The Westpoint, Fincorp and now ACR could see thousands of small investors lose up to $1 billion, with many retirees sucked in by TV advertising.
Collapsed property group Australian Capital Reserve targeted retirees in a string of advertisements offering returns of up to 9 per cent -- much less than a professional investor would require for the same risk.
ACR advertised heavily on TV in the "retirees'' timeslot -- 1pm to 3pm -- and through newspapers.
The company, which went into voluntary administration on Monday, had raised more than $300 million from about 7000 small investors.
ACR issued unsecured deposit notes, using the money raised to finance apartment projects being developed by its development arm, Estate Property Group, in NSW and Victoria.
In 2005, ACR's Prospectus 7 offered one-year returns of 8 per cent and up to 10 years at 8.9 per cent.
Real estate consumer advocate Denise Brailey said she alerted the Australian Securities & Investments Commission to the company's activities in December 2005.
"ASIC should have gone into a heavy campaign to warn them about the model being presented,'' she said.
ASIC placed a final stop order on ACR's ninth prospectus in April. The regulator's handling of property-related collapses such as Westpoint and Fincorp is already under scrutiny from the Senate Estimates Committee.
The role of trustees will also come under the spotlight in committee hearings with Bendigo Bank-owned Sandhurst Trustees involved with both Fincorp and Westpoint, while Sydney-based Trust Company is trustee for the ACR noteholders.
In a statement yesterday, Trust said it was not aware of a "breach of the obligations by ACR under the terms of the Trust Deed''.
Trust's executive general manager, Vicki Allen, said Trust had appointed an independent expert to review ACR and its property arm's financial position.
A statement from ASIC said Trust had been in talks over ACR's financial position for the past two months. Trust was also looking for updated valuations on ACR's properties, ASIC said.
Adminstrator McGrathNicol will oversee the 26 companies in the group which own 21 property developments in NSW and Victoria.
The first meeting of creditors and a separate noteholder information session will be held on June 4.
Ms Brailey, who is employed by litigation funder IMF (Australia) Ltd, said yesterday the group had lured mum-and-dad investors through a network of referral agents that included accountants, solicitors, real estate agents and financial planners.
Source: The Australian
Thursday, May 31, 2007
Monday, May 28, 2007
Australians are going ever deeper into debt to make ends meet
Australians are getting overloaded with debt to make ends meet despite many working harder and longer hours, research from internet auction site eBay reveals.
The research shows Australia's love affair with credit was strong, with more than two-thirds of Australians happy to borrow money to maintain their lifestyle.
The nationwide survey of about 850 people revealed that seven out of 10 Australians were working longer and harder in an effort to meet obligations and negotiate some of life's bigger financial hurdles.
The researchers found that one-third of first-time car buyers used some form of credit to finance their car, while three out of 10 Australians used either a credit card or bank loan to fund moving out of home for the first time.
The survey also found that 45 per cent of new parents said that despite planning financially for their baby, they still had to fork out for unexpected costs.
EBay, in partnership with the founder of savings tips website SimpleSavings.com.au, Fiona Lippey, have produced the Stages of Life Survival Guide.
For more information on the eBay Stages of Life guide visit www.eBay.com.au/stagesoflife.
SOurce: AAP
The research shows Australia's love affair with credit was strong, with more than two-thirds of Australians happy to borrow money to maintain their lifestyle.
The nationwide survey of about 850 people revealed that seven out of 10 Australians were working longer and harder in an effort to meet obligations and negotiate some of life's bigger financial hurdles.
The researchers found that one-third of first-time car buyers used some form of credit to finance their car, while three out of 10 Australians used either a credit card or bank loan to fund moving out of home for the first time.
The survey also found that 45 per cent of new parents said that despite planning financially for their baby, they still had to fork out for unexpected costs.
EBay, in partnership with the founder of savings tips website SimpleSavings.com.au, Fiona Lippey, have produced the Stages of Life Survival Guide.
For more information on the eBay Stages of Life guide visit www.eBay.com.au/stagesoflife.
SOurce: AAP
GE Money profits down as bad debt grows
In a clear sign that credit conditions have taken a turn for the worse, a blowout in bad debts has resulted in a profit slump for the local consumer and business finance operations of GE
Loan impairment losses for GE Capital Finance Australasia, which bought AGC from Westpac five years ago, jumped 54 per cent from $185 million to $285 million.
Along with a higher tax bill, this contributed to a 31 per cent slide in net profit from $159 million to $109 million.
The GE division, with total loans and advances of $13 billion, up from $12 billion, represents only part of the fast-growing group in Australia.
Apart from AGC, the unit includes credit-card services, the Custom Fleet leasing and fleet management business purchased from National Australia Bank for $550 million, and general and life insurance activities. It does not include Wizard Home Loans.
GE representatives were unavailable for comment on the accounts, lodged yesterday with the Australian Securities and Investments Commission.
However, the GE Capital Finance numbers are consistent with warnings from the nation's big-bank chief executives in the recent interim profit reporting season that the credit cycle had turned, with stresses appearing in unsecured lending and credit-card operations, in particular.
ANZ boss John McFarlane said he expected provisions to be higher in the second half, with the first half unusually low due to recoveries.
NAB chief executive John Stewart said he was most concerned about the consumer space.
"The consumer is getting overextended with debt in certain pockets and that will always come out in danger areas like credit cards and unsecured lending," Mr Stewart said.
JP Morgan banking analyst Brian Johnson said yesterday personal lending loss rates were rising "quite dramatically", as shown by provisions at the GE unit rising to 219 basis points (as a percentage of total loans and advances).
Comparative rates for the big-four banks were far lower, at less than 20 basis points, but this was because of their massive, low-risk home lending books.
Mr Johnson estimated credit-card losses were running at about 260 basis points.
"Westpac's sale of AGC is now shown to be a pretty good decision, despite the short-term dilution in earnings per share at the time," he said.
"The banking industry is now exiting the optimal part of the cycle, and things will get worse from here."
GE's tax bill in 2006 was sharply higher, up from $18 million to $70 million. Unlike 2005, when it took a $39 million benefit from paying too much tax previously, the business had to stump up an extra $6 million.
Total assets at the end of last year came to $17.1 billion, up from $14.5 billion.
Finance income was relatively steady at $1.62 billion, but non-interest income doubled from $387 million to $767 million.
The biggest contributor was operating lease rental income, largely from Custom Fleet, which surged from $74 million to $223 million.
Custom Fleet contributed $167 million in revenue and a net loss of $2 million to the group from August 1 last year.
The total asset base for the GE group in Australia is estimated to be about $40 billion, up from $8 billion five years ago.
GE Capital Finance directors said they expected to grow the business further this year.
Source: Australian
Loan impairment losses for GE Capital Finance Australasia, which bought AGC from Westpac five years ago, jumped 54 per cent from $185 million to $285 million.
Along with a higher tax bill, this contributed to a 31 per cent slide in net profit from $159 million to $109 million.
The GE division, with total loans and advances of $13 billion, up from $12 billion, represents only part of the fast-growing group in Australia.
Apart from AGC, the unit includes credit-card services, the Custom Fleet leasing and fleet management business purchased from National Australia Bank for $550 million, and general and life insurance activities. It does not include Wizard Home Loans.
GE representatives were unavailable for comment on the accounts, lodged yesterday with the Australian Securities and Investments Commission.
However, the GE Capital Finance numbers are consistent with warnings from the nation's big-bank chief executives in the recent interim profit reporting season that the credit cycle had turned, with stresses appearing in unsecured lending and credit-card operations, in particular.
ANZ boss John McFarlane said he expected provisions to be higher in the second half, with the first half unusually low due to recoveries.
NAB chief executive John Stewart said he was most concerned about the consumer space.
"The consumer is getting overextended with debt in certain pockets and that will always come out in danger areas like credit cards and unsecured lending," Mr Stewart said.
JP Morgan banking analyst Brian Johnson said yesterday personal lending loss rates were rising "quite dramatically", as shown by provisions at the GE unit rising to 219 basis points (as a percentage of total loans and advances).
Comparative rates for the big-four banks were far lower, at less than 20 basis points, but this was because of their massive, low-risk home lending books.
Mr Johnson estimated credit-card losses were running at about 260 basis points.
"Westpac's sale of AGC is now shown to be a pretty good decision, despite the short-term dilution in earnings per share at the time," he said.
"The banking industry is now exiting the optimal part of the cycle, and things will get worse from here."
GE's tax bill in 2006 was sharply higher, up from $18 million to $70 million. Unlike 2005, when it took a $39 million benefit from paying too much tax previously, the business had to stump up an extra $6 million.
Total assets at the end of last year came to $17.1 billion, up from $14.5 billion.
Finance income was relatively steady at $1.62 billion, but non-interest income doubled from $387 million to $767 million.
The biggest contributor was operating lease rental income, largely from Custom Fleet, which surged from $74 million to $223 million.
Custom Fleet contributed $167 million in revenue and a net loss of $2 million to the group from August 1 last year.
The total asset base for the GE group in Australia is estimated to be about $40 billion, up from $8 billion five years ago.
GE Capital Finance directors said they expected to grow the business further this year.
Source: Australian
A third of Australians live payday to payday
Consumer confidence may be at its highest in more than 30 years, but for many Australians last week's announced tax cuts will have little impact on their day-to-day lives.
A survey conducted by career networking site Linkme.com.au shows that 34.3 per cent of Australians live "pocket-to-mouth".
And while 82 per cent would like to plan their finances better, 43.5 per cent say they did not make enough money to be able to budget any differently.
And for 29.6 per cent in the survey of more than 800 respondents, they say unexpected expenses always get in the way of getting ahead financially.
”Recent tax cuts will not improve the situation for most people and housing shortages and rising rents are just making things worse,'' Linkme.com.au CEO Campbell Sallabank says.
”Housing prices, petrol, bread and milk costs have all sky rocketed whilst salary levels have languished over the past decade.''
Tax cuts help, but more money sought
Tax cuts from July 1 will see a monthly saving of $14.42 per week or $750 per year for someone on an average salary of around $50,000.
For people in the $30,000-$40,000 wage bracket, they will get a slightly higher $21.15 per week or $1100 per year, but for anyone on $25,000 per year of less, they will get just $2.88 per week or $150 per year.
Data released yesterday showed consumer confidence is sitting at its highest since January 1975.
But Mr Sallabank says 24.6 per cent of respondents say they are currently forced to look out for a job that pays more money, while 61.3 per cent say they have to make their lifestyle suit their pay and this means cutting back on luxuries in order to survive.
”The reality is there are tremendous skill shortages in Australia and employees can charge themselves out at a premium,'' Mr Sallabank says.
”There seems to be a great deal of job hopping and no wonder as the pressure to make ends meet is reaching boiling point.''
Source: AAP
A survey conducted by career networking site Linkme.com.au shows that 34.3 per cent of Australians live "pocket-to-mouth".
And while 82 per cent would like to plan their finances better, 43.5 per cent say they did not make enough money to be able to budget any differently.
And for 29.6 per cent in the survey of more than 800 respondents, they say unexpected expenses always get in the way of getting ahead financially.
”Recent tax cuts will not improve the situation for most people and housing shortages and rising rents are just making things worse,'' Linkme.com.au CEO Campbell Sallabank says.
”Housing prices, petrol, bread and milk costs have all sky rocketed whilst salary levels have languished over the past decade.''
Tax cuts help, but more money sought
Tax cuts from July 1 will see a monthly saving of $14.42 per week or $750 per year for someone on an average salary of around $50,000.
For people in the $30,000-$40,000 wage bracket, they will get a slightly higher $21.15 per week or $1100 per year, but for anyone on $25,000 per year of less, they will get just $2.88 per week or $150 per year.
Data released yesterday showed consumer confidence is sitting at its highest since January 1975.
But Mr Sallabank says 24.6 per cent of respondents say they are currently forced to look out for a job that pays more money, while 61.3 per cent say they have to make their lifestyle suit their pay and this means cutting back on luxuries in order to survive.
”The reality is there are tremendous skill shortages in Australia and employees can charge themselves out at a premium,'' Mr Sallabank says.
”There seems to be a great deal of job hopping and no wonder as the pressure to make ends meet is reaching boiling point.''
Source: AAP
Wednesday, May 23, 2007
US Mortgage Brokers and Mortgage Brokers blame each other for the sub-prime meltdown
It got nasty between mortgage bankers and brokers were at loggerheads Tuesday over who's to blame for the housing market's woes.
[The Mortgage Bankers seemed to have "lost their rag" by trying to infer that Mortgage Brokers were somehow to blame for the difficulties that some people have found themselves in by taking on sub prime loan arrangements. After all who determined Mortage Brokers compensation as commission, who pays the commission, and who verifies the facts of the loans before issuing documents? And don't the Mortgage Bankers make money on sub-prime loan mortgages? If not why are they in the business? Surely the Mortgage Bankers have the ultimate say, and so should be ultimately responsible and accountable. ]
The head of the mortgage banking industry's trade group claimed brokers profited from a home loan boom but didn't do enough to examine whether borrowers could repay.
Amid increasing evidence of financial distress for homeowners with weak, or sub prime, credit histories, John Robbins, chairman of the Mortgage Bankers Association, says he is "mad as hell" at "a few unethical actors" that have sullied his profession's reputation.
"Unethical people, they're responsible for this mess," Robbins said. "The short-term folks. People who get a commission when the deal happens. For them, it's the number of loans that counts. Good loan? Bad loan? Who cares? For them it's all about their commission."
In reaction, the president of the National Association of Mortgage Brokers, e-mailed a statement that said: "It is truly unfortunate (Robbins) has attempted to shift blame away from Wall street, federally chartered banks, state-chartered lenders and underwriters for the sub prime situation we find ourselves in today."
Harry Dinham, president of the brokers' group, added that congressional hearings have shown that "most residential mortgage loans are quickly sold into the secondary market - in fact most lenders are really just brokering the transaction but afraid or ashamed to admit it," he added.
In a lunchtime speech at the National Press Club, Robbins called for a national licensing system for mortgage brokers, which would help weed out "scam artists."
The industry's woes are confined to a small segment of the market, he said. About 5 percent of homeowners have sub prime adjustable-rate loans that feature low "teaser" rates which can move sharply higher later. He estimates about half of those homeowners will be able to avoid default or foreclosure. If so, foreclosures among sub prime borrowers will amount to 0.25 percent of U.S. homeowners, Robbins said.
"No seismic financial occurrence is about to overwhelm the U.S. economy," he said.
Yet RealtyTrac Inc., an industry research firm, said last week that mortgage lenders foreclosed on 62 percent more U.S. homes in April than a year ago.
Home prices are falling too. The national median existing single-family home price in the first quarter was $212,300, down 1.8 percent from a year ago when the median price was $216,100, according to the National Association of Realtors. The median is a typical market price where half the homes sold for more and half the homes sold for less.
Earlier this month, Sen. Charles Schumer, D-N.Y. and two other senators introduced a bill that would mandate tougher federal standards for mortgage lenders. No hearing date has been set and the bill is under review by the Committee on Banking, Housing and Urban Affairs. House lawmakers are talking about introducing their own reform bill this summer.
Robbins warned against an overreaction by lawmakers that could cause the country to "revert to a time when without perfect credit you couldn't buy a home."
His speech comes a day after the Mortgage Bankers Association and four other industry trade groups banking industry trade groups endorsed mortgage reform principles.
Any legislation or new regulations should focus on lenders only being permitted to issue high-risk, home loans - if they "reasonably believe" at the time the loan is made that borrowers have the ability to repay, the statement said. Mortgage terms should be "clearly disclosed" to consumers, and estimates of monthly payments that could quickly jump in later years should be made clearer, the groups said.
Banks say they are already stepping up efforts to assist borrowers who face default or foreclosure and tightening loan standards.
Federal Reserve Chairman Ben Bernanke last week said the central bank is considering tougher rules to reduce abusive home loan practices even though he believes the economy should escape without significant harm from the problems in the sub prime mortgage market.
In March, the Fed and the other four federal agencies that regulate banks, thrifts and credit unions proposed guidelines that call for strict evaluations of a borrower's ability to repay and caution when lenders make sub prime mortgage loans.
The guidelines have not yet been made final. The Fed plans a mid-June hearing on ways to curb abusive lending practices.
Source: Forbes and AP
[The Mortgage Bankers seemed to have "lost their rag" by trying to infer that Mortgage Brokers were somehow to blame for the difficulties that some people have found themselves in by taking on sub prime loan arrangements. After all who determined Mortage Brokers compensation as commission, who pays the commission, and who verifies the facts of the loans before issuing documents? And don't the Mortgage Bankers make money on sub-prime loan mortgages? If not why are they in the business? Surely the Mortgage Bankers have the ultimate say, and so should be ultimately responsible and accountable. ]
The head of the mortgage banking industry's trade group claimed brokers profited from a home loan boom but didn't do enough to examine whether borrowers could repay.
Amid increasing evidence of financial distress for homeowners with weak, or sub prime, credit histories, John Robbins, chairman of the Mortgage Bankers Association, says he is "mad as hell" at "a few unethical actors" that have sullied his profession's reputation.
"Unethical people, they're responsible for this mess," Robbins said. "The short-term folks. People who get a commission when the deal happens. For them, it's the number of loans that counts. Good loan? Bad loan? Who cares? For them it's all about their commission."
In reaction, the president of the National Association of Mortgage Brokers, e-mailed a statement that said: "It is truly unfortunate (Robbins) has attempted to shift blame away from Wall street, federally chartered banks, state-chartered lenders and underwriters for the sub prime situation we find ourselves in today."
Harry Dinham, president of the brokers' group, added that congressional hearings have shown that "most residential mortgage loans are quickly sold into the secondary market - in fact most lenders are really just brokering the transaction but afraid or ashamed to admit it," he added.
In a lunchtime speech at the National Press Club, Robbins called for a national licensing system for mortgage brokers, which would help weed out "scam artists."
The industry's woes are confined to a small segment of the market, he said. About 5 percent of homeowners have sub prime adjustable-rate loans that feature low "teaser" rates which can move sharply higher later. He estimates about half of those homeowners will be able to avoid default or foreclosure. If so, foreclosures among sub prime borrowers will amount to 0.25 percent of U.S. homeowners, Robbins said.
"No seismic financial occurrence is about to overwhelm the U.S. economy," he said.
Yet RealtyTrac Inc., an industry research firm, said last week that mortgage lenders foreclosed on 62 percent more U.S. homes in April than a year ago.
Home prices are falling too. The national median existing single-family home price in the first quarter was $212,300, down 1.8 percent from a year ago when the median price was $216,100, according to the National Association of Realtors. The median is a typical market price where half the homes sold for more and half the homes sold for less.
Earlier this month, Sen. Charles Schumer, D-N.Y. and two other senators introduced a bill that would mandate tougher federal standards for mortgage lenders. No hearing date has been set and the bill is under review by the Committee on Banking, Housing and Urban Affairs. House lawmakers are talking about introducing their own reform bill this summer.
Robbins warned against an overreaction by lawmakers that could cause the country to "revert to a time when without perfect credit you couldn't buy a home."
His speech comes a day after the Mortgage Bankers Association and four other industry trade groups banking industry trade groups endorsed mortgage reform principles.
Any legislation or new regulations should focus on lenders only being permitted to issue high-risk, home loans - if they "reasonably believe" at the time the loan is made that borrowers have the ability to repay, the statement said. Mortgage terms should be "clearly disclosed" to consumers, and estimates of monthly payments that could quickly jump in later years should be made clearer, the groups said.
Banks say they are already stepping up efforts to assist borrowers who face default or foreclosure and tightening loan standards.
Federal Reserve Chairman Ben Bernanke last week said the central bank is considering tougher rules to reduce abusive home loan practices even though he believes the economy should escape without significant harm from the problems in the sub prime mortgage market.
In March, the Fed and the other four federal agencies that regulate banks, thrifts and credit unions proposed guidelines that call for strict evaluations of a borrower's ability to repay and caution when lenders make sub prime mortgage loans.
The guidelines have not yet been made final. The Fed plans a mid-June hearing on ways to curb abusive lending practices.
Source: Forbes and AP
Will Australia's rampant economy raise mortgage interest rates?
The pace of economic activity in Australia has picked up in March, with interest rates likely to rise next year, says Westpac.
The Westpac-Melbourne Institute leading index of economic activity, which indicates the likely pace of activity three to nine months in the future, was 4.4 per cent, and above its long-term trend of 4 per cent.
The annualised growth rate of the coincident index was 5.7 per cent, which was well above its long-term trend of 3.6 per cent.
Economy to gain strengthWestpac senior economist Andrew Hanlan said the outcome pointed to a positive economic outlook.
"We saw the Australian economy gather momentum late in 2006 and into early 2007," he said.
"Non-farm GDP strengthened in the December quarter and year-ended growth was a healthy 3.5 per cent.
"A significant lift in consumer spending also suggests the economy has accelerated."
Mr Hanlan said real retail sales over the last two quarters were up 6 per cent annualised, the strongest pace since the housing boom of 2003-04.
"In our view the Leading Index suggests that this new found momentum in the Australian economy is likely to be sustained throughout 2007."
Rates set to rise The international economy continues to provide a significant stimulus to our economy, Mr Hanlan said.
"The risk is that inflation pressures re-emerge with the labour market to tighten further and the housing sector to move into recovery mode," he said.
Mr Hanlan said the inflationary pressures would most likely lead to an interest-rate rise in Australia in the first half of 2008. The central bank raised interest rates three times in 2006.Westpac said that although global economic expansion was set to continue, the pace at which many economies grow was likely to slow over the coming months.
Source: AAP
The Westpac-Melbourne Institute leading index of economic activity, which indicates the likely pace of activity three to nine months in the future, was 4.4 per cent, and above its long-term trend of 4 per cent.
The annualised growth rate of the coincident index was 5.7 per cent, which was well above its long-term trend of 3.6 per cent.
Economy to gain strengthWestpac senior economist Andrew Hanlan said the outcome pointed to a positive economic outlook.
"We saw the Australian economy gather momentum late in 2006 and into early 2007," he said.
"Non-farm GDP strengthened in the December quarter and year-ended growth was a healthy 3.5 per cent.
"A significant lift in consumer spending also suggests the economy has accelerated."
Mr Hanlan said real retail sales over the last two quarters were up 6 per cent annualised, the strongest pace since the housing boom of 2003-04.
"In our view the Leading Index suggests that this new found momentum in the Australian economy is likely to be sustained throughout 2007."
Rates set to rise The international economy continues to provide a significant stimulus to our economy, Mr Hanlan said.
"The risk is that inflation pressures re-emerge with the labour market to tighten further and the housing sector to move into recovery mode," he said.
Mr Hanlan said the inflationary pressures would most likely lead to an interest-rate rise in Australia in the first half of 2008. The central bank raised interest rates three times in 2006.Westpac said that although global economic expansion was set to continue, the pace at which many economies grow was likely to slow over the coming months.
Source: AAP
Tuesday, May 22, 2007
Home finance worries as most Australians will experiance financial difficulty in their lives
Three-quarters of Australians experience financial difficulty Super and home affordability are common concerns.
75 percent of Australians will suffer financial difficulty in their lifetimes, with home affordability a common worry, a survey finds.
Trouble understanding superannuation and not being able to afford the home they want are ranked as the most common concerns.
And not surprisingly, the young are worse off than older generations, says a study by the Financial Planning Association of Australia (FPA), published today.
FPA chief executive Jo-Anne Bloch said young people needed to take control of their finances now, not when they're older.
“Young people need to think about their financial future today, not in 20 years time,'' Ms Bloch said.
“They need to consider salary sacrificing, insurance and good budgeting practice now.''
Financial difficulty widespread The FPA found that of the 1100 people surveyed, 73 per cent of Australians had experienced financial difficulty.
The most common woe was not being able to understand superannuation, with 39 per cent of respondents listing it as a problem.
Being unable to afford a home ranked second, at 35 per cent, while meeting major unexpected expenses (30 per cent), regular expenses (24 per cent) and the cost of education (22 per cent) rounded out the top five.
Credit card concernsCredtt card debt troubled 17 per cent of respondents, and 11 per cent struggled to pay large bills.
Generation X and Y - those born after about 1964 and 1978 respectively, struggled more to meet the cost of housing than older geneations.
The survey found 51 per cent of those between 25-34 unable to afford the home they wanted.
Only 26 per cent of those older than 50 had similar troubles.
Financial tips the FPA recommends include setting realistic financial goals, sparing use of credit cards, sticking to a budget, and shopping around for loans.
The FPA survey has been released to coincide with financial planning week, which begins today (May 21) and runs until May 27.
AAP
75 percent of Australians will suffer financial difficulty in their lifetimes, with home affordability a common worry, a survey finds.
Trouble understanding superannuation and not being able to afford the home they want are ranked as the most common concerns.
And not surprisingly, the young are worse off than older generations, says a study by the Financial Planning Association of Australia (FPA), published today.
FPA chief executive Jo-Anne Bloch said young people needed to take control of their finances now, not when they're older.
“Young people need to think about their financial future today, not in 20 years time,'' Ms Bloch said.
“They need to consider salary sacrificing, insurance and good budgeting practice now.''
Financial difficulty widespread The FPA found that of the 1100 people surveyed, 73 per cent of Australians had experienced financial difficulty.
The most common woe was not being able to understand superannuation, with 39 per cent of respondents listing it as a problem.
Being unable to afford a home ranked second, at 35 per cent, while meeting major unexpected expenses (30 per cent), regular expenses (24 per cent) and the cost of education (22 per cent) rounded out the top five.
Credit card concernsCredtt card debt troubled 17 per cent of respondents, and 11 per cent struggled to pay large bills.
Generation X and Y - those born after about 1964 and 1978 respectively, struggled more to meet the cost of housing than older geneations.
The survey found 51 per cent of those between 25-34 unable to afford the home they wanted.
Only 26 per cent of those older than 50 had similar troubles.
Financial tips the FPA recommends include setting realistic financial goals, sparing use of credit cards, sticking to a budget, and shopping around for loans.
The FPA survey has been released to coincide with financial planning week, which begins today (May 21) and runs until May 27.
AAP
Mortgage lending coasting as property prices are yet to boom
Owner occupier home lending hit $14.52bn in March Investor finance dropped 5% to $6.29bn Property prices aren't booming yet.
The housing sector is showing early signs of recovery with four consecutive months of housing approval loan growth but analysts say it is not the start of another property boom.
But investors remain reluctant to spend because the stock market is offering superior returns.
Economists said a combination of stable interest rates, easing inflation pressures and jobs growth will stimulate a surge in house prices nationally over the next 12-18 months.
Yesterday, Australian Bureau of Statistics data showed that borrowing for owner-occupied housing, driven by the influx of new migrant workers, was up 1.7 per cent to a record $14.52 billion in March.
Investors stick to sharesInvestor concerns, later proven to be unfounded, that the Reserve Bank of Australia would lift interest rates in March or April resulted in investment loans dropping 5 per cent to $6.29 billion.
CommSec equities economist Martin Arnold said the reluctance of investors to cash out of the booming share market, which has delivered returns of almost 12 per cent since the start of the year, was delaying the expected upswing in the property market.
In the 12 months to March, national house prices were up 8.6 per cent on average as the boom in Perth prices had been offset by the lacklustre Sydney market.
"The share market is likely to start trading sideways over the next few months and we then expect a pick up in the investor segment of the property market,'' he said.
"It is likely to be more of a gradual improvement in the housing sector rather than a massive turnaround. The strength of the jobs market is one of the only reasons there is any growth in the property market.''
Dollar liftedby dataThe Australian dollar lifted on the release of the ABS data and closed at US83.34 as some financial market participants bet on a interest rate rise later this year.
But most economists are forecasting the RBA will leave rates on hold at 6.25 per cent until early 2008 after Governor Glenn Stevens earlier this month said annual inflation levels were likely to fall to below 2 per cent over the next couple of quarters.
Westpac senior economist Andrew Hanlan said that the three rate rises in 2006 have lost their sting. Source: Herald Sun
The housing sector is showing early signs of recovery with four consecutive months of housing approval loan growth but analysts say it is not the start of another property boom.
But investors remain reluctant to spend because the stock market is offering superior returns.
Economists said a combination of stable interest rates, easing inflation pressures and jobs growth will stimulate a surge in house prices nationally over the next 12-18 months.
Yesterday, Australian Bureau of Statistics data showed that borrowing for owner-occupied housing, driven by the influx of new migrant workers, was up 1.7 per cent to a record $14.52 billion in March.
Investors stick to sharesInvestor concerns, later proven to be unfounded, that the Reserve Bank of Australia would lift interest rates in March or April resulted in investment loans dropping 5 per cent to $6.29 billion.
CommSec equities economist Martin Arnold said the reluctance of investors to cash out of the booming share market, which has delivered returns of almost 12 per cent since the start of the year, was delaying the expected upswing in the property market.
In the 12 months to March, national house prices were up 8.6 per cent on average as the boom in Perth prices had been offset by the lacklustre Sydney market.
"The share market is likely to start trading sideways over the next few months and we then expect a pick up in the investor segment of the property market,'' he said.
"It is likely to be more of a gradual improvement in the housing sector rather than a massive turnaround. The strength of the jobs market is one of the only reasons there is any growth in the property market.''
Dollar liftedby dataThe Australian dollar lifted on the release of the ABS data and closed at US83.34 as some financial market participants bet on a interest rate rise later this year.
But most economists are forecasting the RBA will leave rates on hold at 6.25 per cent until early 2008 after Governor Glenn Stevens earlier this month said annual inflation levels were likely to fall to below 2 per cent over the next couple of quarters.
Westpac senior economist Andrew Hanlan said that the three rate rises in 2006 have lost their sting. Source: Herald Sun
Mortgage foreclosures four times higher than reported
The number of home foreclosures around the nation is up to four times higher than reported figures show, because lenders are disguising the nature of forced sales to prop up property prices.
Australia's biggest private debt collector, Prushka, yesterday said about three-quarters of sales forced by bank and non-bank lenders were co-ordinated with the consent of home owners, meaning they were not recorded in court repossession figures.
"By far the most popular way for lenders is to sell the property with the consent of the borrower to avoid advertising the property as a forced sale," Prushka chief executive Roger Mendelson said.
"The idea is to work with the seller because if they sell the property as a mortgagee in possession that will slaughter the price because you're going to attract the bargain hunters."
Mr Mendelson said statements by Peter Costello yesterday that Australia had a low home loan "default rate" - where borrowers can't meet mortgage repayments - failed to address the impact of increasing unreported levels of repossessions.
During a discussion about US default rates hitting an all-time high in the first quarter of 2007, the Treasurer had told Macquarie Regional Radio: "The default rate in Australia is much, much lower than it is in the US ... in fact, we have one of the lowest default rates in the world."
Experts said rising interest rates, coupled with the prevalence of low-documentation loans that do not force borrowers to disclose their income, had caused a spike in mortgage defaults in Australia.
Ian Graham, chief executive of PMI Mortgage Insurance, which insures about one million home loans, said Australia had no register for compiling total home repossessions.
"We would like to see a register introduced - I think the Reserve Bank would be one body in particular that would benefit from more complete data," Mr Graham said.
State "writs of possession" registers record only sales where lenders are forced to apply for repossession orders.
Sydney's outer western suburbs are being hardest hit by the surge in repossessions.
In NSW, 5363 writs of possession were issued last year - up 10 per cent on 2005.
Figures from the Victorian Supreme Court show there were 2791 repossession claims lodged last year, up from 2578 in 2005. The figure has more than doubled since 2003, when there were 1225.
"In southwest, west and northwest Sydney, property prices are weakest and in forced-sale situations property price declines of between 20 and 25 per cent are not unusual," Mr Graham said.
Dara Dhillon, principal of Dhillon Real Estate in Ingleburn in Sydney's outer southwest, said 90 per cent of properties coming to the market were forced sales, and the number of homes hitting the market was rising.
"It's actually getting worse by the month - in one family I was working with, the elderly mother had to return to work to keep a roof over their heads," he said.
But he said that with high employment and healthy wages growth, it was last year's interest rate rises and lax lending policies of non-bank lenders - especially "low-doc" loans where borrowers are not required to prove their income - that were to blame for the current fallout.
"It's a joke - if it was my money I wouldn't lend it but I believe lenders are still doing it," he said. "Low-doc, no-doc, whatever doc - doc doesn't even come into the picture."
Source: The Australian
Australia's biggest private debt collector, Prushka, yesterday said about three-quarters of sales forced by bank and non-bank lenders were co-ordinated with the consent of home owners, meaning they were not recorded in court repossession figures.
"By far the most popular way for lenders is to sell the property with the consent of the borrower to avoid advertising the property as a forced sale," Prushka chief executive Roger Mendelson said.
"The idea is to work with the seller because if they sell the property as a mortgagee in possession that will slaughter the price because you're going to attract the bargain hunters."
Mr Mendelson said statements by Peter Costello yesterday that Australia had a low home loan "default rate" - where borrowers can't meet mortgage repayments - failed to address the impact of increasing unreported levels of repossessions.
During a discussion about US default rates hitting an all-time high in the first quarter of 2007, the Treasurer had told Macquarie Regional Radio: "The default rate in Australia is much, much lower than it is in the US ... in fact, we have one of the lowest default rates in the world."
Experts said rising interest rates, coupled with the prevalence of low-documentation loans that do not force borrowers to disclose their income, had caused a spike in mortgage defaults in Australia.
Ian Graham, chief executive of PMI Mortgage Insurance, which insures about one million home loans, said Australia had no register for compiling total home repossessions.
"We would like to see a register introduced - I think the Reserve Bank would be one body in particular that would benefit from more complete data," Mr Graham said.
State "writs of possession" registers record only sales where lenders are forced to apply for repossession orders.
Sydney's outer western suburbs are being hardest hit by the surge in repossessions.
In NSW, 5363 writs of possession were issued last year - up 10 per cent on 2005.
Figures from the Victorian Supreme Court show there were 2791 repossession claims lodged last year, up from 2578 in 2005. The figure has more than doubled since 2003, when there were 1225.
"In southwest, west and northwest Sydney, property prices are weakest and in forced-sale situations property price declines of between 20 and 25 per cent are not unusual," Mr Graham said.
Dara Dhillon, principal of Dhillon Real Estate in Ingleburn in Sydney's outer southwest, said 90 per cent of properties coming to the market were forced sales, and the number of homes hitting the market was rising.
"It's actually getting worse by the month - in one family I was working with, the elderly mother had to return to work to keep a roof over their heads," he said.
But he said that with high employment and healthy wages growth, it was last year's interest rate rises and lax lending policies of non-bank lenders - especially "low-doc" loans where borrowers are not required to prove their income - that were to blame for the current fallout.
"It's a joke - if it was my money I wouldn't lend it but I believe lenders are still doing it," he said. "Low-doc, no-doc, whatever doc - doc doesn't even come into the picture."
Source: The Australian
Mortgage your stocks and shares investment portfolio
Australians are borrowing at record levels to invest in shares, an asset class which is gaining in popularity over property.
An Australian Securities Exchange (ASX) survey found 46 per cent of respondents now own shares either directly or indirectly, down from 55 per cent in 2004.
Many of those who exited the market in the past two years did so to pay off debts on homes and investment properties, according to the research.
Shareholders are now just as likely to be female as male, aged 35 plus and university educated, with a household income of more than $100,000.
Their method of investing has also become more complex, the typical investor has a stake in nine companies, up from seven in 2004.
But the study also shows a remarkable geographic division in share ownership.
Between 2004 and 2006, direct share ownership in regional areas plunged from 45 per cent to 32 per cent, which the ASX believes is largely attributable to the financial strain of the drought.
While share market participation might be down, those who are investing are borrowing madly to take advantage of booming conditions.
Margin loans are at their highest level in Australian history, with demand jumping more than 40 per cent in December according to financial researcher Cannex.
Shares favoured over propertyConversely, investment for housing loans failed to post even a 10 per cent increase in the same quarter.
”The strong growth in the Australian stock market, thanks largely to China and the resources boom, has fuelled increased demand for margin lending as an investment tool,'' says Cannex financial analyst Michael Moran.
”This suggests investors are favouring equity to housing with its current affordability issues in many areas.''
The fact margin loans have skyrocketed in relation to housing investment loans mirror the fluctuations in each market, he says.
Housing investment soared after the property boom in 2003, but tapered off as prices plateaued in most Australian cities.
ASX market research manager Mary-Anne Muscat says many became shareholders accidentally, through demutualisations, the floating of public utilities and enterprises, or employee share schemes.
These “accidental'' share owners contrast with the sophisticated investors who now typify share ownership in Australia. The Advertiser
An Australian Securities Exchange (ASX) survey found 46 per cent of respondents now own shares either directly or indirectly, down from 55 per cent in 2004.
Many of those who exited the market in the past two years did so to pay off debts on homes and investment properties, according to the research.
Shareholders are now just as likely to be female as male, aged 35 plus and university educated, with a household income of more than $100,000.
Their method of investing has also become more complex, the typical investor has a stake in nine companies, up from seven in 2004.
But the study also shows a remarkable geographic division in share ownership.
Between 2004 and 2006, direct share ownership in regional areas plunged from 45 per cent to 32 per cent, which the ASX believes is largely attributable to the financial strain of the drought.
While share market participation might be down, those who are investing are borrowing madly to take advantage of booming conditions.
Margin loans are at their highest level in Australian history, with demand jumping more than 40 per cent in December according to financial researcher Cannex.
Shares favoured over propertyConversely, investment for housing loans failed to post even a 10 per cent increase in the same quarter.
”The strong growth in the Australian stock market, thanks largely to China and the resources boom, has fuelled increased demand for margin lending as an investment tool,'' says Cannex financial analyst Michael Moran.
”This suggests investors are favouring equity to housing with its current affordability issues in many areas.''
The fact margin loans have skyrocketed in relation to housing investment loans mirror the fluctuations in each market, he says.
Housing investment soared after the property boom in 2003, but tapered off as prices plateaued in most Australian cities.
ASX market research manager Mary-Anne Muscat says many became shareholders accidentally, through demutualisations, the floating of public utilities and enterprises, or employee share schemes.
These “accidental'' share owners contrast with the sophisticated investors who now typify share ownership in Australia. The Advertiser
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