Mortgage News

According to a report from Loan Market Group there has been a surge in the demand for higher LVR products rising 250% since the beginning of last year confirms The Adviser. Since the First Home Owners grant incentives initiated by the Australian Government, a return for the demand for the 100% LVR loan has returned. Since the downturn, the majority of lenders have reduced their maximum loaning against property values to around the 85% mark. With many home owners seeking higher LVR products, they are finding themselves coming up short in the marketplace.

Simon Reibelt from Oasis Home Loans Northern Beaches advised that people looking for the higher LVR products needed to ensure they could firstly service the level of debt and understand that the more they borrowed the more they were at risk.

According to a report conducted by Fujitsu Consulting, many new First Home Owners will or may currently be experiencing mild to heavy mortgage stress reported The Age. Fujitsu stated that people entering the property market including investors needed to have robust budgeting plans set out before taking the dive and commitment. They stated that people needed to more scrutinising of their income and expenses, ensuring that repayments could be met and people understood what they could really afford. New mortgagers needed to understand they were entering a marketplace at a low point, with both rates and property currently a lot more affordable than predicted in coming times.

Simon Reibelt from Oasis Home Loans Northern Beaches stated that people must make sure that they understand all possible expenses when entering a mortgage prior to application and settlement. Consulting a local Mortgage Broker can help with the costs and expenses of a mortgage, plus using repayment and affordability calculators can give indications to the necessary financial obligations.

BIS Shrapnel has release a report covered by SMH that Australia will experience another boom period towards the later end of the decade, with only interest rates to subdue to projected growth. BIS indicates it would require rates to jump another 2% at least over the next 3 or 4 years. Now that the economy is into full recovery mode climbing out of a lightweight downturn, essentially Australia experienced a shallow one and therefore with all of the bolstering the Government and wider economy braced themselves for, the rebound strength should tip the economy into one where fiscal policy needs to be implemented.

Simon Reibelt from Oasis Home Loans Northern Beaches saw the report as positive both for investors and developers looking to commit to new projects. While for home owners who were either currently facing affordability issues or to prospective home owners to report did not look as great.

First Home Owners have been confronted with higher interest rates and inflating house prices continuing on from the end of 2009 reports SMH. This has effectively put a holt on new purchases for customers wishing to enter the property market for the first time according to data from The Housing Industry Association and the Commonwealth Bank. With interest rates at an all time low, increasing strong international investor interest and slow growth in housing construction, housing is only getting more expensive and out of reach for the majority. Many prospective home owners feel that even with well paying jobs, good savings habits and additional grants that housing prices are simply rocketing ahead at a rate which cannot be caught. The housing affordability index rose by 18.4% in December 2009 after a fall in September of only 3.3%.

Simon Reibelt from Oasis Home Loans Northern Beaches said that the data showed property’s increasing investment potential, and that it would only give better returns. Though coming at such a high cost, people entering the market should research extensively the best options for their situation, looking outside mainstream lenders for more affordable products.

The NAB has announced it has risen cash earnings for the first quarter by 20% on last year. SMH has reported the Bank stated attributed it to sound performance, recent acquisitions and bad debts falling away as the economy grew stronger. The Bank said that this was despite slow credit growth, increased competition and the higher costing of funds. NAB has been recently been commended with its in line rate rises and reduced fees and costs. It currently offered the lowest standard variable rate of the major four.

Simon Reibelt of Oasis Home Loans Northern Beaches said that the Banks increased profits were a good economic sign for the wider market. NAB currently offered the best rates around if customers wished to use a major bank for security, but there were great lenders and greater savings and rates available if customers consulted their Broker.

SMH has produced reports conducted by Housing NSW to show hat rents in the outer Sydney region are now showing strong signs of improvement over last year. The inflation increased 9.4% in the same period inner suburbs only rose a quarter of a percent. The report shows that demand for suburban rentals is outracing the rest of the market.

Suburbs such as Campbelltown, Penrith and Camden showed the largest increase all in the range of 8-9%. Medium proximity suburbs such as Strathfield, Lane Cove and Leighcardt around 5%, while inner suburbs showed only minor inflation of up to 2%. Over the past five years, outer region suburbs have grown by around 46%.

Simon Reibelt from Oasis Home Loans Northern Beaches saw this growth pattern as opportunities for Investors looking to purchase and expand their portfolio as good return marketplaces.

SMH reports from the RBA’s welcomed rate hold in their last meeting in February, everyone is looking to whether this action was a one off. After the RBA’s three consecutive interest rate increases in late 2009, the Board commented that it did not have to raise rates everytime it met. On the back of the end of the First Home Owners Grant ending and an economy showing signs of recovery, the RBA is currently playing it by year literally to guide their movements with interest rates. The Board meets again on the 2nd of March 2010.

Simon Reibelt from Oasis Home Loans Northern Beaches said that from the article it seemed that it was entirely up in the air to whether and how quick the RBA would raise rates.

Westpac Bank, the nations third largest lender has reported a 33% jump in profits this first quarter. SMH has reported that the profit increase has come a few weeks after the Bank decided to almost double the RBA’s 25 point base interest rate rise. Wide criticism was incurred by Westpac following that many of its competitors did not pass on anymore than the RBA’s official base point rise. Westpac though has stated for the same period that customer profits were down 5 basis points due to reducing fees and to the increased costs of funds.

Simon Reibelt from Oasis Home Loans Northern Beaches said that customers would show their approval through their movements over the next couple of months. If customers were unhappy with service or the cost of their current mortgage, there were great opportunities for refinancing with other non bank lenders with lower rates.

SMH reports that Global Ratings Agency, Fitch has shown that they expect to see mortgage arrears to rise on the back of Christmas spending and three straight interest rate rises over the last few months. Home loan arrears of 30+ days increased across all borrower categories in the December 2009 period. Non-confirming loans and low doc loans were hardest hit with a 50% spike in arrears. Overall, mortgage arrears rose by 0.02% to a total 1.23 percent. Customers who took their loans out prior to the Global Financial Crisis may find it easier to meet projected 2010 interest rates as the standard variable  rate was then up towards 9% in March 2008.

Simon Reibelt from Oasis Hone Loans Northern Beaches said that current home owners who were  already experiencing mortgage stress should look to other lenders apart from mainstream funders for refinancing opportunities.

SMH has reported that the RBA has opened up that if the Labour Party continues to keep its pledge of low spending then, it (The RBA) shall continue to hold the prospect of low interest rates.

If the Government is committed to reduced spending and thus lower its outstanding debts, then we could expect to see short low interest rate rises for the foreseeable future. In return, the Government’s current debts will be cheaper to pay off and thus this would keep rates lower for private borrowers while the economy steadily recovered.

Simon Reibelt from Oasis Home Loans Northern Beaches saw this move by the RBA and Government as both positive for its own position and that of all other borrowers in the economy.