Mortgage Shopper

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.

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

Tips for those struggling to meet their mortgage repayments on time

The golden rule for those struggling to keep up to date with mortgage repayments is to talk this through with the mortgagee [mortgage lender], and explain your situation, preferrably before your loan goes into default. This demonstrates to the lender that not only that you have a problem, but you realise it and you are concerned about. 

The second rule is don't make rash statements about when you will repay . If for instance the financial difficulty is due to a job loss or other loss of income, and you don't have a new job and pay check lined up, don't promise payments till you know that the money is flowing again.

Homebuyers are being urged to notify their loan provider at the first sign of financial difficulty to prevent mortgage defaults, industry insiders say.

"The key is to do it straight away," Mortgage and Finance Association of Australia (MFAA) chief executive Phil Naylor said.

"Don't wait for six months after you've defaulted for three or four months because you are not in a very strong position once you get to that point of the proceedings."

Mr Naylor said if contacted early, lenders would do their best to ensure customers remained in a loan.

"It's not in the lender's interest to see you default or get yourself into financial strife," he said.

But, with the chance of another interest rate rise still on the cards, a further rise in mortgage defaults is a real possibility.

In 2006, the number of legal claims made against borrowers who defaulted on their mortgages rose 10 per cent from the previous year to 5,368, Supreme Court of NSW figures show.

Interest rates rose three times that year to end at the current 6.25 per cent.

The Supreme Court said borrowers did not contest the legal action in about 95 per cent of the cases.

Mr Naylor said that while rising interest rates were not the only reason why borrowers defaulted on their loans, they were often the straw that broke the camel's back.

RESI Mortgage national consumer advocacy manager Lisa Montgomery expects a higher number of mortgage defaults if interest rates rise because consumers are very highly geared.

However, she said borrowers were becoming much more savvy and looking for solutions before falling into default and being forced to sell their property.

She said once borrowers defaulted on their loan, the damage may have already been done.

"It is certainly a good idea to come in earlier rather than later because if you come in later and you have fallen into arrears, there's nothing that can be done about that," she said.

"That could have an effect on the credit rating if it's left too long."

Ms Montgomery said there are a number of arrangements that lenders can make with borrowers to help with repayments and prevent falling into arrears.

"Some individuals may choose to take on their paying principal and interest, or they may choose just to take an interest only loan for a short period of time as well," Ms Montgomery said.

She said borrowers may also have paid excess on their loan repayments previously that could act as a buffer to supplement repayments during times of stress.

"Which is why we always suggest to consumers that they do pay more," she said.

Source: AAP 

Mortgage interest rates to remain Steady

Australian consumer spending has slowed, further easing pressure on inflation and the possibility of interest rates this month and through the year.

Investor confidence in the Australian dollar also took a hit after official figures released yesterday revealed a fall in home building approvals, along with the spending slowdown. The Aussie is down almost 3 per cent since last month's Consumer Price Index showed the first fall in prices in eight years.

Although the Reserve Bank has its first meeting of the year today, any announcement on interest rates will not happen until tomorrow -- and then only if rates change. The 0.3 per cent lift in monthly consumer spending in December to $18.45 billion was below economists' expectations of a 0.5 per cent rise. In response to three rate rises last year, debt-bound households have curbed their spending.

CommSec chief equities economist Craig James said the economic data meant the RBA would have an easy decision in keeping interest rates steady at 6.25 per cent. "The economy has clearly softened in response to the rate hikes delivered over 2006 with new figures on building approvals, retail spending, jobs and activity in the services sector all decidedly soggy in the latest month," Mr James said. The TD Securities-Melbourne Institute inflation gauge also released yesterday showed inflation was unchanged in January as petrol prices fell. The average family is spending about $157 a month on petrol -- down from almost $200 a month in June and August.

The RBA lifted rates in May, August and November last year to curb inflation, which was running above the central bank's target band of 2-3 per cent. Macquarie Bank interest rate strategist Rory Robertson said the RBA would be thrilled with the clear deceleration in consumption growth and unemployment being at its lowest level in three decades. "The Australian economy is in a really good place," he said. Mr Robertson said the next interest rate move was so far off it was impossible to make a meaningful call on whether it would be up or down. He said the April CPI numbers, tracking the first three months of the year, would be the next litmus test for inflation and interest rates.

Mr James said the good news for retailers was that, as interest rate fears receded, consumer confidence and spending would increase. "Some retailers were forced to cut prices in the last three months to get consumers to part with their hard- earned dollars," Mr James said. "While major retailers have reported healthy sales in recent months, the key question is how much of the rise was at the expense of bottom-line profits."

Australian Bureau of Statistics figures showed a 0.7 per cent rise to $53 billion in retail turnover in the December quarter. The Australian dollar closed at US77.33, down marginally for the day after recovering from a sharp turn when the data was released. In mid-January the Aussie hit a high of US79.8.

Source: Herald Sun

Mortgage Myths that prevent home buyers and homeowners owning their homes sooner.

Myth #1. A big brand bank home loan is better than a mortgage from non bank lender.
Most people don’t like the major banks, but this myth prevents them from capitalizing on the mortgage opportunities in the growing non bank area.

Myth #2. A bad credit history means you can’t get a home loan.
It is better that you have clear credit when you apply for a home loan because it improves your chance and options.
But there are great loans for people with bad credit, and they can get better as your credit improves.

Myth #3. To get a home loan at the best mortgage rates you need a 20 per cent deposit.
A 20% deposit on a home loan is a wonderful start, but today 100% home loans are there for the taking for people with excellent credit.
Even for the self employed with no income checks we have up to 95% mortgage loans!

Myth #4. 100 per cent mortgage finance or a no deposit home loan means that you need no money for the transaction yourself.
Buying property has other costs besides the home loan. These costs include stamp duty and Mortgage insurance, and you should allow around 5% for these costs for a high lend mortgage loan. 

Myth #5. The lowest mortgage interest rate means the best loan deal for me. This is rarely the case. Low rates usually mean loss of valuable flexibility and higher fees and charges, or open ended fees and charges increases.

Myth #6. A lower fixed mortgage interest rate is a better deal than a higher variable rate.
The truth is that market forces set the interest rates, and people that have fixed their rates in the last 10 years have lost money. If the fixed interest rates are lower now that is because the people that know are betting that variable rates will be falling.

Myth #7. Your car loans and credit cards can’t be rolled into a new home loan. We can do 105% loans today and higher, so a small amount of personal loans can be consolidated even into a new mortgage, but at a higher interest rate. We don’t however recommend this strategy.

Myth#8. Mortgage insurance is compulsory and can be around 2% of the loan amount.
Non conforming lenders offer mortgage home loan finance with no mortgage insurance, so these may be a better option for you.

Myth #9. A standard variable rate loan on a principal and interest repayment is the best way to pay off a home loan.
The best way depends on your financial goals and your money management skills. Most people who want to get ahead and have the income and desire to buy investment property are better off using a line of credit facility. This is an interest only facility with minimum repayments.

Myth #10. Its better to leave your mortgage with the bank.
Yes, refinancing has costs that you must bear. If the borrowers are the same, these costs are kept to a minimum. But refinancing your loan to a non bank lender can save thousands in rates and fees and charges over the life of the loan.

New Home sales improve

New home sales rose last month thanks to strong improvements in housing markets in New South Wales, Victoria and Queensland markets, figures show.

The latest Housing Industry Association's (HIA) new home sales survey shows sales of new homes and units by Australia's largest builders and developers rose by 1.3 per cent in October to 7434 dwellings.

That followed a fall of 3 per cent to a 21 month low of 7342 dwellings in September.

The survey also found that new house sales increased by 4.6 per cent in October while sales of multi-unit fell by 16 per cent.

HIA executive director of economics and housing Simon Tennent said the results reflected the dual nature of the nation's economic growth and housing affordability across the states.

"New home sales were resilient in the eastern states as house prices continue to grow in line with consumer prices," he said.

New South Wales, Victoria and Queensland detached housing sales were up strongly, while the accelerating house prices and land constraints in Western Australia meant the new home sales market continued to struggle, he said.

In October, detached house sales fell by 21.9 per cent in WA and 0.9 per cent in South Australia but rose by 16.7 per cent in NSW, 15 per cent in Victoria and 8.5 per cent in Queensland.

"The real test will be in the first quarter of 2007 when the combined affect of three interest rate rises start to squeeze household budgets, particularly in the resource-poor states," Mr Tennent said.

The Reserve Bank of Australia lifted interest rates this month by 25 basis points to 6.25 per cent.

That followed hikes by the same amount in May and August.

Economists say it is not likely that the RBA will lift rates again at the first board meeting of the year in February as the RBA will want to see how the three hikes have trickled through the economy.

Source: AAP and HIA

How to avoid losing your home through foreclosure when your mortgage loan falls into default

9 tips to avoid foreclosure when your mortgage falls into default.
As any real estate agent knows, home sales heat up with rising temperatures every summer. Now, with mortgage interest rates more than a full point higher than at this time last year, fuel costs riding high, higher minimum credit card payments and consumer debt still raging, many U.S. homeowners risk foreclosure on their homes but they don’t have to lose their slice of the American dream.

Last year, 31 percent of home loans issued were adjustable-rate mortgages [ARMs, which could spell big trouble as fixed mortgage rates hover around 6.83 percent and ARMs are poised to go much higher, Holders of ARMs will be paying an additional $14 billion annually for every 1 percent increase in mortgage rates. People who bought homes at the edge of their spending ability with an ARM could face dire consequences as their mortgage payments increase -- but they can take steps to keep their financial situations in check.

According to the Mortgage Bankers Association of America, 4.7 percent of U.S. mortgages were delinquent at the end of 2005. With $9 trillion in outstanding U.S. mortgage debt, that places $423 billion at risk of foreclosure. Homeowners who are at risk (as well as prospective homeowners) can use the tips below to avoid mortgage trouble.

How to prevent problems:
1. Create a budget and don’t stretch yourself too far. The unexpected can and does happen to millions of Americans each year. For people who live at the far edge of their means, one life event can hijack their lives and lead to defaults on bills and/or mortgage payments. The key is to build a detailed budget of income and expenses, making sure to allow some breathing room to weather an unexpected downturn.
2. Be very careful with ARMs or interest-only loans. These types of loans let borrowers qualify for more expensive homes , but beware as rates (and payments) climb. If you can barely afford the payment on your ARM or interest-only mortgage, you are asking for trouble in a few years when the teaser period expires and your loan re-sets to a fixed rate. Be sure you have extra cushion in your budget with these loans.
3.    Don’t jump to refinance your home to pay off credit card debt. Many people faced with large credit card debt or other unsecured debts consider refinancing their homes. But this strategy only moves the debt, securing it with your home. That puts your home is at risk of foreclosure if you are unable to pay. If you are not confident that you can keep up with your home loan payments, consider debt resolution or another debt relief option.
We can’t emphasize enough that people must educate themselves about what they're getting into with a mortgage. Overall debt problems will continue to escalate unless people rein in their spending to live within their means. Unfortunately, for some people, that may mean losing their home to resolve their financial situation.
How to avoid foreclosure, if it’s already on its way:
1.    Enter into a forbearance agreement. For a temporary hardship, lenders might grant a forbearance agreement to lower - or eliminate payments for a limited time.
2.    Consider loan modification. A loan modification seeks a permanent change to the loan, such as lowering the payment and extending the loan term, or incorporating any delinquencies into future payments.
3.    Obtain a deed in lieu of foreclosure. A deed in lieu essentially allows the borrower to return the title or deed of the property giving the home to the mortgage holder to avoid foreclosure.
4.    Sell the home. Selling your home may not be ideal, but it is a way to avoid foreclosure proceedings on your house and pay back your lender.
5.    Refinance the loan. It may be possible to refinance your mortgage for a lower interest rate and/or lower monthly payment (this is much different than refinancing to take cash out to pay off credit cards). However, if you already have had late payments on your mortgage, the interest rate offered to you may be too high to lower your monthly payment. Educate yourself on current rates by checking online rate comparison sites and using online calculators to determine the real costs of refinancing. These tools are available on a number of Web sites, including http://www.bills.com/calculators/.
6.    Be cautious. Be wary of so-called equity skimmers. If your house is facing foreclosure, you will probably receive numerous solicitations from companies looking help you prevent foreclosure by offering to sell your home for you or by taking ownership of your home. In most cases, these solicitations are scams trying to take advantage of people in difficult situations. The perpetrators aim to snatch the equity you have built up in your home.

In many states, foreclosure rates have already started to increase, especially impacting the segment of the population that carries adjustable-rate mortgage loans, whose payments climb upward with every interest-rate increase. However, homeowners can make choices, ideally, before they purchase a home, but even after problems arise, that will help them keep a home, or at least minimize the damage a foreclosure could have on their futures.