Mortgage Shopper

Mortgage lenders OK with RBA leaving interest rates on hold

Australia appears to have escaped the worst of the world financial crisis and the recession we had to have seems to have evaporated.

The Reserve Bank of Australia in deciding to leave interest rates unchanged at 3 per cent, when the board met today at its June meeting has basically acted on the buoyant retail sales, new home sales and good employment data as well as the recovery happening with our trading partners.

The Rudd government must be dancing in the corridors of Parliament house. Expect them to make the Liberal opposition pay now for its criticism of the stimulus package handouts, and first home owners Grant boost, which saved the building industry from decline and job losses. The Retail industry must also be thankful as the stimulus reaped them a record April shopping spree. Things are looking good.

The decision to keep interest rates at its 45-year low is good news for the housing industry, home buyers and mortgage lenders because there is money to throw at any weakness the RBA board sees later in the year.

In a statement released this afternoon, Reserve Bank governor Glenn Stevens said there was evidence emerging the global economy is stabilising.

"The turnaround is clearest in China nd some other emerging countries [from the recession]," he said.

"Recovery in the major countries is likely to take longer to begin and be slower when it does occur."

Mr Stevens said although the effect of low mortgage rates was yet to be seen, future rate cuts were possible if the economy continued to deteriorate.

"The prospect of inflation declining over the medium term suggests that scope remains for some further easing of monetary policy, if needed."

The Reserve Bank cut the official cash rate by 25 basis points in April ending 425 basis points worth of reductions since September.

The central bank has since indicated it is in no rush to lower rates further as it assesses the impact of its easier monetary policy stance and the Federal Government's stimulus packages.

The stimulus packages have worked their magic and have lifted the retail industry, with figures out yesterday showing consumers spending a record $19.4 billion shopping in April.

Is Australia building a housing bubble that is yet to burst?

Australia’s housing market has fared much better over the past several years compared to the US or even the UK property markets, and for some that means that Australia’s housing bubble burst has been postponed to a later date. The signs are that the market is heating up due to the housing construction industry being a key a growing Australian economy. And our economy looks in better shape, and do our banks, who continue to lend money to homebuyers, although at lower Loan to value ratios than in the past.

Home mortgage interest rates in Australia are at their lowest since records were kept so home ownership for those with secure incomes is more affordable than for the last 5 years. THe Beserve Bank of Australia has hinted that they have more to slice off the rates if it proves necessary to stimulate the economy further. They are also mindful that a over heated housing market will not be in anyone's interest.

First-home buyers are swimming in the cash streams created by the tripling of the First home Owners Grant for new homes, and this has boosted a flagging home construction industry in the wake of the economic downturn.

With the recent extension of the First Home Owners Grant boost to the end of the year, we can predict that the building boom will continue til then at least for the first home Buyers. And hopefully that will translate into the second home market picking up. 

This all sounds great so where’s the problem I here you ask.

Well here’s the problem. The New First Home Owners Grant Boost is expected to be reduced in January 2010. And on top of that interest rates are expected to rise.

Will the new home owners be able to cope with these new repayments, especially the ones that were shoe horned into tight loans to begin with. These will become the new mortgage stressed depending on how high those rates do go.

Should rising job losses continue into next year one could expect a glut of homes on the home market and that would mean lower home prices, because homes would be less affordable, and the grant would be less meaning secondhand buyers would have a lower grant and this would mean they would have to save more, and put off the purchase till the deposits were saved.

My personal view is that this is unlikely, as these owners will have to live somewhere and rental accommodation has become scarce in Most Capital cities, so they will somehow find the money to stay in their homes, and economise in other areas to do that.

So my advise to you is this. If you can afford to buy now, and you have job or income security, then buy your home now. Uncertainty in your life is something we all have to live with, but it’s a good reason to put off doing what you will have to do at some stage.

If on the other-hand you do have reason to fear you or your partner may lose your job, and you don’t have great prospects to get re-employed quickly, then it may be wise to sit on the fence and see which way the cat jumps.

Even is that is the case, maybe buying a secondhand home at a moderate price may be the best way for you to go. This will give you a quicker transition to home ownership, and lower repayments. It should also mean you are closer to the city cent re and work. This would also reduce transport costs and male it easier to make the repayments should the worse happen.

Australian homes are more affordable than 5 years ago, due to falling property values and mortgage interest rates rates

Is now a good time to buy a home? Some say so. The RBA say that a typical home worth a little over four times the average household's annual after-tax income This is down from almost six times, just five years ago.

Strong growth in incomes over the last three months, [despite rising unemployment levels] and a period of more sluggish median house price growth are working in the interests of first time home buyers.

But housing still remains expensive by historic standards. In the 1980s, it took just three times the average annual disposable income to afford a median priced home.

Australia

remains one of the least affordable countries in the world. In

Canada

the multiple is less than four. In the

United States

it has remained at about three times annual disposable income for the past two decades and precipitous house price falls in some areas of the

US

has reduced this even further.

The governor of the Reserve Bank, Glenn Stevens, said yesterday that the gradual improvement in affordability suggested Australian house prices were not heading for the same large price falls witnessed in other countries.

"In

Australia

's case, the ratio of the median dwelling price to average household income has declined quite noticeably since 2003, without a very large absolute decline in housing prices.

"This is evidence for at least the possibility that these adjustments can take place over reasonably lengthy periods and without being terribly disruptive to the economy."

Also working in favour of prospective home buyers has been the drop in mortgage interest rates to their lowest since the 1960s. Mr Stevens said this had already delivered a significant boost to household spending power. "I don't have much doubt that certainly for the household sector, this is an expansionary setting of policy."

Mr Stevens has also held open the possibility of further small interest rate cuts if needed to boost consumer confidence.

Australia's housing problem to get worse with rising mortgage rates and house prices forecast

Australia's housing affordability will get worse before it gets any better, with home mortgage interest rates more likely to rise over the next year or so, the federal opposition's housing summit was told today. Financial markets are already betting the Reserve Bank of Australia will need to raise interest rates next month to kerb renewed signs of price pressures.

Any mortgage rate rise will compound already stretched household budgets after last year's three interest rate rises. More than 100 experts in finance, economy and politics have joined federal and state Labor politicians at Parliament House in Canberra to find solutions to the housing affordability crisis. ANZ Bank chief economist Saul Eslake told the conference that high interest rates were the cause of the last housing crisis in the late 1980s, which was later countered by low interest rates.

But this time the problem was also rising house prices, which would be “a problem for some time to come,'' Mr Eslake said. Lower mortgage rates would help, and authorities should aim to put downward pressure on interest rates, and “saving more from the resources boom than the present government,'' he said.

Young home buyers are the victims.

The conference was told that the main victims in the current housing crisis are under the age of 35 that typically borrowed too much during the 2000-2004 housing boom. This group is now suffering from rising interest rates, and in some cases are having to take on a second job to meet repayments. NSW Planning Minister Frank Sartor said the cost of building houses was accelerating, and needed to be countered with a quicker turnaround in housing permits. But he disagreed with the federal government's solution to the housing problem that it was just a question of releasing more land for housing and cutting state housing related taxes.

Mr Sartor said cutting taxes would just lift house prices by the amount of the tax cut. This is a similar argument the government uses for not raising the $7,000 First Time Home Owners Grant. But in any case, the conference was told that the value of the grant has been hugely diminished due to the rise in house prices. The Government is undertaking a national land audit to find suitable areas to build new housing, and continues to press states and territories to cut land taxes as part of the GST agreement.

Infrastructure is key

Australian Local Government Association president Paul Bell says it is not just a question of building new houses, but building them where people wanted to live, with proper services and infrastructure. ”Supply has to be where demand is,'' he said. Housing Industry Association managing director Ron Silberberg says states will suffer a $50 billion shortfall over the next 10 years as they try and keep up with new infrastructure needs. He said there should be a residential infrastructure fund, similar to Auslink and the government's new roads initiative, to allow for a synchronised roll-out of infrastructure with new home building.

Another problem for new home buyers is they are competing with investors who can gain tax benefits from investing in property, and are driving up house prices. But Mr Eslake said saving initiatives to help fund the deposit for a new home, such as a superannuation-type scheme, should be aimed at buying a new property rather than inflating the price of an existing home.

Mortgage Brokers lending skills blamed for mortgage home loan default rise.

[As the Howard Government tries to play catch up with the Labor opposition, they are looking for people to blame [don't they have mirrors in Canberra?] and have turned on the innovative mortgage brokers and non bank mortgage funders, blaming them as the source of Australia's Housing market meltdown and debt crisis, instead of the fact that Liberal's work choices scheme is preventing Australians from earning a decent wage so that they could pay their mortgage when due.]

A Howard Government inquiry into mortgage finance may [wait for it] recommend first time home buyers be required to put up a deposit of 20 per cent. [That would spell the end of the first home buyer in Australia. 20 percent deposit hasn't been the norm since mortgage insurance cam into the market thirty years ago, when homes and land on a quarter acre could be bought for $20,000 to $30,000 dollars. If people could not save $6,000 for a deposit then, how can they save $100,000 for a deposit and all the costs that Governments suck out of home buyers and developers now?]

The parliamentary economics committee has called the snap inquiry into home lending as the number of people defaulting on mortgages continues to rise.

Personal bankruptcies up 17 percent 

Despite low unemployment figures, economic growth and high consumer confidence, personal bankruptcies went up by 17 per cent in the 2006-07 financial year.

The chair of the committee, Bruce Baird, today said the inquiry would bring together banks, the Australian Securities and Investment Commission, the Reserve Bank of Australia (RBA), the banking regulator and consumer groups. [Not the 'villian' mortgage brokers and the non bank mortgage industry players.]

Discussions would focus on discovering the extent of the problem, the role of mortgage brokers and whether fierce competition between the banks was eroding prudent lending practices, Mr Baird said.

One outcome could be tighter controls on mortgage brokers, he said.

"Also some requirement there is adherence to a degree of equity, it's normally 20 per cent equity but if that's being eroded stricter controls can be brought in,'' Mr Baird said.

He said the inquiry would also consider whether the root of the problem lay with consumer attitudes.

The McMansion dream

"There's also the question of whether we have just normal greed coming in, where people want their McMansions.''

The RBA had been concerned for some time about the ease of securing home loan credit and the abandonment of the normal prudential requirement of 20 per cent equity, he said.

"We are seeing that eroded and we are seeing more of a 100 per cent of the value of a house being borrowed,'' he said.

Falling house prices in areas such as western Sydney left many homeowners with negative equity, saddling them with a debt if they were forced to sell due to financial shocks such as job loss or pregnancy, he said.

Debt explosion

The financial divide is growing between those struggling under debts and those with the resources to pay off their home, according to research by the Melbourne Institute.

Rising interest rates and the drought have led to an increase - from 10.8 per cent to 15.1 per cent over the past year - in the number of people running into debt or drawing on their savings.

The Melbourne Institute research also shows that the number of people devoting more than half their salary to debt has increased from 5.9 to 7.5 per cent over the past year.

Rural stress

Financial stress is greatest in rural districts, where the number of people running into debt or drawing on savings has soared from 9.9 to 20.8 per cent.

But there has also been an increase in metropolitan areas. The number of people succeeding in saving some of their income in metropolitan districts has dropped from 57.7 per cent to 50.7 per cent in the past year.

The study confirms Reserve Bank research showing that people with the highest debt service burdens are generally those with higher incomes.

More than 80 per cent of people earning less than $40,000 a year spend less than 10 per cent of their income on debt. Most are either in the rental market or, in the case of age pensioners, have a fully paid-off home.

The survey nevertheless found that 28.8 per cent of the people who spend more than half their income on debt service earn $50,000 or less.

Source: The Australian

[PS Someone needs to tell these Liberal and National Party pricks that mortgage brokers don't make decisions on who is accepted or declined a mortgage. It is the bank, the non bank lender and or the mortgage insurer who decide that. All the mortgage broker does is take applications and put them to lenders. How these Howard Govenment dunderheads believe that they can change mortgage defaults by blaming someone who has no control over the decision, explains why the Liberals are lagging in the polls. They don't know the problem, so how can they figure a solution?]

Mortgage market growth tipped to slide

Fewer Australians plan to take out a mortgage home loan over the next 12 months, leading to fears the mortgage market will slow.

A survey in May by the Mortgage and Finance Association of Australia (MFAA) and BankWest found almost one in five of the 814 respondents expected to take out a new home loan in the next 12 months, down from 25.9 per cent in November 2006. The number of people who are unsure or never expect to take out a home loan rose to 37.2 per cent from 32.6 per cent in November. MFAA chief executive Phil Naylor said the changes indicated more Australians perceived home ownership to be out of reach. The survey showed that 61.6 per cent of respondents expected residential property prices to rise in the next quarter, up strongly from 43 per cent in November. However, Mr Naylor said other findings showed a more positive outlook than six months earlier. "More people are confident interest rates will stay put for now ... and more people said they are in a better financial position than last year." Some 45.1 per cent expected interest rates to rise in the next quarter, down from 81.1 per cent in November. BankWest head of broker sales Phil Colton said the potential for a slowdown in home buying was likely to affect all states, as the survey showed no major difference in expectations between states. "We are coming off an active time in the home loan market in Queensland and Western Australia and there is some expectation that this will slow, which is further supported by this latest research," he said. Recent Australian Bureau of Statistics data showed the number of home loans for owner-occupied housing inched up 0.1 per cent in May to 66,040. The result was 5.5 per cent higher than in May last year.

Source: AAP

Housing Market crisis has Rudd suggesting a tax credit system help lower lower rents so renters can save and become home buyers

Australia's housing market crisis has would-be Prime Minister Kevin Rudd today suggesting tax credits for housing investors as a way to ease the rental shortage of affordable rental accommodation

Australia's opposition Labor Party has suggested tax credits for those willing to invest in affordable rental housing accomodation.

The Federal Opposition Leader, Kevin Rudd, has suggested offering tax credits to residential real estate property investors who are willing to develop affordable rental housing. Mr Rudd says spiralling rents are making it hard for young people to save enough for a housing deposit. He says tax credits could help address a tight rental market. "The Commonwealth Government could establish a pool of tax credits for those who are proposing to invest in affordable rental accommodation," he said. "Once they've invested in affordable rental accommodation and offer cheaper prices for those renting that accommodation, they become eligible to apply for tax credits from the Australian Taxation Office."

Source: AAP

House prices out of reach for first time home buyers

Debate is raging in the Queensland community about housing affordability and the official statistics show first-home buyers today are faced with fewer choices than their parents.

The Queensland State Government has offered some mortgage duty relief to all homebuyers, not just first time home buyers. This is after and inline with other Australian State Government lowering or abolishing of State mortgage stamp duty, whilst retaining the transfer duty.

In a bid to counter the affordability crisis for all home buyers, mortgage duty will also be phased out over two years and land tax thresholds changed to reduce the cost of buying properties.

First time home buyers are already exempt from duty on mortgages up to $250,000, and are taxed at a lower rate on larger amounts, so the savings are minimal.

Michael Matusik, property market analyst, says Queensland homebuyers are paying on average 35 per cent of income to service a mortgage, compared to 40 per cent in NSW.

Another measure of housing cost is to plot the median house price as a multiple of median incomes.

Over the past 50 years, Mr Matusik says people spent three to four times their median household income on buying a house, now it was 6.2 times in Brisbane.

Sydney at present has a median multiple of 8.5 times, Perth 8, Hobart 7, and Melbourne and Adelaide 6.5.

"This began to accelerate rapidly over the last decade and especially over the last five years," Mr Matusik says.

"All of the Australian cities above rank in the top 25 most expensive places to live in the world. Sydney is now ranked the seventh least affordable city in the world, beaten by six American cities including California, San Diego, San Francisco and Honolulu."

Mr Matusik says there is simply not enough developable land within urban areas and more needs to be released.

"We believe that land supply is a key issue with regard to affordability and it is no accident that the top 25 most expensive places in the world have little or no land left to develop, however the public does not think so.

"The second solution involves improving development assessment that is clearing backlogs and fast-tracking standard applications."

Mr Matusik says Australia's tax system also needs a complete overhaul.

"Contrary to popular opinion, there are not enough residential investors, and owner-residents are more often than not (and increasingly so) speculators.

"The average time between sales of an owner-residence is approaching six years and was over 15 years just a generation ago.

"More than half of the owner-residences resold over the last five years had undergone a substantial renovation (meaning more than $50,000 was spent on the property) between sales."

The average new home loan in Queensland broke through the $300,000 mark in May, up from $288,000 in April, according to AFG, Australia's largest mortgage broker.

"The $300k Club now comprises Queensland as well as NSW, where the average new mortgage is $382,000, and Western Australia ($359,000)," Mark Hewitt, AFG general manager of sales, says.

The AFG Mortgage Index also shows fixed-interest home loans have fallen from a peak of popularity in November 2006, when they represented a quarter of all new home loans, to 20.3 per cent in May. Property buyers may be less concerned about rate hikes than they have been in the past.

Wizard's Tomorrow's First Home Buyers series reveals the number of Australians intending to purchase their first home in the next 12 months jumped six per cent to 523,000 in the March quarter.

Wizard chairman Mark Bouris says the growth was largely driven by first-home buyers with higher household incomes keen to capitalise on their financial gain through property investment.

"We are seeing the emergence of a new breed of higher-income first-home buyer with their sights set firmly on the property market as a way to build their wealth," Mr Bouris says.
Source: Courier Mail, Queensland Australia

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

Price of land at near historic highs hits new home buyers.

The price of housing land nationwide had lowered slightly at the end of last year but still sits at historical highs and is likely to rise in most cities, according to a report.

Vacant lots in Perth, which posted blistering growth in value over the whole of 2006, are still the most expensive, above Sydney, according to research by the Housing Industry Association (HIA) prepared by Australian Property Monitors.

But growth in the value of Perth lots slowed in the last three months of 2006, while Sydney prices surged.

The research, released today, said the weighted average vacant lot price for Australia's largest five cities fell by 0.3 per cent to $183,873 in the three months to December 2006.

But the figure remains 7.7 per cent higher than in the corresponding quarter in 2005.

"Recent englobo land sales reveal that further price increases are likely in most cities,'' the report said.

Englobo means land that is suitable for residential development with significant sub-division potential.

Land prices in Sydney skyrocketed at the end of 2006, rising 11.7 per cent to $357,500 per vacant lot in the three months to December after remaining flat for the previous nine months.

Perth residential land prices jumped a staggering 122.7 per cent in the year to December 2006 to sit well above Sydney at $389,750. But growth slowed to 2.2 per cent in the last quarter of the year.

Prices in Melbourne rose 3.4 per cent in the quarter and 9.2 per cent over the year to $155,000 per vacant lot.

Places where the price of land has dropped included Brisbane, the rest of Queensland, Western Australia excluding Perth, Darwin and Hobart.

The number of lots sold across the nation over the December quarter fell to historic lows, the report said, down 30 per cent due to supply constraints and a lack of demand at higher price points.

While availability in Sydney had improved to be above the "sluggish'' level of demand, HIA said there was still a critical shortage of land in Sydney below $250,000.

"Perth's land supply remains in critical shortage, whilst Adelaide is in better shape,'' the report said.

HIA's executive director for NSW, Graham Wolfe, said the report's findings were clear evidence that land costs and charges were to blame for near record low housing affordability levels in Sydney's growth areas.

"Inevitably Sydney's rental squeeze will tighten and rental costs will continue to rise,'' Mr Wolfe said.

Mr Wolfe called on all three levels of government to put aside their differences to address housing affordability in Sydney.
Source: AAP