OVER 66,000 Australians bit the bullet and took out a home loan in May, despite the rising cost of buying a property.
Growing job security, as the unemployment rate falls, rising wages and recent stability in interest rates have made people more comfortable about taking on debt, economists say.
In total, 66,040 owner-occupied housing loans were agreed to by banks and finance institutions in May, a seasonally adjusted increase of 0.1 per cent over loans committed in April, Australian Bureau of Statistics (ABS) data released today found.
This is the sixth straight month of growth in housing loans.
Economists had expected to see no growth in May.
The total value of dwelling commitments in May was $22.139 million, a 2.7 per cent increase on the previous month.
Housing affordability has been a hot topic in the political arena in the past week with the Opposition saying it will hold a summit in Canberra on July 26 to find ways to ease the pain for first homebuyers trying to get into the market, as well as tackle soaring rents.
The Government wants to conduct a national audit to find suitable land for housing and ease the cost burden on homebuyers.
The ABS data shows that first-time homebuyers made up 16.6 per cent of loans committed in May, down from 17.2 per cent the previous month, and well shy of the 26.1 per cent set in July 2001.
The average Australian home loan size was $268,900 in May.
Loan commitments in the country's largest housing market in NSW fell 2.6 per cent in May after four straight months of growth, while loans grew in Victoria by 1.7 per cent.
Demand for home loans growing
Growing job security, as the unemployment rate falls, rising wages and recent stability in interest rates have made people more comfortable about taking on debt, economists say.
In total, 66,040 owner-occupied housing loans were agreed to by banks and finance institutions in May, a seasonally adjusted increase of 0.1 per cent over loans committed in April, Australian Bureau of Statistics (ABS) data released today found.
This is the sixth straight month of growth in housing loans.
Economists had expected to see no growth in May.
The total value of dwelling commitments in May was $22.139 million, a 2.7 per cent increase on the previous month.
Housing affordability has been a hot topic in the political arena in the past week with the Opposition saying it will hold a summit in Canberra on July 26 to find ways to ease the pain for first homebuyers trying to get into the market, as well as tackle soaring rents.
The Government wants to conduct a national audit to find suitable land for housing and ease the cost burden on homebuyers.
The ABS data shows that first-time homebuyers made up 16.6 per cent of loans committed in May, down from 17.2 per cent the previous month, and well shy of the 26.1 per cent set in July 2001.
Loan commitments in the country's largest housing market in NSW fell 2.6 per cent in May after four straight months of growth, while loans grew in Victoria by 1.7 per cent.
In Queensland, loans rose by 1.4 per cent, a fourth straight month of growth, and in South Australia they rose by 0.7 per cent.
In Western Australia they dropped 7.3 per cent, almost whipping out the 7.9 per cent gain in the previous month, while the strongest state in the month was Tasmania, up 6.3 per cent.
In the Northern Territory loans rose 2.3 per cent and the in ACT they increased by 4.6 per cent.
In Queensland, loans rose by 1.4 per cent, a fourth straight month of growth, and in South Australia they rose by 0.7 per cent.
In Western Australia they dropped 7.3 per cent, almost whipping out the 7.9 per cent gain in the previous month, while the strongest state in the month was Tasmania, up 6.3 per cent.
In the Northern Territory loans rose 2.3 per cent and the in ACT they increased by 4.6 per cent.
Source: AAP
Saturday, July 14, 2007
Monday, July 09, 2007
Mortgage rip off victims of Sample & Partners can claim compensation. Here's how.
A court ruling has found that Sample and Partners, a mortgage broker in three States misled borrowers on debt reduction schemes.
Sample and Partners, a mortgage broker exposed by "Money" for charging borrowers thousands of dollars in fees for a mortgage reduction scheme involving high-interest line-of-credit loans, may have to compensate borrowers following a court action.
But the NSW Consumer Credit Legal Centre's principal solicitor, Katherine Lane, says the mortgage broker should have been fined so a compensation fund could be established for borrowers. She says it is disappointing victims have to make a claim against the company in order to obtain compensation.
Federal Court orders obtained last month by the Australian Securities and Investments Commission found that George Matthew Sample (known as Matthew Sample) and Craig Kenneth Turrell deceived and misled borrowers about their mortgages and how quickly those loans could be paid off.
The court finding followed a three-year investigation by the regulator. Matthew Sample is principal and managing director of Sample and Partners, while Craig Turrell is general manager of the mortgage broking firm, which has offices in Sydney, Melbourne and Brisbane.
The scheme came with high fees and charges for line-of-credit loans that Sample and Partners promised could be repaid faster than a standard variable home loan.
Carolyn Bond, the co-chief executive of the Consumer Action Law Centre in Victoria, says: "Action by the regulator means that the industry is cleaning up its act a bit. You see less and less of these sort of loans on offer."
Bond says borrowers who were misled are entitled to compensation. "There's no reason why you shouldn't get funds covering fees and interest charges back."
ASIC's executive director of enforcement, Jan Redfern, says the court case sends a clear message to other mortgage brokerage firms marketing mortgage reduction schemes or line-of-credit loans that come with promises that the debt can be repaid quicker than debt on a standard, variable interest-rate mortgage. "It sets out clearly what we have found to be problematic or objectionable behaviour. The company has had to make undertakings to make good," she says.
The investigation by Money found interest rates on Sample and Partners' brokered home loans that were 0.6 to 1.5 per cent higher than a basic home loan. Fees for the debt reduction scheme ranged from $3000 to $8000 and involved line-of-credit loans.
After paying the high fees the original debts were enlarged and, coupled with higher interest rates, could not be paid off faster.
Unlike standard home loans, which require principal and interest repayments to reduce the debt, line-of-credit loans require interest payments only.
Lane says ordinary families have a lot of trouble paying off line-of-credit loans.
"At least with a normal home loan, it is forced saving. You have to make repayments. Five years after signing up for a line-of-credit loan you might not have paid anything off the loan," she says.
ASIC alleged that Sample and Partners' sales staff told borrowers that by switching to a Sample and Partners' loan they would save money and pay off their home loan sooner.
"But they failed to adequately explain that to obtain this benefit clients would need to make extra repayments," ASIC said in a statement released after the court's finding.
The court heard that Sample and Partners also used case studies that referred to people who had switched to Sample and Partners loans and saved money. These people did not exist.
The Sample and Partners brokers told borrowers they searched the market for the best possible loan when, in fact, they offered a limited range of home loans. Some borrowers also ended up with loans from a company called World Home Loans. Matthew Sample did not tell borrowers he was a director of Sample and Partners and a director and shareholder of World Home Loans Pty Ltd and World Home Loans Administration Service Pty Ltd.
The court declared the mortgage broker told clients that before they refinanced, it would consider their financial circumstances and whether or not they would benefit from changing loans.
Sample and Partners also told clients it had expertise to offer insurance advice and employed specialist staff including financial planners and solicitors when it did not.
The mortgage broker must write to all former clients within 30 days (of June 18) and tell them of the court order, and it must provide borrowers with documents to help them make a claim against the firm.
ASIC's Redfern says the court order includes the appointment to Sample and Partners of an independent compliance officer, who will monitor their handling of claims. The compliance officer will also report to ASIC on whether Sample and Partners is complying with the ASIC Act with regards to future clients.
The court orders prohibit Sample and Partners from engaging in this conduct in the future.
Sample and Partners agreed to the orders, which also involve the payment of ASIC's costs of $200,000.
"Choosing a home loan is likely to be one of the biggest financial decisions a person will make," Redfern says.
"Mortgage brokers, who are often relied upon to facilitate and help people through this process, have important responsibilities to ensure that the information they provide is accurate and truthful."
Sample and Partners' director of corporate services, Michael Crouch said in a written statement that "as a company we look forward to working with all regulators both state and federal to ensure ongoing compliance in our industry".
How to make a claim
The Consumer Action Law Centre in Victoria and the NSW Consumer Credit Legal Centre will help borrowers make a claim against Sample and Partners.
Their lawyers believe that borrowers should be able to mount a case to have fees and charges as well as high interest payments returned.
The only way to reduce a home loan faster is to make extra repayments - paying off as much as you can, as often as you can, on a low interest loan.
For help, phone the Consumer Credit Legal Centre in NSW on 1800 808 488 or in Victoria, phone the Consumer Action Law Centre (03) 9629 6300. For the court declarations on the case, visit ASIC's website at www.asic.gov.au.
Sample and Partners, a mortgage broker exposed by "Money" for charging borrowers thousands of dollars in fees for a mortgage reduction scheme involving high-interest line-of-credit loans, may have to compensate borrowers following a court action.
But the NSW Consumer Credit Legal Centre's principal solicitor, Katherine Lane, says the mortgage broker should have been fined so a compensation fund could be established for borrowers. She says it is disappointing victims have to make a claim against the company in order to obtain compensation.
Federal Court orders obtained last month by the Australian Securities and Investments Commission found that George Matthew Sample (known as Matthew Sample) and Craig Kenneth Turrell deceived and misled borrowers about their mortgages and how quickly those loans could be paid off.
The court finding followed a three-year investigation by the regulator. Matthew Sample is principal and managing director of Sample and Partners, while Craig Turrell is general manager of the mortgage broking firm, which has offices in Sydney, Melbourne and Brisbane.
The scheme came with high fees and charges for line-of-credit loans that Sample and Partners promised could be repaid faster than a standard variable home loan.
Carolyn Bond, the co-chief executive of the Consumer Action Law Centre in Victoria, says: "Action by the regulator means that the industry is cleaning up its act a bit. You see less and less of these sort of loans on offer."
Bond says borrowers who were misled are entitled to compensation. "There's no reason why you shouldn't get funds covering fees and interest charges back."
ASIC's executive director of enforcement, Jan Redfern, says the court case sends a clear message to other mortgage brokerage firms marketing mortgage reduction schemes or line-of-credit loans that come with promises that the debt can be repaid quicker than debt on a standard, variable interest-rate mortgage. "It sets out clearly what we have found to be problematic or objectionable behaviour. The company has had to make undertakings to make good," she says.
The investigation by Money found interest rates on Sample and Partners' brokered home loans that were 0.6 to 1.5 per cent higher than a basic home loan. Fees for the debt reduction scheme ranged from $3000 to $8000 and involved line-of-credit loans.
After paying the high fees the original debts were enlarged and, coupled with higher interest rates, could not be paid off faster.
Unlike standard home loans, which require principal and interest repayments to reduce the debt, line-of-credit loans require interest payments only.
Lane says ordinary families have a lot of trouble paying off line-of-credit loans.
"At least with a normal home loan, it is forced saving. You have to make repayments. Five years after signing up for a line-of-credit loan you might not have paid anything off the loan," she says.
ASIC alleged that Sample and Partners' sales staff told borrowers that by switching to a Sample and Partners' loan they would save money and pay off their home loan sooner.
"But they failed to adequately explain that to obtain this benefit clients would need to make extra repayments," ASIC said in a statement released after the court's finding.
The court heard that Sample and Partners also used case studies that referred to people who had switched to Sample and Partners loans and saved money. These people did not exist.
The Sample and Partners brokers told borrowers they searched the market for the best possible loan when, in fact, they offered a limited range of home loans. Some borrowers also ended up with loans from a company called World Home Loans. Matthew Sample did not tell borrowers he was a director of Sample and Partners and a director and shareholder of World Home Loans Pty Ltd and World Home Loans Administration Service Pty Ltd.
The court declared the mortgage broker told clients that before they refinanced, it would consider their financial circumstances and whether or not they would benefit from changing loans.
Sample and Partners also told clients it had expertise to offer insurance advice and employed specialist staff including financial planners and solicitors when it did not.
The mortgage broker must write to all former clients within 30 days (of June 18) and tell them of the court order, and it must provide borrowers with documents to help them make a claim against the firm.
ASIC's Redfern says the court order includes the appointment to Sample and Partners of an independent compliance officer, who will monitor their handling of claims. The compliance officer will also report to ASIC on whether Sample and Partners is complying with the ASIC Act with regards to future clients.
The court orders prohibit Sample and Partners from engaging in this conduct in the future.
Sample and Partners agreed to the orders, which also involve the payment of ASIC's costs of $200,000.
"Choosing a home loan is likely to be one of the biggest financial decisions a person will make," Redfern says.
"Mortgage brokers, who are often relied upon to facilitate and help people through this process, have important responsibilities to ensure that the information they provide is accurate and truthful."
Sample and Partners' director of corporate services, Michael Crouch said in a written statement that "as a company we look forward to working with all regulators both state and federal to ensure ongoing compliance in our industry".
How to make a claim
The Consumer Action Law Centre in Victoria and the NSW Consumer Credit Legal Centre will help borrowers make a claim against Sample and Partners.
Their lawyers believe that borrowers should be able to mount a case to have fees and charges as well as high interest payments returned.
The only way to reduce a home loan faster is to make extra repayments - paying off as much as you can, as often as you can, on a low interest loan.
For help, phone the Consumer Credit Legal Centre in NSW on 1800 808 488 or in Victoria, phone the Consumer Action Law Centre (03) 9629 6300. For the court declarations on the case, visit ASIC's website at www.asic.gov.au.
Queensland credit unions announce merger proposal
The boards of the Queenslanders Credit Union and Ipswich-based Discovery Credit Union have announced a proposal to merge.
A proposal - which would create a new credit union with about $400 million in assets, eight branches and 80 staff - will be put to members of both credit unions at their respective annual general meetings in November.
The agreement ensures all staff will be retained and all existing branches will remain open. The merged credit union will trade under the new name Queenslanders Personal Banking.
The merger will also need approval from the Australian Prudential Regulatory Authority (APRA) and other relevant regulators.
Under the merger agreement, Ross McDowell, CEO of Queenslanders Credit Union, will be the CEO of the new organisation and the current management team of Discovery will be part of the new management structure.
John Weier, the general manager of Discovery will be the deputy CEO of the new credit union and will continue to play a major role in the development of the organisation in the greater Ipswich area.
All Discovery directors have been invited to join the board of the merged credit union.
"Discovery Credit Union has been proud to support many local sporting and community groups through ongoing sponsorship programs and this will not change if the merger proceeds," Mr Weier said.
"As all of our staff and branches will be retained, members will not notice any change except for the name."
In a joint statement, Mr McDowell and Mr Weier said the boards of both credit unions had recognised the potential for growth in the Ipswich area.
"(We) believe the merger will create a financially strong regional credit union with sufficient size to ensure that it can continue providing friendly, personalised service to members," they said.
"In addition, having the economies of scale of a large financial institution will allow the merged credit union to take advantage of the opportunities that are available in the western corridor due to the strong local economy and continuing development."
A proposal - which would create a new credit union with about $400 million in assets, eight branches and 80 staff - will be put to members of both credit unions at their respective annual general meetings in November.
The agreement ensures all staff will be retained and all existing branches will remain open. The merged credit union will trade under the new name Queenslanders Personal Banking.
The merger will also need approval from the Australian Prudential Regulatory Authority (APRA) and other relevant regulators.
Under the merger agreement, Ross McDowell, CEO of Queenslanders Credit Union, will be the CEO of the new organisation and the current management team of Discovery will be part of the new management structure.
John Weier, the general manager of Discovery will be the deputy CEO of the new credit union and will continue to play a major role in the development of the organisation in the greater Ipswich area.
All Discovery directors have been invited to join the board of the merged credit union.
"Discovery Credit Union has been proud to support many local sporting and community groups through ongoing sponsorship programs and this will not change if the merger proceeds," Mr Weier said.
"As all of our staff and branches will be retained, members will not notice any change except for the name."
In a joint statement, Mr McDowell and Mr Weier said the boards of both credit unions had recognised the potential for growth in the Ipswich area.
"(We) believe the merger will create a financially strong regional credit union with sufficient size to ensure that it can continue providing friendly, personalised service to members," they said.
"In addition, having the economies of scale of a large financial institution will allow the merged credit union to take advantage of the opportunities that are available in the western corridor due to the strong local economy and continuing development."
ANZ bank buys 10% stake in Vietnamese bank
ANZ Banking Group Ltd has continued its widespread geographical expansion in Asia, acquiring a 10 per cent stake in Vietnam investment bank Saigon Securities Incorporation for $US88 million ($102 million).
It is the second acquisition in Vietnam for Australia's third largest bank, which took a 10 per cent stake in retail bank Sacombank in the market in 2005 for $US27 million ($A31.52 million).
Established in 2002, Saigon Securities is Vietnam's largest broker, holding a 27 per cent slice of the market.
It provides broking and investment banking services like corporate advisory, financing and research to more than 30,000 customer accounts.
ANZ set up its first ANZ-branded Vietnamese branch in Hanoi in 1993 and opened a second branch in Ho Chi Minh City in 1996.
Both continue to cater to Australian travellers and businesses coming into Vietnam.
"ANZ was one of the first foreign banks to open in Vietnam and regards expansion in the country as one of its highest priorities," ANZ said.
ANZ and Saigon Securities had already been cooperating for some time on corporate bond issues for large Vietnamese companies, buoyed by a Vietnamese economy that has averaged GDP growth of more than 7.5 per cent in the last five years.
ANZ has made no secret of its plans to expand into Asia.
Outgoing chief executive John McFarlane said in April ANZ's acquisition priorities lay in Asia because opportunities were limited in Australia.
In November 2006, ANZ paid $383 million for an initial 13.5 per cent stake in Malaysia's fifth-largest bank, AMMB Holdings Berhad.
That same month, ANZ disclosed that it had acquired a 19.9 per cent interest in China's Shanghai Rural Commercial Bank (SRCB) for $328 million.
In March this year, ANZ took a 60 per cent stake in a Laotian bank.
ANZ has announced its intention to expand its international franchise in Malaysia, China, Guam and Laos.
ANZ also is interested in India and Thailand.
ANZ rival Commonwealth Bank of Australia Ltd is also active in the region, currently holding interests in the Hangzhou City Commercial Bank and Jinan City Commercial Bank in China.
It also has an Indonesian subsidiary, PT Bank Commonwealth.
Source: AAP
It is the second acquisition in Vietnam for Australia's third largest bank, which took a 10 per cent stake in retail bank Sacombank in the market in 2005 for $US27 million ($A31.52 million).
Established in 2002, Saigon Securities is Vietnam's largest broker, holding a 27 per cent slice of the market.
It provides broking and investment banking services like corporate advisory, financing and research to more than 30,000 customer accounts.
ANZ set up its first ANZ-branded Vietnamese branch in Hanoi in 1993 and opened a second branch in Ho Chi Minh City in 1996.
Both continue to cater to Australian travellers and businesses coming into Vietnam.
"ANZ was one of the first foreign banks to open in Vietnam and regards expansion in the country as one of its highest priorities," ANZ said.
ANZ and Saigon Securities had already been cooperating for some time on corporate bond issues for large Vietnamese companies, buoyed by a Vietnamese economy that has averaged GDP growth of more than 7.5 per cent in the last five years.
ANZ has made no secret of its plans to expand into Asia.
Outgoing chief executive John McFarlane said in April ANZ's acquisition priorities lay in Asia because opportunities were limited in Australia.
In November 2006, ANZ paid $383 million for an initial 13.5 per cent stake in Malaysia's fifth-largest bank, AMMB Holdings Berhad.
That same month, ANZ disclosed that it had acquired a 19.9 per cent interest in China's Shanghai Rural Commercial Bank (SRCB) for $328 million.
In March this year, ANZ took a 60 per cent stake in a Laotian bank.
ANZ has announced its intention to expand its international franchise in Malaysia, China, Guam and Laos.
ANZ also is interested in India and Thailand.
ANZ rival Commonwealth Bank of Australia Ltd is also active in the region, currently holding interests in the Hangzhou City Commercial Bank and Jinan City Commercial Bank in China.
It also has an Indonesian subsidiary, PT Bank Commonwealth.
Source: AAP
Debt reduction, not credit card rates from banks are the big concern
Credit card rates are the least of Australians' concerns when it comes to managing their personal finances, a survey has found.
Despite the four biggest banks increasing credit card interest rates this year, the factor was on the bottom of the list when respondents ranked their 10 most important money matters in a national survey by NEWS.com.au and polling firm Coredata.
The most important considerations were reducing debts (85 per cent of respondents), planning for retirement (75 per cent) and superannuation (74 per cent), the June survey of 1830 people found.
Only 53 per cent considered credit card rates important.
Anne-Marie Esler, technical research manager with financial advisors Centric Wealth, said while it was surprising credit card rates were a low priority it was encouraging debt reduction was high on the list.
“Personal debt includes amounts owing on credit cards, so hopefully people have considered paying these off in order to help improve their financial situation,” she said.
Interest in investments
Three quarters of those polled believed investments were important, with property being the most popular option (59 per cent), followed by the stock market (53 per cent) and managed funds (42 per cent).
Finance websites, including business news sites and information sites, were the main sources of investment information, followed by newspapers, banks, then family and friends.
Getting advice
Of those who sought advice from banks, less than half - 46 per cent - were satisfied with the information they received. Mortgage brokers fared worse, with just 44 per cent satisfied with their advice.
This compared to 78 per cent of respondents who were satisfied with information they got from websites.
“This result suggests people need to take more time in considering who is in the best position to guide them financially,” Ms Elser said.
Half the respondents said they occasionally sought professional advice on money management while 31 per cent had never done so.
Those with higher incomes were more likely to seek advice.
Retirement
When it came to planning for retirement, 60 per cent of young respondents aged 29 and below said it was important.
“This is a surprising result. It is great to see that so many people under 29 years are contemplating their retirement savings,” Ms Esler said.
“Hopefully these people will also be taking action by having a savings plan either inside super by way of salary sacrifice or taking advantage of the Government’s co-contribution, or outside super through share, managed funds or property investments.”
Those aged 40-49 placed the most importance on a retirement plan (91 per cent), followed by the 50-59 age group (89 per cent).
Despite the four biggest banks increasing credit card interest rates this year, the factor was on the bottom of the list when respondents ranked their 10 most important money matters in a national survey by NEWS.com.au and polling firm Coredata.
The most important considerations were reducing debts (85 per cent of respondents), planning for retirement (75 per cent) and superannuation (74 per cent), the June survey of 1830 people found.
Only 53 per cent considered credit card rates important.
Anne-Marie Esler, technical research manager with financial advisors Centric Wealth, said while it was surprising credit card rates were a low priority it was encouraging debt reduction was high on the list.
“Personal debt includes amounts owing on credit cards, so hopefully people have considered paying these off in order to help improve their financial situation,” she said.
Interest in investments
Three quarters of those polled believed investments were important, with property being the most popular option (59 per cent), followed by the stock market (53 per cent) and managed funds (42 per cent).
Finance websites, including business news sites and information sites, were the main sources of investment information, followed by newspapers, banks, then family and friends.
Getting advice
Of those who sought advice from banks, less than half - 46 per cent - were satisfied with the information they received. Mortgage brokers fared worse, with just 44 per cent satisfied with their advice.
This compared to 78 per cent of respondents who were satisfied with information they got from websites.
“This result suggests people need to take more time in considering who is in the best position to guide them financially,” Ms Elser said.
Half the respondents said they occasionally sought professional advice on money management while 31 per cent had never done so.
Those with higher incomes were more likely to seek advice.
Retirement
When it came to planning for retirement, 60 per cent of young respondents aged 29 and below said it was important.
“This is a surprising result. It is great to see that so many people under 29 years are contemplating their retirement savings,” Ms Esler said.
“Hopefully these people will also be taking action by having a savings plan either inside super by way of salary sacrifice or taking advantage of the Government’s co-contribution, or outside super through share, managed funds or property investments.”
Those aged 40-49 placed the most importance on a retirement plan (91 per cent), followed by the 50-59 age group (89 per cent).
Australian homeowners don't understand their mortgage home loans
Almost three quarters of Australians say they are unhappy with their home loan and don't fully understand the paperwork, an online survey says.
And even though they could save as much as $60,000 on an average-size mortgage by shopping around for a better deal, most don't - either through apathy or a lack of understanding.
Mortgage lender Myrate.com.au found 77 per cent of the 1100 people it questioned last month felt unhappy or confused with their home loan.
"The survey found an overwhelming majority of Australians were not happy with their home loan and admit to feeling miserable, confused and downtrodden as a result," the company said.
However, only 38 per cent were prepared to shop around for a cheaper deal.
The survey also found that 71 per cent of respondents would rather drive out of their way to get cheaper petrol than investigate ways to obtain a less expensive home loan.
"For many Australians, the idea of saving money on petrol is an easy equation - it's laid out in front of you in black and white, whereas the perception of refinancing your home loan in order to get a better deal seems far too daunting," said Myrate.com.au general manager Kevin Sherman.
"We try to encourage people to pull out their home loan paperwork and look at their personal circumstances to make sure their home loan is still appropriate for them."
Mr Sherman said a person could save as much as $60,000 on a $300,000 home loan if they shopped around.
"To get your initial home loan, it feels like a lot of work. Most people think a home loan is the same across the board, but the deals are very different."
Mr Sherman said the failure of people to check whether they had the best home loan situation was a combination of apathy and a lack of understanding.
"People put it in the too hard basket," he said.
"A home loan can be the biggest financial investment many people will make in their lifetime, so it's important they check their home loan on an annual basis to ensure they're getting the best deal."
SOURCE: AAP
And even though they could save as much as $60,000 on an average-size mortgage by shopping around for a better deal, most don't - either through apathy or a lack of understanding.
Mortgage lender Myrate.com.au found 77 per cent of the 1100 people it questioned last month felt unhappy or confused with their home loan.
"The survey found an overwhelming majority of Australians were not happy with their home loan and admit to feeling miserable, confused and downtrodden as a result," the company said.
However, only 38 per cent were prepared to shop around for a cheaper deal.
The survey also found that 71 per cent of respondents would rather drive out of their way to get cheaper petrol than investigate ways to obtain a less expensive home loan.
"For many Australians, the idea of saving money on petrol is an easy equation - it's laid out in front of you in black and white, whereas the perception of refinancing your home loan in order to get a better deal seems far too daunting," said Myrate.com.au general manager Kevin Sherman.
"We try to encourage people to pull out their home loan paperwork and look at their personal circumstances to make sure their home loan is still appropriate for them."
Mr Sherman said a person could save as much as $60,000 on a $300,000 home loan if they shopped around.
"To get your initial home loan, it feels like a lot of work. Most people think a home loan is the same across the board, but the deals are very different."
Mr Sherman said the failure of people to check whether they had the best home loan situation was a combination of apathy and a lack of understanding.
"People put it in the too hard basket," he said.
"A home loan can be the biggest financial investment many people will make in their lifetime, so it's important they check their home loan on an annual basis to ensure they're getting the best deal."
SOURCE: AAP
Saturday, July 07, 2007
Wealthy become mortgage lenders darlings as they borrow to buy investment property
Australia's richest federal electorates, in Sydney and Brisbane, have been leading the mortgage binge, dousing fears that the majority of households are facing a debt crunch.
Wealthy families are borrowing against their bricks and mortar to buy investment properties, and to fund holidays or their children's education. This group, not the battlers, explains much of the drop in home ownership over the past five years, data obtained by The Australian shows.
The best example is Mitchell, in Sydney's northwest suburbs wealth-belt. It boasts the second-richest electorate by income and the largest concentration of houses with four or more bedrooms, and is the second-safest Liberal seat on the electoral pendulum. Yet the proportion of households paying off their homes has jumped from 35.4 per cent in 2001 to 46 per cent last year.
This week's release of the national census showed the share of Australian households owning their home outright crashed from 39.8 per cent in 2001 to just 32.6 per cent last year. And the proportion who were paying off their home jumped from 26.5 per cent to 32.2 per cent over the same period.
The housing boom since 1997, which has typically seen prices double as nominal interest rates have halved, has created fears about the locking-out of young families.
But new entrants to the market over the past five years facing larger debts do not account for the fall in the share of houses owned outright. It is existing owners using their bricks and mortar as a line of discretionary credit who are driving the trend to lower rates of freehold title.
"That third that have paid off their home may well be borrowing against it," federal Treasurer Peter Costello said. "My suspicion is that there are a lot of people unlocking equity in their homes, particularly amongst those older people who would traditionally have paid off their mortgage in its entirety."
Stephen Walters, chief economist at investment bank JP Morgan, said people might have expected an ageing population would mean a greater proportion of people fully paying off their homes, but more people were now prepared to be investors.
"Certainly the big change between 2001 and 2006 is deteriorating affordability. As prices boomed through 2002-03, more people had to borrow to gain a foothold in the market," Mr Walters said.
"But added to that is the changes in banking products that are allowing people to redip into their mortgages to fund things like their kids' education and go on overseas holidays. It puts off paying the final debt, and pushes up the proportion of households that aren't paid off."
NSW, which has experienced a property slump in recent years, had the lowest proportion of home mortgages (30.2 per cent) of any of the main states, the main census said. The boom state of Western Australia had the highest proportion of mortgaged homes at 35.2 per cent.
Source: The Australian
Wealthy families are borrowing against their bricks and mortar to buy investment properties, and to fund holidays or their children's education. This group, not the battlers, explains much of the drop in home ownership over the past five years, data obtained by The Australian shows.
The best example is Mitchell, in Sydney's northwest suburbs wealth-belt. It boasts the second-richest electorate by income and the largest concentration of houses with four or more bedrooms, and is the second-safest Liberal seat on the electoral pendulum. Yet the proportion of households paying off their homes has jumped from 35.4 per cent in 2001 to 46 per cent last year.
This week's release of the national census showed the share of Australian households owning their home outright crashed from 39.8 per cent in 2001 to just 32.6 per cent last year. And the proportion who were paying off their home jumped from 26.5 per cent to 32.2 per cent over the same period.
The housing boom since 1997, which has typically seen prices double as nominal interest rates have halved, has created fears about the locking-out of young families.
But new entrants to the market over the past five years facing larger debts do not account for the fall in the share of houses owned outright. It is existing owners using their bricks and mortar as a line of discretionary credit who are driving the trend to lower rates of freehold title.
"That third that have paid off their home may well be borrowing against it," federal Treasurer Peter Costello said. "My suspicion is that there are a lot of people unlocking equity in their homes, particularly amongst those older people who would traditionally have paid off their mortgage in its entirety."
Stephen Walters, chief economist at investment bank JP Morgan, said people might have expected an ageing population would mean a greater proportion of people fully paying off their homes, but more people were now prepared to be investors.
"Certainly the big change between 2001 and 2006 is deteriorating affordability. As prices boomed through 2002-03, more people had to borrow to gain a foothold in the market," Mr Walters said.
"But added to that is the changes in banking products that are allowing people to redip into their mortgages to fund things like their kids' education and go on overseas holidays. It puts off paying the final debt, and pushes up the proportion of households that aren't paid off."
NSW, which has experienced a property slump in recent years, had the lowest proportion of home mortgages (30.2 per cent) of any of the main states, the main census said. The boom state of Western Australia had the highest proportion of mortgaged homes at 35.2 per cent.
Source: The Australian
Property Investors stand to lose half a billion dollars
18,000 investors stand to lose half a billion dollars.
Many Bridgecorp investors knew of risks: analyst (AM) Related Story: Bridgecorp collapse a 'wake-up call' for financial services With the full extent of this week's collapse of the Bridgecorp property group yet to become apparent, it has emerged that many investors were at least partly aware of the company's problems and knew the risks they were taking.
Investment analysts in New Zealand had long regarded Bridgecorp as a ticking time bomb - simply because its troubled property ventures particularly in Australia and Fiji have been disclosed in prospectuses.
But about 18,000 investors on both sides of the Tasman who did not heed the fine print now stand to lose half a billion dollars.
One veteran analyst who had flagged the Bridgecorp risk is Brian Gaynor of Milford Asset Management, and he spoke with our business editor Peter Ryan.
"A lot of investors were very much aware, but mainly I guess equity investors," he said.
"[But] it seems that the fixed interest investors were disconnected. They didn't seem to pay any attention to the company's share price, which was indicating that Bridgecorp was at risk and it did have some problems.
"So it was only the mum and pop investors who put their money into Bridgecorp, who didn't seem to understand that a low share price was indicative of a company that had problems."
Bridgecorp's interest rate wasn't actually that much more than what you would get by going with a traditional bank. Is that surprising?
"No, well that's certainly a characteristic in New Zealand, where one could argue that Bridgecorp's interest rates were very low given the risk.
"You know, the prospectus had pretty full disclosure. I've got to say that if one is critical of Bridgecorp, one can't be critical of its level of disclosure.
"One would've thought, given that, investors would have demanded much higher interest rates, but they were quite willing to invest in the company, which had well-identified problems at pretty low interest rates, not that much above what the major banks were offering in New Zealand.
"Admittedly, the disclosure was quite complicated, but if one read through the prospectus it was all very clear. But it does seem that most people just didn't pay much attention to it."
Any thoughts about the level of bad news creditors could receive at the meeting next week?
"We are aware of probably up to 15 per cent of the company's assets, which are going to be very difficult to get back.
"Given the fact that only 30 per cent of Bridgecorp's lending was secured against first mortgages, one would imagine that there will be more bad news as well.
"So I don't think investors will get an awful lot of very positive news next week."
Many Bridgecorp investors knew of risks: analyst (AM) Related Story: Bridgecorp collapse a 'wake-up call' for financial services With the full extent of this week's collapse of the Bridgecorp property group yet to become apparent, it has emerged that many investors were at least partly aware of the company's problems and knew the risks they were taking.
Investment analysts in New Zealand had long regarded Bridgecorp as a ticking time bomb - simply because its troubled property ventures particularly in Australia and Fiji have been disclosed in prospectuses.
But about 18,000 investors on both sides of the Tasman who did not heed the fine print now stand to lose half a billion dollars.
One veteran analyst who had flagged the Bridgecorp risk is Brian Gaynor of Milford Asset Management, and he spoke with our business editor Peter Ryan.
"A lot of investors were very much aware, but mainly I guess equity investors," he said.
"[But] it seems that the fixed interest investors were disconnected. They didn't seem to pay any attention to the company's share price, which was indicating that Bridgecorp was at risk and it did have some problems.
"So it was only the mum and pop investors who put their money into Bridgecorp, who didn't seem to understand that a low share price was indicative of a company that had problems."
Bridgecorp's interest rate wasn't actually that much more than what you would get by going with a traditional bank. Is that surprising?
"No, well that's certainly a characteristic in New Zealand, where one could argue that Bridgecorp's interest rates were very low given the risk.
"You know, the prospectus had pretty full disclosure. I've got to say that if one is critical of Bridgecorp, one can't be critical of its level of disclosure.
"One would've thought, given that, investors would have demanded much higher interest rates, but they were quite willing to invest in the company, which had well-identified problems at pretty low interest rates, not that much above what the major banks were offering in New Zealand.
"Admittedly, the disclosure was quite complicated, but if one read through the prospectus it was all very clear. But it does seem that most people just didn't pay much attention to it."
Any thoughts about the level of bad news creditors could receive at the meeting next week?
"We are aware of probably up to 15 per cent of the company's assets, which are going to be very difficult to get back.
"Given the fact that only 30 per cent of Bridgecorp's lending was secured against first mortgages, one would imagine that there will be more bad news as well.
"So I don't think investors will get an awful lot of very positive news next week."
Housing affordability gets political boost
Australian Labor Opposition Leader Kevin Rudd says he will hold a national housing affordability summit later this month to look at ways to ease the burden on families.
Releasing a paper in Brisbane entitled New Directions for Affordable Housing, Mr Rudd said representatives from the finance and property development industries and state governments would be invited to the summit in Canberra to work on solutions to the growing crisis.
Mr Rudd said land release strategies, urban infill, high government infrastructure charges and skills shortages in the building sector would be examined.
``Once we've had this national summit on housing affordability, we then want to work through the individual responses from the finance sector, from the housing sector and others, to then define and shape exactly the proposals we'll take to the next election,'' Mr Rudd said.
Mr Rudd said one new initiative raised in Labor's paper was allowing for new home deposit savings vehicles, which allowed higher returns and tax advantages to ``supercharge'' the savings capacity of young Australians.
Contributions would be made from pre-tax dollars and earnings could be taxed in the same way as super nest eggs with the money only able to be withdrawn to buy a first home.
``Our national government has to show leadership to find better ways of making it easier for working families to save for a deposit on their first home, and to deal with the overall problem of affordability,'' Mr Rudd said.
Source: Courier Mail
Releasing a paper in Brisbane entitled New Directions for Affordable Housing, Mr Rudd said representatives from the finance and property development industries and state governments would be invited to the summit in Canberra to work on solutions to the growing crisis.
Mr Rudd said land release strategies, urban infill, high government infrastructure charges and skills shortages in the building sector would be examined.
``Once we've had this national summit on housing affordability, we then want to work through the individual responses from the finance sector, from the housing sector and others, to then define and shape exactly the proposals we'll take to the next election,'' Mr Rudd said.
Mr Rudd said one new initiative raised in Labor's paper was allowing for new home deposit savings vehicles, which allowed higher returns and tax advantages to ``supercharge'' the savings capacity of young Australians.
Contributions would be made from pre-tax dollars and earnings could be taxed in the same way as super nest eggs with the money only able to be withdrawn to buy a first home.
``Our national government has to show leadership to find better ways of making it easier for working families to save for a deposit on their first home, and to deal with the overall problem of affordability,'' Mr Rudd said.
Source: Courier Mail
Credit Fees are beginning to bite
Credit card fees are increasing and more credit card customers are being hit with penalty fees imposed on their plastic, financial counsellors warn.
With the average credit card debt now nudging $3000, up from $1836 in 2001, more and more card-holders are being hit with late fees, over-the-limit charges and other penalties that can be as high as $40 a pop.
According to Carol O'Brien, a financial counsellor with Lifeline Brisbane, penalty fees make it harder for people to get out of debt and can be the straw that breaks the camel's back in some households.
"When you get caught in that cycle, it's very difficult to get back out again," she explains.
"A lot of our clients get themselves in so deep with massive credit card debt that the only way out they can see is bankruptcy."
Financial counsellors' concerns are backed up by a Reserve Bank of Australia study released last month that showed the total fees paid by households on credit cards rose by 13 per cent in 2006, four times the rate of inflation.
The study also revealed that the banks now raked in more than $1 billion in fees each year from their household credit card operations alone.
With average over-the-limit fees increasing from $18 to $31 (or 73 per cent) in five years and average late penalties up 49 per cent in the same period, even supposedly low-cost cards can morph into "monsters", says Harry Senlitonga, a financial analyst with research firm Cannex.
"Consumers think they are doing the responsible thing by getting a no-frills card but even a few spending and repayment misdemeanours can make any credit card a lot more expensive than anticipated," he says.
Mr Senlitonga calculates that an interest rate of less than 10 per cent quickly balloons out to about 22 per cent over a year if two late payment penalties of $25 each and two over-the-limit penalties of $35 each are incurred.
"Most of us get caught with credit card penalties on the odd occasion but consumers who regularly incur penalty fees due to household budget pressures are building their debt," he says.
Penalty fees are as widespread as they are ruthless. For instance, of the 245 credit cards Cannex analysed in a recent report, only three imposed no fee on people exceeding their credit limits.
Fiona Hawkins, a financial counsellor with Relationships Australia, says anyone thinking about taking up a card offer is urged to read the fine print first, to understand which fees will apply and in what circumstances.
"When you're entering into a credit card contract, you should treat it very much like a complex game of Monopoly," she said.
"If the bank knows the rules and you don't, it's not a fair game, especially if the rules aren't reasonable."
Meanwhile, the Australian Bankers Association claims the average price of banking services in Australia is actually falling.
In its Fees for Banking Services 2007 Report, Kim Hawtrey, associate professor of economics at Macquarie University, notes that "customers are choosing cheaper banking options and the number of transactions continues to increase".
Prof Hawtrey also points out the growth in some fees needs to be viewed in the context of more competitive interest rates, particularly in housing.
But consumer groups are calling on financial institutions to cut penalty fees, in line with international developments.
For example, the British Fair Trading Office last year found that late payment fees were unfair and did not reflect of the cost of dealing with a late payment. Banks were forced to cut their average penalty charges for credit cards by more than half.
Gordon Renouf, manager of policy and campaigns at consumer organisation Choice, says the severity of the penalties imposed by banks in Australia on consumers who pay late, or breach credit limits, are also out of all proportion. They also weigh most heavily on those who already experiencing financial difficulties.
"For some people, it only takes one thing to go wrong with their financial planning and all the cards come tumbling down," he says.
Ms O'Brien advises staying a little under your limit. That way, you won't be tipped over the edge when interest is added at the end of the month.
Choosing a credit card to suit your spending patterns also is important.
For instance, Mr Senlitonga says impulse spenders who use their card for things like shopping sprees, holidays and emergencies should look for a very low rate card with a low or no annual fee.
By contrast, everyday spenders who put all their regular purchases like groceries and petrol on the card, but paid off the balance in full each month, should consider cards that provided extra loyalty features and perks that would be of value to them.
Source: Sunday Mail
With the average credit card debt now nudging $3000, up from $1836 in 2001, more and more card-holders are being hit with late fees, over-the-limit charges and other penalties that can be as high as $40 a pop.
According to Carol O'Brien, a financial counsellor with Lifeline Brisbane, penalty fees make it harder for people to get out of debt and can be the straw that breaks the camel's back in some households.
"When you get caught in that cycle, it's very difficult to get back out again," she explains.
"A lot of our clients get themselves in so deep with massive credit card debt that the only way out they can see is bankruptcy."
Financial counsellors' concerns are backed up by a Reserve Bank of Australia study released last month that showed the total fees paid by households on credit cards rose by 13 per cent in 2006, four times the rate of inflation.
The study also revealed that the banks now raked in more than $1 billion in fees each year from their household credit card operations alone.
With average over-the-limit fees increasing from $18 to $31 (or 73 per cent) in five years and average late penalties up 49 per cent in the same period, even supposedly low-cost cards can morph into "monsters", says Harry Senlitonga, a financial analyst with research firm Cannex.
"Consumers think they are doing the responsible thing by getting a no-frills card but even a few spending and repayment misdemeanours can make any credit card a lot more expensive than anticipated," he says.
Mr Senlitonga calculates that an interest rate of less than 10 per cent quickly balloons out to about 22 per cent over a year if two late payment penalties of $25 each and two over-the-limit penalties of $35 each are incurred.
"Most of us get caught with credit card penalties on the odd occasion but consumers who regularly incur penalty fees due to household budget pressures are building their debt," he says.
Penalty fees are as widespread as they are ruthless. For instance, of the 245 credit cards Cannex analysed in a recent report, only three imposed no fee on people exceeding their credit limits.
Fiona Hawkins, a financial counsellor with Relationships Australia, says anyone thinking about taking up a card offer is urged to read the fine print first, to understand which fees will apply and in what circumstances.
"When you're entering into a credit card contract, you should treat it very much like a complex game of Monopoly," she said.
"If the bank knows the rules and you don't, it's not a fair game, especially if the rules aren't reasonable."
Meanwhile, the Australian Bankers Association claims the average price of banking services in Australia is actually falling.
In its Fees for Banking Services 2007 Report, Kim Hawtrey, associate professor of economics at Macquarie University, notes that "customers are choosing cheaper banking options and the number of transactions continues to increase".
Prof Hawtrey also points out the growth in some fees needs to be viewed in the context of more competitive interest rates, particularly in housing.
But consumer groups are calling on financial institutions to cut penalty fees, in line with international developments.
For example, the British Fair Trading Office last year found that late payment fees were unfair and did not reflect of the cost of dealing with a late payment. Banks were forced to cut their average penalty charges for credit cards by more than half.
Gordon Renouf, manager of policy and campaigns at consumer organisation Choice, says the severity of the penalties imposed by banks in Australia on consumers who pay late, or breach credit limits, are also out of all proportion. They also weigh most heavily on those who already experiencing financial difficulties.
"For some people, it only takes one thing to go wrong with their financial planning and all the cards come tumbling down," he says.
Ms O'Brien advises staying a little under your limit. That way, you won't be tipped over the edge when interest is added at the end of the month.
Choosing a credit card to suit your spending patterns also is important.
For instance, Mr Senlitonga says impulse spenders who use their card for things like shopping sprees, holidays and emergencies should look for a very low rate card with a low or no annual fee.
By contrast, everyday spenders who put all their regular purchases like groceries and petrol on the card, but paid off the balance in full each month, should consider cards that provided extra loyalty features and perks that would be of value to them.
Source: Sunday Mail
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