
Track record
NAB likes to advertise itself as an organisation responsive to the needs of its customers but the bank's critics say it has a bad track record.
"They've been prosecuted four times previously," Mr Ford said. "This is the fifth time now that the bank is under scrutiny for those precise things."
In fact, in 2001, the Federal Court ruled that NAB had acted unconscionably in the case of a Tasmanian woman left in charge of her husband's business after he had suffered a serious head injury.
In his absence, she signed what the bank told her were "routine papers". They were anything but - what she signed was a personal guarantee over the home.
The Australian Competition and Consumer Commission (ACCC) took action, alleging in court the bank did not explain the consequences of the guarantee to her, nor did it reveal that her husband's business was already in serious financial difficulty.
The ACCC said that not long after, the bank told the woman she had to sell her house to meet the personal guarantee.
As a result of that case, NAB consented to orders it would in future ensure its customers had the opportunity to obtain legal advice before signing guarantees.
But Mr Ford says the Safetlis' claims are history repeating.
"There's got to be alarm bells ringing for the regulator to say, 'Why are we here again after the ACCC's prosecution for precisely the same thing?'" Mr Ford said.
More allegations
Sydney pharmacist Voula Amassah is also locked in dispute with NAB, again over an agreement that she claims was never properly explained to her.
Ms Amassah says she lost her family home and other assets after her husband arranged a loan from the bank.
"I discovered that the loan had actually been rejected and the only way that it had been passed was by putting it in joint names and using my properties as security," she said.
Mr Ford says she was asked to sign up to it under "a certain degree of duress or stress".
"But she had no knowledge of the joint loan in her name until she got to the bank," he said.
Ms Amassah has since separated from her husband but says she is still angry with the bank for keeping her in the dark.
"Basically, I went in to sign a loan document," she said. "I wasn't given a copy of that document. I wasn't even given any statements when the mortgage was put into place, and that ended up being a financial disaster for me, a complete financial disaster."
Senators worried
The chairman of the Federal Parliamentary Committee on Financial Services, Liberal Senator Grant Chapman, says such practice would be inappropriate.
The committee has been on the receiving end of complaints about the banks.
In a written response to one, Senator Chapman notes that the allegations of malpractice and unconscionable conduct suggest a number of banks continue to engage in practices that appear to be seriously flawed.
"We want ASIC to thoroughly investigate each of these cases, come back to us with the details of their findings and then we'll make some decisions from there," he said.
But Opposition committee members like Senator Nick Sherry are not as confident with ASIC's ability to bring the banks to task and have accused the regulator of dragging its feet.
"Basically, when has ASIC examined the operations of internal dispute processes in, let's say, the four major banks?" he said.
"I have raised this issue on ... two or three previous occasions. I don't seem to be getting anywhere with some very clear definitive statistical, factual response."
'Debts unknown'
A complaint common to many who have defaulted on their loans is that their banks won't provide them account statements with a precise figure on how much they owe. That's despite banks like NAB vowing in its advertisements to its customers to tell it how it is.
Mr Safetli says his family is still trying to find out from the bank how much it owes.
"Write them a blank cheque - that's what they want," he said.
The ABC approached NAB for its response to the claims being made about its lending practices, but the bank declined to comment, saying that to do so would breach the privacy of its customers.
However, a bank spokeswoman did say the bank makes every effort to work with customers to resolve any disputes, and it will cooperate fully with any inquiries that are launched into that process.
But for their part, the Safetlis remain unconvinced by those reassurances.
"They're the ones that tell everybody what to do," Mr Safetli said. "They can do anything they want, any time they want and it's about time somebody just put a stop to it."
Source: ABC
CREDIT WARNING: NAB at it again! National Australia Bank [NAB] forcing borrowers to the wall
Allegations: The Safetli family says it has been misled into grave debt by the NAB.
Source: AFP: Greg Wood)
NAB accused of unconscionable conduct.
Several banks, NAB in particular, face complaints of unscrupulous lending behaviour in cases in which customers claim they have been forced to the wall after being persuaded to sign complicated loan guarantees they could neither afford nor understand.
The lending practices of the big banks are also coming under increasing scrutiny, with two influential federal parliamentary committees and the corporate regulator, ASIC, all intensifying their inquiries.
The claims come as growing numbers of Australians sink further into debt, leading to what has been dubbed "mortgage stress".
The Safetli family knows what it is like to lose almost everything to the bank.
When NAB foreclosed on their loans, husband and father Haissem Safetli, even lost his grip on sanity.
"I completely lost the plot," Mr Safetli said. "I lost my mind, I lost everything. I lost all feelings that I have left in this world."
His wife, Amanda, says the successful businessman had a complete breakdown.
"He ended up in a mental health facility trying to take his own life," she said.Source: ABC
Before their financial ruin, the Safetlis thought they were building their wealth on solid foundations, but they now say NAB's banking practices brought it crashing down around them.
The question worrying authorities now is how many other Australians could be in the same situation?
$800,000 mistake
The Safetlis are in financial limbo. As their dispute with NAB has dragged, Mr Safetli has tried to make a living out of selling tyres from his home garage.
He says his troubles began when NAB itself overextended finance to his wholesale tyre company under an existing trade refinance and credit facility.
In its ultimate notice of termination and formal demand, the bank admits it made an $800,000 mistake.
But according to the Safetlis, that didn't stop the bank demanding immediate repayment.
The money had already been spent on new stock. The family's cash problems only got worse as the bank began seizing assets, triggering a cascading series of loan defaults.
"At any time, we could have sold assets and paid off the bank," Mr Safetli said. "The problem you have with the banks is when they grab you, that's it, you're finished."
Homes lost
It might have been just another of the scores of business collapses that occur every year but authorities are especially concerned about what happened next.
Mr Safetli's mother, Faouzia, and her daughter-in-law claim the family's bank manager asked them to come to his office to sign some routine documents.
"He put all the papers in front of me," Faouzia Safetli said. "'Sign here,' I sign, that's it. 'Thank you very much.' That's it."
Amanda Safetli says she has realised in hindsight she should have checked what they were signing.
"My mother-in-law has limited English, limited reading," she said. "You walk into the bank, they give you a wad of documents, say 100 pages, and the little tabs say, 'Sign here, sign here,' and you do it."
What both women claim they were never told is that they were in fact signing binding personal guarantees over the loans mistakenly made to Haissem Safetli's tyre business.
Those guarantees would shortly afterwards see them each lose their homes.
Faouzia Safetli says nobody told her to seek legal advice before signing the document.
"I end up with nothing. My son - he end up with nothing," she said. "We all end up with nothing - our kids, his kids."
ASIC concerned
An independent advocate who helps people like the Safetlis resolve disputes with the banks, Bruce Ford, says the claims raise very serious questions about NAB's internal practices.
"The NAB and all banks are obliged at law to provide consumers to obtain independent legal advice prior to granting a guarantee," Mr Ford said. "That wasn't followed through with Mrs Safetli."
The corporate watchdog, the Australian Securities and Investments Commission (ASIC), shares the concern, as it makes clear to the bank in this letter: "NAB's knowledge of Mrs Safetli's level of understanding and the lack of any opportunity afforded to Mrs Safetli to obtain legal advice raises concern about unconscionable conduct by NAB."
Perhaps more seriously for the bank, ASIC is also concerned about NAB providing false evidence about the matter.
The bank told the watchdog: "Statutory declarations which stated that she had received independent legal advice were ... false and known to be false by the NAB."
Track record
NAB likes to advertise itself as an organisation responsive to the needs of its customers but the bank's critics say it has a bad track record.
"They've been prosecuted four times previously," Mr Ford said. "This is the fifth time now that the bank is under scrutiny for those precise things."
In fact, in 2001, the Federal Court ruled that NAB had acted unconscionably in the case of a Tasmanian woman left in charge of her husband's business after he had suffered a serious head injury.
In his absence, she signed what the bank told her were "routine papers". They were anything but - what she signed was a personal guarantee over the home.
The Australian Competition and Consumer Commission (ACCC) took action, alleging in court the bank did not explain the consequences of the guarantee to her, nor did it reveal that her husband's business was already in serious financial difficulty.
The ACCC said that not long after, the bank told the woman she had to sell her house to meet the personal guarantee.
As a result of that case, NAB consented to orders it would in future ensure its customers had the opportunity to obtain legal advice before signing guarantees.
But Mr Ford says the Safetlis' claims are history repeating.
"There's got to be alarm bells ringing for the regulator to say, 'Why are we here again after the ACCC's prosecution for precisely the same thing?'" Mr Ford said.
More allegations
Sydney pharmacist Voula Amassah is also locked in dispute with NAB, again over an agreement that she claims was never properly explained to her.
Ms Amassah says she lost her family home and other assets after her husband arranged a loan from the bank.
"I discovered that the loan had actually been rejected and the only way that it had been passed was by putting it in joint names and using my properties as security," she said.
Mr Ford says she was asked to sign up to it under "a certain degree of duress or stress".
"But she had no knowledge of the joint loan in her name until she got to the bank," he said.
Ms Amassah has since separated from her husband but says she is still angry with the bank for keeping her in the dark.
"Basically, I went in to sign a loan document," she said. "I wasn't given a copy of that document. I wasn't even given any statements when the mortgage was put into place, and that ended up being a financial disaster for me, a complete financial disaster."
Senators worried
The chairman of the Federal Parliamentary Committee on Financial Services, Liberal Senator Grant Chapman, says such practice would be inappropriate.
The committee has been on the receiving end of complaints about the banks.
In a written response to one, Senator Chapman notes that the allegations of malpractice and unconscionable conduct suggest a number of banks continue to engage in practices that appear to be seriously flawed.
"We want ASIC to thoroughly investigate each of these cases, come back to us with the details of their findings and then we'll make some decisions from there," he said.
But Opposition committee members like Senator Nick Sherry are not as confident with ASIC's ability to bring the banks to task and have accused the regulator of dragging its feet.
"Basically, when has ASIC examined the operations of internal dispute processes in, let's say, the four major banks?" he said.
"I have raised this issue on ... two or three previous occasions. I don't seem to be getting anywhere with some very clear definitive statistical, factual response."
'Debts unknown'
A complaint common to many who have defaulted on their loans is that their banks won't provide them account statements with a precise figure on how much they owe. That's despite banks like NAB vowing in its advertisements to its customers to tell it how it is.
Mr Safetli says his family is still trying to find out from the bank how much it owes.
"Write them a blank cheque - that's what they want," he said.
The ABC approached NAB for its response to the claims being made about its lending practices, but the bank declined to comment, saying that to do so would breach the privacy of its customers.
However, a bank spokeswoman did say the bank makes every effort to work with customers to resolve any disputes, and it will cooperate fully with any inquiries that are launched into that process.
But for their part, the Safetlis remain unconvinced by those reassurances.
"They're the ones that tell everybody what to do," Mr Safetli said. "They can do anything they want, any time they want and it's about time somebody just put a stop to it."
Source: ABC
Source: AFP: Greg Wood)
NAB accused of unconscionable conduct.
Several banks, NAB in particular, face complaints of unscrupulous lending behaviour in cases in which customers claim they have been forced to the wall after being persuaded to sign complicated loan guarantees they could neither afford nor understand.
The lending practices of the big banks are also coming under increasing scrutiny, with two influential federal parliamentary committees and the corporate regulator, ASIC, all intensifying their inquiries.
The claims come as growing numbers of Australians sink further into debt, leading to what has been dubbed "mortgage stress".
The Safetli family knows what it is like to lose almost everything to the bank.
When NAB foreclosed on their loans, husband and father Haissem Safetli, even lost his grip on sanity.
"I completely lost the plot," Mr Safetli said. "I lost my mind, I lost everything. I lost all feelings that I have left in this world."
His wife, Amanda, says the successful businessman had a complete breakdown.
"He ended up in a mental health facility trying to take his own life," she said.Source: ABC
Before their financial ruin, the Safetlis thought they were building their wealth on solid foundations, but they now say NAB's banking practices brought it crashing down around them.
The question worrying authorities now is how many other Australians could be in the same situation?
$800,000 mistake
The Safetlis are in financial limbo. As their dispute with NAB has dragged, Mr Safetli has tried to make a living out of selling tyres from his home garage.
He says his troubles began when NAB itself overextended finance to his wholesale tyre company under an existing trade refinance and credit facility.
In its ultimate notice of termination and formal demand, the bank admits it made an $800,000 mistake.
But according to the Safetlis, that didn't stop the bank demanding immediate repayment.
The money had already been spent on new stock. The family's cash problems only got worse as the bank began seizing assets, triggering a cascading series of loan defaults.
"At any time, we could have sold assets and paid off the bank," Mr Safetli said. "The problem you have with the banks is when they grab you, that's it, you're finished."
Homes lost
It might have been just another of the scores of business collapses that occur every year but authorities are especially concerned about what happened next.
Mr Safetli's mother, Faouzia, and her daughter-in-law claim the family's bank manager asked them to come to his office to sign some routine documents.
"He put all the papers in front of me," Faouzia Safetli said. "'Sign here,' I sign, that's it. 'Thank you very much.' That's it."
Amanda Safetli says she has realised in hindsight she should have checked what they were signing.
"My mother-in-law has limited English, limited reading," she said. "You walk into the bank, they give you a wad of documents, say 100 pages, and the little tabs say, 'Sign here, sign here,' and you do it."
What both women claim they were never told is that they were in fact signing binding personal guarantees over the loans mistakenly made to Haissem Safetli's tyre business.
Those guarantees would shortly afterwards see them each lose their homes.
Faouzia Safetli says nobody told her to seek legal advice before signing the document.
"I end up with nothing. My son - he end up with nothing," she said. "We all end up with nothing - our kids, his kids."
ASIC concerned
An independent advocate who helps people like the Safetlis resolve disputes with the banks, Bruce Ford, says the claims raise very serious questions about NAB's internal practices.
"The NAB and all banks are obliged at law to provide consumers to obtain independent legal advice prior to granting a guarantee," Mr Ford said. "That wasn't followed through with Mrs Safetli."
The corporate watchdog, the Australian Securities and Investments Commission (ASIC), shares the concern, as it makes clear to the bank in this letter: "NAB's knowledge of Mrs Safetli's level of understanding and the lack of any opportunity afforded to Mrs Safetli to obtain legal advice raises concern about unconscionable conduct by NAB."
Perhaps more seriously for the bank, ASIC is also concerned about NAB providing false evidence about the matter.
The bank told the watchdog: "Statutory declarations which stated that she had received independent legal advice were ... false and known to be false by the NAB."
Track record
NAB likes to advertise itself as an organisation responsive to the needs of its customers but the bank's critics say it has a bad track record.
"They've been prosecuted four times previously," Mr Ford said. "This is the fifth time now that the bank is under scrutiny for those precise things."
In fact, in 2001, the Federal Court ruled that NAB had acted unconscionably in the case of a Tasmanian woman left in charge of her husband's business after he had suffered a serious head injury.
In his absence, she signed what the bank told her were "routine papers". They were anything but - what she signed was a personal guarantee over the home.
The Australian Competition and Consumer Commission (ACCC) took action, alleging in court the bank did not explain the consequences of the guarantee to her, nor did it reveal that her husband's business was already in serious financial difficulty.
The ACCC said that not long after, the bank told the woman she had to sell her house to meet the personal guarantee.
As a result of that case, NAB consented to orders it would in future ensure its customers had the opportunity to obtain legal advice before signing guarantees.
But Mr Ford says the Safetlis' claims are history repeating.
"There's got to be alarm bells ringing for the regulator to say, 'Why are we here again after the ACCC's prosecution for precisely the same thing?'" Mr Ford said.
More allegations
Sydney pharmacist Voula Amassah is also locked in dispute with NAB, again over an agreement that she claims was never properly explained to her.
Ms Amassah says she lost her family home and other assets after her husband arranged a loan from the bank.
"I discovered that the loan had actually been rejected and the only way that it had been passed was by putting it in joint names and using my properties as security," she said.
Mr Ford says she was asked to sign up to it under "a certain degree of duress or stress".
"But she had no knowledge of the joint loan in her name until she got to the bank," he said.
Ms Amassah has since separated from her husband but says she is still angry with the bank for keeping her in the dark.
"Basically, I went in to sign a loan document," she said. "I wasn't given a copy of that document. I wasn't even given any statements when the mortgage was put into place, and that ended up being a financial disaster for me, a complete financial disaster."
Senators worried
The chairman of the Federal Parliamentary Committee on Financial Services, Liberal Senator Grant Chapman, says such practice would be inappropriate.
The committee has been on the receiving end of complaints about the banks.
In a written response to one, Senator Chapman notes that the allegations of malpractice and unconscionable conduct suggest a number of banks continue to engage in practices that appear to be seriously flawed.
"We want ASIC to thoroughly investigate each of these cases, come back to us with the details of their findings and then we'll make some decisions from there," he said.
But Opposition committee members like Senator Nick Sherry are not as confident with ASIC's ability to bring the banks to task and have accused the regulator of dragging its feet.
"Basically, when has ASIC examined the operations of internal dispute processes in, let's say, the four major banks?" he said.
"I have raised this issue on ... two or three previous occasions. I don't seem to be getting anywhere with some very clear definitive statistical, factual response."
'Debts unknown'
A complaint common to many who have defaulted on their loans is that their banks won't provide them account statements with a precise figure on how much they owe. That's despite banks like NAB vowing in its advertisements to its customers to tell it how it is.
Mr Safetli says his family is still trying to find out from the bank how much it owes.
"Write them a blank cheque - that's what they want," he said.
The ABC approached NAB for its response to the claims being made about its lending practices, but the bank declined to comment, saying that to do so would breach the privacy of its customers.
However, a bank spokeswoman did say the bank makes every effort to work with customers to resolve any disputes, and it will cooperate fully with any inquiries that are launched into that process.
But for their part, the Safetlis remain unconvinced by those reassurances.
"They're the ones that tell everybody what to do," Mr Safetli said. "They can do anything they want, any time they want and it's about time somebody just put a stop to it."
Source: ABC
Tuesday, August 07, 2007
Queensland housing affordability on a downhill slide
Queensland residential real estate developers say there has been a substantial slide in housing affordability across the state in recent years.
The Urban Development Institute of Australia has today released a new national affordability report.
It charts the change in affordability of 70 centres in Australia between 2001 and 2006.
Institute state president Brian Stewart says the change in Queensland mirrors that in other states.
"We've moved from a situation in 2001 where 83 per cent of homes sold that year were affordable to families on a median salary, to a situation in 2006 where they can only purchase 27 per cent of the housing stock in Queensland," he said.
"That's [a] very substantial slide in affordability."
Source: ABC
The Urban Development Institute of Australia has today released a new national affordability report.
It charts the change in affordability of 70 centres in Australia between 2001 and 2006.
Institute state president Brian Stewart says the change in Queensland mirrors that in other states.
"We've moved from a situation in 2001 where 83 per cent of homes sold that year were affordable to families on a median salary, to a situation in 2006 where they can only purchase 27 per cent of the housing stock in Queensland," he said.
"That's [a] very substantial slide in affordability."
Source: ABC
Monday, August 06, 2007
Labor broadside at PM's mortgage rate blame game
Labor has hit back at John Howard after he and Finance Minister Nick Minchin blamed the states for pushing up interest rates.
Ahead of an expected interest rate rise this week, federal Finance Minister Nick Minchin today said the Labor states were putting upward pressure on rates by accruing too much debt.
The Reserve Bank of Australia (RBA) is widely tipped to raise interest rates by one quarter of one per cent on Wednesday.
Senator Minchin said the Federal Government was minimising upward pressure on inflation and mortgage interest rates.
"Our fiscal policy settings are such that we are minimising the pressure on inflation and mortgage interest rates while we observe that the state Labor governments all going into deficit, racking up debts,'' he told the Ten Network.
"They're going to rack up $80 billion in debt over the next four years, so we are concerned about the extent to which state Labor governments are putting upward pressure on interest rates.''
Later, the Liberal Party launched an ad on internet video website YouTube called Labor can't manage money, attacking the states' escalating debt.
"Never forget, it is governments who borrow money and get into debt who put upward pressure in interest rates,'' the ad says.
Senator Minchin indicated he did not think the expected interest rate rise later this week was warranted, pointing out underlying inflation was running at 2.6 per cent.
"From our point of view, their job is to keep inflation between two to three per cent and that's where inflation is,'' he said.
However, National Australia Bank chief executive John Stewart today said he thought there was a 50/50 chance the RBA would lift rates this week.
Opposition Leader Kevin Rudd said Prime Minister John Howard and the Federal Government were trying to pass the buck.
"Mr Howard seems to now be saying that if there's a problem with interest rates in Australia, it's because of the states, it's because of anybody else apart from Mr Howard,'' he said.
"I find that a very interesting exercise in the blame game.''
West Australian Premier Alan Carpenter also accused the Federal Government of trying to shift blame ahead of the federal election.
"John Howard and Nick Minchin are asserting states are running deficits and that's affecting interest rates,'' Mr Carpenter said.
"It doesn't work that way.
"John Howard told people he'd keep interest rates down and he hasn't.
"So he's looking for people to blame - he's to blame.''
Senator Minchin today also responded to calls from the Real Estate Institute of Australia to double the first home buyers grant to $14,000 to give people a better chance of entering the market.
He said such a move would drive up housing prices unless state governments released more land for housing.
"I do caution against those advocating doubling it because that will end up just feeding into prices and no one will be better off,'' Senator Minchin said.
"The trouble with that is that it adds to demand.
"You would not want to double the first home owners grant unless you were sure there was going to be a supply response at the state level.''
Source: AAP
Ahead of an expected interest rate rise this week, federal Finance Minister Nick Minchin today said the Labor states were putting upward pressure on rates by accruing too much debt.
The Reserve Bank of Australia (RBA) is widely tipped to raise interest rates by one quarter of one per cent on Wednesday.
Senator Minchin said the Federal Government was minimising upward pressure on inflation and mortgage interest rates.
"Our fiscal policy settings are such that we are minimising the pressure on inflation and mortgage interest rates while we observe that the state Labor governments all going into deficit, racking up debts,'' he told the Ten Network.
"They're going to rack up $80 billion in debt over the next four years, so we are concerned about the extent to which state Labor governments are putting upward pressure on interest rates.''
Later, the Liberal Party launched an ad on internet video website YouTube called Labor can't manage money, attacking the states' escalating debt.
"Never forget, it is governments who borrow money and get into debt who put upward pressure in interest rates,'' the ad says.
Senator Minchin indicated he did not think the expected interest rate rise later this week was warranted, pointing out underlying inflation was running at 2.6 per cent.
"From our point of view, their job is to keep inflation between two to three per cent and that's where inflation is,'' he said.
However, National Australia Bank chief executive John Stewart today said he thought there was a 50/50 chance the RBA would lift rates this week.
Opposition Leader Kevin Rudd said Prime Minister John Howard and the Federal Government were trying to pass the buck.
"Mr Howard seems to now be saying that if there's a problem with interest rates in Australia, it's because of the states, it's because of anybody else apart from Mr Howard,'' he said.
"I find that a very interesting exercise in the blame game.''
West Australian Premier Alan Carpenter also accused the Federal Government of trying to shift blame ahead of the federal election.
"John Howard and Nick Minchin are asserting states are running deficits and that's affecting interest rates,'' Mr Carpenter said.
"It doesn't work that way.
"John Howard told people he'd keep interest rates down and he hasn't.
"So he's looking for people to blame - he's to blame.''
Senator Minchin today also responded to calls from the Real Estate Institute of Australia to double the first home buyers grant to $14,000 to give people a better chance of entering the market.
He said such a move would drive up housing prices unless state governments released more land for housing.
"I do caution against those advocating doubling it because that will end up just feeding into prices and no one will be better off,'' Senator Minchin said.
"The trouble with that is that it adds to demand.
"You would not want to double the first home owners grant unless you were sure there was going to be a supply response at the state level.''
Source: AAP
Labor Leader Switches from Mortagge interat rates to housing affordability
Labor Leader Kevin Rudd says Prime Minister John Howard has remained silent on housing affordability.
Labor is trying to switch the political focus to housing affordability ahead of federal Parliament's return this week and the Reserve Bank's interest rate decision on Wednesday.
Mr Rudd says Mr Howard has remained silent on housing affordability.
Finance Minister Nick Minchin has dismissed suggestions the first home buyers grant should be boosted.
"That will end up just feeding into price," he said.
He says the states should release more land.
With widespread forecasts of an interest rate hike this week, the Liberal Party is launching a pre-emptive strike, targeting Labor state government debt in an online campaign.
But Labor Leader Kevin Rudd says there has been a string of rate rises under the coalition.
"[Prime Minister John] Howard seems to now be saying that if there is a problem with interest rates in Australia, it's because of the states, it's because of anybody else apart from Mr Howard," he said.
WA Premier hits back in blame game
Western Australian Premier Alan Carpenter accused Mr Howard and his ministers of looking to blame anyone but themselves for the nation's problems.
Mr Carpenter was responding to comments by Mr Minchin, who claims state debt levels are putting upward pressure on interest rates.
The Reserve Bank is widely tipped to increase the official rate at its meeting this week.
Mr Carpenter says WA is running a very strong budget surplus and the assertion that state finances may force the Reserve Bank's hand are wrong.
"John Howard told people that he would keep interest rates down and he hasn't, so he's looking for people to blame - he's to blame," he said.Source: ABCHousing affordability plummets: reportPosted 11 minutes ago
The Urban Development Institute of Australia (UDIA) says a new national report proves housing affordability has worsened dramatically in recent years.
The report will be released today and charts the change in affordability of 70 centres in Australia between 2001 and 2006.
It has found that in 2001, 96 per cent of all the centres were considered affordable.
But UDIA national president Grant Dennis says there has been a major shift in affordability since then.
"In 2001, half the population could have purchased 71 per cent of the houses that were on sale in that year across the country," he said.
"If you skip forward to 2006, half the population could have only purchased 29 per cent of those houses."
Mr Dennis says only 39 per cent of centres are now deemed to be affordable.
"What the report clearly demonstrates is that it's not a local or state government issue - it's very clearly a Federal Government issue," he said.
"I think the only way that the issue can be resolved is that there has to be the creation of a ministerial council for housing, urban development, affordable housing - something along those lines.'
Source: ABC
Labor is trying to switch the political focus to housing affordability ahead of federal Parliament's return this week and the Reserve Bank's interest rate decision on Wednesday.
Mr Rudd says Mr Howard has remained silent on housing affordability.
Finance Minister Nick Minchin has dismissed suggestions the first home buyers grant should be boosted.
"That will end up just feeding into price," he said.
He says the states should release more land.
With widespread forecasts of an interest rate hike this week, the Liberal Party is launching a pre-emptive strike, targeting Labor state government debt in an online campaign.
But Labor Leader Kevin Rudd says there has been a string of rate rises under the coalition.
"[Prime Minister John] Howard seems to now be saying that if there is a problem with interest rates in Australia, it's because of the states, it's because of anybody else apart from Mr Howard," he said.
WA Premier hits back in blame game
Western Australian Premier Alan Carpenter accused Mr Howard and his ministers of looking to blame anyone but themselves for the nation's problems.
Mr Carpenter was responding to comments by Mr Minchin, who claims state debt levels are putting upward pressure on interest rates.
The Reserve Bank is widely tipped to increase the official rate at its meeting this week.
Mr Carpenter says WA is running a very strong budget surplus and the assertion that state finances may force the Reserve Bank's hand are wrong.
"John Howard told people that he would keep interest rates down and he hasn't, so he's looking for people to blame - he's to blame," he said.Source: ABCHousing affordability plummets: reportPosted 11 minutes ago
The Urban Development Institute of Australia (UDIA) says a new national report proves housing affordability has worsened dramatically in recent years.
The report will be released today and charts the change in affordability of 70 centres in Australia between 2001 and 2006.
It has found that in 2001, 96 per cent of all the centres were considered affordable.
But UDIA national president Grant Dennis says there has been a major shift in affordability since then.
"In 2001, half the population could have purchased 71 per cent of the houses that were on sale in that year across the country," he said.
"If you skip forward to 2006, half the population could have only purchased 29 per cent of those houses."
Mr Dennis says only 39 per cent of centres are now deemed to be affordable.
"What the report clearly demonstrates is that it's not a local or state government issue - it's very clearly a Federal Government issue," he said.
"I think the only way that the issue can be resolved is that there has to be the creation of a ministerial council for housing, urban development, affordable housing - something along those lines.'
Source: ABC
Saturday, August 04, 2007
Macquarie calls for calm after market meltdown
Macquarie Bank executive director Peter Lucas has moved to reassure investors over the bank's exposure to the US subprime mortgage sector.
A fortnight ago Macquarie Bank chief executive Allan Moss said the bank was not exposed to the subprime mortgage market in the United States.
Yesterday almost $2.5 billion of Macquarie's market value was lost with investors concerned the bank will in fact be affected by the subprime crisis.
Although one of its retail investment vehicles, Macquarie Fortress, is being indirectly hurt by the instability, Macquarie remains confident investors' funds are safe.
Mr Lucas does not believe the bank is caught in a worsening global credit crunch, and says Macquarie Bank did see the warning signs in relation to subprime.
"The credit quality has been poor there for a while, and I think lots of people knew that there would be increasing delinquencies and defaults in the subprime mortgage sector," he said.
He has clarified Mr Moss's statement, saying Macquarie Bank's exposure to the subprime mortgage sector is minimal.
"And it's in relation to securities that are rated AAA and AA, so I think Allan's statement was that we had no meaningful exposure in the context of the bank as a whole," he said.
And Mr Lucas stands by the assertion that there is no direct exposure to subprime.
"To say that the flow-on effects that we've seen in financial markets worldwide, like equity markets are down, I don't think anyone could've assumed from Allan's statement that we were saying equity prices may not see flow-on effects from the liquidity issues that are going on in financial markets," he said.
Credit crunch
Mr Lucas says investors will be concerned by Macquarie Fortress's indirect exposure, but denies an assertion that the bank has been caught up in a global credit crunch.
"The bank doesn't have underwriting positions, in relation to credit positions, that are acting as a strain on our balance sheet," he said.
And although the bank has warned of losses as high as 20 per cent on Macquarie Fortress, he says at the moment the losses are substantially unrealised.
"The people we've lent money to, the corporations we've lent money to, are continuing to pay, when due, and we fully expect them to pay out 100 cents on a dollar on the loans we've advanced to that," he said.
"So we are confident that the losses here can be contained, and what are largely unrealised losses will not be materialised to anywhere near that level."
He is also confident Macquarie will not default on any of its loans.
And Mr Lucas says the prospect of a run on Macquarie Fortress does not concern him.
"A run by investors on redemptions would simply mean that we needed to sell some of the loans in the portfolio, and there is liquidity in the loan market, we can sell loans," he said.
"Albeit we're selling them at loans that reflect less than 100 cents in the dollar. So if people wish to redeem at these levels, and actually realise the loss, they're free to."
Mr Lucas says yesterday's sell-off does not mean Macquarie Bank's reputation for reading and minimising risk has been damaged.
"The fall in price that we saw in our share price was within the range of outcomes," he said.
"I don't think we're worried. There's two sides to every coin - some people will be saying this is a buying opportunity," he said.
A fortnight ago Macquarie Bank chief executive Allan Moss said the bank was not exposed to the subprime mortgage market in the United States.
Yesterday almost $2.5 billion of Macquarie's market value was lost with investors concerned the bank will in fact be affected by the subprime crisis.
Although one of its retail investment vehicles, Macquarie Fortress, is being indirectly hurt by the instability, Macquarie remains confident investors' funds are safe.
Mr Lucas does not believe the bank is caught in a worsening global credit crunch, and says Macquarie Bank did see the warning signs in relation to subprime.
"The credit quality has been poor there for a while, and I think lots of people knew that there would be increasing delinquencies and defaults in the subprime mortgage sector," he said.
He has clarified Mr Moss's statement, saying Macquarie Bank's exposure to the subprime mortgage sector is minimal.
"And it's in relation to securities that are rated AAA and AA, so I think Allan's statement was that we had no meaningful exposure in the context of the bank as a whole," he said.
And Mr Lucas stands by the assertion that there is no direct exposure to subprime.
"To say that the flow-on effects that we've seen in financial markets worldwide, like equity markets are down, I don't think anyone could've assumed from Allan's statement that we were saying equity prices may not see flow-on effects from the liquidity issues that are going on in financial markets," he said.
Credit crunch
Mr Lucas says investors will be concerned by Macquarie Fortress's indirect exposure, but denies an assertion that the bank has been caught up in a global credit crunch.
"The bank doesn't have underwriting positions, in relation to credit positions, that are acting as a strain on our balance sheet," he said.
And although the bank has warned of losses as high as 20 per cent on Macquarie Fortress, he says at the moment the losses are substantially unrealised.
"The people we've lent money to, the corporations we've lent money to, are continuing to pay, when due, and we fully expect them to pay out 100 cents on a dollar on the loans we've advanced to that," he said.
"So we are confident that the losses here can be contained, and what are largely unrealised losses will not be materialised to anywhere near that level."
He is also confident Macquarie will not default on any of its loans.
And Mr Lucas says the prospect of a run on Macquarie Fortress does not concern him.
"A run by investors on redemptions would simply mean that we needed to sell some of the loans in the portfolio, and there is liquidity in the loan market, we can sell loans," he said.
"Albeit we're selling them at loans that reflect less than 100 cents in the dollar. So if people wish to redeem at these levels, and actually realise the loss, they're free to."
Mr Lucas says yesterday's sell-off does not mean Macquarie Bank's reputation for reading and minimising risk has been damaged.
"The fall in price that we saw in our share price was within the range of outcomes," he said.
"I don't think we're worried. There's two sides to every coin - some people will be saying this is a buying opportunity," he said.
Subprime mortgage meltdown could hurt Macquarie Bank
Australia's biggest investment bank, Macquarie, has become the latest local fund manager to confirm its potential exposure to the US subprime mortgage market. Two of its funds face losses of up to 25 per cent, or as much as $300 million.
Macquarie has made its name around the world for delivering big returns for investors.
That global reputation is a key selling point in Macquarie Fortress Investments (MFI), a retail arm managing high returns for small investors prepared to take a risk.
Some of that risk has been in the US mortgage market and last night, Macquarie told investors that two high-yield funds might be hurt by the widening crisis in subprime mortgage defaults.
In a statement to the Australian Stock Exchange last night, MFI director Peter Lucas said imbalances caused by a spillover from subprime defaults could mean losses of up to 25 per cent.
"While Fortress notes have no direct exposure to US subprime mortgages, the portfolio continues to be adversely impacted by price volatility in the US credit markets," a statement said.
Mr Lucas said while there was no reason to believe Macquarie would not be able to meet interest and principal payments, he was working to avoid a margin call when worried lenders call in their loans.
"As the market value of the portfolio has decreased further, it has become necessary for the investment manager to sell selected loans and apply the proceeds to reduce the leverage facility so that the loan-to-value ratio meets the applicable borrowing covenants," the statement said.
Macquarie's Fortress Investments joins two other Australian funds exposed to the US subprime crisis, Basis Capital and Absolute Capital, which have flagged potential losses over the past fortnight.
Wall Street losses
There was also more bad news at the subprime epicentre this morning.
The Dow Jones Industrial Average plunged more than 1 per cent in late trade after two home loan insurers said their billion-dollar stake in a subprime mortgage company might be worthless.
The late news caused a sell off in the banking sector, erasing earlier gains on Wall Street.
Still, market watchers like UBS senior economist Paul Donovan are continuing to focus on the fundamentals, such as a strong underlying US economy.
"It's essentially an issue of confidence - are investors willing to take risks or not?" he said.
But Mr Donovan says widening subprime mortgage defaults first need to be contained.
"If that spreads and we see lenders refusing credit elsewhere, it becomes more significant," he said.
Today's good news in the US was consumer confidence for June, which hit its highest level in almost six years.
But the next reading will be critical, and any sign that Americans are dramatically trimming household budgets on mortgage concerns could put a shadow across assurances that the world's biggest economy is in the best of health.
Macquarie has made its name around the world for delivering big returns for investors.
That global reputation is a key selling point in Macquarie Fortress Investments (MFI), a retail arm managing high returns for small investors prepared to take a risk.
Some of that risk has been in the US mortgage market and last night, Macquarie told investors that two high-yield funds might be hurt by the widening crisis in subprime mortgage defaults.
In a statement to the Australian Stock Exchange last night, MFI director Peter Lucas said imbalances caused by a spillover from subprime defaults could mean losses of up to 25 per cent.
"While Fortress notes have no direct exposure to US subprime mortgages, the portfolio continues to be adversely impacted by price volatility in the US credit markets," a statement said.
Mr Lucas said while there was no reason to believe Macquarie would not be able to meet interest and principal payments, he was working to avoid a margin call when worried lenders call in their loans.
"As the market value of the portfolio has decreased further, it has become necessary for the investment manager to sell selected loans and apply the proceeds to reduce the leverage facility so that the loan-to-value ratio meets the applicable borrowing covenants," the statement said.
Macquarie's Fortress Investments joins two other Australian funds exposed to the US subprime crisis, Basis Capital and Absolute Capital, which have flagged potential losses over the past fortnight.
Wall Street losses
There was also more bad news at the subprime epicentre this morning.
The Dow Jones Industrial Average plunged more than 1 per cent in late trade after two home loan insurers said their billion-dollar stake in a subprime mortgage company might be worthless.
The late news caused a sell off in the banking sector, erasing earlier gains on Wall Street.
Still, market watchers like UBS senior economist Paul Donovan are continuing to focus on the fundamentals, such as a strong underlying US economy.
"It's essentially an issue of confidence - are investors willing to take risks or not?" he said.
But Mr Donovan says widening subprime mortgage defaults first need to be contained.
"If that spreads and we see lenders refusing credit elsewhere, it becomes more significant," he said.
Today's good news in the US was consumer confidence for June, which hit its highest level in almost six years.
But the next reading will be critical, and any sign that Americans are dramatically trimming household budgets on mortgage concerns could put a shadow across assurances that the world's biggest economy is in the best of health.
Friday, August 03, 2007
US credit market and subprime mortgage securities meltdown creates opportunities for scavengers
Not everyone's afraid of the credit market meltdown. For some firms subprime slaughter has a whiff of opportunity to it. Now they're coming out to hunt.
They're working in scary territory. Tuesday analysts following insurance giant AIG calculated that the company might have lost as much as $2.3 billion from its holdings of securities backed by subprime mortgages. Macquarie Bank of Australia disclosed that two of its investment funds could lose up to 25%, or $300 million, of their value because of exposure to the market.
A third Bear Stearns fund had been closed to redemptions, a month after the bank, which happens to be among the biggest packagers of mortgage securities, shut down two of its other mortgage-laden hedge funds in June amid margin calls and redemptions.
Bear Stearns, whose shares were down more than 2% Wednesday and are at a 19-month low, also faces an arbitration suit by a 73-year-old investor who claims the firm misled investors about its exposure to subprime mortgages.
Still, it wasn't a complete bloodbath. Several firms came out to deny rumors of their imminent demise--Beazer Homes being one. The mortgage company denied it is approaching the bankruptcy abyss, refuting rumors that started after American Home Mortgage shares plunged 90% Tuesday when the company said it was having trouble getting funding.
Caxton Associates, an $11 billion New York hedge fund firm, said Wednesday that contrary to rumors on the Internet, its flagship fund is up 3.2% for the year after fees. Caxton did say the fund was down 3% in July and that it had moved to reduce its value-at-risk (how much it could lose at any one time under certain market conditions) to 0.5% of capital.
Caxton president Peter D'Angelo wrote in a letter to investors Wednesday that circulated on the Internet, "We believe that this market change will continue to provide renewed opportunities in the macro trading environment."
He's not the only one to think this subprime meltdown may lead to profits. Several funds specializing in buying up distressed debt are swooping in, hoping the paper was written down to artificially low levels and will rebound once investors regain their sea legs.
Citadel Investments, the Chicago hedge fund, bought the credit portfolio of Sowood Capital earlier this week after the troubled fund ran into problems with the repricing of assets in the subprime sector. Marathon Asset Management, a $9 billion New York fund firm, is said to be setting up a distressed subprime fund, seeing "significant" opportunity in the sector. Another fund that specializes in distressed assets, Harbinger Capital, is thought to have logged double-digit gains in July.
Official performance figures for hedge funds will be released next week by Hedge Fund Research, the Chicago firm that keeps track of the industry.
Fund managers who had sold short the shares of mortgage lenders and other financial firms over the last few months have also made money.
Charles Gradante, research director at the Hennessee Group, which advises clients on hedge fund investments, said many long/short hedge funds had earmarked 5% to 10% of fund assets to be short the lenders and the subprime index since last year. The group is up 9% year to date, one-third of that gain attributable to making the right bet on subprime.
But most funds aren't crazy enough to risk buying up the distressed debt and riding out the market, Gradante says.
Many hedge fund managers have been moving to cash until the panic subsides. "The fundamentals are still good, but the big unknown is how much the panic is building up," he says. "It's like a kettle with steam. You just don't know when it's going to blow."
On Wednesday, Fitch Ratings affirmed $20 billion worth of residential mortgage backed securities and downgraded $2.4 billion. It has been reviewing 170 deals, about $7 billion worth, and will be announcing its ratings action over the next two weeks. This first $2.4 billion batch was what was considered the worst performing of the 170 deals.
Credit markets have seized up in the last few weeks after a record first half of the year, when $452 billion worth of leveraged loans and $98 billion of high-yield bonds hit the market, according to Standard & Poor's. The average quality of those new issues was lower than in the same period last year--about 48% of it was rated B-minus or below, compared with 32% of new issues in the first half of 2006.
But some point out that the credit markets are not so much in severe distress as they are coming down off remarkably good times. Spreads between Treasurys and speculative grade credit are 417 points. But the longer-term average is more like 450 points, according to S&P, meaning spreads have a way to go to meet the average.
The widest spreads came after the dot-com bubble burst, when speculative grade credit traded at 1,000 basis points or more over Treasurys. "The market needed to be prepriced," says Diane Vazza, managing director of fixed income research at S&P. "But you can argue that the market has gone too far the other way, and we would say that is the case."Source: Forbes.com
They're working in scary territory. Tuesday analysts following insurance giant AIG calculated that the company might have lost as much as $2.3 billion from its holdings of securities backed by subprime mortgages. Macquarie Bank of Australia disclosed that two of its investment funds could lose up to 25%, or $300 million, of their value because of exposure to the market.
A third Bear Stearns fund had been closed to redemptions, a month after the bank, which happens to be among the biggest packagers of mortgage securities, shut down two of its other mortgage-laden hedge funds in June amid margin calls and redemptions.
Bear Stearns, whose shares were down more than 2% Wednesday and are at a 19-month low, also faces an arbitration suit by a 73-year-old investor who claims the firm misled investors about its exposure to subprime mortgages.
Still, it wasn't a complete bloodbath. Several firms came out to deny rumors of their imminent demise--Beazer Homes being one. The mortgage company denied it is approaching the bankruptcy abyss, refuting rumors that started after American Home Mortgage shares plunged 90% Tuesday when the company said it was having trouble getting funding.
Caxton Associates, an $11 billion New York hedge fund firm, said Wednesday that contrary to rumors on the Internet, its flagship fund is up 3.2% for the year after fees. Caxton did say the fund was down 3% in July and that it had moved to reduce its value-at-risk (how much it could lose at any one time under certain market conditions) to 0.5% of capital.
Caxton president Peter D'Angelo wrote in a letter to investors Wednesday that circulated on the Internet, "We believe that this market change will continue to provide renewed opportunities in the macro trading environment."
He's not the only one to think this subprime meltdown may lead to profits. Several funds specializing in buying up distressed debt are swooping in, hoping the paper was written down to artificially low levels and will rebound once investors regain their sea legs.
Citadel Investments, the Chicago hedge fund, bought the credit portfolio of Sowood Capital earlier this week after the troubled fund ran into problems with the repricing of assets in the subprime sector. Marathon Asset Management, a $9 billion New York fund firm, is said to be setting up a distressed subprime fund, seeing "significant" opportunity in the sector. Another fund that specializes in distressed assets, Harbinger Capital, is thought to have logged double-digit gains in July.
Official performance figures for hedge funds will be released next week by Hedge Fund Research, the Chicago firm that keeps track of the industry.
Fund managers who had sold short the shares of mortgage lenders and other financial firms over the last few months have also made money.
Charles Gradante, research director at the Hennessee Group, which advises clients on hedge fund investments, said many long/short hedge funds had earmarked 5% to 10% of fund assets to be short the lenders and the subprime index since last year. The group is up 9% year to date, one-third of that gain attributable to making the right bet on subprime.
But most funds aren't crazy enough to risk buying up the distressed debt and riding out the market, Gradante says.
Many hedge fund managers have been moving to cash until the panic subsides. "The fundamentals are still good, but the big unknown is how much the panic is building up," he says. "It's like a kettle with steam. You just don't know when it's going to blow."
On Wednesday, Fitch Ratings affirmed $20 billion worth of residential mortgage backed securities and downgraded $2.4 billion. It has been reviewing 170 deals, about $7 billion worth, and will be announcing its ratings action over the next two weeks. This first $2.4 billion batch was what was considered the worst performing of the 170 deals.
Credit markets have seized up in the last few weeks after a record first half of the year, when $452 billion worth of leveraged loans and $98 billion of high-yield bonds hit the market, according to Standard & Poor's. The average quality of those new issues was lower than in the same period last year--about 48% of it was rated B-minus or below, compared with 32% of new issues in the first half of 2006.
But some point out that the credit markets are not so much in severe distress as they are coming down off remarkably good times. Spreads between Treasurys and speculative grade credit are 417 points. But the longer-term average is more like 450 points, according to S&P, meaning spreads have a way to go to meet the average.
The widest spreads came after the dot-com bubble burst, when speculative grade credit traded at 1,000 basis points or more over Treasurys. "The market needed to be prepriced," says Diane Vazza, managing director of fixed income research at S&P. "But you can argue that the market has gone too far the other way, and we would say that is the case."Source: Forbes.com
Mortgage rate increase more likely due to consumer price rises
A Mortgage interest rate rise next week is looking all the more certain after consumer prices rose at their fastest pace in almost a year, possibly due in part to the government's tax cuts.
The TD Securities-Melbourne Institute monthly inflation gauge, which indicates the likely pace of official inflation, rose 0.6 per cent in July to its highest rate since August 2006.
The result followed an increase of 0.2 per cent in June and took the annual pace of inflation to 3 per cent - at the top of the Reserve Bank of Australia's (RBA) annual inflation target of 2 to 3 per cent.
Core inflation also was higher, with the measure excluding volatile items rising 0.7 per cent in July for an annual pace of 3.8 per cent.
TD Securities senior strategist Joshua Williamson said the rise in consumer prices coincided with the government's latest tax cuts, which started on July 1.
"There is some suspicion that prices were pushed higher as firms took advantage of more favourable consumer finances," Mr Williamson said.
He said the acceleration in inflation in July should lock in an interest rate rise on Wednesday. Most economists expect interest rates to rise 25 basis points to 6.50 per cent.
"The RBA has kept interest rates on hold so far in 2007, but with economic growth strong and the labour market tight, the inflation pick up needs to be nipped in the bud for the inflation credibility of the RBA to be maintained," Mr Williamson said.
"Any further acceleration in inflation in the months ahead would increase the risk of yet a further rate rise in late 2007."
Consumer prices rose in a record 45 expenditure classes, fell in 10 classes and remained unchanged in 35 for a net balance of 35 price rises in July, the inflation gauge showed.
The biggest contributors to inflation during the month were increases in the prices of fruit and vegetables, bread and cereal products, and alcohol and tobacco.
The rises were partially offset by falls in the prices of automotive fuel, telecommunications, and audio, visual and computing equipment.
The July inflation gauge follows a stronger than expected rise in official inflation in the June quarter.
Source: AAP
The TD Securities-Melbourne Institute monthly inflation gauge, which indicates the likely pace of official inflation, rose 0.6 per cent in July to its highest rate since August 2006.
The result followed an increase of 0.2 per cent in June and took the annual pace of inflation to 3 per cent - at the top of the Reserve Bank of Australia's (RBA) annual inflation target of 2 to 3 per cent.
Core inflation also was higher, with the measure excluding volatile items rising 0.7 per cent in July for an annual pace of 3.8 per cent.
TD Securities senior strategist Joshua Williamson said the rise in consumer prices coincided with the government's latest tax cuts, which started on July 1.
"There is some suspicion that prices were pushed higher as firms took advantage of more favourable consumer finances," Mr Williamson said.
He said the acceleration in inflation in July should lock in an interest rate rise on Wednesday. Most economists expect interest rates to rise 25 basis points to 6.50 per cent.
"The RBA has kept interest rates on hold so far in 2007, but with economic growth strong and the labour market tight, the inflation pick up needs to be nipped in the bud for the inflation credibility of the RBA to be maintained," Mr Williamson said.
"Any further acceleration in inflation in the months ahead would increase the risk of yet a further rate rise in late 2007."
Consumer prices rose in a record 45 expenditure classes, fell in 10 classes and remained unchanged in 35 for a net balance of 35 price rises in July, the inflation gauge showed.
The biggest contributors to inflation during the month were increases in the prices of fruit and vegetables, bread and cereal products, and alcohol and tobacco.
The rises were partially offset by falls in the prices of automotive fuel, telecommunications, and audio, visual and computing equipment.
The July inflation gauge follows a stronger than expected rise in official inflation in the June quarter.
Source: AAP
Rents are rising because property investors have cashed out to reinvest in Superannuation
House rents have risen at their highest rate in 18 years because investors have sold property assets to boost their superannuation, housing economists say.
And an interest rate rise next week would make buying a home even harder for those hit already with higher rent.
University of Sydney economics faculty academic and housing specialist Judy Yates said Treasurer Peter Costello's super laws encouraged investors to pull out of the housing market just when rental demand was growing.
"Just at a time you had increasing demand for rental properties, you had a cutback in rental properties coming into the market," said Associate Professor Yates, who is also an Australian Council of Social Service housing policy adviser.
Under changes to superannuation laws, investors could deposit up to $1 million post-tax into their super before June 30.
Since then, a $150,000 post-tax super limit has applied.
Housing Industry Association (HIA) chief economist Harley Dale said the high cost of residential building had made one-off superannuation contributions a more attractive option.
"There's no doubt that in the first half of the year, the superannuation laws did divert funds away from other areas," Mr Dale said.
"Rental investment property was one of these. There's a bit of coincidental timing."
Rents rose by 1.6 per cent in the three months to June to record their biggest quarterly jump since September 1989, the Australian Bureau of Statistics revealed in its consumer price index release last week.
Mr Dale predicted rents would climb at a faster pace in coming quarters, even though investors have lost their chance to make a $1 million post-tax super contribution, as building costs remained high.
But a Hobart-based researcher with the Australian Housing and Urban Research Institute Keith Jacobs said diminished funding for public housing also had pushed up rents as competition for accommodation intensified.
"The reason why you have such a rental increase is because the opportunity for low-income households to rent in the public sector is very, very limited," Dr Jacobs said.
The HIA argues that rental affordability is low because land prices are up to four times that of building costs.
Dr Jacobs refutes the HIA's call to release more land, saying this would favour developers who are more interested in building homes for wealthy owner-occupiers.
And an interest rate rise next week would make buying a home even harder for those hit already with higher rent.
University of Sydney economics faculty academic and housing specialist Judy Yates said Treasurer Peter Costello's super laws encouraged investors to pull out of the housing market just when rental demand was growing.
"Just at a time you had increasing demand for rental properties, you had a cutback in rental properties coming into the market," said Associate Professor Yates, who is also an Australian Council of Social Service housing policy adviser.
Under changes to superannuation laws, investors could deposit up to $1 million post-tax into their super before June 30.
Since then, a $150,000 post-tax super limit has applied.
Housing Industry Association (HIA) chief economist Harley Dale said the high cost of residential building had made one-off superannuation contributions a more attractive option.
"There's no doubt that in the first half of the year, the superannuation laws did divert funds away from other areas," Mr Dale said.
"Rental investment property was one of these. There's a bit of coincidental timing."
Rents rose by 1.6 per cent in the three months to June to record their biggest quarterly jump since September 1989, the Australian Bureau of Statistics revealed in its consumer price index release last week.
Mr Dale predicted rents would climb at a faster pace in coming quarters, even though investors have lost their chance to make a $1 million post-tax super contribution, as building costs remained high.
But a Hobart-based researcher with the Australian Housing and Urban Research Institute Keith Jacobs said diminished funding for public housing also had pushed up rents as competition for accommodation intensified.
"The reason why you have such a rental increase is because the opportunity for low-income households to rent in the public sector is very, very limited," Dr Jacobs said.
The HIA argues that rental affordability is low because land prices are up to four times that of building costs.
Dr Jacobs refutes the HIA's call to release more land, saying this would favour developers who are more interested in building homes for wealthy owner-occupiers.
APRA to change rules that will hurt fist home buyers and low income earners buying a home according to Mortgage Insurers PMI
APRA may change the rules for first time home buyers and low-income borrowers making them pay a higher interest rate as a result of new capital rules announced by APRA, Australia's financial services industry regulator, according to one of Australia's two providers of lenders mortgage insurance, PMI.
PMI Australia chief executive Ian Graham condemned the proposed changes announced by APRA on Monday, which reduce concessions for the amount of regulatory capital required to be held by lenders in support of home loans protected by LMI cover.
With less incentive to use LMI, lenders were likely to lift interest rates for the more disadvantaged borrowers, Mr Grahame said.
The changes to the capital rules governing home loans from banks, building societies and credit unions are part of the so-called Basel II accord.
Basel II aims to harmonise principles governing regulatory capital and how lenders manage risk, with the overall objective of reducing volatility in the global financial system.
Mr Graham said PMI was concerned that the Australian Prudential Regulation Authority had taken a too narrow view of the proposed changes.
Source: The Australian
PMI Australia chief executive Ian Graham condemned the proposed changes announced by APRA on Monday, which reduce concessions for the amount of regulatory capital required to be held by lenders in support of home loans protected by LMI cover.
With less incentive to use LMI, lenders were likely to lift interest rates for the more disadvantaged borrowers, Mr Grahame said.
The changes to the capital rules governing home loans from banks, building societies and credit unions are part of the so-called Basel II accord.
Basel II aims to harmonise principles governing regulatory capital and how lenders manage risk, with the overall objective of reducing volatility in the global financial system.
Mr Graham said PMI was concerned that the Australian Prudential Regulation Authority had taken a too narrow view of the proposed changes.
Source: The Australian
Thursday, August 02, 2007
Great Australian Dream becomes unrealistic as real estate and mortgage costs spiral
With housing affordability and mortgage rates now an election issue — and with house prices falling in Sydney's battler electorates and a Labor poll showing high rents are eating into people's incomes in marginal seats — experts warn the problem will get worse. They also say it might be permanent.
They warn that it will create an eastern seaboard pocketed with ghettos that will lock the have-nots out of housing, and spell the end of Australia as an egalitarian society.
Peter Brain, executive director of the National Institute of Economics and Industry Research, said housing problems were the result of loose monetary policies that had extended easy and cheap credit including mortgage loans, home loan grants and cuts in sales tax that had driven up prices, and 30 years of neglect by governments on infrastructure.
"I do not see an easy way out," Dr Brain said. "Building infrastructure is a 10-year program of upgrading rail, public transport and freeways.
"With good planning starting today, and with appropriate government action, it would take 10 years.
"It's going to take billions upon billions upon billions and the idea of giving tax cuts is just so immoral, because what you are doing is condemning an increasing segment of the population to a ghetto existence with not enough time or material resource to access what's their basic right."
The warning comes as the Reserve Bank board meets on Tuesday week to determine whether there will be another interest rate rise. Following new inflation figures last week, the market seems to be now saying it is a lay-down misere.
Trading on the SFE 30 Day Interbank Cash Rate Futures contract on Friday showed the market had assumed a 73 per cent chance of a pre-election interest rate rise next month.
Political parties and experts have come up with their solutions to the problem.
The Howard Government has promised a shake-up of public housing by forcing the states to compete with the private sector for $1 billion of federal funds. Opposition Leader Kevin Rudd's ideas include an Affordable Housing Agreement with states and local governments.
Other ideas include ANZ economist Saul Eslake's call to make interest payments made by first-home buyers tax deductible if they promise to pay capital gains later, and billionaire apartment king Harry Triguboff's suggestion that young people should be allowed to delay compulsory contributions into superannuation to save a deposit.
But specialists say there are no easy solutions.
While a report by economic forecaster BIS Shrapnel last week warned the national rental squeeze will last until at least the end of this decade, they warn the crisis may last longer, perhaps permanently.
KPMG demographer Bernard Salt said the problem was driven by changes in the shape of Australian households, and the fact that Australian cities were now becoming global.
The family unit is now increasingly being overtaken by singles, childless couples and gay people with more money to spend who can force up the prices with their demand for property, he said.
"You can't stop social change and the key driver here is social change," Mr Salt said.
"I can't see any reason why this won't continue step by step, inch by inch, certainly for decades to come."
Mr Salt said this signalled the end of two visions of Australia: as an egalitarian society, and secondly a country where everyone had the right to own their own home. The outcome here is social stratification, at a geographic level.
"If you simply cannot afford to live in Sydney, you move out. If you can't afford to buy in Melbourne, you move out. So then you have families, the poor, even the lower middle class being relegated to cheaper options outside the city."
"The social structure of Australia must change, even the notion that we are an egalitarian society where everyone has equal access to housing. That may well have been the case in the '50s, '60s, '70s and '80s but that may not be case in the 21st century. I can see actually quite significant social division in Australia. We might not think it, but I reckon in 20 years time, we will look back and say this was a pretty good time in history with prosperity, job opportunities."
Source: The Age
They warn that it will create an eastern seaboard pocketed with ghettos that will lock the have-nots out of housing, and spell the end of Australia as an egalitarian society.
Peter Brain, executive director of the National Institute of Economics and Industry Research, said housing problems were the result of loose monetary policies that had extended easy and cheap credit including mortgage loans, home loan grants and cuts in sales tax that had driven up prices, and 30 years of neglect by governments on infrastructure.
"I do not see an easy way out," Dr Brain said. "Building infrastructure is a 10-year program of upgrading rail, public transport and freeways.
"With good planning starting today, and with appropriate government action, it would take 10 years.
"It's going to take billions upon billions upon billions and the idea of giving tax cuts is just so immoral, because what you are doing is condemning an increasing segment of the population to a ghetto existence with not enough time or material resource to access what's their basic right."
The warning comes as the Reserve Bank board meets on Tuesday week to determine whether there will be another interest rate rise. Following new inflation figures last week, the market seems to be now saying it is a lay-down misere.
Trading on the SFE 30 Day Interbank Cash Rate Futures contract on Friday showed the market had assumed a 73 per cent chance of a pre-election interest rate rise next month.
Political parties and experts have come up with their solutions to the problem.
The Howard Government has promised a shake-up of public housing by forcing the states to compete with the private sector for $1 billion of federal funds. Opposition Leader Kevin Rudd's ideas include an Affordable Housing Agreement with states and local governments.
Other ideas include ANZ economist Saul Eslake's call to make interest payments made by first-home buyers tax deductible if they promise to pay capital gains later, and billionaire apartment king Harry Triguboff's suggestion that young people should be allowed to delay compulsory contributions into superannuation to save a deposit.
But specialists say there are no easy solutions.
While a report by economic forecaster BIS Shrapnel last week warned the national rental squeeze will last until at least the end of this decade, they warn the crisis may last longer, perhaps permanently.
KPMG demographer Bernard Salt said the problem was driven by changes in the shape of Australian households, and the fact that Australian cities were now becoming global.
The family unit is now increasingly being overtaken by singles, childless couples and gay people with more money to spend who can force up the prices with their demand for property, he said.
"You can't stop social change and the key driver here is social change," Mr Salt said.
"I can't see any reason why this won't continue step by step, inch by inch, certainly for decades to come."
Mr Salt said this signalled the end of two visions of Australia: as an egalitarian society, and secondly a country where everyone had the right to own their own home. The outcome here is social stratification, at a geographic level.
"If you simply cannot afford to live in Sydney, you move out. If you can't afford to buy in Melbourne, you move out. So then you have families, the poor, even the lower middle class being relegated to cheaper options outside the city."
"The social structure of Australia must change, even the notion that we are an egalitarian society where everyone has equal access to housing. That may well have been the case in the '50s, '60s, '70s and '80s but that may not be case in the 21st century. I can see actually quite significant social division in Australia. We might not think it, but I reckon in 20 years time, we will look back and say this was a pretty good time in history with prosperity, job opportunities."
Source: The Age
Great Australian Dream becomes unrealistic as real estate and mortgage costs spiral
With housing affordability and mortgage rates now an election issue — and with house prices falling in Sydney's battler electorates and a Labor poll showing high rents are eating into people's incomes in marginal seats — experts warn the problem will get worse. They also say it might be permanent.
They warn that it will create an eastern seaboard pocketed with ghettos that will lock the have-nots out of housing, and spell the end of Australia as an egalitarian society.
Peter Brain, executive director of the National Institute of Economics and Industry Research, said housing problems were the result of loose monetary policies that had extended easy and cheap credit including mortgage loans, home loan grants and cuts in sales tax that had driven up prices, and 30 years of neglect by governments on infrastructure.
"I do not see an easy way out," Dr Brain said. "Building infrastructure is a 10-year program of upgrading rail, public transport and freeways.
"With good planning starting today, and with appropriate government action, it would take 10 years.
"It's going to take billions upon billions upon billions and the idea of giving tax cuts is just so immoral, because what you are doing is condemning an increasing segment of the population to a ghetto existence with not enough time or material resource to access what's their basic right."
The warning comes as the Reserve Bank board meets on Tuesday week to determine whether there will be another interest rate rise. Following new inflation figures last week, the market seems to be now saying it is a lay-down misere.
Trading on the SFE 30 Day Interbank Cash Rate Futures contract on Friday showed the market had assumed a 73 per cent chance of a pre-election interest rate rise next month.
Political parties and experts have come up with their solutions to the problem.
The Howard Government has promised a shake-up of public housing by forcing the states to compete with the private sector for $1 billion of federal funds. Opposition Leader Kevin Rudd's ideas include an Affordable Housing Agreement with states and local governments.
Other ideas include ANZ economist Saul Eslake's call to make interest payments made by first-home buyers tax deductible if they promise to pay capital gains later, and billionaire apartment king Harry Triguboff's suggestion that young people should be allowed to delay compulsory contributions into superannuation to save a deposit.
But specialists say there are no easy solutions.
While a report by economic forecaster BIS Shrapnel last week warned the national rental squeeze will last until at least the end of this decade, they warn the crisis may last longer, perhaps permanently.
KPMG demographer Bernard Salt said the problem was driven by changes in the shape of Australian households, and the fact that Australian cities were now becoming global.
The family unit is now increasingly being overtaken by singles, childless couples and gay people with more money to spend who can force up the prices with their demand for property, he said.
"You can't stop social change and the key driver here is social change," Mr Salt said.
"I can't see any reason why this won't continue step by step, inch by inch, certainly for decades to come."
Mr Salt said this signalled the end of two visions of Australia: as an egalitarian society, and secondly a country where everyone had the right to own their own home. The outcome here is social stratification, at a geographic level.
"If you simply cannot afford to live in Sydney, you move out. If you can't afford to buy in Melbourne, you move out. So then you have families, the poor, even the lower middle class being relegated to cheaper options outside the city."
"The social structure of Australia must change, even the notion that we are an egalitarian society where everyone has equal access to housing. That may well have been the case in the '50s, '60s, '70s and '80s but that may not be case in the 21st century. I can see actually quite significant social division in Australia. We might not think it, but I reckon in 20 years time, we will look back and say this was a pretty good time in history with prosperity, job opportunities."
Source: The Age
They warn that it will create an eastern seaboard pocketed with ghettos that will lock the have-nots out of housing, and spell the end of Australia as an egalitarian society.
Peter Brain, executive director of the National Institute of Economics and Industry Research, said housing problems were the result of loose monetary policies that had extended easy and cheap credit including mortgage loans, home loan grants and cuts in sales tax that had driven up prices, and 30 years of neglect by governments on infrastructure.
"I do not see an easy way out," Dr Brain said. "Building infrastructure is a 10-year program of upgrading rail, public transport and freeways.
"With good planning starting today, and with appropriate government action, it would take 10 years.
"It's going to take billions upon billions upon billions and the idea of giving tax cuts is just so immoral, because what you are doing is condemning an increasing segment of the population to a ghetto existence with not enough time or material resource to access what's their basic right."
The warning comes as the Reserve Bank board meets on Tuesday week to determine whether there will be another interest rate rise. Following new inflation figures last week, the market seems to be now saying it is a lay-down misere.
Trading on the SFE 30 Day Interbank Cash Rate Futures contract on Friday showed the market had assumed a 73 per cent chance of a pre-election interest rate rise next month.
Political parties and experts have come up with their solutions to the problem.
The Howard Government has promised a shake-up of public housing by forcing the states to compete with the private sector for $1 billion of federal funds. Opposition Leader Kevin Rudd's ideas include an Affordable Housing Agreement with states and local governments.
Other ideas include ANZ economist Saul Eslake's call to make interest payments made by first-home buyers tax deductible if they promise to pay capital gains later, and billionaire apartment king Harry Triguboff's suggestion that young people should be allowed to delay compulsory contributions into superannuation to save a deposit.
But specialists say there are no easy solutions.
While a report by economic forecaster BIS Shrapnel last week warned the national rental squeeze will last until at least the end of this decade, they warn the crisis may last longer, perhaps permanently.
KPMG demographer Bernard Salt said the problem was driven by changes in the shape of Australian households, and the fact that Australian cities were now becoming global.
The family unit is now increasingly being overtaken by singles, childless couples and gay people with more money to spend who can force up the prices with their demand for property, he said.
"You can't stop social change and the key driver here is social change," Mr Salt said.
"I can't see any reason why this won't continue step by step, inch by inch, certainly for decades to come."
Mr Salt said this signalled the end of two visions of Australia: as an egalitarian society, and secondly a country where everyone had the right to own their own home. The outcome here is social stratification, at a geographic level.
"If you simply cannot afford to live in Sydney, you move out. If you can't afford to buy in Melbourne, you move out. So then you have families, the poor, even the lower middle class being relegated to cheaper options outside the city."
"The social structure of Australia must change, even the notion that we are an egalitarian society where everyone has equal access to housing. That may well have been the case in the '50s, '60s, '70s and '80s but that may not be case in the 21st century. I can see actually quite significant social division in Australia. We might not think it, but I reckon in 20 years time, we will look back and say this was a pretty good time in history with prosperity, job opportunities."
Source: The Age
Men more likely to default on credit than women
Men are more likely to default on credit obligations including credit card repayments, and have a higher rate of bankruptcy than women, a study has found.
The research, over a five-year period, also shows women make fewer credit applications than men.
The credit reference company Veda Advantage found men accounted for 62 per cent of all defaults on personal loans and overdrafts.
Men also accounted for 56 per cent of all mortgage defaults and 54 per cent of the 16,000 bankruptcy cases reviewed by Veda.
The most common ages for bankruptcy were between 28 and 37.
"This study indicates women appear to be more reliable payers than men," one of Veda's general managers, Erica Hughes, said in a statement.
"Although it's important to note that across the five-year period women applied for less credit."
Men accounted for 71 per cent of individual commercial inquiries and 56 per cent of credit card, overdraft and personal loan inquiries.
Young people, between the ages of 18 and 30, accounted for the greatest percentage of overall credit applications and eventual defaults.
During the study period, they made 35.8 per cent of all inquiries and registered 44.8 per cent of all defaults.
Young men had slightly higher credit application and default levels than young women.
The research, over a five-year period, also shows women make fewer credit applications than men.
The credit reference company Veda Advantage found men accounted for 62 per cent of all defaults on personal loans and overdrafts.
Men also accounted for 56 per cent of all mortgage defaults and 54 per cent of the 16,000 bankruptcy cases reviewed by Veda.
The most common ages for bankruptcy were between 28 and 37.
"This study indicates women appear to be more reliable payers than men," one of Veda's general managers, Erica Hughes, said in a statement.
"Although it's important to note that across the five-year period women applied for less credit."
Men accounted for 71 per cent of individual commercial inquiries and 56 per cent of credit card, overdraft and personal loan inquiries.
Young people, between the ages of 18 and 30, accounted for the greatest percentage of overall credit applications and eventual defaults.
During the study period, they made 35.8 per cent of all inquiries and registered 44.8 per cent of all defaults.
Young men had slightly higher credit application and default levels than young women.
Macquarie bank stocks fall in credit confidence loss due to US subprime mortgage crisis
The stocks of Macquarie Bank have fallen over seven per cent after it revealed last night that two of its funds faced losses related to the US sub-prime mortgage crisis of up to 25 per cent.
The listed Macquarie Fortress Notes fund has about $140 million of investors' money and the unlisted Macquarie Fortress Fund has about $80 million.
Neither fund has direct exposure to US subprime mortgages, but both have been hit by price volatility in US credit markets triggered by the sub-prime crisis.
Macquarie said it had been forced to sell some of the loans in the portfolio in a subdued market after receiving margin calls on the funds, which are highly geared at six to seven times.
The average price of assets in the two funds fell four per cent in June.
"We expect the impact of the price declines in July to result in a further deterioration in NAV (net asset value) for 31 July 2007 of approximately 20 to 25 cents,'' Macquarie said last night.
Source: Courier Mail
The listed Macquarie Fortress Notes fund has about $140 million of investors' money and the unlisted Macquarie Fortress Fund has about $80 million.
Neither fund has direct exposure to US subprime mortgages, but both have been hit by price volatility in US credit markets triggered by the sub-prime crisis.
Macquarie said it had been forced to sell some of the loans in the portfolio in a subdued market after receiving margin calls on the funds, which are highly geared at six to seven times.
The average price of assets in the two funds fell four per cent in June.
"We expect the impact of the price declines in July to result in a further deterioration in NAV (net asset value) for 31 July 2007 of approximately 20 to 25 cents,'' Macquarie said last night.
Source: Courier Mail
Wednesday, August 01, 2007
Mortgage home loan on a fixed-rate possibly best option, because the fixed rate loan shifts the rate swing exposure on to the lender
If as expected, the RBA lifts rates next week Australia, then a fixed rate loan may be your best option.
Fixed or variable? Home-loan borrowers know there's usually a premium payable for the security of a fixed-rate mortgage but at the moment it's actually cheaper to go fixed.
And with the Reserve Bank of Australia expected to make a decision shortly to move floating rates upwards, the unusual discount for fixed-rate borrowers will almost certainly get bigger.
Strong competition
The odd situation has been caused by competition among the major banks, allied to the fact that the proportion of variable-rate to fixed-rate mortgages taken out in Australia is one of the highest in the world.
A new report by Fitch Ratings has found that floating mortgages are much more popular in Australia than locked-in loans.
The prospect of a rate rise next week is strong as the RBA is tipped to shift the cash rate to 6.5 per cent when it meets next Tuesday. The local financial markets are pricing the chance of a hike at 78 per cent, slightly down from the 85 per cent forecast last week.
A rate rise of 25-basis points would take the standard variable rate from 8.07 to 8.32 per cent.
The rise would mean the monthly repayment of an average mortgage of $200,0000 would become $40 more expensive.
The move comes as BankWest, the aggressive Perth-based bank, is offering an 8 per cent interest rate to depositors.
Fixed rates 'will be cheaper'
The shift in the global credit markets has prompted most of the banks to increase their fixed rates by up to 20-basis points, or less than the likely rate move.
The average fixed rate on a three-year loan is between 7.59 to 7.69 per cent - below the level where the variable rate will shift.
Recent estimates show that about 85 per cent of new home loans in Australia are taken at the variable rate, while the remainder are set at fixed rates or a combination of fixed and floating.
The proportion is in contrast to New Zealand where the majority of mortgages are fixed, meaning the impacts of rate rises are not immediately felt by borrowers.
Australia 'more exposed' because most people have variable home loan finance.
The Fitch report said countries with a higher proportion of variable loans were more exposed to shifts in monetary policy.
"The extent to which changes in interest rates affect households also depends on the type of mortgage that predominates in the market," Fitch said.
"In countries such as the US and the Netherlands, where fixed-rate mortgages are the norm, a rate cut will lead to households refinancing their mortgages at a lower rate."
Fitch said the dominance of fixed rates in some countries meant the risk burden was held by the lenders.
"On the other hand, in countries such as Australia and UK where where floating-rate mortgages prevail, this risk is largely transferred to the housing sector," it said.
The study found Australian households, despite holding a relatively large amount of net debt, were in good shape. Fitch said flat house prices and the "soft landing" of the national property market allowed Australia to withstand external shocks to housing.
Source: The Australian
Fixed or variable? Home-loan borrowers know there's usually a premium payable for the security of a fixed-rate mortgage but at the moment it's actually cheaper to go fixed.
And with the Reserve Bank of Australia expected to make a decision shortly to move floating rates upwards, the unusual discount for fixed-rate borrowers will almost certainly get bigger.
Strong competition
The odd situation has been caused by competition among the major banks, allied to the fact that the proportion of variable-rate to fixed-rate mortgages taken out in Australia is one of the highest in the world.
A new report by Fitch Ratings has found that floating mortgages are much more popular in Australia than locked-in loans.
The prospect of a rate rise next week is strong as the RBA is tipped to shift the cash rate to 6.5 per cent when it meets next Tuesday. The local financial markets are pricing the chance of a hike at 78 per cent, slightly down from the 85 per cent forecast last week.
A rate rise of 25-basis points would take the standard variable rate from 8.07 to 8.32 per cent.
The rise would mean the monthly repayment of an average mortgage of $200,0000 would become $40 more expensive.
The move comes as BankWest, the aggressive Perth-based bank, is offering an 8 per cent interest rate to depositors.
Fixed rates 'will be cheaper'
The shift in the global credit markets has prompted most of the banks to increase their fixed rates by up to 20-basis points, or less than the likely rate move.
The average fixed rate on a three-year loan is between 7.59 to 7.69 per cent - below the level where the variable rate will shift.
Recent estimates show that about 85 per cent of new home loans in Australia are taken at the variable rate, while the remainder are set at fixed rates or a combination of fixed and floating.
The proportion is in contrast to New Zealand where the majority of mortgages are fixed, meaning the impacts of rate rises are not immediately felt by borrowers.
Australia 'more exposed' because most people have variable home loan finance.
The Fitch report said countries with a higher proportion of variable loans were more exposed to shifts in monetary policy.
"The extent to which changes in interest rates affect households also depends on the type of mortgage that predominates in the market," Fitch said.
"In countries such as the US and the Netherlands, where fixed-rate mortgages are the norm, a rate cut will lead to households refinancing their mortgages at a lower rate."
Fitch said the dominance of fixed rates in some countries meant the risk burden was held by the lenders.
"On the other hand, in countries such as Australia and UK where where floating-rate mortgages prevail, this risk is largely transferred to the housing sector," it said.
The study found Australian households, despite holding a relatively large amount of net debt, were in good shape. Fitch said flat house prices and the "soft landing" of the national property market allowed Australia to withstand external shocks to housing.
Source: The Australian
BankWest takes on Big Four banks on interest rate and savings offer, with credit card offers to come.
Bankwest has backed up its threat of taking on the nation's Big Four banks and yesterday pulled the price lever by launching the nation's highest interest-rate saving product.
The new BankWest Regular Saver Account, which comes less than a month after the bank's owner, HBOS Australia, announced an aggressive east-coast expansion, will offer an 8 per cent interest rate - 2.4 percentage points above its closest rival Rabobank at 6.6 per cent.
The high-yielding account is expected to be the first in a line of "better deal" banking products the bank will be rolling out over the next few months across retail deposit, credit card and mortgage products and will be accompanied with a marketing blitz.
"It's time the Australian banking and finance industry took savings seriously and BankWest is reinvigorating this space and leading the charge once again," BankWest's head of deposits, Paul Vivian, said.
"We do have some other products up our sleeve that we will be releasing later this year", Mr Vivian said, while pointing to credit cards, mortgages and savings as its primary focus. Earlier this month, HBOS Australia launched a $430 million-plus assault on the Big Four banks, with plans to roll out 160 branches across the east coast over the next three years. About 3000 jobs are expected to be created.
At the time of the launch, HBOS Australia chief David Willis warned that it hoped to win customers from the Big Four by being price competitive and introducing new products.
Outgoing Westpac chief David Morgan last week said BankWest's expansion "needs to be taken seriously and I think they will in time take some share".
Analysts are predicting the Big Four banks will take some hit on their cash earnings.
Mr Vivian said the BankWest Regular Saver Account was a long-term sustainable offer.
He said the 8 per cent rate was "pitched out there very purposely to be significantly better than any other savings rate in the marketplace".
"We would love to take customers and money off the Big Four banks," he said.
"There's some very lazy money currently (put) in products with the Big Four. It's time for customers to have a look at what their earnings on their term deposits are, what their earning on their at-call savings are and we are confident we can offer better returns across the place."
BankWest's share of the deposit space is about 4 per cent.
To receive the 8 per cent interest rates, customers need to deposit between $50 and $500 in that month, make no withdrawals during that period and link the account to another eligible BankWest account.
The new BankWest Regular Saver Account, which comes less than a month after the bank's owner, HBOS Australia, announced an aggressive east-coast expansion, will offer an 8 per cent interest rate - 2.4 percentage points above its closest rival Rabobank at 6.6 per cent.
The high-yielding account is expected to be the first in a line of "better deal" banking products the bank will be rolling out over the next few months across retail deposit, credit card and mortgage products and will be accompanied with a marketing blitz.
"It's time the Australian banking and finance industry took savings seriously and BankWest is reinvigorating this space and leading the charge once again," BankWest's head of deposits, Paul Vivian, said.
"We do have some other products up our sleeve that we will be releasing later this year", Mr Vivian said, while pointing to credit cards, mortgages and savings as its primary focus. Earlier this month, HBOS Australia launched a $430 million-plus assault on the Big Four banks, with plans to roll out 160 branches across the east coast over the next three years. About 3000 jobs are expected to be created.
At the time of the launch, HBOS Australia chief David Willis warned that it hoped to win customers from the Big Four by being price competitive and introducing new products.
Outgoing Westpac chief David Morgan last week said BankWest's expansion "needs to be taken seriously and I think they will in time take some share".
Analysts are predicting the Big Four banks will take some hit on their cash earnings.
Mr Vivian said the BankWest Regular Saver Account was a long-term sustainable offer.
He said the 8 per cent rate was "pitched out there very purposely to be significantly better than any other savings rate in the marketplace".
"We would love to take customers and money off the Big Four banks," he said.
"There's some very lazy money currently (put) in products with the Big Four. It's time for customers to have a look at what their earnings on their term deposits are, what their earning on their at-call savings are and we are confident we can offer better returns across the place."
BankWest's share of the deposit space is about 4 per cent.
To receive the 8 per cent interest rates, customers need to deposit between $50 and $500 in that month, make no withdrawals during that period and link the account to another eligible BankWest account.
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