As investors and second and third home buyers stay away from property, by default the first home buyer share of the mortgage market has risen to a seven-year high in response to big rate cuts and generous grants to new home owners.
The Australian Bureau of Statistics (ABS) data also showed that overall home loan approvals rose for the second straight month in November while the popularity of fixed-rate loans dived to a record low.
The number of housing finance commitments for owner-occupiers rose 1.3 per cent in November, seasonally adjusted. In Queensland this was a negative number, so some States got a good bounce from the incentives put to first time home buyers.
This followed October's 1.4 per cent gain, which reversed eight consecutive monthly falls.
Commonwealth Bank senior economist Michael Workman said aggressive rate cuts and the Federal Government's boost to first-home buyer grants had restored housing sector confidence.
"It is indicating that the interest rate cuts and also the first home buyers scheme have had quite a strong impact on lending,'' Mr Workman said.
The Real Mortgage Picture is still bleak
On an annual basis, mortgage commitments have fallen by a quarter, with 49,192 mortgages taken up in November compared with 65,495 a year earlier.
In October, the Federal Government doubled the first-home buyer grant for established dwellings to $14,000, and tripled the subsidy for newly built homes to $21,000.
The housing finance take-up was likely to improve in coming months as borrowers responded to the increased first-home buyer grant and recent rate cuts, and put aside fears of unemployment.
New dwelling mortgage commitments climbed by a hefty 9.8 per cent in November, while established home lending rose by 1.1 per cent, the ABS data showed.
The mortgage market also boosted by the Reserve Bank of Australia's (RBA) decision to slash interest rates by one percentage point in October and by 75 basis points in November.
Interest rates were slashed again in December, by one percentage point, taking the cash rate to a six and a half year low of 4.25 per cent.
Expectations of more interest rate cuts appear to have affected the popularity of fixed-rate home loans, which fell to a 2.5 per cent market share in November - the lowest proportion since the ABS started collecting this data in 1991.
Whilst the rate cuts were enticing owner-occupiers and first home buyers, a recovery in the home building sector was still some way off.
Overall, confidence in the property market is still missing and job uncertainty is high.
The value of lending for investor housing fell by 6.1 per cent in November, while the number of loan commitments to build new dwellings dropped by 0.3 per cent.
NSW enjoyed a strong recovery in home loans during November, with the 5.8 per cent rise in housing finance for owner-occupiers reversing nine consecutive months of decline.
Only Tasmania had a bigger monthly increase of 6.5 per cent.
The story was different in the former commodities-boom state of Western Australia, where mortgage commitments fell by 5.8 per cent in November.
The ACT had the steepest monthly fall of 13.8 per cent.
Saturday, January 24, 2009
Rising mortgage applications a sign that housing market has turned the corner
Westpac economists said in a research note that the rise housing finance in October signalled the start of a recovery for the housing market.
This momentum will hopefully support the recovery in the housing market.
The RBA's decision to slash interest rates by 400 basis points since September, and the federal government's stimulus package for first home buyers, would get new home buyers into the housing market.
The only downer is the fear of unemployment that is creeping into the scenario.
JP Morgan forecasts the RBA will lower the cash rate by 50 basis points at their next meeting in February, and by another 25 basis points in March to a 3.5 per cent rate, lowest rate since 1965.
Others are now saying that another 100 basis point reduction in February is on the cards.
This momentum will hopefully support the recovery in the housing market.
The RBA's decision to slash interest rates by 400 basis points since September, and the federal government's stimulus package for first home buyers, would get new home buyers into the housing market.
The only downer is the fear of unemployment that is creeping into the scenario.
JP Morgan forecasts the RBA will lower the cash rate by 50 basis points at their next meeting in February, and by another 25 basis points in March to a 3.5 per cent rate, lowest rate since 1965.
Others are now saying that another 100 basis point reduction in February is on the cards.
Preventing those after Christmas credit card blues
As we get ready to start work in the new year, you may be suffering from credit cards blues as the thought of those bills that are about to hit your letterbox start to filter into your mind.
The easy way is not overspending, but I guess that that advice is a little late.
So lets have a look at a few suggestions for managing the debts that have become a reality for you.
The first thing you need to do know how bid your debts are.
Once you have this picture, maybe you can do a card swap. NAB and other lenders are offering interest free transfers right now.
Switching to this arrangement and then committing to debt reduction within the interest free period might save your bacon.
By pay off this debt over say the next six months or 90 or however long the grace period will put you in control.
Even if you don't switch your bank credit cards, make a habit of paying the whole debt to zero in the normal interest free period.
Never just pay the minimums. This is a suckers path to eternal debt.
Please remember that Christmas is a one day event. It is not worth spending six months of your surplus income on and then paying your credit card debt off over the following year.
The easy way is not overspending, but I guess that that advice is a little late.
So lets have a look at a few suggestions for managing the debts that have become a reality for you.
The first thing you need to do know how bid your debts are.
Once you have this picture, maybe you can do a card swap. NAB and other lenders are offering interest free transfers right now.
Switching to this arrangement and then committing to debt reduction within the interest free period might save your bacon.
By pay off this debt over say the next six months or 90 or however long the grace period will put you in control.
Even if you don't switch your bank credit cards, make a habit of paying the whole debt to zero in the normal interest free period.
Never just pay the minimums. This is a suckers path to eternal debt.
Please remember that Christmas is a one day event. It is not worth spending six months of your surplus income on and then paying your credit card debt off over the following year.
Greedy banks raise credit card rates as official cash rate falls
Australian banks are accused of being greedy and taking advantage of the financial crisis and the Rudd Government' s shop message, as they slide up the credit card interest rate by up to 2% as official cash rate falls by a similar amount.
Research has revealed at least five card providers increased their interest rates in the past three months, even though the RBA has slashed the cash rate by 2 per cent since September.
According to financial data company Infochoice, GE Money and Wizard Home Loans had both increased credit card rates by 2 per cent or more since September, when the RBA began its series of rate cuts.
Bank of Queensland, Citigroup and Suncorp had also increased rates on some cards by up to 0.84 per cent.
Crucially, not a single credit card provider passed on the entire two percentage points of official cash-rate cuts announced since September.
Commentators said banks should be put under more pressure to ensure that interest-rate cuts are applied across the range of financial products, so the economy gets as much stimulus as possible.
So far the Federal Government has given away $10.4 billion in a massive financial giveaway, and the RBA has cut rates aggressively, yet part of the benefit of these measures is being wiped out by banks, which are keeping the savings for themselves.
"By not passing on the rate cuts, card companies are doing nothing to alleviate the debt burdens on Australian households so are limiting the effectiveness of monetary policy,'' TD Securities senior analyst Josh Williamson said.
"It could be banks are robbing Peter to pay Paul - using money from credit cards to help subsidise cuts to their mortgage rates.''
With the average credit card rate at just under 20 per cent, borrowers paying over the odds should switch as soon as possible - preferably to a zero per cent deal which will help them pay off the capital quickly.
Research has revealed at least five card providers increased their interest rates in the past three months, even though the RBA has slashed the cash rate by 2 per cent since September.
According to financial data company Infochoice, GE Money and Wizard Home Loans had both increased credit card rates by 2 per cent or more since September, when the RBA began its series of rate cuts.
Bank of Queensland, Citigroup and Suncorp had also increased rates on some cards by up to 0.84 per cent.
Crucially, not a single credit card provider passed on the entire two percentage points of official cash-rate cuts announced since September.
Commentators said banks should be put under more pressure to ensure that interest-rate cuts are applied across the range of financial products, so the economy gets as much stimulus as possible.
So far the Federal Government has given away $10.4 billion in a massive financial giveaway, and the RBA has cut rates aggressively, yet part of the benefit of these measures is being wiped out by banks, which are keeping the savings for themselves.
"By not passing on the rate cuts, card companies are doing nothing to alleviate the debt burdens on Australian households so are limiting the effectiveness of monetary policy,'' TD Securities senior analyst Josh Williamson said.
"It could be banks are robbing Peter to pay Paul - using money from credit cards to help subsidise cuts to their mortgage rates.''
With the average credit card rate at just under 20 per cent, borrowers paying over the odds should switch as soon as possible - preferably to a zero per cent deal which will help them pay off the capital quickly.
Friday, January 23, 2009
Simonds Homes Queensland close down
Simonds Homes Queensland closed its doors this week and I say good riddance to them. If I could I would kick them all the way back to Victoria. They are not nice people to deal with in my opinion.
If I were buying a home anywhere in Victoria, Simonds Homes would be the last people I would contact.
As a past employee of Simonds Homes in 2008, I could see the writing on the wall.
Over priced homes and display items that you could not order at any price were only the tip of the iceberg.
Two days into the position and the State Manager was sacked.
The the new staff turned up as Mystery Shoppers to find what the problem was, and a new wave a managers, recycled golf buddies and others came and went.
Repeated attempts to direct my sales efforts to grow the business and my profile in the community I was working were met with cold water.
I heard stories from nice people that had in my view the misfortune to buy their homes and then have to endure the terrible service that they delivered.
Then without warning they marched into my sales display office at Reedy Creek and ordered me out, with the new draftsman the New State Manager and the New Sales Manager as beef, without a reason, without payment in lieu of notice, without 6 weeks pay for the time they had not pay me.
I am currently taking action through Government bodies and legislation to recover monies owed to me. I am sure that there would be others who need help to recover unpaid wages from these guys.
Some say Simonds Homes tactics are a blight on the building industry and this is a view shared by others as told to me who served and said they were not paid by them.
I am sure that there are other sales people, contractors, draftspeople and office staff that feel they they also have been duded that have worked at Simonds Home Queensland.
There are probably similar stories in Victoria.
If you have suffered through not being paid your wages or earnings through Simonds Homes Queensland or Simonds Homes what you feel you are owed by Simonds Homes in Melbourne or Victoria, please contact us here.
Maybe we can start a class action against Simonds Homes to recover our unpaid salaries, wages, commission, and fees.
If I were buying a home anywhere in Victoria, Simonds Homes would be the last people I would contact.
As a past employee of Simonds Homes in 2008, I could see the writing on the wall.
Over priced homes and display items that you could not order at any price were only the tip of the iceberg.
Two days into the position and the State Manager was sacked.
The the new staff turned up as Mystery Shoppers to find what the problem was, and a new wave a managers, recycled golf buddies and others came and went.
Repeated attempts to direct my sales efforts to grow the business and my profile in the community I was working were met with cold water.
I heard stories from nice people that had in my view the misfortune to buy their homes and then have to endure the terrible service that they delivered.
Then without warning they marched into my sales display office at Reedy Creek and ordered me out, with the new draftsman the New State Manager and the New Sales Manager as beef, without a reason, without payment in lieu of notice, without 6 weeks pay for the time they had not pay me.
I am currently taking action through Government bodies and legislation to recover monies owed to me. I am sure that there would be others who need help to recover unpaid wages from these guys.
Some say Simonds Homes tactics are a blight on the building industry and this is a view shared by others as told to me who served and said they were not paid by them.
I am sure that there are other sales people, contractors, draftspeople and office staff that feel they they also have been duded that have worked at Simonds Home Queensland.
There are probably similar stories in Victoria.
If you have suffered through not being paid your wages or earnings through Simonds Homes Queensland or Simonds Homes what you feel you are owed by Simonds Homes in Melbourne or Victoria, please contact us here.
Maybe we can start a class action against Simonds Homes to recover our unpaid salaries, wages, commission, and fees.
US Banks to liquidate best assets
Crippled US banks need to sell their best assets as they relieve the strain of the credit crisis that they themselves created and on sold to many other banks.
Sell off and Sell off Early
The lesson to be learnt from this credit crisis has been to sell off assets and sell them early.
However, it appears that US bankers are setting out to make the same mistakes of the past 2 years again."
How low can the Market go?
The delusional belief that their stock prices were too distressed and did not reflect the true underlying value of their asset backing was wrong, and this has cost Merrill Lynch and Citigroup Inc., more than half of their per share capital.
In the case of Lehman Brothers and Bear Stearns, they had no net value, so any price would have been a good result.
Rewarding Bad Behavior
Now US taxpayers became the default investors in banks as a result of the U.S. Treasury's Troubled Asset Relief Programme, which recapitalized the institutions, whilst much of these funds were used top pay "bonuses" to staff.
Discounted Assets Sales Ahead
Asset sales are certain to be heavily discounted just as initial bids for collateralized debt obligations and retail mortgage-backed securities were.
While it is never pleasant to sell one's 'crown jewels', the strain of this credit crisis and the overextending of many bank balance sheets will require that they sell what they can and perhaps not what they would like.
This has to mean major job shedding in the near term.
Sell off and Sell off Early
The lesson to be learnt from this credit crisis has been to sell off assets and sell them early.
However, it appears that US bankers are setting out to make the same mistakes of the past 2 years again."
How low can the Market go?
The delusional belief that their stock prices were too distressed and did not reflect the true underlying value of their asset backing was wrong, and this has cost Merrill Lynch and Citigroup Inc., more than half of their per share capital.
In the case of Lehman Brothers and Bear Stearns, they had no net value, so any price would have been a good result.
Rewarding Bad Behavior
Now US taxpayers became the default investors in banks as a result of the U.S. Treasury's Troubled Asset Relief Programme, which recapitalized the institutions, whilst much of these funds were used top pay "bonuses" to staff.
Discounted Assets Sales Ahead
Asset sales are certain to be heavily discounted just as initial bids for collateralized debt obligations and retail mortgage-backed securities were.
While it is never pleasant to sell one's 'crown jewels', the strain of this credit crisis and the overextending of many bank balance sheets will require that they sell what they can and perhaps not what they would like.
This has to mean major job shedding in the near term.
Tuesday, January 20, 2009
Mortgage Brokers and your mortgage are in for a hell of a ride in 2008
When it comes to mortgage rates, 2008 may be remembered as the year the market went haywire.
Near the start of the year, some long-term mortgages were around 6 percent, but by July the average rate approached 7 percent. In October, rates jumped by half a percentage point during one seven-day period, then dropped by the same amount the next week, only to surge again a week later.
"We thought the refinancing boom of the late '80s was a wild time," said Sharon Heitman, the owner of the Heitman Group, a mortgage consulting firm. "But I've truly not seen anything like this."
In years past, Heitman noted, mortgage rates followed fairly predictable trends. They would generally increase toward the end of a year, then hold steady through midwinter. By late February or early March, they would head lower and remain in a range until late fall.
But those patterns seemed to change about six years ago, she said, as lenders began aggressively packaging loans as investment securities. While that may have added financing sources, it also caused volatility.
The credit crunch and financial crisis have dried up the market for mortgage-backed securities, leaving many lenders with little or no money for borrowers.
Interest rate swings, meanwhile, grew more pronounced as Fannie Mae and Freddie Mac, the government agencies that buy mortgages from lenders, began increasing the fees they charge to help shore up their own finances.
Rates on 30-year fixed-rate mortgages, the most commonly held home loans, opened 2008 at 6.07 percent, with some lenders offering rates even lower, according to Freddie Mac. In the Northeast, rates were hovering slightly higher, at 6.14 percent.
By late December, the national average had dropped to roughly 5.1 percent, with some lenders offering rates just below 5 percent.
In many weeks in between, there was a huge spread.
Heitman, who receives interest-rate data daily from mortgage lenders, said that in years past the highest and lowest rates on a given day might have been separated by about a tenth of a percentage point. If a lender reported an interest rate significantly higher than the prevailing market rate, she said, she would call the company. "And it was usually an error," she added.
In recent months, however, the spread stretched to half a percentage point on some days. The higher rates reflected some lenders' concerns about whether borrowers would be able to repay their loans in a souring economy, or whether banks could resell the loans to investors anytime soon.
For borrowers, though, 2008 highlighted the importance of shopping around - a habit that mortgage industry executives say is still not practiced widely enough.
Because a mortgage broker typically sells loans on behalf of perhaps 10 lenders, at most, a borrower could be offered a range of loans that does not include the market's lowest.
Loan officers working at banks can sometimes offer other lenders' products, but they typically give borrowers fewer loan options than brokers.
This is not to say that borrowers can afford simply to skip banks in favor of brokers - last year, local banks offered some of the lowest mortgage rates on the market.
Borrowers might simply do well to exercise considerable patience while shopping around, and hope that the mortgage roller coaster slows down in 2009.
Near the start of the year, some long-term mortgages were around 6 percent, but by July the average rate approached 7 percent. In October, rates jumped by half a percentage point during one seven-day period, then dropped by the same amount the next week, only to surge again a week later.
"We thought the refinancing boom of the late '80s was a wild time," said Sharon Heitman, the owner of the Heitman Group, a mortgage consulting firm. "But I've truly not seen anything like this."
In years past, Heitman noted, mortgage rates followed fairly predictable trends. They would generally increase toward the end of a year, then hold steady through midwinter. By late February or early March, they would head lower and remain in a range until late fall.
But those patterns seemed to change about six years ago, she said, as lenders began aggressively packaging loans as investment securities. While that may have added financing sources, it also caused volatility.
The credit crunch and financial crisis have dried up the market for mortgage-backed securities, leaving many lenders with little or no money for borrowers.
Interest rate swings, meanwhile, grew more pronounced as Fannie Mae and Freddie Mac, the government agencies that buy mortgages from lenders, began increasing the fees they charge to help shore up their own finances.
Rates on 30-year fixed-rate mortgages, the most commonly held home loans, opened 2008 at 6.07 percent, with some lenders offering rates even lower, according to Freddie Mac. In the Northeast, rates were hovering slightly higher, at 6.14 percent.
By late December, the national average had dropped to roughly 5.1 percent, with some lenders offering rates just below 5 percent.
In many weeks in between, there was a huge spread.
Heitman, who receives interest-rate data daily from mortgage lenders, said that in years past the highest and lowest rates on a given day might have been separated by about a tenth of a percentage point. If a lender reported an interest rate significantly higher than the prevailing market rate, she said, she would call the company. "And it was usually an error," she added.
In recent months, however, the spread stretched to half a percentage point on some days. The higher rates reflected some lenders' concerns about whether borrowers would be able to repay their loans in a souring economy, or whether banks could resell the loans to investors anytime soon.
For borrowers, though, 2008 highlighted the importance of shopping around - a habit that mortgage industry executives say is still not practiced widely enough.
Because a mortgage broker typically sells loans on behalf of perhaps 10 lenders, at most, a borrower could be offered a range of loans that does not include the market's lowest.
Loan officers working at banks can sometimes offer other lenders' products, but they typically give borrowers fewer loan options than brokers.
This is not to say that borrowers can afford simply to skip banks in favor of brokers - last year, local banks offered some of the lowest mortgage rates on the market.
Borrowers might simply do well to exercise considerable patience while shopping around, and hope that the mortgage roller coaster slows down in 2009.
Sunday, January 11, 2009
Citigroup Sells Crowns Jewels and sheds workers after Subprime fallout
The once mighty Citigroup hopes to sell a majority stake in Smith Barney, the brokerage firm, to Morgan Stanley in a deal that would create the world's biggest wealth manager.
The negotiations came to light as Robert Rubin, the former US Treasury Secretary, resigned as senior counsellor and director of Citigroup after months of criticism for his role in leading what was once the world’s largest bank to the brink of collapse.
Under the deal being discussed by Morgan Stanley and Citigroup, 51 per cent of Smith Barney will be sold to Morgan Stanley with an option to buy the rest of the business within five years.
Morgan Stanley declined to comment on the talks and Citigroup did not respond to requests for comment.
It was not clear how much the deal would cost Morgan Stanley.
The banks are expected to work through the weekend to finalise the terms of the deal. The merger would help Morgan Stanley, which converted to a bank holding company last year and subsequently received $US10 billion ($14 billion) in Government aid, to diversify.
Citigroup, which has taken $US45 billion in government funding, is likely to welcome the additional capital that the deal would provide. The move is also in line with the strategy of Vikram Pandit, the Citigroup chief executive, to downsize the business after the sub-prime debacle. Citigroup is dismissing 52,000 of its workers after it made $US20 billion in credit-related losses.
The bank also announced the resignation of Mr Rubin, who was Treasury Secretary from 1995 to 1999. In a letter to Mr Pandit, Mr Rubin said:
In his time at Citigroup, Mr Rubin collected about $US150 million in remuneration.
Before becoming Treasury Secretary, Mr Rubin, who is a graduate of Harvard and Yale Law School, had a long career at Goldman Sachs, where he started on the arbitrage trading desk and worked his way up to become co-chairman of the elite bank.
Shares in Citigroup closed in New York at $US6.75, down by 5.7 per cent.
The negotiations came to light as Robert Rubin, the former US Treasury Secretary, resigned as senior counsellor and director of Citigroup after months of criticism for his role in leading what was once the world’s largest bank to the brink of collapse.
Under the deal being discussed by Morgan Stanley and Citigroup, 51 per cent of Smith Barney will be sold to Morgan Stanley with an option to buy the rest of the business within five years.
Morgan Stanley declined to comment on the talks and Citigroup did not respond to requests for comment.
It was not clear how much the deal would cost Morgan Stanley.
The banks are expected to work through the weekend to finalise the terms of the deal. The merger would help Morgan Stanley, which converted to a bank holding company last year and subsequently received $US10 billion ($14 billion) in Government aid, to diversify.
Citigroup, which has taken $US45 billion in government funding, is likely to welcome the additional capital that the deal would provide. The move is also in line with the strategy of Vikram Pandit, the Citigroup chief executive, to downsize the business after the sub-prime debacle. Citigroup is dismissing 52,000 of its workers after it made $US20 billion in credit-related losses.
The bank also announced the resignation of Mr Rubin, who was Treasury Secretary from 1995 to 1999. In a letter to Mr Pandit, Mr Rubin said:
My great regret is that I and so many of us who have been involved in thisMr Rubin, who joined Citigroup in 1999, has been excoriated in the media as the force behind the bank’s decision to chase profits by pushing into risky credit-related products. His duties at the bank, other than using his network to attract clients, were not clear, but insiders said that his influence was pervasive.
industry for so long did not recognise the serious possibility of the extreme
circumstances that the financial system faces today.
In his time at Citigroup, Mr Rubin collected about $US150 million in remuneration.
Before becoming Treasury Secretary, Mr Rubin, who is a graduate of Harvard and Yale Law School, had a long career at Goldman Sachs, where he started on the arbitrage trading desk and worked his way up to become co-chairman of the elite bank.
Shares in Citigroup closed in New York at $US6.75, down by 5.7 per cent.
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