Mortgage Shopper

Mortgage borrowers with newly floated RAMS face a rate hike

Shares in RAMS have more than halved, with investors panicking because the newly floated home-loans company failed to refinance its short-term debt overnight.

And the broader market is again down sharply. The All Ords was 205.5 points lower at 5596 a short time ago. The fall has wiped out the last of 2007's sharemarket gains.

A short time ago RAMS shares were down 70c to 65c. They were trading at more than $2 this time last week. The company floated at $2.50 a share just two weeks ago.

RAMS said this morning it was unable to complete a funding transaction overnight in the US.

The non-bank lender said a lack of market liquidity meant it was unable to sell so-called $6.2 billion of "extendable commercial paper" - it's main source of funding.

"The company is taking active steps to refinance the programs,'' RAMS said in a statement to the ASX.

RAMS has 180 days to find buyers for the debt. The buyers would get a rate that yields 25 basis points more than the London interbank offered rate. This debt yielded less than the London interbank offered rate only two weeks ago.

If RAMS financing costs rise sharply it could be forced to pass on the increases to the thousands of Australians who have borrowed a total of about $13 billion from the mortgage house.

RAMS said earlier this week that an increased cost of funding will have a material negative impact on its fiscal 2008 earnings forecast.

"The full extent of that effect will be only know when the refinancing has been completed, the result of which will depend on market conditions at the time,'' it added.

RAMS reiterated that it has no US sub-prime lending exposure and that all its loans are 100 per cent mortgage insured.

"The current issues being experienced are as a result of the tightening in the global credit markets and not the performance of the company,'' it said.

"The underlying business of the company continues to operate profitably.''

Source: Daily Telegraph

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

Australia's strong economy pressures a rate rise

Australia's inflationary pressures to mount as the economy is grows above trend rates suggesting a rate rise in 2008.

The sheer pace of economic activity in Australia has picked up in March, with interest rates likely to rise next year, says Westpac.

The Westpac-Melbourne Institute leading index of economic activity, which indicates the likely pace of activity three to nine months in the future, was 4.4 per cent, and above its long-term trend of 4 per cent.

The annualised growth rate of the coincident index was 5.7 per cent, which was well above its long-term trend of 3.6 per cent.

Economy to gain strength

Westpac senior economist Andrew Hanlan said the outcome pointed to a positive economic outlook.

"We saw the Australian economy gather momentum late in 2006 and into early 2007," he said.

"Non-farm GDP strengthened in the December quarter and year-ended growth was a healthy 3.5 per cent.

"A significant lift in consumer spending also suggests the economy has accelerated."

Mr Hanlan said real retail sales over the last two quarters were up 6 per cent annualised, the strongest pace since the housing boom of 2003-04.

"In our view the Leading Index suggests that this new found momentum in the Australian economy is likely to be sustained throughout 2007."

Rates set to rise
The international economy continues to provide a significant stimulus to our economy, Mr Hanlan said.

"The risk is that inflation pressures re-emerge with the labour market to tighten further and the housing sector to move into recovery mode," he said.

Mr Hanlan said the inflationary pressures would most likely lead to an interest-rate rise in Australia in the first half of 2008.  The central bank raised interest rates three times in 2006.

Westpac said that although global economic expansion was set to continue, the pace at which many economies grow was likely to slow over the coming months.

AAP

Property investment goes into orbit

Investment in residential property is back in favour as data shows record levels of investment during April 2007 as people bet on a stronger property market and capital gains in 2007.

The AFG Mortgage Index shows that last month 33.8 per cent of mortgages were sold to investors rather than owner occupiers in April – an increase on March’s all time high of 32.9 per cent and a significant increase on the figure of 28.3 per cent recorded 12 months ago.

Western Australia and Queensland continue to drive the housing property market for investors, but it is the growing resurgence in New South Wales, Victoria and South Australia which is  leading to the dream scenario of healthy, growing markets coast-to-coast.

Despite fears about the WA market coming off the boil, investment there continues at near record levels and the average mortgage size broke through the $350,000 barrier last month.

Positive property outlook

Mark Hewitt, General Manager of Sales and Operations said things were looking positive for the property market.

“It is seldom that we see the indicators for every state looking positive, but right now that’s exactly what’s happening," he said.

"The levelling off in interest rates is just what property markets on the east coast need to build up a momentum. Meanwhile the strength of the resources sector continues to support property markets in WA and Queensland."

"We’ve just been doing our internal business forecasts for the next year and AFG is very positive about the year ahead.”

Mortgage size growing
The average home loan nationally now stands at $307,000, with the highest average loans in NSW ($362,000) and WA ($352,000) followed by Queensland (($288,000), Victoria ($277,000) and South Australia ($231,000).

Paradoxically, loan-valuation-ratios (LVRs), which are the value of a loan expressed as a percentage of the value of a property, are lowest in WA (55.4 per cent) and NSW (67.7 per cent), where the cost of housing is highest. Victoria has the highest LVR in the country of 73.0 per cent.
Source:NEWS.com.au

Australia's mortgage belt hip pockets fleeced by rising interest rates

The nation's Reserve Bankers are confident Australians are coping well with higher interest rates. But comments from News.com.au reveal we're hurting where it hurts most, in the hip pocket, and life is getting a bit more depressing for those with more debt than dollars.

Some Australians are ditching the daily espresso and drinking Nescafe Blend 43. Others are contemplating buying tents as home affordability plummets. Babies are being deferred, despite Treasurer Costello's wish that we have more. We're cutting back hard on spending, even avoiding going shopping.

Below is a summary of readers' comments on higher interest rates - and you won't read anything like it in the RBA's recent summary on household finances.

Our central bankers might be doing OK with their mortgages (because they think we're all doing OK), but that's not the people's message.

"I am under a lot more stress at the moment. I have no money for anything extra. Got a family of four on a single low income. If the RBA ups the rates again, I might have to buy a tent."

"I can't afford to eat out or buy clothes. I just miss the little things like buying coffee at work. I also lost my sunglasses the other day and can't afford to replace them. Now days when things break, I go without."

'I can't afford another mortgage increase. I have to find things to sell on eBay every month as it is to make my repayments."

"Cutting back on expenses as much as possible. No more eating at restaurants. Now have to drink Nescafe Blend 43. Only use the car to go to work. Miserly with electricity usage. Cutting back on luxuries."

"It is another kick in the face after struggling with high petrol prices, rises in food, medical, government rates and charges. What planet are these Reserve Bank Board members from?? Come out and talk to the mortgage belt families."

"Since buying a house 2 years ago and being a single female I have had to work my full-time job as well as part time as a bar maid. The more interest rates go up the more hours I have to do at the pub. Currently working 45 hrs/week in full-time job and 20 hrs/week at pub."

"It has affected the way we spend our money, we cannot afford to start a family, as we bought only two years ago in Brisbane, if rates keep going up we may be forced to sell. It has certainly increased my stress levels which in turn have caused me to be far more irritable than in the past."

"Having to cycle to work to save on parking and petrol. Not able to buy things for around the house. No trips anywhere."

"(Interest-rate rises are) adding to the demoralising feeling that Australia is becoming a place that is impossible to have a simple life in."

"Another interest rate rise will mean our children will be pulled out of private schooling and have to attend public schooling as we will no longer be in a position to afford the private school fees or we will not be able to have our family holiday which we are only having every two years now. I feel we need that holiday for our sanity."

"Anxiety that cost of living is rising much faster than income and that I may not be able to meet my commitments in the future. Pension increases are not keeping pace with other costs such as car running costs, debt servicing."

"As most mortgagees I was trying to get as far ahead of repayments as possible but the interest rate rises are gradually bring the repayments up to the amount I am putting into the account each month, so basically it is extending my home loan by two years each time the rate is increased by .25 per cent. A bit disheartening really."

"Anger at which we have to pay interest rates which is high and anger at the Government who don't even address the problem of high interest rates and no combat to lower the rates in any polices."

"I am a single person with an income of $50,000. With that, I have to pay a home loan, income protection, health insurance, car insurance, home and contents insurance, phone, gas, electricity etc. I get no assistance from anyone. I haven't seen prices go down anywhere . If the interest rates continue to increase, I will have to sacrifice elsewhere, be it health insurance or selling my home."

"Less savings, less disposable income, less money to spend on choices rather than necessities......overall stress, fear and uncertainty of the future, worry that we will not have much retirement savings, no extra funds for emergencies, makes life a struggle less savings, more stress, life seems a little less stable."

Views from the survivors
For those doing well, often the reason why is rising wages - but also the reason rates are increasing, to curb inflation from strong wages growth due to low unemployment.

"Salary increases have greatly outstripped the effect of the interest rate increases."

Some are lucky and fixed interest rates on their loans, meaning their mortgage isn't ruining their life.

"Locked into a fixed interest loan in August so further rises won't impact me for the next couple of years."

"My partner's and my home loan has been 80 per cent fixed since we got it in 2005 so no real impact there, we have so much money 'saved' in the variable part as redraw cash. I fixed my investment loan in 2006 so no impact there."

For those people are doing well, perhaps like the nation's Reserve Bankers in Martin Place in Sydney, here is the sentiment.

"Having to read rubbish in the newspapers about higher interest rates. It doesn't affect the majority of Australians. Get over it."

But such reader's comments are few and far between.

Source: NEWS.com.au

New home sales rise a welcome trend despite mortgage interest rate concerns

The number of new home sales rose for a third straight month in February led by a recovery in New South Wales as new home buyers took advantage of stable interest rates.

New home sales rose 2.9 per cent from a month earlier to 8193 dwellings, according to data from the Housing Industry Association (HIA) today.

New home sales in NSW rose 16.9 per cent from the month earlier period, HIA said.

HIA executive director Simon Tennent warned though that with affordability still low, further interest rate rises may stymie the nascent recovery.

"Affordability looms large and there is simply no room to move after saving a deposit and covering the upfront costs,'' Mr Tennent said.

Sales of private detached houses rose by 3.9 per cent, while sales of units fell by 4.2 per cent, the HIA said.

Western Australia had the second-fastest rise in sales volume with an increase of 11.2 per cent, while sales volumes fell in Queensland by 3.4 per cent.

Despite the three months of gains, overall sales volumes last month were down 5.2 per cent compared with the year earlier period, after the November interest rate rise.

While sales in NSW were up 5.6 per cent during the three months to February compared with the three months to November, volumes were down 21.4 per cent compared with the three months to February 2006.

"Buyers are still acutely aware that they are not out of the woods yet, following the most recent interest rate pressure,'' Mr Tennent said.

Source: AAP

Property transfer stamp duty is not the home buyers primary concern says Queensland Government

The federal Government should keep interest rates low to improve housing affordability instead of asking the states to abolish stamp duty, says the Queensland Government.

Federal Treasurer Peter Costello wants Australia's States and Territories to abolish stamp duty on residential property transactions.

He said the states had enjoyed a massive windfall from the introduction of the GST and it was time to do away with property transfer stamp duty on residential real estate.

Queensland Acting Premier and Treasurer Anna Bligh said that was not the solution to housing affordability, accusing Mr Costello of trying to divert attention from scandals engulfing the Howard Government.

"The federal Treasurer should know that the most important ingredient in housing affordability is the price of money - that is the interest rates on the mortgages, particularly of first home buyers," Ms Bligh said.

"I would encourage Peter Costello to go and look in his own backyard at mortgage interest rates and be doing everything he can to ensure that the Reserve Bank can keep interest rates low."

Ms Bligh said in Queensland, a first home buyer purchasing a property at the average cost of $320,000 paid no stamp duty.

"So any suggestion that first home buyers are finding difficulty in the market because of stamp duty in Queensland just doesn't hold up," she said.

Meanwhile the Property Council of Australia has repeated its calls for the abolition of stamp duty on new residential properties to stimulate growth in the construction industry.

The council said new Australian Bureau of Statistics (ABS) figures showed the number of new housing starts in NSW had fallen to record lows.

There were 25 per cent fewer houses started in NSW in 2006 compared to 10 years earlier, while Victoria has seen a 63 per cent increase, Queensland a 20 per cent increase and WA more than an 80 per cent increase.

The council said abolishing the duty would stimulate housing construction, drive economic growth and boost housing supply.

"NSW is experiencing record low levels of housing construction, and this is dragging our economy down," Property Council NSW executive director Ken Morrison said.

"Today's ABS figures reveal NSW urgently needs a housing industry stimulus to kick-start the state's flat-lining economy."

Source: AAP

Home loan mortgage rates likely to remain steady

Economic analysts say the Reserve Bank of Australia is unlikely to raise interest rates when it meets this morning. This is good news for homeowners in Australia's mortgage belts, who are doing it tough with three rate rises last years and property values in many key markets, especially many Sydney suburbs actually falling in value.

The Reserve Bank of Australia (RBA) increased official interest rates, which automatically translates to mortgage rate increases, three times last year in a bid to rein in inflation.

The official cash rate currently stands at 6.25 per cent.

The central bank has already met once this year and decided to keep interest rates on hold.

TD Securities chief strategist Stephen Koukoulas says while inflation is still higher than the Reserve Bank would like, it is unlikely to raise rates.

"The RBA is waiting to see if the rate hikes of 2006 cool the economy down," Mr Koukoulas said.

"It's too early to be sure that that's the case but they can afford to wait another month."

He says the conflicting news of too high inflation and low economic activity almost guarantees a decision to hold rates.

The RBA will announce its decision tomorrow morning.

Source: Australian Broadcasting Commission

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