Mortgage Shopper

Mortgage home buyers want home savings.

Home Savings has become the new want for home buyers and homeowners looking to refinance.

If you are buying a house, home savings is what your should be looking for, and if you are a mortgage broker, home savings is what you should be selling and delivering today.

Home buyers spending money like there was no tomorrow is becoming a distant memory. I suspect that this behavior will return, but not anytime soon. So don't hold your breath.
Remember when the real estate frenzy drove everyone to buy, regardless of the price, because they assumed that prices would always go up? Well, that bubble burst years ago, and home buyers are beginning to see the light now, 5 years on. They are also getting angry with banks.

Real Estate Prices flat

Real estate will probably be flat [again] at least for the next year, so if you are buying a home, best to test the bottom of the market, rather than pay too much for a depreciating asset.
The RBA Drops mortgage rates .75% in recent months, but nobody is interested in new loans.

Interest rate have fallen, and will fall further

We have had two interest rate drops in recent months totaling three-quarters of a percent drop to the base interest rates, but nobody seems to care, because home savings have not been fully passed through. Not to shoppers in credit card interest and not home buyers in mortgage rate reductions. It's even hard to get duped bank customers interested. The idea in dropping interest rates was to give consumers a reason to open their wallets and use their credit cards more often, but the banks grabbed a big slice of that action for themselves. The result was disinterest by the consumer, and a little anger towards the banks.

Australia: Saving Nation

The result is the spending switch is still locked in the off position. And Australians are becoming addicted to saving, instead of spending. Like all habits, they become addictive as having money in the bank and no debt on your credit cards can be very empowering.

A Change in consumer behavior towards interest rates?
Like well-trained flees, consumers know when they are being manipulated for someone else's benefit. Do they really care that retailers are suffering, and that business bankruptcies are up? When you use people's hip pockets to control their behavior, don't be surprised if that behavior carries secondary gain trap. People have been switched off spending so long that they are rusted on to savings. And the savings habit can be become entrenched.

The second problem is that only people with big mortgages and credit card debts are interested in low-interest rates. There are people who want higher interest rates. Who? The savers. They get more for their money when interest rates are high. And the savings epidemic is creating more people who want higher interest rates. Can you remember when interest rates were 12%? I can, and people with savings were easy to sell to.

Mortgage shoppers give the banks no respect. Non bank mortgage lenders on the rise, because they offer savings

Instead of being milking cows for the banks, consumers are becoming interest rate shoppers. They are paying out their credit cards and using only the interest free element.
At the height of the GFC, home buyers switched to big bank home loans in droves.

Australia's savings rock. The compulsory superannuation Scheme

There is a rock that is bolstering Australia's economic strength, that is growing and gaining strength.

Its called "super" and it will be the foundation of Australian wealth for the future.
Super has zoomed past $1 trillion dollars and will soon reach $2 trillion, simply on the basis that your first trillion is always the hardest one to make. When you add of the magic of compound interest, let alone more people in the system, higher participation of the population and a proposed higher rate of superannuation contributions, you can see the snowball is becoming a mountain.

Savings in the form of Superannuation will be Australia's great stabilizer and provide the fuel for the investment engine to drive growth for the future. The big picture is looking wonderful for Australia, and it's because we are all forced to save for the future. That is catching on in a secondary saving boom, in direct savings of personal income, retaining of profits in companies, and budgets of surpluses by the governments.

How to sell mortgages in 2012? Sell savings!

Right now you might be thinking, how will that help me as a home buyer, or if I am a mortgage broker? Well this will mean lower interest rates into the future, so that has to help everyone home buyers to qualify to buy a home,homeowners pay their mortgages, and mortgage brokers to sell their home loans. So if you are worried about the mortgage business in this climate, you would be right if you look at the big picture. The big picture is looking bright for Australia.

But what about selling mortgage loans today? Go with the flow!

The answer is if you want to sell anything, it's easier to sell what people really want. Selling money is what mortgage brokers have always done. Now they have to sell a different type of money. More money for you. Its time to sell savings.
People don't want a mortgage. There! I've said it. Right now people want savings. They are buying savings. So sell savings that are in your mortgage products.
Savings in fees and charges on their home loans. Savings on switching fees between mortgage lenders. Savings on home loan interest rates. Savings on mortgage broker commissions.

Whatever it takes to demonstrate you are offering exactly what the customer wants. They want home savings

Just make sure you don't fall into the bank's trap and them start thinking its all about you. It not. It's about the customer, and what they want.

Mortgage brokers, like retailers should not be holding onto false hope that the cautious consumers will thaw out and will return to spending again anytime soon. Better to assume that this is new normal and prosper from that assumption. The assumption that home savings is what customers are looking to buy.
Hope this helps.

Rick Adlam Mr Mortgage

Interest rates: Up or down for RBA in mixed figures is a split decision

Australia's Inflation rate falls below 2%. And February's inflation was just 0.1%. Is that the trigger? Or will low unemployment cause RBA to pause?

In the twelve months to March 2012 inflation has fallen below 2%, and this is seen by many to be a good indicator that the RBA will reduce interest rates by .25% Australia has the luxury of the ability to reduce interest rates at least two percent if the need arose to kick-start the economy, and some are saying that the time to act is now.

The "Goldilocks inflation rate band" is 2.0% to 2.8%

The RBA would be reluctant to move on interest rates anytime inflation is in the Goldilocks band. That rate is between 2.0% and 2.8%. Now that the inflation rate has moved below that range band hopes are rising in property investment industries and the "mortgage belts" of Australia that the rate will be reduced, at least to compensate for the big bank rate hikes in recent weeks to fill the profit gap squeezed by Government Policies that banned many bank fees and charges.

The inflation rate was just .1% for February and that may be a trigger to get the RBA to take action.

Market view is a hold on Interest rates is the most likely outcome tomorrow.

On the other-hand the market view is that the RBA is more likely to stay put on interest rates, and leave the cash rate at 4.25 per cent when it meets tomorrow. With unemployment low at at steady 5.2%, and many believing that the RBA views house prices as needing to fall further to make housing more affordable, a hold on mortgage rates is the most likely income.

So the pinch on mortgage repayments looks likely to continue.

If you are feeling the pinch, maybe you should look at the great mortgage rates on offer at non bank lenders. That way you will get a reduction in home loan repayments regardless on what the Reserve Bank of Australia decides. Just a thought.

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!

Australian Mortgages: Why we're finding them easier to manage

Australian Mortgages in 2011 from the rear view mirror

The fact that Australian mortgage delinquencies have declined in the third quarter in Australia points to the fact that the worst of mortgage stress may be over.

The return of the saver, and the virtue of saving

This year has seen more Australian households reining in their expenditures, and the biggest fatality of all this is the credit card. Australians seem to be shunning credit card debt like the plague as well as mortgage debt. This year has been credit card debt reduction as the biggest shift to saving has occurred.

That has to be a good thing for everyone, except retailers who have been milking Australians with over priced goods for generations.

The rise and rise of online sales

This year we have seen online sales surge to the point of critical mass, as Australians are starting buy online in a big way, and that has to mean better retail pricing and services in 2012. Even grumpy old Gerry Harvey has capitulated, and has online offers. [Not convinced Gerry, Sorry] If you want to buy superceded stock at new retail prices, shop Harvey Norman is may motto. His ads can shout at me all they like. I have only ever bought duds from Gerry. THat's why I never shop there anymore. But there is a suckerborn every minute, right Gerry?

The 2011 Christmas shopping season

This is one reason I feel that Christmas is going to be challenging for retail. Spending money you are yet to earn is becoming very unwise to savvy Australian shoppers, and those waiting for the Christmas sales to spend their holiday wages are being tempted with ever more attractive pre Christmas sales. And our high dollar means overseas spenders are less likely to come, and have less money to spend if they get here. At the same time cashed up Aussies are flying out and spending on holidays and spending their money overseas. But Australians know that the family home is more important than tinsel and glitter, and so only people with cash in hand seem to be shopping these days.

The banks are a multi-channel money machine

The banks however are doing OK, despite the loss of credit card revenues, and that is due to business loans growing to replace the shrinkage in credit card debt and home mortgage loans applications, which continue to fall away.

So mortgage delinquencies may have fallen, which is good for the banks, but that does not mean that new people want to be roped into 30 years of debt, so we are seeing a fall in housing prices in all capital cities, as interest rates fall and wages rise.

Did Real Estate become a Ponzi Scheme? I think so.

The combination of rising wages, full employment, lowering mortgage rates and falling house prices tells me that Australians have learnt the lesson from the US finance collapse. That Real estate prices can and do get ahead of themselves and must eventually collapse when they grow out of kilter with the wages and supply.

In this respect I feel that real estate price growth has been a massive Ponzi scheme, and that has deflated slowly in Australia, unlike what has occured in the US, the UK and Europe where house prices are down for possibbly a generation.

Suddenly a house is not an investment anymore, it is a way of securing your accommodation for the long haul. Isn't that what a home should be about?

So what will happen to Australia's 1.7 million residential home investors who lose more on their investment every year in the hope of seeing capital gains? Well they are the victims of their own folly. As tax rates have fallen, the attractiveness of these negative gearing schemes was only shored up by one off growth spurt on the early 2000's, and that was on the back of sales pitches historical housing figures that will not be repeated. So all this fluff and puff is behind us.Like all ponzi schemes, the ones holding the baby when the music stops carries the lose, as those out early get to spend their money. What a beautifu swindle! It's not legislation as a crime! So the perpetrators get out scott free.

What's ahead for Mortgages in 2012?

Whats ahead? A flat house market and steady house prices. Maybe a little more price easing. Hopefully a big fall in land prices that is the real problem in home prices.[Ever wonder why the biggest donations to political parties were from Property Developers? Hmmmm.]

Expect to see house price inflation in country areas where the mining boom is happening. Other areas will see falls in house prices I predict. Its already happening in residential land prices in the towns across Australia. If I were buying a home in a country town, I would want a 10 year mortgage with comfortable repayments. Otherwise renting would be my option. A thirty year mortgage only makes sense in the capital cities of Australia today, because are economy and our society is so dynamic, and mobile. You can't shift real estate.

Australia: Experts in Digging Holes and turning dirt into Gold

The great thing about Australia is that most of it is lousy for growing things, but the soil is rich in minerals. So we have become more into digging holes and shipping the dirt off for Gold. Not a bad earner.

What we have also become is the beacon for climate change and hopefully we can transform this into an energy creation earner. More renewal energy means less imports of oil, and less pollution. Can we export energy so produced, or at least the kit to make it happen. I hope so. My Crystal ball is telling me is that energy, clean air, clean water and food will all be at a premium in the years ahead. We should position the Nation for this inevitable future World.

The cost of money will rise in 2012

The banks are trying to warn people, but the Government is pretending not to listen. The Euro crisis, and in particular, the fact that the UK does not want to touch their baby [smart brave move], will mean that France's banks is caught holding that particular baby, so expect to hear the music stop anytime soon. Once that happens we will have a credit crunch, lower RBA cash rates, not all passed on by the banks because the cost of their borrowing will zoom up.

2012? A good time to be a Saver. A good time to be in Australia. Have a good one!

Source: Rick Adlam, Mr Mortgage

Reserve Bank of Australia: Rate rise likely due to inflation

RBA ask home buyers & homeowners to carry the "interest rate" can for the economy again.

Australian home buyers and mortgagor homeowners might get punished By the Reserve Bank of Australia with higher mortgage repayments for the mining boom, the Queensland floods and Cyclone Yasi.

Real economy is going backwards

This grim analysis is based on the wider economy going backwards, with house prices falling in all areas except mining boom towns, fruit and vegetables are growing in price rather than in the fields, and the devastation of the Queensland floods will divert construction to remedial and refurbishment damaged buildings and away from building new homes.

These events have given Australia an inflation rate of 3.3% per annum, and that is over the 3% ceiling the Reserve Bank has set as the top line within its framework of control.

Whilst tightening of credit is an important consideration to keep a lid on the housing inflation , I have always thought that in times like these the RBA would do better to make finance and home loans harder to get, by controlling the lending practices of the banks to require higher deposits. The mining industry is relatively small when you look at the employment side of things. But small business and retailing are huge employers collectively and any rate rise will hit them hardest and not do anything to control the investments made by the mining industry.

Is the Consumer Price Index is a "crock".

How do they work out the CPI in the first place? Food, water and utilities is becoming a diminishing part of the CPI basket and food prices, water and electricity have gone through the roof in recent years. So inflation for families is possibly 10% per annum, not 3.3% that the RBA claim it is for the economy. These fake inflation figures more about controlling demands for higher wages than about reporting the rising cost of living in my view. Where are the unions when you need them? Making credit card repayments and mortgage payments higher on top of the highre food and electricity bills burden burden, and at the same time as family payments and welfare payments are targeted for reduction and savings, could fracture the economy down the middle.

Is the RBA toolbox is too skinny.

My biggest beef with the RBA is it likes to keep it simple, too simple in my view. Interest rate control has been its blunt hammer for decades. Haven't we evolved a more complex economy since then that has better more refined solutions. Interest rate rises hurt too many people these days for the result that they give. Controlling banks lending policies seems a much fairer way to control lending and money circulation. Another method might be to offer a rate reduction for people that set a shorter term to repay their home loan. This would force mortgagors into "saving" and take money out of the economy without the need to make homeowners carry a bigger burden without saving money. So whilst economists say that the RBA rate rise is going to happen sooner rather than later, I ask the question why?

Author: Mr Mortgage

Mega Bank profits: Are the glory days of mortgage lending profits over?

The big banks have never had it so good. Will new Government Reforms take this away from them?

Increased Mortgage Lending competition for the big four banks, and major banking reform from the Gillard Government could see the major banks profits shrink.

The problem is that every government reform aimed at the banks in Australia over the last 20 years have eventually added to the bottomline of the big mortgage lenders. Has this been more because of the banks wiles or the lack of foresight of the Government Policy? Maybe a bit of both.

Mortgage Exit Fees: The Fly in the ointment

 Before Christmas I wrote to the Prime Minister and advised her of the "fly in the ointment" of the Wayne Swan proposed solution to our mortgage woos. His solution was a simple one.

Make it a no brainer to switch lenders by removing exit fees on home loans and the rates would fall.

Mortgage Reform problem No 1

The problem was that mortgage managers, the securitised lenders that helped to reduce mortgage interest rates by 3% were the very ones that would be most hurt by the reform.

Why? Because mortgage managers charged the highest exit fees, by way of deferred establishment fees on their mortgages loans

These deferred fees had a sunset clause of about 5 years, so most people never paid these anyway. But it gave a way for lenders to pay mortgage brokers a commission to compensate them for their efforts. Any government reform must address this vital issue. Otherwise it could kill mortgage competition in Australia and set us back 20 years.

Ralph Norris cries Crocodile Tears over the Mortgage Managers plight.

The funniest thing is that the CBA who have all but destroyed the mortgage managers loan sector, with the help of Kevin Rudd's Banking Guarantee support, now says he is hurting for the small end of town. This is just a ploy, but Mr Norris does make the same point I rose last year. 

Australia's Banks. Are they too big to control?

Based on Ralph Norris's [CEO of CBA] comments and the reality of the power and control of the Big Four Banks, its time to ask the unthinkable.

1. Are the banks too powerful to control? 
2. Have they become the Mafia of Austalia, where they can do what they like and still be supported by the government? 

Sometimes the lines between the profit motive, the public good, and business ethics are blurred and this I believe is where we are in the banking debate right now.

The business Power of the banks

A case on point Norris claims that:

The moves to limit excess fees on credit cards and improve credit protections will have a similar perverse effect as far as the reaction from the major banks.

 The new national credit protection regulations means that banks simply have a higher cut off level for those to whom they are willing to provide credit.

Does this not smell of a lender who thinks he owns the lenders and credit space?

If so is he right. I say yes to both propositions!

The law of unexpected consequences

The best intentions of government regulations often create unexpected consequences.

The Government needs to focus more on the purpose of the reform and how it will affect the mortgage industry as a whole.

Any bank and mortgage reform aimed at lowering mortgage rates, and exit fees has to be balanced with the planned growth non bank lenders. That means a no bank involved sector. Not the miss-mash we now have. Allowing banks to own their competitors is a stupid idea that keeps repeating itself in the mortgage lending sector.

 Author: Rick Adlam, Mr Mortgage

Big banks to profit from market muscle in 2010

Australian home buyers and homeowners will feel the squeeze of the big banks' market muscle in 2010. 

 With the demise of sub-prime lending, the collapse of the non bank lenders and the securitised lending brands now being controlled by the banks,  and tighteneing credit rules by the Reserve Bank of Australia, the scene is set for higher lending margins by the big banks. 

And that means higher interest rates for homeowners with a mortgage, as well as mortgage shoppers.

According to recent Australian Prudential Regulation Authority data The commonwealth Bak and Westpac wrote nearly 60 percent of the home loan mortgage business between them in 2009.

When you add the ANZ and NAB figures in that 90% of all home loans written be the top four players. That is what I call market muscle on steroids.

Small fry, Bank of Queensland, Suncorp-Metway and Bendigo Bank have been left with 1.8 per cent, 2.9 per cent and 2.2 per cent of the mortgage market, respectively.

As you can see there is no space left for the rest of the players in the micro-bank, international bank, credit union, building society, and non-bank home loan sectors.

If I were buying shares in 2010, I would seriously look at the potential rise of profits that this market position offers the big four banks.

On the other hand, if I were looking for the best loan deal, now and next years, I would be looking at a non bank lender.

Rick Adlam, Mr Mortgage

Mortgage Rates: Reviewing 2009 and what's ahead for 2010

The lowest mortgage rates ever in 2009 have given home buyers and homeowners a welcome relief in 2009, with the Reserve Bank of Australia delivering the lowest cash rates in history.

 With the unchartered waters of the World Financial crisis, ironically created by US banks in the mortgage industry, house prices remained flat in Australia, and started to rise again in the second half of the year, when it became clear that Australia had dodged the Recession bullet, and unemployment fears had evaporated, the Australian property market was in a business as usual mode.

And for that we have to thank the Rudd Labor Government's swift action on economic stimulus packages, and its execution of the roll-out, which continues into infrstructure building for the next few years.

Looking back on 2009, one thing that joe public did not see was the demise of the non-bank mortgage sector, with capital raisings for mortgage securitisation on the nose, the mortgage securitisation industry was on it knees.

The Rudd Government rescued the mortgage securitisation industry with a couple of large cash injections, and now the industry has sprung back to life.

But not before the damage was done. The non-bank mortgage sector has less than 5% market share right now, when you take out all the brands that the banks have recently acquired, including RAMS, Aussie and Challenger. The sub-prime mortgage market was virtually wiped out in 2009, though its now making a comeback.

Most of the big origination players were picked up for peanuts by the big banks, and now the Australian mortgage borrower will pay, with banks moving to improve their margins by rising their rates above the recent increases of the base rates by the RBA. [Why the ACCC allowed this to happen is beyond me. The banks have bought out their biggest competitors.]

Wespac in particular were rapacious in their price increases. This just goes to show that Australia's mortgage industry in controlled by the big banks, and as soon as the opportunity presents they will sting you.

So for 2010 the message is clear. Banks put you second to their shareholders profits. By supporting your local mortgage originator, and refinancing away from the banks, you will secure better mortgage rates for yourself, and bring margins at the banks down nationally. A well supported non-bank mortgage sector like Mr Mortgage is your best guarantee for lower mortgage rates in 2010, regardless of how many rises the RBA imposes this year.

Mortgage rate alert. CBA increases fixed interest mortgage rate

Mortgage rates tipped to increase as CBA ups fixed rate mortgage ahead of RBA rises.

Mortgage rate alert: Mortgage Rates are now tipped to rise several times as the Australian economy strengthens. Whilst The National Australia Bank and the Commonwealth Bank of Australia might both claim that they are the biggest bank in Australia, in terms of mortgage home loans, the CBA grabs first place.

And as Australians relish the fact that they missed out on the World recession and have renewed their love affair with residential property the banks are tipping the Reserve Bank of Australia will be raising the cash rate anytime soon.

This was verified by the Commonwealth Bank raising interest rates on its new fixed-rate loan offers. 

Raising interest rates on future fixed-rate loans without any increase by the Reserve Bank, is an indicator that variable rate increases are coming. 

The Commonwealth's one-year fixed rates will rise by half a percentage point to 6.19 per cent.

Its two-year fixed rate mortgage is going up by 30 basis points, while three-year fixed home loan rates will increase by 15 basis points.

Treasurer Wayne Swan said today that "banks usually increase their fixed rates in response to higher global funding costs, while their variable rate changes tend to track the RBA's movements."

"It's a measure of what's going on in international markets as much as anything else," he said.

In the meantime The Governor of the Reserve Bank made the point yesterday that the increasing strength of the Australian Dollar and economy are pointing to rising interest rates in the near term.

Author: Rick Adlam Mr Mortgage

Are Mortgage Brokers honest with home buyers and refinancing Homeowners

Mortgage brokers are in the firing line of late, and now Westpac bank and the Commonwealth bank are putting pressure on accredited mortgage brokers, telling them that if they don’t have a certain number of loans settle with them within a 6 month time frame, they will lose their accreditation with the lender. This brings into question a brokers relationship with his or her customer.

The mortgage brokers have responded by saying that their “Independence” is in jeopardy, because many brokers will bow to the pressure and set loans for clients for the home buyers or refinancing homeowner with these lenders, rather than the best loan for the customer.

In my prior article I was a little harsh on mortgage brokers, and this brought up the question of the meaning of the "honesty" of the dealings of the Mortgage brokers.

So here is my revised take on this important topic.

The Mortgage Brokers Intent indicates his or her honesty.

Honesty in this context should not be taken on a legal or literal definition of the relationship between the mortgage broker and the lender and the home buyer or refinanced homeowner, but on the intent of the mortgage broker when they are helping their customer select the best loan for them.

If the Mortgage Broker has the intention of always selecting the very best mortgage lender and mortgage loan product for their customer, then its obvious to an impartial viewer that the mortgage broker can be considered an honest mortgage broker.

If the Mortgage broker explains to the client that they are offering a no cost loan service to them, because the lenders are paying them a commission for introducing the loan to the lender, they are being honest in my view.

If on the other-hand the mortgage is selected because it favours the mortgage broker and his or her own personal interest, then the mortgage broker would have to be considered dishonest in my view.

Banks and other mortgage lenders that offer lenders inducements to put loans through them, compromise the brokers’ impartiality and their honesty, and the trust that a customer puts in them. So do lenders that force lenders to have sales targets. Doing so in my view makes mortgage brokers appear commission representatives of the lender. 

That has to be a bad thing for the mortgage broker industry and the customer than place their trust in a Mortgage Broker to do the right thing by them, according to Mr Mortgage