Mortgage Shopper

Are Australian Mortgage Loans turning Japanese? Yes I think so

Japanese banks prepare to launch a surprise attack on Australian Mortgage Profit margins

Australia's big four banks, CBA, NAB, Westpac and ANZ are the envy of the banking world.

Yet Japanese banks have been in operating successfully in a recession economy for twenty years.Then something happened. A big Japanese builder bought out Iconic Australian project home builder AV Jennings, and the secret profits got back to Japan.

The interest rates they operate on are puny compared to Australian Home loan rates and bank margins. So its natural that they want a piece of the action.

Some say that Japanese banks could get a $100 billion of the Australian home loan market in double quick time.

At the February RBA meeting most financial analysts are punting on a further rate cut to the official cash rate. That normally translates to a similar reduction in mortgage interest rates.However some of the big four banks are hinting at not passing on all of the rate difference, citing rising fundings costs as the reason.

A cynic might suggest that the real reason is maintaining profit levels in a shrinking home loan & credit card finance by Australians.

Japanese banks are all cashed up with nowhere else to go.

Japanese lenders are brimming with low cost cash because of the recession, and the Japanese savings ethic.

Australia's trillion dollar mortgage pie

Australia's trillion dollar home loan market looks ripe for the picking and snaring just a 10% slice of Australia's Mortgage pie. That would give them a $100 billion dollar windfall.

A Japanese Bank raid a cakewalk for four good reasons

1. Australians have no loyalty to their banks. They will change lenders, and do so often.
2. Money talks. Australian home buyers and homeowners are hurting financially mainly because they paid too much for property on the basis of low interest rates.
3. An open Mortgage Broker channel. Single unit and franchise mortgage brokers have established channels that the Japanese raiders can tap into instantly.
4. They could also operate an online channel, as this is how a lot of Australians looking to refinance do their research these days.

2012 may prove to be a tough year for mortgage lenders in Australia, and that means a better deal for Aussie home loan borrowers.

That has to be good news for anyone where home affordability is important, including the real estate industry, the home building sector, land developers, mortgage brokers, as well as homeowners and home buyers looking for a better mortgage deal.

 So will Japanese banks succeed in turning Australian home loan Japanese? yes I think so!

First time home buyers return to the housing market

First time home buyers have returned to the Australian housing market in droves.

Bank and non bank home loan data from the Bureau of Statistics shows that first-time buyers across Australia made up 18.2 per cent of the market in March. That was the highest level since April 2006, the month before the first of three interest rate increases. However, first-home buyers now make up a much smaller proportion of the market than in the late 1990s and early 2000s.

Home Loan size nearly doubles.

The average new loan approval for a first-home buyer in March was a record $231,600 — up $105,700 since the start of 2001 or almost double. Reflecting that increase, the share of first-time buyers has fallen from 24 per cent in 2001 — the year after the first-home buyers grant was introduced — to just 17.5 per cent last year. Figures for Victoria are similar to the national figures: the proportion of first-home buyers has dipped since the start of the decade but rose in March to make up 20.4 per cent of the market. Housing Industry Association chief economist Harley Dale said housing affordability would need to improve for the recovery in first-time buyers to be sustained. "We have seen before, however, that improvement in the first-home buyer segment of the market proves all too short-lived in the current climate of record low housing affordability." Across Australia, loans approved to all owner occupiers rose a seasonally adjusted 1.3 per cent in March to 63,335, the ABS data released yesterday shows. This was slightly below economists' forecasts. In Victoria there was a 0.4 per cent dip to 14,156 after four months of increases while in the subdued NSW market there was an increase in lending for the third straight month. Economists also pointed to a fall in lending to investors in March after a climb in recent months.

Property Investment Lending Up

In February the value of lending to investors reached its highest monthly level since November 2003. But in March the value of lending to investors on a seasonally adjusted basis fell 5 per cent from February to $6.3 billion. In trend terms, however, it was up slightly. "While housing-related finance to investment purposes fell, this is viewed as a mild correction following four consecutive months of solid increases," JPMorgan economist Jarrod Kerr said in a report. "Investors continue to underpin demand for housing-related financing as the recent uptrend in rents, coupled with a more moderate pace of house price appreciation, has generated an attractive gross rental yield." Mr Kerr expects increased home lending in the second half of the year, with the Reserve Bank tipped to keep interest rates on hold, and in a climate of rising wages and tight labour markets. Meanwhile an Australian Industry Group-Australian Constructors Association survey of leading builders has found that building activity in the engineering and non-residential sectors is set to moderate in the next two years but remain solid. The value of total construction work by the private sector is tipped to reach about $72 billion in 2008.

Source: Australian Bureau of Statistics

Australia's run away growth might drive up home mortgage interest rates

Mortgage interest rates may rise this year if Westpca Bank's tealeaf readers are right that Australian economy will power ahead over the next nine months helped by strong consumer spending and people working longer hours caused by skilled labour shortgages, a report shows.

But stronger growth is expected to lead to one more home loan interest rate rises, according to Westpac Bank. [It will of course be also dependent on other factors including fuel costs and inflation outcomes which appear to be trending lower.]

In November the Westpac/Melbourne Institute leading index of economic activity index climbed 1.3 points, bringing the annualised rate of growth to 6 per cent, well above its long term trend of four per cent.

Each of the four quarterly components increased, with overtime worked and the real money supply making the largest positive contributions to the annualised growth rate of the index in November, the report showed.

The annualised growth rate of the coincident index was 3.7 per cent, also above its long-term trend of 3.3 per cent.

The leading index indicates the likely pace of economic activity three to nine months into the future.

Westpac chief economist Bill Evans said this was the fastest annualised growth rate of the index since February 2000, with the index now above trend for most of 2006.

"It continues to point to a solid pick up in economic growth in the first half of 2007," he said.

Westpac said growth was expected to accelerate to 3.2 per cent during the year to November 2007, up from 2.2 per cent in the year earlier period.

Mr Evans said the index was not capturing much of the impact of the November interest rate hike or the impact of the expected increase in February.

"However it is telling us that without these policy responses Australia's growth recovery would be strong, probably putting excessive pressure on inflation which is already at the top of the Reserve Bank's comfort zone," he said.

"The key aspect of our growth forecasts are a consumer maintaining solid but below average spending pace, residential building entering another modest down cycle in response to higher interest rates, business investment remaining at very high levels but showing little new growth and strong export growth," he said.

The Reserve Bank board meets on February 6 and economists are split on whether they will hike rates gain.

Mr Evans expected the bank to lift rates one more time by 25 basis points in response to the three prior hikes in 2006 only making a moderate impact in inflationary pressures.

The definitive evidence on the inflation front would come with next week's consumer price index (CPI) report for the December quarter.

"As we have stressed in the past the rate hike decision will be contingent on evidence that underlying inflation pressures remain too higher," Mr Evans said.

"The leading index provides some support to the higher inflation view pointing to rising activity which would put further pressure on capacity, which is already stretched."

Source: AAP

Korean Mortgage rate set to rise

Households face heavier interest costs from this month as banks are set to raise mortgage borrowing rates following the Bank of Korea’s (BOK) increase in the key short-term call rate last Thursday.

The interest rates for real estate mortgage loans are expected to keep rising in the months to come as the central bank, in an apparent move to fight growing inflationary pressures, has signaled a further call interest rate hike.

The interest rate rise may pressure households to tighten their belts to cover rising mortgage home loan interest costs. Banks expect the rise to decrease demand for new loans and thus help stabilize the volatile real estate market.

Last week, Woori Bank, a state-owned lender, raised borrowing rates for its housing collateral loans 0.23 percentage points to 5.29-6.59 percent, immediately after the BOK hiked its call rate by 25 basis points to 4.25 percent. That means a household borrowing 100 million won from Woori should pay 230,000 won more interest annually.

Hana Bank, the country’s fourth-largest lender, also slightly increased its mortgage loan rates. The bank said it plans to raise mortgage loan rates for those owning apartments in volatile areas by 0.5 percentage points, making it clear it will take stronger action to help curb real estate speculation.

Other banks, such as Kookmin and Shinhan, will follow Woori and Hana to increase mortgage loan rates from today.

Banks tend to link mortgage loan rates to the rates of certificates of deposit (CDs). CD rates have risen steadily as the central bank has tightened its monetary policy since late last year, but banks have cut mortgage loan rates to draw more loan-seekers.

``The government’s real estate policymakers see the banks’ mortgage loan policies as fueling property demand and helping destabilize the market,’’ a BOK official said. ``Cooling down the property market has been the top priority of the government’s real estate policy, but banks refused to follow by maintaining low interest rates for mortgage loans.’’

But the situation is a lot different now. If banks raise mortgage loan rates, policymakers believe demand for loans will fall, and this will ultimately help ease the property bubble. However, market watchers point out the rate hikes will give households a greater financial burden and will thus negatively affect the reviving household spending.

According to Barclays Capital, growing household debt has spurred domestic consumption in South Korea. However, as banks are tightening lending policies for mortgage loans, consumer spending may fall, negatively affecting the country’s economic growth, the bank said.

During a meeting with bank CEOs on May 19, BOK Governor Lee Seong-tae said the government’s tighter anti-speculation measures, in place since March 30, are now affecting the borrowing patterns of housing loan seekers. Demand for mortgage loans has remained strong, but the measures will slow the pace of their growth.

Affected by the government’s real estate policy, commercial banks are instead focusing more on corporate client loans. Most banks plan to expand loans to small and medium-sized enterprises (SMEs) in a bid to diversify their income sources.

Source: Korea Times