Mortgage News

Rental tenants in Sydney should be ready for rental increases come this year. Landlords for the last couple of years have experienced record low interest rates, with median rental prices rising by only $10/week a report by SMH has discovered. With less justification to pass on costs, renters have enjoyed a reprisal from price hikes. Coupled with job losses, uncertainty in the workforce along with the Governments First Home Owner Grants pulling in new prospects, landlords have stay put. Now with all of the above factors subsiding, the Government’s FHOG ending, the economy bouncing back strong and 3 consecutive interest rate hikes already with more forecasted, tenants need to be aware and ready that rental increases are inevitable.

Simon Reibelt from Oasis Home Loans Northern Beaches agreed with the points raised by SMH and stated the tenants needed to be informed and aware of the economy’s position as it will cause rents to rise.

SMH has reported Treasurer Wayne Swan has cautioned the Banks not to increase interest rates as the Government initiates it’s withdrawal of Deposit Guarantees. Along with this, the Wholesale Funding Guarantee program which helps banks borrow money from overseas will too be phased out. Mr Swan said that the cost of borrowing had gone back to levels pre the Global Financial Crises. He stated that it would be at the peril of the Banks to raise interest rates higher than the RBA, warning of swift consequences brought on by both the Australian public and the Government.

Simon Reibelt from Oasis Home Loans Northern Beaches saw this comment as quite strong. If Banks chose to move outside of RBA increases, as Westpac has already learnt, the greater community would voice its approval through loyalty and movements. Though for other funding sources, interest rate differences can open opportunities for customers with cheaper rates which would well be worth the shop around.

The Council of Financial Regulators which is comprised of the RBA and the Treasury has announced that Government backed Bank Guarantees will be phased out from reports on SMH. It has decided that the worst of the economic conditions has now passed and the 150 odd financial institutions no longer need the tax payer backed guarantees.

Deposits of more than $1,000,000 will no longer be covered by the guarantee effective come the 31st March 2010. But accounts with deposits less than $1 million will still be covered until sometime into 2011.

Simon Reibelt from Oasis Home Loans Northern Beaches said the removal and downsizing of the Government’s Bank Guarantee was a positive move. It showed the economic and financial conditions in Australia had now improved to such an extent that the governing bodies considered the economy strong enough to hold its own . Along with the guarantee removal we would see improved competition between bank and non-bank lenders, as consumers now had a wider panel of lenders to choose where their finance would be sourced from.

SMH has brought forward a report conducted by Fitch Ratings showing as the interest rate climb over the next year, it will only undermine residential backed security bonds as mortgage defaults would too keep rising. Fitch has shown that along with the three rate rises in a row up until now, this years forecasted rate rises will cause a 1.5% increase in mortgage defaults. As the rates increase monthly repayments, the rate of delinquencies would be in turn rise.

Simon Reibelt from Oasis Home Loans Northern Beaches pointed out that anyone with current mortgages should always allow for rate rises, especially in light of what is predicted with strong growth in 2010. If customers are currently paying a higher rate, there is an option to refinance down and reduce payments.

The Adviser has reported that the RBA’s decision to hold the Interest Rate at 3.75% has been received well by brokers, customers, investors and home owners alike. Effectively holding the rates will further  help stimulate the economy and provide much needed breathing space for current mortgagees.

The RBA commented that the expensive cost of funding and higher lending rates has prompted them to place a pause on a rate increase for the moment. At the end of the last quarter, inflation figures slowed, with commodity prices falling and building labour costs increasing with the decrease in demand.

Property experts all welcomed the rate pause, with property expected to boom in 2010. Though with such predicted strength this year, inflation and therefore interest rates would keep increasing over time. Simon Reibelt from Oasis Home Loans Northern Beaches said that keeping rates steady at the start of a new year would give everyone confidence and as the year progressed, the economy would rally with this little bit of allowance and power into high gear over the next few months.

The Adviser has reported that information gathered by LJ Hooker and BIS Shrapnel Residential Property Index in December 2009 indicated that 38% of all real estate activity was due to customers seeking property upgrades. As First Home Buyers activity winds down this year, we expect that upgraders and new investors will fill the demand in the marketplace .

They seem to be re-entering most major capital cities, purchasing middle to high end real estate property. This data paired with the strong growth patterns that seem to emerging early indicate that 2010 will be a good year for people to consider that long awaited or needed upgrade into something new. Simon Reibelt from Oasis Home Loans Northern Beaches said that anyone who ever was considering a move into a larger or more appointed property should consider future interest rate rises over then next year and move to secure that dream house.

As the RBA meets tomorrow (Tuesday), SMH has reported that Westpac will carefully consider its next rate rise on the back of negative consumer and industry feedback last time round when the Bank raised their rates significantly beyond the RBA. The Bank will look to restore themselves to inline raises with the RBA to shed its overly expensive shadow cast by its former actions. The NAB has been placing pressure on the other majors with level interest rate hikes and with aggressive competition in order to gain more market share. Funding cost increases are blamed for Westpac’s higher interest rates, with word this time round the Bank will keep in sync with the RBA’s estimated .25% increase to take the interest rate to 4%.

Simon Reibelt from Oasis Home Loans Northern Beaches saw this increase in competition as a positive, as consumers would be the ones to benefit. If differing Bank rates were to continue, it may provide enough intensive for customers to seek to refinance and jump ship.