Interest rates will soon fall says Westpac

According to Westpac the Reserve Bank of Australia is getting ready to cut interest rates. That has to be good news for home buyers, homeowners and housing construction industry. But will it happen in October?

Westpac is Australia's second largest home loan lender, and the biggest winner in mortgage growth in recent years since the GFC. It believes the RBA will start cutting interest rates at its next meeting. Many other experts says lower interest rates are on the way, but after October.

The prophet of profits bank

Westpac, has a good track record in predicting the timing of RBA rate cuts. After all it has a big stake in the outcomes. Westpac believes that reigning in the value of the high Australian dollar would help Australian businesses, especially those that are not in the mining sector.

It would also be shot in the arm for the ailing house building industry, and that is a big employer

ANZ predicts a brace of interest rate cuts, in October next month and in November!

The RBA was close to cutting interest rates in its September meeting, but wanted more data on the economy due later in September . And things are suddenly unraveling for Australia with global economic conditions going south, the drop in commodity prices hurting Australia, and the low inflation all mean the bank could cut the base interest rate at its October 2 meeting.

All in all, a mortgage rate cut of 0.5% before Christmas is looming as a real possibility. Source: Mr Mortgage Mortgage information

Mortgage Interest Rates: Why the RBA is leaning toward a rate cut in Oct 2

Will the RBA Backflip to Lower Interest Rates?

In September the RBA saw no reason to change interest rates.
Now two weeks later the financial experts are saying that the Reserve Bank of Australia is preparing the markets for cuts to interest rates? It apparently won't need to see the inflation figures due in November to make the move. Obviously there are things that the RBA board members didn't see as important then, that have now emerged.

Suddenly the RBA signalled its new bias towards an easing on October 2 in a statement released by its governor, Glenn Stevens, after yesterday's board meeting in Sydney

How things have changed since August.

It was just in August that optimism ruled the RBA's statements on the World Economy. In particular that China's growth appeared to have stopped slowing. yesterday's updated assessments of international conditions is now more subdued. 

Australian Banks are lowering their mortgage rates independent of the Reserve Banks

Just weeks ago the Big Four banks were not passing on the RBA rate reductions.
Now the CBA has about faced and  lowered its fixed rates by up to .4%. What's that all about? First they say they can't afford it, then drop their pants weeks later?

When the big banks broke ranks with the RBA on interest rate reductions, they broke the pact with the RBA to support the Banks. That is a dangerous move and the banks seem to be thinking that through.

Europe's economy is still going backwards

Anyone that thinks that Europe has fixed its problems with Greece, Spain and Portugal isn't thinking straight. It will be 5 to 10 years before these problems have been ironed out.

Growth in the US was ordinary

The US economy is still in a hole. Its climbing out of a creator left by Bush's scatter brained bunch. What if the Party that caused that hole gets back into power again in November. Another disaster looms large in my view. 

Obama promised blue skies, and then discovered the economy was trashed by years of Republican actions. 

Clearly Obama should have been straight with the people once he discovered the Gravity of the mess he found. He should have told the US that they had an eight year hole to fill. Then the Republicans blocked his efforts at job creation. And now people belief that the Republicans can fix things? We have the same problem in Australia. A hostile opposition party trying to hold Australia back. 

The biggest problem I see for the  US is  property prices increasing and then mortgage rates increasing, and then the Republicans getting the population to work for less money. Either way, home prices in the US are down for years.

China had uncertainty about near-term growth

China has so many areas it can grow in, but right now they don't know which way to go, and even their Premier says the economy is disorganised. When it gets it's act together the growth will continue. 

The RBA is very concerned the big falls in "some coal and iron ore prices of importance to Australia, are not being reflected in the Price of the Australian Dollar

This is the dilemma that we face. The Australian Dollar is overpriced at its current value, given these in massive falls resources prices. But when those prices fell, the Australian dollar held up. That need to change.

It seems that the Australian Dollar is too attractive in an uncertain World, and paying good interest rates compare to other Countries. 

So if the RBA wants to shake this inertia, it might be thinking more than one reduction to get the momentum for a lower dollar in motion.  An Australian Dollar at 90 Cents US would make our economy so much better.

Food Security a hot topic, but not on the RBA radar?

One thing the RBA has not mentioned is Australia's bumper wheat crop in a hungry World.
Food security could be a factor just when Australian wheat growers are having a bumper crop, and major wheat producers like Russia, the US and Canada are having poor crop harvests.
So Australian Farmers are expecting a once in 20 year win on the grain prices, just at the very time that World Leaders are stating that Food Security is the future concern.
So Australia gets lucky again!

Miners pull back on projects

Lesser factors are the pull back of mining projects. Clearly, if all the projects talked about came on stream, there would be to many projects and no enough skilled people to handle them. And many Australians don't want to import workers for the purpose of bringing these projects forward.

Fortescue Metals Group became the first big resources company to scale back an investment program [funny about that] until prices recovered. Whilst the RBA has to consider the announcement as factual, you have to wonder at their real motive in this.

As the Prime Minister has said
"This is a boom with three distinct phases: a prices boom, which is now passing, an investment boom - still to reach its peak - and a production boom for the years and decades ahead."

Will Australia's inflation stay low with the carbon tax?

Economists have said that Australia's inflation rate is unlikely to climb above 3 per cent for the next one to two years, even with the Carbon tax effect added.
The RBA may well ignore the carbon tax inflationary effect, so that even a 3.5% inflation rate could be seen as within its comfort band.
The one thing that has not been looked at is the inflationary effect of a World wheat shortage on grocery prices. Wheat is just about everything that is in a packet these days.

Summary on Mortgage rates

The RBA seems to have gone from "no need" to reduce interest rates, to being concerned about the US, Chins, Europe, Asia and the sudden drop in commodity prices, whilst the dollar hangs too high. It clearly sees that the Dollar has to be forced to come down hard.
At the same time the CBA has reduced deeply its fixed rates interest on many home loans. A give away that it sees mortgage rates heading lower, and that competition in the mortgage market is heating up on thin home loan sales.

Home loan views sourced by Mr Mortgage

Mortage defaults: Why is Ipswich Australia's mortgage default capital?

Ipswich homeowners mortgage repayment defaults  the highest in Australia says ratings agency Fitch Ratings

And Queensland is the Worst performing State in Australia on mortgage repayments. So why is this?

In a word, Floods. Queensland has has two major Cyclones hit in two consecutive  years in 2010 and 2011, and recovery is only half done. Many people and businesses will never recover. So mortgage defaults are only one sad statistic in all this.

Mortgage defaults in Ipswich are very low by US and World standards.

First let's make the point that even in Ipswich, which is the worst performing area in mortgage repayment arrears. Its still pretty damn good compared to other real estate markets in the World.

The results don't mean mortgage holders are defaulting on loans, but do point to economic hardship by region, caused by a one off event that will take another year or two to fully resolve.

The Fitch ratings report, which looks at how many mortgage holders are more than 30 days in arrears, ranked Ipswich City first on a list of the worst-performing regions by number of home loan delinquencies.

More than one in 50 mortgages in the Ipswich region are over a month in arrears, with a 25% increase being recorded in the six-month period from September 2011 to March 2012. 

Overall, 2.14% of all mortgages in Ipswich City are now more than 30 days in arrears, up from just 1.28% in March 2010. 

Ipswich has a lot of low cost homes

The makeup of Ipswich home buyers is an important factor in mortgage defaults. Ipswich has many fine new estates. But it also has a lot of low lying flood prone and flood affected building areas, as well as a lot of older areas that were inundated.
So these homes were lower value and these homes attracted home buyers with lower incomes. They got hurt more than homeowners on higher incomes.

The Floods of 2011 has had a major impact on mortgage defaults in Ipswich

The floods that swept through Ipswich impacted homes directly, and home values going forward.

After the floods people thought twice about buying a home in Ipswich.
So house prices fell most there and people that were struggling yet not sell their homes.

Many homeowners did not have the right insurance

Many insurance companies never covered for flood damage and this has impacted on homeowners that were flood affected to recover form that damage.
And post floods, the insurance premiums for those properties so affected are simply out of reach for many in those areas.
This has to reflect in home values and future mortgage conditions on those properties.

Ipswich industries were greatly impacted by the Brisbane Floods

Many Ipswich businesses were inundated by the Floods. This has hurt homeowners in many ways.

• Many small businesses were not correctly insured and so many of these businesses never recovered.
• So both the business owners and their employees lost incomes.
• Many businesses that did get a payout decided to quit the area, as it would take the area years to recover fully, and they could see that they could take their money and reinvest elsewhere with less risk.
• Even where businesses stood down employees whilst the repairs were conducted. That can leave a hole in their budgets that takes years to make up.

Many of the mortgage lenders who operate in the Ipswich area cite a lot of cases of hardship and unemployment as contributing factors. Most of those relate directly to the Floods.

These factors affected many regions of Queensland, but Ipswich and Logan City were affected more because of the stronger concentration of borrowers with a lower average income, and those tended to be in low lying areas.

Summary of Other badly performing Mortgage repayment areas in Australia

Mortgage Delinquencies: Australia 10 worst-performing regions with more than 30 days in home loan arrears:

1. Ipswich City - 2.14%
2. Outer SW Sydney - 1.89%
3. Gold Coast West - 1.89%
4. Central Coast Sydney - 1.85%
5. Logan (& Beaudesert) - 1.84%
6. Caboolture Shire - 1.76%
7.  Fairfield-Liverpool - 1.73%
8. Gold Coast East - 1.69%
9.  Blacktown - 1.60%
10. Outer West Sydney - 1.60%

Source: Mr Mortgage

Student Loans: Five big mistakes that students make with credit cards.

Credit cards and students don't always mix well, mostly because easy money is too soon spent

But if students avoid these mistakes then they will have an enjoyable experience with money. This applies to any first time credit card user, but students are can also be away from home and that puts them at greater risk.
The Five biggest mistakes students make with credit cards are:

1. Getting a credit card without understanding the terms.

Credit cards are a financial contract. "I'll do this for this much, if you do pay me this much."
Contracts also carry consequences.
Do you know what those consequences are using your credit card, and who might be affected, besides yourself?
For instance, do you:

• Know the interest rate on your credit card
• How that interest rate is calculated
• What penalties apply if you breach the terms of the contract?
• What those breaches will cost you in money
• What those breaches will cost in your parents credit score if they are guarantor
• What those breaches will cost your future credit?

If your parents guarantee the loan what will happen to their credit and repayment costs if you default?Do you know all the ways you can default on a credit card loan?

2. Buying things you don't need because you have a credit card

Its so easy to buy with a credit card. The money isn't real and its painless. Everybody's doing it right.
Retailers love credit cards because they know people, especially students will spend more because they have a credit card.
Here's a few credit card tips:

• Always know your monthly budget
• Never buy what you know you can't afford to pay off in advance.
• Never go to sales, just because you might find a bargain. Target purchases in sales that you know you need.
• Never buy lunch with a credit card. Get cash out and then buy.

Remember the average student carries over $3,000 in credit card debt. Do you know how much that means in payments you have to make every month, just to cover the minimum repayments.

3. Make do with just one credit card

The average student carries 4 credit cards. That's four ways to get into debt. Four service and monthly fees.

Remember if you fail to meet the minimum requirements on your credit cards your credit score will tank and then all the interest rates could increase.

4. Keep track of credit card purchases

It easy to have $100 in your wallet and then wonder where it went by the next day.
Well a credit card is like having that $100 constantly replaced with fresh ones. You need to keep count and keep track. Otherwise you will soon max out your credit and card.

5. Pay less credit card interest

Choose the card with the least amount of interest payable. Know the terms of the contract and ensure you don't breach them.

• You will always have to pay back the credit card debt 
• Plus interest 
• Plus service fees and charges 
• Plus credit card baggage if you mess up. 

When you mess up your credit scores, every credit reporting agency gets to know about it. There is no where to hide. You need to know this before you use that credit card the first time, not when you have a mountain of debt and no way to repay it.

If you buy something for $500 and it ultimately costs over a $1,000 in interest repayments, added fees and charges and penalty fees and interest, and extra interest rates because you have destroyed your credit, was that $500 purchase the bargain you thought it was?

Credit cards make it easy to get what you need to complete your studies.
It also makes it easy to get whatever you want. Know the difference.
Source: Mr Mortgage

Mortgage Home Loan Rates May Fall In October

Some experts are now saying that the Reserve Bank might be edging toward a rate cut in October. But its too early to tell from here

The other thing you have to question these days is "who said interest rates will fall in October and why they said it." 

There are a lot of self interested groups out there spreading baseless rumours about everything these days, from job cuts, asylum seekers, interest rate cuts, the value of the Australian dollar, and about the Gillard Government Leadership. And for what purpose, other than sell gloom and negativity? 

Well, apparently gloom and doom sells papers.

Is Australia's Right Wing Media trying to bring down an Elected Government?

This is a valid question. Its pretty obvious that many that work for Rupert Murdcoh seem to hate the fact that the Gillard Government is doing so well, and actually trying to make out that its not as good as it the numbers say. But the caravan rolls on, and things just keep on getting better for Australia. Despite their unfair and essentially untrue attacks.

Its gotten so bad, that I have refused to buy Newscorp's Australian newspapers anymore. Fairfax is still balance it its editorials in my view.

And the free community papers go straight in the bin. 

So if you advertise with these right wing papers, you need to realise that people with non political views, or centre or left of centre views are being turned off your ads. 

Its interesting that Newscorp profits fell last year. 

Well I hope they keep on falling till they turn to losses that kill the papers that publish this spew, and pay these journos that produce it.

The RBA says enough is enough.

And its not just me that is seeing this bias and negativity by the Murdcoh papers.

The right wing media's relentless negativity is being drowned out in the Financial arena by a constant flow of comments by the RBA, who seems to be crushing a lot of the ring wing media's urban myths.

There used to be a time when you could read a paper, get the facts and make up your own minds. Now all you get is opinions and the facts are rarely given.

Gimme the facts, just the facts. Keep your opinions to yourself.

Today that idea of reporting the facts and letting people form their own opinions has all but gone.

Now the news giants peddle opinions. 

Opinions that are best for them and their self interest in my view, not in the interest of teh public. So now we have the media supporting opinions biased towards one political party. Sure they can pull out any fact and statistic and make it sound that the Government is doing a lousey job and things would be so much better if Mr Abbott and the Coalition were in power.

But the fly in the ointment is that when the Coalition were in power, they had better conditions, but they  performed worse by any standard, and lowered our services.

The RBA is telling people how it is, and it all good. Maybe too good.

Australians required confidence and composure from the crap that was coming from the right wing media.
This section is constantly talking down the economy and the achievements of the Labor Governments of Rudd and Gillard.
So the RBA Governor's hand was forced. He started to let people know how good things were travelling.
Did the right wing spruikers react? Boy did they? They started to slag the RBA Governor, started to say he should not be making public statements. Who says? They do. They were in charge of public opinion apparently.
Was the Government complaining? Of course not.

The comparisons are damning for the Liberals.

The liberals had the reins of the economy in the good times. The numbers are all sour for the Howard Government.
Employment, inflation, wages, productivity, and the value of the dollar were all worse under Howard. So why do the media think they are any good at running the Country? Believing their own spin? Wanting to believe?
Anyone can balance a budget by cutting spending in schools and hospitals and make companies more profitable in the short term by cutting wages. Anybody. There is no secret, No magic. But does that work long term? I believe not. design and innovation mean you get to the future first, and that is where the money is.
Industrial relations to the Liberals means lowering wages and conditions, and now sacking Public servants to balance to balance the books.
But if you want to build a competitive Nation that pays high wages, then that is a challenge.
Its means you have to get smarter, leaner and more innovative. All failures of the Liberals who's claim to fame is cost cutting and scaring the sh-t out of stupid people with regard to asylum seekers.
Australia is in a great position and we don't need lower wages and working conditions to make our way in the World.
We don't have to be mean and miserable to asylum seekers to protect our borders.
We need to take more Asylum seekers and have less failed States.
We need more of the Gillard Government.
For the second consecutive month we have seen declines in the jobless rate in August to just 5.14 per cent. That is during the barrage of gloom and doom spewing out of the Opposition and their media mates.
Can you imagine how good things will be if they media got behind the Government?
Where we need improvements.
The biggest room in the World is the room for improvement. We need improvements in the home construction industry, the building materials sectors and retailing needs a boost.
Both could be improved with an upswing in housing construction, as new homes means new needs to fit out and furnish those homes.
How we do that without causing land price inflation is the thing that the Gillard Government needs to work on next.
We have to learn to life with high wages and a high dollar value. That what success means to most.
Nobody in Australia wants Australians to have what the Greeks have.
The Australian Economy is far from Perfect. But in my view we have to give credit where credit is due. The gIllard Government continues to improve despite a hostile press.
If you advertise with News Ltd and you agree with this, Why not complain to the editor.

PS. I got a call from NewsPoll [I believe a NewsCorp Company 2 nights ago] The caller claimed he was "calling from NewsPoll, on behalf of the Government ". Since when does NewsPoll call and do surveys on behalf of the Government? Are they now telling outright  lies?
Mr Mortgage

Commbank: CBA slashes fixed rates to attract home buyers

CBA aims to torpedo competition with big drop in mortgage fixed interest rates

The Commonwealth Bank of Australia is feeling the heat from the NAB and pressure about their margins and have dropped their fixed interest rates on many of their home loans to the lowest in 9 years

The Commonwealth Bank of Australia overnight cut its 1 year fixed rate, 3 year fixed rates, 4 year fixed mortgage rate and five year home loan interest rates from .1% to .4 perent.

$ and 5 year fixed interest Mortgage rates the lowest in 9 years.
The CBA fixed interest home loan rates  for both 4 year rate was cut .3% and the 5 year fixed interest rate cut by .4% with both terms now at just 6.15 percent per annum.

New rates for new customers only or those switching from variable to fixed rates.
The new rates will be available for new customers, or those switching to fixed rate loans.

Source: Mr Mortgage

Credit Cards: No interest rate credit cards on the Rise. Where's the catch?

Credit card interest rates are rising relative to the RBA cash rate here in Australia, if you haven't noticed, but you can win with interest free credit cards in the US. So where's the catch you might ask?       

US consumers are using credit cards less.

Keeping their debt levels lower when it comes to credit cards is the current focus for Americans nationwide since the recession. Many credit card issuers have evidently noticed this trend, as they are offering no-interest cards at an increasing rate. But those deals have a catch, as you would expect.

No interest credit card offers

Nearly half of all major credit card issuers throughout the U.S. offering no-interest credit cards, the latter half of the year appears to be an opportune period for many consumers to jump on offers.

No fees on credit cards for the first year deals

In addition to the considerable number of credit card companies offering zero interest, Waters noted many are also offering no fees for the first year of having the cards, as well as extended teaser rates.

Your Credit score, and credit history are important to qualify for a no interest rate credit card. Going in and during the credit card use

Many banks and card companies are gearing a number of their credit card offers toward the high-credit-score demographic, who are the consumers who can mostly qualify for no-interest cards.

If you have recently improved their credit standings may find you qualify for the zero-interest cards on offer.

So. What's the catch with interest free credit cards?

Well, you would think that not defaulting will keep your credit scores high.
That can be a mistake, because no-interest rate credit cards, have clauses that say that if your credit score falls during the introductory period you get hit with interest charges of between 10 and 25 percent.

Keeping your credit score high is essential to keeping a no interest rate credit card active. And the credit card companies are betting on you falling off the wagon.
The catch in no interest rate credit card deals is in the fine print.

Source: Mr Mortgage

Mortgage Loans: Fannie Mae Squeezes Mortgage Standards

Home Buyers and Refinance: US Home buyers and refinance applicants will soon find mortgages harder to set

Fannie Mae gets tough with Home Loan Borrowers and Mortgage Lenders 

Fannie Mae is the largest source of money for the U.S mortgage industry and has warned mortgage lenders it will be raising some of its qualification standards for people buying homes, whether first homes or second home buyers, and also for those seeking mortgage refinance.

The changes to Fannie Mae Mortgage standards include lowering Loan to Value Ratios 

In the past mortgage borrowers could buy homes with no money down in some cases, but typically a 3% deposit [down payment] would get home buyers over the line.
Starting from October 2012, the changes to lowering loan to value ratios for some adjustable-rate mortgages to 90 percent, down from a maximum of 97 percent.
Mortgage applicants also require a better credit history than previously, with an increased credit scores requirements for certain loans.

Low doc home loans for the self employed tightened 

Fannie Mae also will start demanding more tax returns from self-employed borrowers. Many are expecting that many borrowers in self employment will suddenly find many mortgage avenues closed to them, and this may make some homes harder to sell.

Tougher Guidelines for Mortgage lenders 

Fannie Mae (FNMA) and its smaller Government Sponsored Enterprise mortgage intermediary Freddie Mac, guarantees mortgage-backed securities financing of two-thirds of all new loans, so more misery for the housing market is likely to continue for some time
Fannie Mae told mortgage lenders that the adjustments were part of regular reviews of data and loan performance.

Stricter Reporting standards

Both Fannie Mae and Freddie Mac will need to provide annual reports on actions they are taking “to reduce taxpayer exposure to mortgage credit risk.” The requirement is part of changes to the companies’ bailouts agreements the Treasury Department last week.

Credit Scores and Credit history

Fannie Mae’s tightened standards include an increase of minimum credit scores for adjustable-rate mortgages needing to be at least 640, up from a previous minimum of 620, [on a scale ranging from 300 to 850, with 850 being clear credit], and removing flexibility to move on this with mitigating circumstances. 

The concept of benchmarking will also be eliminated. 

Instead, 36 percent will be the “stated maximum,” [This ratio can be as high as 45 percent if the borrowers meet credit score or cash reserve thresholds.] This “provides more transparent requirements with regard to how compensating factors must be applied,” 

Borrowers without credit histories will only be able to apply for single family homes they intend to live in [owner occupied].

Appraisals to be more thorough

Fannie Mae will now require a full inspection to appraise the value of the property. [No more drive by, or kerb-side appraisals will be accepted.
Sworn Appraisals will mean valuers will be liable for overstating values and this has also been a problem in Australia in the past. 

Duplex dwellings are the exception

An exception to loan tightening is duplex dwelling unit blocks upping LVR to 85% Fannie Mae is loosening some standards with the loan-to-value ratio allowed for some fixed-rate loans on two-unit properties will increase to 85 percent, from 80 percent. Down payment requirements [deposits] also will fall for certain co-op loans. It is obvious where people buy a duplex home and rent one unit out, that these people will have fewer problems in repaying the mortgage.

Australia is watching these mortgage tightening

These developments are being watched in Australia, with several similar recommendations being made by the RBA and other Peak finance groups concerning Low doc loans and Loan to value ratios and even interest only home loans.

Mr Mortgage

100 Percent Interest Only Home loans: Did they increase the size of your mortgage?

Easy mortgage money including interest only mortgage loans, short term mortgage lending and home loans for 100 per cent of the property's valuation might soon be curtailed 

Boom and bust in house prices: is easy finance the driver? 

Nobody wins in boom and bust property markets, with the exception of savvy property investors, those getting out of real estate during a boom, and maybe real estate agents and mortgage brokers.
When you have winners, there must be losers in the zero sum game of the giant Ponzi Scheme that we have seen operate across the Globe over the past 12 years.
So what's the answer, beside living in a cave or under a bridge?

Home loans that require a saved deposit are best for the majority of home buyers and lenders, and the housing market in general. Three peak economic institutions found that requiring mortgage borrowers to save and provide a decent deposit would moderate future housing booms, and reduce any down side or housing bust. 

The Reserve Bank, the International Monetary Fund and the Bank of International Settlements claim That:

1. Setting maximum loan-to-valuation ratios could help reduce the damage housing cycles cause to the economy. 
2. And that ensuring home buyers pay down their home loan has many benefits including:
1. The Reserve Bank believes that having home buyers amortise their home loans, by having them paying down the loans delivered two benefits. 
1. It lowered the purchase price that a borrower could borrow on, and meant that homeowners gained equity in the property. 
2. And because this would effectively lower the closing price of the home, then it would moderate house prices more in line with earnings. 

Going from renting homes to renting money 

An interest only loan has effectively meant that people have gone from renting their home to renting the money to buy a home. The only thing that changed is the bank is now the landlord?

Interest only home loans are seductive

 Interest only home loans means you never pay off the principal. How could this be of any benefit? Well in lowers the mortgage payments. And that means less commitments [all tax deductible] whilst the property gains capital value as house prices rise. But is that model sustainable going forward? I don' think so.
And home buyers got sold on interest only mortgage payments because of these lower repayments.
And made a more expensive home seem affordable. And made selling a home for more money easy. Soon home buyers were forced to take these loans as they were the only path to home ownership. Again, this was sale-able as long as prices kept increasing.
The problem with that is that home buyers were going from renting homes to renting money.

With the glory days of high returns behind us, people should be buying a home for future financial security. So buying a home with little equity and no amortisation of the principal could mean that home loans could quickly go under water. When this happens then people may just decide to quit their homes. This happened on a large scale in the US and after 4 years, property prices seem to be returning to a path of moderate property gains. 

Property Investors may get caught in low performing investments

Restricting credit by increasing deposit requirements, and snuffing interest only loans may cause a drop in demand, and that may be enough to lower price increases in housing.
If that were to happen, it could mean an exodus in property investors in housing, and that would see both a price crash and an increase in rental demand. But this would only be temporary, and the outlook would be more affordable housing and more Australian buying their own homes.

Bank home loan policy can only be controlled indirectly, under current legislation

The fact is that Australia's banks are free to lend as they see fit.
However, the Australian Prudential Regulation Authority [APRA] sets policy on banks setting aside capital to cover loans, presently for more than 80 per cent of a property's valuation.
SO how can they offer 95% or 100% loans? Easy.
The gap is covered by mortgage insurers. This means that Australian banks are well protected from any downside in property bubbles, and can currently bypass this safe guard.
Can you imagine how less we would be paying for homes if home buyers had to come up with a 20% deposit?
Banks are also free to make interest-only loans. 
In fact this has been a big selling point with many home loan scenarios, including 5 year and ten year interest only loans that convert to Principal and interest repayments later to ensure the loan is paid down.

Its interesting that a big player in this type of loan has recently seen big drops in its share value. If we move to this new model I see moderate house prices for the future and that would make it less attractive for investors. 

Will the Government move to offer first time home buyers on low incomes tax deductions?

So maybe we should see Governments moving to tax deductions for first time home buyers on low incomes. 
This would improve housing demand for smaller, low cost housing, and that is where any housing shortage will be most felt. Did "easy to get home loans", "interest only home loans" and "100% mortgage financing" increase the demand and therefore the prices of your current home, and the land it was built on?
The answer would have to be yes.
So any credit restrictions will have a reverse effect. Fortunately we have been restricting home loan credit in Australia before the the GFC compared to the US, and since the GFC we have restricted lending further. So any further restrictions will moderate capital gains in residential real estate further, and that could see reductions in people using property to build wealth.
So maybe the Government has to fill the gap by empowering low income earners to buy smaller homes and allow them to build modest wealth and financial security by giving them tax breaks on their home loan interest.

Commbank says no to mortgage interest rate cut

The Commonwealth Bank's chief executive Ian Narev has ruled out a rate cut independent of the Reserve Bank in the short-term.

The major banks have increased mortgage rates relative to the Reserve Bank's cash rate since the onset of the financial crisis, by lifting rates when the Reserve has kept them on hold, increasing them by more than the RBA's cash rate rises, or not passing on the same percentage point reduction as the RBA when official rates have fallen.

Westpac's chief executive Gail Kelly and Mr Narev had both intimated previously that their banks will eventually reduce their mortgage rates relative to the cash rate as funding costs ease.

However, speaking to AM, Mr Narev says funding costs remain high, meaning that a potential home loan rate reduction relative to the Reserve Bank's cash rate will have to wait.

"You've got to bear in mind that what puts pressure on our wholesale funding is the cost of new funding relative to the cost of the funding it replaced, which isn't usually funding from a month ago, it's funding from two or three years ago, and that continues to go up," he said.

"The other factor we've got here is that deposit competition is increasing and, as I said before, depositors do well, but that does continue to put pressure on our deposit pricing so, as we sit today, unfortunately we're not at the end of a cycle where funding costs are going up."

Ian Narev says that situation is unlikely to change in the short-term while volatility and uncertainty about Europe's economic future reigns.

"We think there must be a solution, it involves greater integration, but we can't see how that solution's going to be workable politically and I continue to hold that view today. And I don't think that uncertainty's a good thing for the global economy or indeed the economy here in Australia," he observed.

"So, we don't foresee a big disaster in Europe, although that is a possibility, but at the same time we can't really see yet what the catalyst is going to be for a significant improvement."

However, despite the prospect of mortgage rates remaining high relative to the cash rate and the bank's record $7.1 billion profit, CBA's chief has brushed aside calls for a another banking enquiry.

"We do think it's a very competitive banking system, so I don't think you need an enquiry to tell as that. And indeed we've had various versions of enquiries trying to get at that and, I think what I've said before on the impact on margin shows that it is competitive," he added.
"But there are legitimate questions about Australia's long-term funding that need public debate and, if the way to do that is through an enquiry, then we would be happy to participate in that."

Source: Mr Mortgage 

Credit card scam: Half a million Credit Card numbers breached in Australian Point-of-Sale Hack

Australian Police are investigating a breach of half a million credit card numbers by the same gang that struck the Subway restaurant chain in the United States.

The credit card hacking intrusion occurred at an unidentified merchant in Australia and is being blamed on Eastern European hackers who installed keystroke-logging software on point-of-sale terminals (POS) and siphoned card data from the terminals remotely, according to SC Magazine.

The company’s network used default passwords and stored unsecured transactional data. The gang allegedly used an unsecured Microsoft Remote Desktop Protocol (RDP) connection to transmit the data.

"The network was setup by some local suppliers who didn’t understand IT security,” Det. Sup. Marden told the magazine. “It was a disaster waiting to happen.”

The hackers are believed to be members of the same Romanian group that was responsible for hacking 150 Subway sandwich shops and other unnamed retailers in the U.S.

Last December, four Romanian nationals – Adrian-Tiberiu Oprea, 27; Iulian Dolan, 27; Cezar Iulian Butu, 26; and Florin Radu, 23 — were charged in the District of New Hampshire with four counts related to those hacks, including conspiracy to commit computer fraud, wire fraud and access device fraud. The indictment also referred to two unindicted co-conspirators who used the online nicknames “tonymontanamiami” and “marcos_grande69.”

Few details have been released about the credit card hack in Australia, but in the Subway case, the hackers compromised the credit-card data of more than 80,000 customers and used the data to make millions of dollars of unauthorized purchases, according to authorities.

From 2008 until May 2011, they allegedly breached more than 200 POS systems in order to install a keystroke logger and other sniffing software that would steal customer credit, debit and gift-card numbers. They also placed backdoors on the systems to provide ongoing access.

POS systems generally consist of a card scanner at a checkout register where customers scan their cards and type in a PIN or provide a signature, as well as a computer system for transferring the data to a card processor for verification and approval.

The indictment didn’t identify the POS system used by Subway, nor does the news from Australia indicate the brand of terminal attacked in that breach, but Subway announced in January 2009 that it was deploying the Torex Quick Service POS in all of its 30,000 restaurants.

The Subway case shared similarities to what occurred to seven U.S. restaurants that sued the maker of a POS in 2009 for failing to secure the product from a Romanian hacker who breached their systems.

Australia's Housing Shortage: Is it just an urban myth?

I have been accepting as "fact" for 8 years that Australia has a housing shortage. But what if that was not the case. Would you still buy a home? Is that the question?
Investment Banker Mortgage Stanley recently released research that pointed to Australia actually having a glut of housing, rather than the much touted housing shortage we have all heard about that keeps growing like an evil magic pudding.
Admittedly, I have heard about this housing shortage since 2003 and wondered where all the tent cities were being erected in Australia to justify these claims.
Maybe we will see fake one's sprouting up all over Australia soon?

Housing Shortage, Fact or Myth:Australia goes from an estimated 228,000 housing shortfall to a 341,000 home glut in the time it takes to produce a report!

So how did we get this 569,000 housing turnaround in weeks?

There has to be a reason that house prices have not collapsed in the wake of the GFC.

The estimated 228,000-home shortfall, cited by everyone from the construction industry to economists at the major banks as evidence for why prices remain so high, may, in fact, be an excess of 341,000 homes, according to Morgan Stanley.

Whether the new figures are accurate will only become clear in time, as house prices either level off because real estate is scarce, or prices fall and attract more scrutiny about the fundamentals of the market.
But what if there are other reasons why home prices are staying high in the gloom. Here's a few.

1. Real estate is worth what someone else will pay you for it. People have not been willing to pay what many buyers want, but...
2. Real estate is also worth what you are prepared to let it go for if you are selling. When people have not been able to sell at the price they want or even need, they are hanging on to it.
3. If you have a job you can afford the mortgage till things come good. In Australia's case the job market never went bad, so people can hang onto property for longer.
4. If you hang onto to the old property, then real estate agents are not going to be happy, because you don't effect your sale, and you therefore can't buy the next home. This is exactly what is happening.
5. People are now hanging on to their homes longer and their mortgages longer.
6. From a generational point of view, people are living longer and staying in their homes for longer. And the Government assists this with carers and other services to help people stay out of nursing homes longer.

But the all-important nature of house price movements underscores a bigger issue: we simply don't know what impact elevated property prices have on other aspects of the economy because we don't have a long history of clean, robust and comparable data to rely on.
But I will give it a try here.

1. When you pay too much for a home, you have to hang onto it for longer or risk going underwater.
2. When you pay too much, your mortgage is bigger than it should be. That makes banks happy and rich and that means that you pay more of your income in mortgage repayments than you should be, for the next 30 years. That causes a thing called mortgage stress. As these things have happened then we can say people have paid too much for their homes in the recent past.
3. Are they still paying too much? That will be clear in 2 years time. If prices go down, then yes they are still paying too much today.

In Australia, there is no clear, undisputed authority of information in this area crucial to the economy.

In the US, the S and P Case-Schiller index, which measures changes in prices of the same properties over time, and that is only 25 years old. So where do investment gurus pull 100 year figures from?
The problem I have with any long range figures is that they only rate the homes that are still standing,and over 100 years maybe more than half the housing stock may be demolished. SO counting just the best ones that are left is a hardly a way to determine the appreciation of housing generally. Its taking a generalisation and making it specific. But what about the home that was bought, and later demolished. Surely its worthless. When these homes are included in the overall picture, actual returns are lower.

In Australia, Residex's repeat sales index goes back to 1991, in the middle of a Sydney house price correction on 17% pa interest rates just before the two-decade run-up in house prices began.

One thing for certain is that it is unwise to expect the "boom conditions" to persist indefinitely. That is a interesting term. I thought the boom finished in 2003 and we got ripples in 2006, and last hurrah in 2010?

In 2010, Reserve Bank governor Glenn Stevens appeared on breakfast TV to warn viewers it was a mistake to ''assume a riskless, easy, and guaranteed way to prosperity is just to leverage property''.
That advise I was giving out from 2005, but nobody wanted to listen back then. That's why home prices went too high. Are they still too high. Well RBA Governor Stevens says no, they are not.

Source; Mr Mortgage

Credit card fees: Visa & Mastercard deal may not help stores recover charge fees & costs

What appeared to be a clean 'n' sweet credit card fees deal may have opened a can of worms, in some States, and with convenience stores [low value transactions.]

Stores and e-tailers may not find it easier to charge shoppers fees for paying by credit card as a result of a $7.25 billion class action settlement with Visa and MasterCard, which might delay or sabotage its approval, an analyst said on Monday. And larger retailers are saying that they don't want to make extra charges.

The Proposed Visa Card and MasterCard settlement

The proposed settlement between retailers and the two biggest credit card companies would resolve class action stores' claim that Visa and MasterCard conspired with major banks to fix swipe fees, the amount paid to process debit and credit card payments.

In addition to a $6.05 billion payment and temporary $1.2 billion swipe-fee reduction, the deal would also allow stores to start charging so-called checkout fees to customers who pay with MasterCard or Visa credit and debit cards, to defray their costs From Visa, MasterCard and Banks for using credit cards.

But retailers might not in reality get much help from the deal in offsetting the credit card swipe fees by charging customers more.

The settlement's much-touted credit card surcharging provisions actually have no real usefulness to merchants.
Because buried in the fine print of the agreement are provisions that undercut the stated intent of the settlement.

For instance, if retailers force customers to pay more for using Visa or MasterCard, they essentially must charge consumers more when they pay using other credit card networks, such as American Express, according to Bouregois' analysis of the proposed settlement.[not part of the claim or settlement]

But American Express prohibits merchants from implementing policies that discriminate against its cards, like discounts designed to steer customers to different forms of payment. Although this may be unlawful I feel.

The credit card settlement is also subject to approval by a federal judge.

The surcharge rules will also not apply in the 10 states that prohibit that practice, including Texas, California and New York.

Credit Cards increase sales

This could undermine the settlement if merchants voice their objections to this provision during fairness hearings prior to the court's final approval.
Some stores have said they will not impose extra fees for paying with plastic, even if they can.
One of the largest U.S. retailers, Target Corp., issued a statement Friday saying it did not intend to impose checkout fees, and calling it "bad for both retailers and consumers."

The National Association of Convenience Stores believes the deal does not address convenience stores merchants long-standing concerns over how Visa and MasterCard set credit card swipe-fee rates.

Credit Cards Fees: Retailers have a few options

The settlement would give retailers a couple of different options should they choose to pursue checkout fees.

For instance, stores could choose not to assess the fees, or if they did, they could re-examine their agreements with competing credit card issuers or even drop those other cards altogether, he said.

The settlement agreement should now give freedom to merchants to make those choices that they think are in the best interest of their business and their customers.

Because the value merchants get from MasterCard acceptance is far in excess of the actual cost of acceptance, so merchants would not have to impose credit card use checkout fees, as the costs have been taken care of.
Source: Mr Mortgage

Mortgage Rates : How Mark Zuckerberg lowered his mortgage interest rate to 1.05%

My first question is how come the 40th richest man in the World needs a mortgage home loan in the first place? 

My second question is why is his mortgage interest rate so low? The answer to the first question may be that he is paper money rich? 

Many of super rich count money that is not fold-able, see-able or actualized yet. An example is shares that have never been bought or sold. That money has never been realized. Its in assets that can be converted into money. Its like the TV program Deal or No Deal. Until you take the deal, its just a number on the board.

Or maybe that he can do better than 1.05% by investing that money instead. 

If someone worth over $15 billion needs to make money on his money, then is that just plain greedy? He probably wants that money to be free and maybe even wants to know what's it like to have a mortgage like normal people.

So did Mark Zuckerberg get such a low rate? 

Here's my take.
1. Its a no risk loan. Every time your bank makes a loan it has to factor in risk that makes up part of the mortgage interest rate.
In Australia that's a low risk, because less than 2% have any default, and less than 1% go into serious default.
So lending to one of the Richest men in the World, who's fortunes are still on the rise, is a no-brainer.
2. Scarcity. The loan is secured against his home in Palo Alto. Homes there were never affected by the GFC. High tech still boomed, and even average homes there go for over a million, so the security is likely to appreciate.
3. Prestige. Everybody in the World knows who Mark Zuckerberg is. And its not a common name.
Question. Name anybody who is the 20th to the 50th Richest persons in the World. Off the top of your head that would be hard. But even if you Googled and found the list, would you actually know any of them? They don't have the pulling power of Mark Zuckerberg do they?
The point is that the bank gets a great great boost of this publicity by the prestige of the customer. Its called name-dropper.

You might be thinking. Maybe I too can score a low interest rate mortgage, just like Mark Zuckerberg. You would probably be wrong. But you do see the value of having a high profile customer and a low rate, right?

4. Where does Mark Zuckerberg stash all his lose change?
Maybe in the same bank that holds his mortgage? I think so. If I were his bank I might be tempted to give him a 0% interest free mortgage, just as a stunt. That would make even bigger news. Don't forget, one percent of $6 million is only $60,000 a year, so hardly a big deal in the scheme of advertising these days. So whilst Mark Zuckerberg's mortgage interest rate deal may be an example of the rich getting richer, the fact is that this is a no risk deal for the bank, and an opportunity to get "free" publicity for his bank. His bank is assured a return regardless of what the housing market in the US does. Can you say the same for your home, your income prospects and your advertising pulling power?

Source: Rick Adlam, Home Mate

Retailers & e-tailers win credit card swipe fee war against Visa, Mastercard & Banks

Entrepreneur Mitch Goldstone lead fight with credit card giants Visa and MasterCard for 7 years to help reach a $7.2-billion settlement over transaction fees.

Mitch Goldstone of ScanMyPhotos was a lead plaintiff in antitrust litigation against Visa, MasterCard and the banks that issue their cards over credit card "swipe fee." 

Visa, MasterCard to pay $6 billion to settle retailers' lawsuit

Most small-business owners regarded the rising fees they paid to Visa and MasterCard as an unavoidable cost of doing business. Not so photo processor Mitch Goldstone. He saw it as a ripoff.

Contending that a price-fixing cartel was exploiting him and other entrepreneurs, Goldstone went to war in media interviews, blog posts and as a lead plaintiff in a giant class-action lawsuit, comparing the payment processors to drug pushers and to the railroads that profited at the expense of farmers.

What Goldstone calls his "Erin Brockovich moment" arrived with last week's $7.2-billion settlement with Visa, MasterCard and the banks that issue their cards after seven years of antitrust battles in federal court in Brooklyn, N.Y. The agreement will shift power to sellers of goods and services and could transform how — and whether — millions of Americans use their credit cards.

The agreement also allows Retailers to charge customers to recover costs.

Now Visa and MasterCard have agreed for the first time to bargain with groups of retailers over credit card fees, so small businesses can team up to gain leverage.
The agreement also allows merchants for the first time to charge customers extra for using credit cards, so long as the charges reflect the actual cost and are broken out clearly for consumers to see.

That would drag the processing charges — formally known as interchange fees, colloquially called credit card swipe fees — into the light, so consumers can finally see how costly they are to the businesses they patronize.

"If you ask customers what's an interchange fee, they'll say it has something to do with a freeway," Goldstone said. "And millions and millions of merchants just accepted it as a cost of doing business."

The interchange fees are complex as well as arcane. The latest version of MasterCard's online rate summary, current as of April, runs 131 pages.

The Federal Reserve last year cut debit-card fees from 44 cents to 21 cents per transaction. But credit-card fees run much higher, especially for popular rewards cards, averaging 2% of a purchase price and reaching 5% for minor purchases from small retailers — a cost most Americans have been blissfully unaware of.

Goldstone says the ability to bargain collectively will gradually bring down card costs for retailers, who in a competitive environment will pass along the savings to customers across the country.

Imposing credit card surcharges is trickier. For one thing, the practice is banned in 10 states including California, although the Golden State makes an exception for gas stations.

A recent California Supreme Court decision that federal law preempts state laws dealing with credit cards means that courts could nullify the state ban on surcharges.

Many retailers say credit cards are king these days, despite efforts by some jewelers, spa owners, movers and even dentists to entice shoppers to pay with cash.

Goldstone thinks few merchants will impose surcharges but says the threat will force the card companies to lower their fees. "The balance of power is going to shift very fast," he said.

That would be a distinct contrast with the situation in 2005, when digitizing old snapshots became so cheap that his 30 Minute Photos shop slashed its charge to scan a picture from $5 to 15 cents.

Technology also was transforming credit card companies, with electronic transfers replacing manual imprint machines and carbon-copy receipts — yet the rates Goldstone paid the payment processors were rising.

"I kept asking Visa and MasterCard if they'd charge me less," he said, "but they wouldn't even call me back to discuss it."

Now that the interchange war is over, Goldstone says he will devote time to nonprofits, creating a foundation that will monitor the credit card industry and a group that will lobby small businesses to support President Obama.

Credit Card Skimmer caught: Protect your credit cards by checking accounts for fraud.

The new rules for getting credit card fraud at bay. Never let that card out of your sight, and check your account constantly for suspect charges.

Think twice before using your credit cards for low cost transactions where low paid workers serve you.

A Chicago man pleaded guilty Tuesday to organizing an ATM “skimming” ring that stole more than $200,000 from diners using bank or credit cards at restaurants and attractions across the city, including Wrigley Field.

Joseph Woods, 32, pleaded guilty to felony conspiracy to commit a financial crime before Cook County Circuit Court Judge Diane Cannon, who sentenced him to five years in prison, according to the Illinois Attorney General’s office, which prosecuted the case.

Woods organized an identity theft and bank fraud scheme which “skimmed” information from credit cards at several restaurants, including RL on the Magnificent Mile, Taco Bell, McDonald’s and a food vendor operating at Wrigley Field, according to a release from the attorney general’s office. More than $200,000 was stolen using the victims’ bank and credit cards.

Food Service employees accepted payments to commit the credit card skimming fraud.

Woods paid employees of the restaurants and eateries to skim customer credit card information using a small card reader provided by Woods, prosecutors said. Employees would swipe customers’ cards, giving Woods access to account information, with which he created counterfeit credit cards and made phony purchases.

Compromised in the scheme were accounts from Chase, U.S. Bank, Citibank, Harris Bank, American Express, Bank of America and Fifth Third Bank, all of which assisted in the investigation and notified potential victims.

Co-defendants in the credit card skimming fraud have cases pending.

Skimming operations are a growing threat to your credit card account.
To protect yourself:

1. Consider using cash for mall transactions to minimize credit card use especially on low cost transactions.
2. Use a debit card for these transactions.
3. Check credit card bills and financial statements regularly for unauthorized charges.
4. Report any suspect charges to your bank immediately.
5. Never allow your card out of your site. never hand your credit card to the waiter at your table. Insist on paying at the the counter so you can see the transaction.
6. Remember that even then the card reader may be swapped by the skimmer gang. so the debit card is always the safest way to go. You can only be cleaned out for the amount you have on the card at the time.

Rick Adlam: Mr Mortgage

Credit card fees: Excessive surcharges to be banned

The Reserve Bank of Australia is urging business owners and operators to get ready for the ban on excessive credit card fees, to come into effect in January 2013

Taxis, Restaurants, Tourism and e-tailers are the worst offenders of credit card excessive charges

A Reserve Bank of Australia ruling to limit credit card surcharges to a "reasonable cost of card acceptance" will come into force on January 1st 2013.
The RBA had noted a large rise in the number of businesses levying card charges, with taxis, restaurants, tourism operators and e-tailers among the worst offenders.
The RBA says large businesses are the most common surchargers, but the proportion of small businesses that charge for card use has grown from about 4 per cent in 2005 to 25 per cent today.

The National Australia bank already working with Business Owners

NAB's David Gall says business owners will need to speak with their bankers. "Businesses that accept cards need to know what the cost of accepting cards is and the reasonable cost of surcharging," he says.
Processing costs can vary dramatically but are typically between 0.5 per cent and 2 per cent of the transaction cost.
NAB has introduced a more transparent credit card billing approach for its 120,000 business customers and Gall says it has been well received.

 "Merchants now receive a monthly breakdown of the fees charged by card issuers, allowing them to understand exactly how their monthly bill is made up" he says. The RBA will accept submissions about its surcharge plans before Friday. 

 It has received concerns that some businesses are using credit card surcharges to slug customers,rather than recoup the cost of accepting cards.

House Prices collapse deflated US household net worth

Since the sub-prime home loan bubble burst in 2007 causing house prices to fall 40%, Americans have suffered a record decline in household wealth to 1992 levels

According to a Federal Reserve report on the recent recession, the median family's net worth dropped nearly 40 per cent during the three-year period, and this is linked directly to declines in house prices.
This was the biggest drop in net worth since the survey started in 1989.

House equity linked to net worth?

The problem I have with this notion is that the family home should never be viewed as an investment, and no self respecting financial planner would use the family home as a gauge of personal wealth.

Household wealth in the US now stands at 1992 levels as house prices slid

The median net worth, [the value of assets less debts], plunged from $126,000 to just $77,300 in 2010 , which brings it thudding back to 1992 personal wealth levels. These figures also show that most people's "wealth" is tied up in their homes. Which says a lot for the real wealth of people in the US.

Personal wealth in the US appears to be a mirage, if you accept the notion that a home should never be included in a net worth sum.

"Housing was of greater importance than financial assets for the wealth position of most families," the Fed said.
"A substantial part of the declines observed in net worth over the 2007/10 period can be associated with decreases in the level of unrealized capital gains on families' assets," the Fed said.
"The share of total assets of all families attributable to unrealized capital gains from real estate, businesses, stocks, or mutual funds fell 11.6 percentage points to 24.5 per cent in 2010," it said.

We must be forget that many in the US used their homes as cash machines and extracted all the equity from them to fuel their lifestyles, so they would have suffered hard, and many of those would have lost their homes or had their net worth under water.

Household debt levels overall are unchanged

While the overall level of debt owed by families was unchanged, debt as a percentage of assets rose to 16.4 per cent in 2010 from 14.8 per cent in 2007 because the value of the underlying assets, especially housing, decreased faster.

People shed credit card debt.

The share of families carrying a credit card balance fell 6.7 percentage points to 39.4 per cent in 2010. The median balance fell 16.1 per cent to $2,600 in 2010 from $3,100 in 2007. The proportion of families with debt payments greater than 40 per cent of their income was nearly unchanged between 2007 and 2010. These were obviously people who were caught in the debt trap but retained their jobs.
People have hitched their wagon to house prices always appreciating, as a way to built net worth. This is faulty thinking in my view, and why the US housing market has not recovered. It is simply seen as a bad investment, instead of what it is, Place to live and bring up a family in a stable environment.
 Mr Mortgage

Payday Lender: 5 year ban from the Industry for unlicensed lender

Australian unlicensed payday Lender get 5 year ban from the Industry by ASIC

The Australian Securities and Investments Commission [ASIC] has handed a five-year ban to an unlicensed payday lender, saying unlicensed lending poses a risk to the public.

Banned payday lender named

Victorian payday lender Victor Manatakis has been banned by the regulator after an investigation uncovered that his business was conducting credit activities without an ACL.
Manatakis's business, Billpal, was the operator of payday lending business Cashpal.
ASIC found that between August and October of 2011, Billpal issued credit contracts despite the fact it held no licence.

Unlicensed lending could pose a risk to the Public

ASIC commissioner Peter Kell said the unlicensed lending could pose a risk to the public.
"People in the consumer credit industry need to be aware of the licensing requirements and the implications they will face if they fail to meet these requirements," Kell said.

Mortgage Broker: Paperwork and compliance relief announced at FBBA

Australian Government Announces reduction in broker compliance burden at FBAA conference

What I like about the FBAA is that they get results that benefit Mortgage and Finance Brokers, not just lenders.

As an ex-Mortgage broker, I have been lobbying the Federal Government Ministers, including the Minister for Small Business [ The HON Brendan O'Connor, whom I consider a real asset to small business in Australia] about the burden that recent laws have placed on Mortgage brokers.
So I am happy to see that they are looking to relax the compliance requirements placed on brokers.

The FBAA Conference announcement

Speaking at the inaugural FBAA conference in Sydney yesterday, the leader of the deregulation task-force told attendees that the government was in the process of reducing the costs and time associated with regulation and compliance.

Mr Sinodinos has worked in the finance industry says the government wants to hear broker feedback on the matter, so as to speed up the whole process and implement initiatives that are well received by the industry.

“Our job is to identify ways to reduce the cost burdens of regulation and compliance on businesses with a focus on small businesses,” he said.
“I recently spoke to a person in Brisbane and he said that, for mortgage brokers, one hour with a client results in six to seven hours of paperwork.
“I’m looking to reduce this time spent on paperwork. I think there is a way we can save brokers at least $1 billion in compliance and business costs. And, I think we can even go further than that.”

This has to be good news for Australian Mortgage Brokers. Great work from the FBAA!

Other people's low interest money. The scourge that destroyed the US and the European economies.

Is the RBA right on the money with interest rates?

A lot of the Australian media is pushing the story that  interest rates are too high. But is the RBA on the money on this one?

Everybody seems to have a fixation and an opinion on interest rates these days, and you would think that lower interest rates would fix everyone's problems the way the media is attacking the RBA [Reserve Bank of Australia] these days.

But there are a growing number of people who actually want higher interest rates, especially the self funded retirees that gravitate to savings deposits. For them the higher the interest rates, the better.

The fact is that the RBA has two primary functions it uses interest rates. 

1. To contain inflation. And that band has been set at the Goldilocks rate between 25 and 2.8%. Higher or lower it acts.
2. To keep unemployment low.

On the basis that these two factors have been delivered, how could anyone argue against the RBA settings on rates?

Why low interest rates have destroyed the World Economy

let's keep this simple so anyone can understand it. 

What is the Euro, the US and even Australia's greatest problem? 

People have spent too much on over priced assets. Now they pay with higher interest rates and falling asset values. They are caught holding the problem. In Europe those interest rates are going to be sky high.

What made them do that?
They had cheap money thrown at then and they could not resist it.

What we are seeing now is two things.

1. The consequences of that spending binge, as people struggle under that debt and interest rates as their assets deflate.
2. Vested interest insiders pumping up and then deflating the markets with rumours of fixes and ruin, to give them the margins to profit of both rises and declines in values of shares.

The result is that people are constantly bombarded with false information that is repeated in the news. That fact is that a depression is spreading over Europe, and Governments have to force people into lower home values and suffering with lower expectations, or revert to their own currencies and deflate that value of their currencies, and so the value of assets by using the markets. And that means the break up of the Euro.

That's why Britain was wise to realise that it had to retain the Pound, and keep that possibily open to them.

The nonsense we here about interest rates.

What are people saying we need to do? Lower interest rates. Why? So people can suck up more debt, and buy over priced homes, and get retailing at the dizzy heights it was when people were spending like there was no tomorrow? They must be kidding.

If or China slows buying are minerals, we will have to deflate the value of our assets, so isn't it better not to add fuel to the fire now? BUt we have no control over that because we don't control the Euro, or the Chinese domestic economy or the US economy.

The Euro issues, and how it affects us.

There is also a lot of bellyaching about the Euro and how it affects us. The rise of the prophets of doom, headed by their "poster boy" Tony Abbott. Although I am sensing a turn in believing he is a contender for leading the Nation.

What caused the change?

We see great numbers on Australia's economy, so even though interest rates are lowered, the AU$ is rising.

Everyone is waking up to the fact that the Euro problems have been around for four years or more. And they won't go away in the next four years. In fact they won't go away in my view till the Euro is disbanded, or Europe becomes one political power, and that latter won't happen.

Australia will never have that problem because we have a floating Currencies and are the masters of our destiny. Keeping interest rates high is the solution to the problem, not the problem.

What is the connection to low interest rates and the Euro problem?

Its about Nations spending too much of other peoples' money because it was cheap. That created an illusion of being wealthy when you are not.
What does lower interest rates do. Make people want to spend other people's money. The cause of the problem in the first place.

My advice on interest rates to joe public. 

• Cut up your credit card. If you can't pay cash, you don't need it.
• If you don't have the money, don't buy it. 
• If you see a car ad with a 2.9% interest rate, keep walking! that's why we got into this pickle in the first place.

Yes I have said that the interest rates were set too high, and should be lower, faster.

But was I right? The figures on the economy have vindicated the RBA and proved me wrong.

Will we see more easing in interest rates. 

We probably will see lower interest rates, but hopefully that will not rise house prices, because they are already too high.

• Low interest rates and easy money caused the problem we now have.
• Lower interest rates will not fix it.

To those that link the Australian economy to the Titanic, I say this.

The iceberg was low interest rates and easy money. That is not the solution to a stronger Australian Economy.
The answer is people saving more, and spending less, so we don't have to borrow money from Europe to meet lending demand.

Interest rates will go lower, but don't let that make you spender too much on your next home. We happy with less. Less home, less gadgets, less debt, less junk, less mortgage.
Source: Mr Mortgage

Credit Cards: RBA Announces end to unreasonable credit card surcharges

Credit Card Surcharge: Reverse Bank to bring the fair and reasonable test to surcharges of credit cards 

Australia's central bank, the Reserve Bank of Australia seems to be coming more proactive in the regulation of the business of banking RBA is targeting excessive credit card surcharges. 

The ripoff off merchants include big brands such as Qantas, Virgin, and Cabcharge

The Reserve Bank has finally set the sunset clause on the credit and debit card surcharge earner on January 2013, with what they term a variation in surcharging standards.

Credit card surcharging standard: The fly in the ointment

Whilst card companies may stipulate a “reasonable limit" how much merchants can charge consumers for using their credit cards, it does not specify what reasonable means.
This will I guess be left to the Trade Practices Act to determine, and regulate, as this seems to fill into the consumer law of equity of contract.

Credit card surcharge standards

And that brings up a question; given the financial services industry's record on setting their own standards, isn't it reasonable that the RBA spend the next six months in talks with the Office of fair trade and the ACCC to nut out some guidelines for these cowboys?
But there are some guidelines of what a reasonable limit might include in the various costs that might come with accepting payment by cards. These include actual fees charged by the credit card providers, the cost of terminals and the like.
One card scheme did propose that the “reasonable” cost recovery should include an appraisal of the benefits merchants get by being able to accept card payment – a concept that could have tied up bank vaults of lawyers and sundry consultants for years to come.

Credit card surcharge relief at last

The obvious change to the consumer will be that Cabcharge 10 per cent rort or that flat whack charged by Qantas and Virgin for actually using a credit card to pay for flights or even buy drinks on board!

Finally we will get a level playing field in the fringe area of credit card  fees and charges, those pushing the envelope surcharges.http://mrmortgage.com.au/

New homes: Project Housing contracts Sales edge up in April

New home sales have come off a first quarter downward spiral to show the sales slump may have bottomed. 

HIA economist, Dr Harley Dale said an April lift in new home sales of both detached houses and 

multi-units was an imperative result. 

According to the HIA the problem looms

"Even with this latest improvement, the aggregate volume of both new home sales and local 

government building approvals imply that in the absence of a rapid and sustained recovery, national 

new home building is heading to a recessionary level in 2012,” said Harley Dale. 

This solution is what I can't agree with

“That’s an unfortunate fact which everybody needs to face and which requires further interest rate cuts 

and immediate government action,” Harley Dale said.  

What's wrong with this statement

1. Nothing new here. We have heard same old song for 12 years. Give us an unfair advantage and give each customer a tax payer funded slush fund, and we'll build those houses for Australia.
2. It will ease the pain, but does not solve the problem. 

What about Retailing? What about manufacturing?

Retailing and manufacturing are much bigger employers, and both have serious problems right now. Do they ask the Government for tax payer funded handouts for their customers?

Yet the building industry has had the lowest interest rates in history, and been supported by Government handouts to their customers, directly or indirectly, for 12 years.

And they are stilling singing the same song?

Last time I checked low interest rates and tax payer funded handouts were not working for you, so why keep asking for things that do not work, and in the end a worse problem for your next customers? In other words. The housing industry has proven that tax handouts reduces demand. 

So why did it not work?

Well it did, but them everybody sucked the goodness out of the situation, 

and now we have people wanting homes the can't afford. So who sold them on that?

People don't want postage stamp blocks where you have to have a two story home. Who wants that?

They cost $20,000 more to build, have less usable space, are a health hazard,and have countless issues that will unfold down the track.

Clearly the HIA have never presented a solution to the problem.

I believe because they Have looked in the wrong places.

Its the cost of land Dummy

If land were half the price more people would build a new home. If interest rates were 12% that would not stop them, because it would still be affordable.

What the HIA can't see, is that selling homes that go on postage stamp blocks in Sardine City is not the Australian Dream.

Selling what State Governments and land developers want sell but people resist buying is no way to run a business.

Creating an abundance of cheap residential land with block sizes that people want is the way to go.

 My Story

I planned to build a home two years after this one I am in, and then five years after, but never did. Why not? But the land prices were too high and the blocks were ordinary, and the streets were too skinny.

So what chance have you ever got of selling me a new home? Buckley's. Even though I want to build. 

State Government and Federal Government grants only make things worse. they actually make homes unaffordable down the line and create a worse situation.

Sure if you wave money at people some will drop their pants. But the ones that don't won't when the grants are gone. They want more for waiting.

The HIA solution? More grants, bigger grants. Its pathetic.

What's needed is less whinging, less begging, and more working on the problem. The problem is the price & availability of cheaper land, and keeping homes single level.

Source: Mr Mortgage