Mortgage Broker News

Mortgage repayments: Why NSW has nearly half of Australia's home loan battlers

2010-10-13T13:41:00.001+10:00

According to a Moody's latest investment report, New South Wales has 44 per cent of Australia's entire home loan delinquencies, and mortgagors in Sydney's fringe suburbs are most likely to lose their homes through mortgage stress.

Most of those are in Sydney's outer regions where more about 2.5 per cent of mortgages are more than 30 days behind in repayments, a Moody's Investors Service report said.

Australia's mortgage market is generally performing well, but not as well as four years ago

Australia's mortgage market has always performed well, with just a National figure of about 1.3 percent of mortgages in default due to slow mortgage repayments.
This figure is about ten times better than the US experience over the past two years, but is not as good as it was four years ago.

So why is Sydney having suburbs with double the National average?

Overvalued house prices. Show me struggling homeowners and I'll show you overvalued homes. Many home buyers have paid too much for their homes and will suffer the most.
Commuting expenses. When you are in the outer suburbs you will be travelling longer to get to work, and that means high transport, car and petrol expenses, so you have less to spend on your mortgage. Rising petrol prices have not helped.
Starting families too early. Having kids is expensive and it means that many partners choose to stay home to care for their children. Starting a family may have been unplanned or seemed affordable two years a go with record low interest rates and the baby bonus. But the baby bonus doesn't go far and the the mortgage keeps rising. You cannot make mortgage repayment and feed a family on one income these days, so both partners need to be income earners.

The RBA tipped to raise interest rates

The troubles may be in front of those now struggling to meet mortgage commitments as the RBA is widely tipped to raise mortgage interest rates by up to 1.25% over the next twelve months and the Major banks looking to raise rates over this figure.
Softening house prices in these suburbs will not assist mortgage stressed homeowners to sell their way out of debt, so people behind in mortgage repayments will have to learn to tighten their belts over the next few years.

Mr Mortgage Advice. If you are struggling with mortgage repayments now, I suggest that you switch to a non bank mortgage lender with lower mortgage interest rates, and maybe a discounted one year mortgage rate to help you through the next twelve months. The major banks want to raise rates in addition to any Reserve Bank rate increases, so your need to out of that scenario now.

Registered Finance Broker uses Ponzi schemes to swindle clients out of $6 million.

2010-08-19T11:50:00.005+10:00

Ponzi schemes nets $4m for female finance broker in Mormon Swindle.

All scam artists have a common trait.
They swindle their own because its easier. They are most trusted and liked within their own sub-cultures. Why try to con random victims when you can target people who trust you and like you?
In this case its a Mormon woman in Perth conning other Mormon women in Perth. The second trick is to offer something too good to be true. In this case ultra high interest rate returns [yields].

50 year old Perth based female registered finance broker invents a Ponzi Scheme
A 50 year old has been charged with 24 charges related to defrauding many Perth residents of more than $4 million by selling shares in an invented land development scam she called "Mormonville", according to Perth Police.
The 50-year-old female registered finance broker is said to have selected her victims aged from 43 to 73 with many of them being age pensioners.
WA police said the woman in Perth's south, set up "illusory schemes" in 2007 to fund her personal investments and affairs.

The Finance Broker Hatched swindle in 2007, which became more targeted to Mormons as she no doubt discovered that's what victims liked to hear.
The woman deceived and mislead people to invest by offering exceptionally high rates of returns with little or no risk to invested money," a police spokeswoman said. This is the footprint of all Ponzi schemes.
The swindle allegedly grew from her selling investments in 'part-shares' of land but later evolved into a scheme that she advertised as Mormonville, which claimed to be a village-type development for members of the woman's own church.

Swindler grosses $6 million.
Victims were scammed out of between $40,000 and $400,000 each for a total of $4,212,388, according to police reports.
Those targeted ranged between 43 and 73 years of age, with many relying on the age pension as their sole sources of income.
WA Officers of the Fraud squad confirmed that between early 2007 and mid-2008, the woman acquired $6 million from victims and then drip feed small amounts of the money to meet the monthly 'dividends' to investors so as to give the deception of a legitimate operation. This is how Ponzi schemes usually operate.

This provided the illusion of real investment, and engendered more trust. Yet the alleged swindler spent the majority of the funds on her personal investments according to sources.

The Global Financial Crisis brought down the scam
The Finance Broker's swindle was undone by the Global Financial Crisis spooking any new victims, with the banks being able to give Government Guarantees on bank deposits. With new money not coming into her clutches, the dividends went unpaid, and soon the Ponzi collapsed.

Things to watch out for in Ponzi Schemes
You are in line to be scammed if you do these things:

You don't get a second opinion with a competent stranger. [someone who is removed from benefiting from the scheme, and has the expertise to judge the investment.]
The person running the scheme is trusted or is referred to you from someone you trust. It could be from your investment adviser, your lawyer, your accountant or your bank manager. This makes it seem unnecessary to do due diligence.
You have a lot in common, Ethnicity, language, faith, work, family background, gender and age group. You trust the person so well you don't think it necessary for you to take due diligence and have your legal representative or financial adviser to check it out. In fact it could be your account or lawyer who is promoting the swindle.
The offer seems too good to be true, but is made to seem very plausible. ["These sort of deals are normally only available to the rich, who keep it quiet." "The rich get richer and the poor get poorer. Here's why"]
It pushes your "Greed Button". You reason, or are told to reason that you'll have your money back soon and then your investment will be free and clear. ["Double your money and take it away." or " Have your cake and eat it too!"]
Pride. You been told to hand over your financial affairs to your children and you want to show them you know how to manage money.

Mortgage Broker top performer now faces jail over massive home loan fraud

2010-01-12T07:02:00.000+10:00

A few short months ago a New Zealand mortgage broker was hailed as her company's top performer in a low mortgage location, now the 43 year old mother faces 10 years behind bars after being convicted of fraud.
The mortgage broker pleaded guilty in a Wellington District Court to using scissors and a photocopying machine to create false documents to write more than NZ$15 million in phoney mortgages.
Some unsuspecting clients have lost their homes and others are struggling to continue to make their mortgage payments.
The woman's branch office starred as the best performing in the company, supported by the fake mortgages, between September 2006 and July 2008 - and it was this that lead to her undoing.
Never meet your heroes
The parent company began an audit into her loan applications because her branch's outstanding performance was at odds with its geographical location.
Most of the loans obtained through the woman's actions are being repaid.
She has been remanded on bail until 27 January for sentencing.

Are Mortgage Brokers honest with home buyers and refinancing homeowners?

2009-07-25T06:45:00.004+10:00

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.
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 these brokers, and this brought up the question of honesty of the Mortgage brokers.
So here is my revised take on this important topic.

The Mortgage Brokers Intent indicates his or her honesty.
Honesty 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 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 with the customer in my view.
If on the other-hand the mortgage is selected 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.
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.

home loan and mortgage refi rise on low interest rates

2009-05-21T15:42:00.003+10:00

Mortgage Bankers Assoc says home loan activity on the rise with mortgage refinance leading the way on the back of low interest rates.
Lower interest rates appear to be luring more homeowners to the table to refinance.
The number of mortgage applications rose by a seasonally adjusted 2.3 percent for the week ended May 15, according to the Mortgage Bankers Association.
The Market Composite Index, a measure of mortgage loan application volume, rose to 915.9 from 895.6 one week earlier.The Refinance Index increased 4.5 percent, to 4,794.4 from 4,588.6 the previous week.
The refinance share of mortgage activity increased to 73.6 percent of total applications from 71.9 percent the previous week.
The average interest rate for 30-year fixed-rate mortgages decreased to 4.69 percent from 4.76 percent, with points decreasing to 1.13 from 1.18.The average interest rate for 15-year fixed-rate mortgages decreased to 4.44 percent from 4.5 percent, with points decreasing to 1.01 from 1.08.The average interest rate for one-year adjustable rate mortgages decreased to 6.38 percent from 6.41 percent, with points decreasing to 0.1 from 0.11.

Property Investors see opportunity in housing needs

2009-04-30T20:13:00.005+10:00

Australian residential property is again being viewed as a solid investment, even though low mortgage interest rates won't last forever. This is good news for mortgage brokers who work with investors.
The home construction slow down over the last 12 months hurt mortgage brokers in the area, but that in turn has created a tight rental market and investors are back in the game.
In fact the combination of low interest rates, high rent returns and low prices can produce ,"positively geared" investments. This means two things. Property can be attractive to lower income earners without tax to offset,to be a money making proposition from day one.
This means low capital growth is not a deterrent, and this could be the case over the next few years.
At the end of the day people need somewhere to live and keep their stuff.
If they can't afford to buy, they rent and that means that there will always be people who need to rent in areas with schools, transport and near work.

Mortgage Brokers expected to boom as home owners seek to refinance after RBA's interest rate cut

2009-04-17T09:30:00.002+10:00

Mortgage Brokers are expected to be busy as home owners refinance from high fixed-rate mortgages after yesterday's 25-basis-point interest rate cut, coupled with high real estate sales figures in the low cost areas.
The sticking point for many will be hefty fixed rate "break fees", which can be more than $20,000 on a $500,000 home loan.
Break fees, made up of a comparatively small charge to exit the loan plus a bigger fee that is the economic cost to the bank of losing the business, had become a bigger proportion of housing loan fees in recent years, he said.
The Housing Industry Association yesterday called on banks to drop severance and other refinancing charges from fixed-rate loans, but banks are unlikely to do so.
HIA chief executive Chris Lamont said banks would be swamped with borrowers trying to refinance.
A home loan taken out early last year when mortgage rates were 7.5-8 per cent would cost a borrower about $670 a month more on a $250,000 home loan, than if the loan were taken out today, he said.
Mr Lamont believes yesterday's drop in the cash rate will have little impact on the housing market, even if passed on by the banks, as buyers already believe mortgage rates are reaching the bottom of the cycle.
"Falling interest rates are now being overshadowed by the availability of finance, with the banks asking for higher deposits, particularly from first-home buyers," he said.
Real estate agents are reporting increased home sales, particularly for lower-priced property, with Australia's biggest agent, Ray White, making $2.37billion of sales last month, a 15 per cent rise on the same month last year.

NAB flags strong revenue growth, supports Rudd's economic stimulas package to break the cycle

2009-02-08T18:16:00.003+10:00

National Australia Bank's new CEO delivered his debut quarterly trading update for NAB, flagging strong revenue growth, broadening bad debt issues, increasing economic uncertainty and the clear and present danger that rising funding costs would prevent NAB from passing on the full amount of any future rate cuts.

The future is very uncertain and it is neither sensible nor realistic to
try to predict the future

The NAB boss's briefing was a sober bookend to a week that opened with the Commonwealth Bank's Ralph Norris confirming the CBA would deliver earnings stronger than market consensus, which was then punctuated by Suncorp's rush to recapitalise in the wake of a weakening earnings outlook.
But Clyne's commentary show it would be a mistake for anyone to imagine our banks will remain immune from the economic realities, either here or internationally.
There are tough and testing times ahead and the wave of bad debts that will inevitably be generated by our almost certain recession will hit bank profits and eat into their statutory capital.
As that happens, we can expect the banks to move with defensive vigour to protect their capital bases by trimming dividends and raising new capital, though either vanilla or hybrid equity.
Each of the banks, either formally or anecdotally, is reinforcing the same business themes.
Their revenues and pre-provision earnings have been buoyed by government underwriting and the rush to quality inspired by uncertainty and volatility. Bad debts are on the rise, however, and if unemployment reaches anything like the 7 per cent widely predicted by their own economists, the need for more severe collective provisioning will intensify. There is confidence that, even if unemployment hits about 7 per cent, the mortgage books will remain largely sound. There is a general expectation that, over the coming six months there will be a worrying and costly deterioration of the business lending books.
It is clear, for example, that having almost instantly squeezed the life out of the vulnerable at the top end of the corporate food chain, the global financial crisis is beginning to migrate to the small and medium business sector.
As Clyne said yesterday, the single names that forced NAB's $521 million worth of specific provisions over the December quarter have been well known for the best part of 12 months.
"But we are starting to see more general stress and deterioration in the SME book," he said.
Small and medium businesses are the core generator of entrepreneurial wealth and employment in Australia.
The real danger of a meaningful, extended recession in that sector is that it becomes almost self-perpetuating. A small business closes, causing unemployment, which in turn forces more businesses to shut their doors. And so on. That is why NAB's collective provision increased nearly 30 per cent to $303 million over its first quarter and that is why the Rudd Government has acted so quickly in deciding to spend $42 billion of our national surplus.
The aim is to provide a circuit breaker to prevent recession.

Barclays and Llyods bank on time to rush bonuses through

2009-02-07T12:55:00.003+10:00

Banks that are dependent on UK taxpayer support are planning to rush out hundreds of millions of pounds in bonuses to senior bankers and traders before a threatened crackdown.
As ministers in Britain prepared to curb excessive remuneration, it emerged that Barclays and Lloyds Banking Group were poised to follow Royal Bank of Scotland by paying bonuses within weeks.
Lloyds, which has taken £17 billion ($38.1 billion) in rescue money from the Government, appears ready to give hundreds of millions of pounds to top executives and more junior staff.
Barclays, which has tapped the Bank of England for billions of pounds in loans and guarantees, is believed to be planning even larger payouts.
According to the terms of its purchase of the North American division of the collapsed Lehman Brothers, Barclays is due to pay $US2.5 billion ($3.8 billion) in bonuses to traders and dealmakers on Wall Street in the next few days.
Ministers reacted angrily to reports in The Times that RBS was preparing to give bonuses to thousands of senior bankers and traders. Banks applying for government insurance to underwrite toxic debt assets and free up cash for lending are likely to have to meet conditions preventing them paying excessive remuneration, officials said.
A White Paper to be published alongside the Budget in April will beef up supervision of banks by giving non-executive directors more powers to hold bank chiefs to account. However, senior bankers suggested that the clampdown would come too late to prevent bonuses being paid for 2008.
No final approval of bonuses has been made but UK Financial Investments, the Treasury body that owns the stakes in RBS and Lloyds, is prepared to see limited payouts as long as it is convinced that they are in the long-term interest of taxpayers.
Banks argue that bonuses will help to retain and attract good staff and so hasten the end of their need for government support. Many are obliged to pay them because of the wording of employment contracts.
Richard Pym, who earns £750,000 a year as executive chairman of the state-owned Bradford & Bingley, collects a £140,000 guaranteed bonus next month. The bonus, agreed upon before B&B’s collapse, has to be paid regardless of performance. Mr Pym will also collect a further bonus of £187,500 in respect of the first half of 2009.
Lloyds said that any director bonuses would be paid in shares at the end of 2009 and that staff bonuses would be lower than in previous years.
Barclays, which reports its annual results on Monday, is expected to pay large bonuses to the tens of thousands of employees in Barclays Capital. Last year, they were paid an average of £182,000 each.
Eight former Lehman high-flyers taken on by Barclays Capital in New York have reportedly been locked into contracts paying $US10-25 million a year.
Government officials said that all banks would in future have to adopt new incentive structures.
British Prime Minister Gordon Brown expected decisions to reflect the conditions of the economy and the performance of the banks. “There are no rewards for failure in what we are proposing,” he said.
Lord Mandelson, the Business Secretary, warned the RBS that it risked alienating ordinary people if it gave its traders and bosses “exorbitant” bonuses.
George Osborne, the Shadow Chancellor, said: “It would be an insult to struggling taxpayers if the Government allowed banks we part own to pay out big cash bonuses. To increase taxes on people earning £20,000 to pay the bonuses of someone earning £2 million is totally unacceptable.”
Any measures in Britain are likely to fall short of the plans by US President Barack Obama to enforce a $US500,000 cap on the pay of bank executives bailed out by US taxpayers.
In Britain, officials at No 10 Downing Street, the PM’s residence, said Mr Brown agreed with Mr Obama that a new approach to rewards was needed, although it was not thought possible to introduce an industry-wide pay ceiling without breaking contracts.

Queensland banking and insurance giant Suncorp CEO quits

2009-02-05T10:15:00.002+10:00

Banking, insurance and financial services big hitter Suncorp Metway was floored when chief executive John Mulcahy resigned, after the bank announced its interim after-tax profit to be between $250 million and $270 million after being hit with significantly higher bad debt charges.
Suncorp said its bad debt expenses for the half year to December 31, 2008, would rise to $355 million - "significantly above forecasts," it said - on specific provisions and write-offs.
Suncorp said its board would declare an interim dividend of 20 cents per share, fully franked, down from 52 cents per share for the previous corresponding period.
Interim profit before tax and items, including those related to the Promina acquisition, will be between $470 and $500 million, Suncorp said in a statement.
Mr Mulcahy has agreed to stay on while the company looks for a new chief executive.

Not happy bank! Australian banks earn $2 billion in fees and charges from their customers

2009-02-02T15:07:00.004+10:00

The major Australian banks earned $2 billion more in fees and charges from their customers while hiking interest rates independently of the Reserve Bank.
New research published yesterday showed that in the year to June, the most recent figures available, banks accrued income from fees and commissions of $22.6 billion.
The result was well up on $20.48 billion they earned in the previous year and came as they were lifting, of their own accord, rates on mortgages, credit cards and personal loans.
The spate of rate hikes started in January when each major bank moved independently of the Reserve Bank, blaming the global financial crisis for increasing wholesale funding costs.
The round of rate hikes occurred on top of the Reserve Bank of Australia's two upward movements in official rates in February and March.
The figures published by the Australian Prudential Regulatory Authority did not show the impact of the 300 basis points in cuts ordered by the Reserve Bank in the past four months.
However, some of the banks have not passed on the full cuts to customers, with ANZ and Westpac keeping some of of the reduction from the 100-basis point cut by the RBA this month in their profit margins.
The level of account fees paid by Australian customers has reached a record high, with at least $1.4 billion spent in the June quarter on transaction and lending activity.
MWE Consulting analyst Mike Ebstein, an independent researcher, said the increase in fees came as customers placed more money with the major banks.
"The year end June total is up on the year end of June 2007," Mr Ebstein said.
"But the last quarter went against the annual trend and the 10.4 per cent growth in fees and commissions was well below the growth in assets and deposits."
Despite the increase in fees, Australians have turned into fiscal conservatives, choosing to hoard cash out of the volatile financial markets.
Before the recent interest rate cuts, banks were offering deposit rates above 8 per cent in a bid to reduce their reliance on volatile funding markets. However, as official rates have been cut, deposit rates have been slashed.

Rising mortgage applications a sign that housing market has turned the corner

2009-01-24T09:03:00.003+10:00

Westpac economists said in a research note that the rise housing finance in October signalled the start of a recovery for the housing market.
This momentum will hopefully support the recovery in the housing market.
The RBA's decision to slash interest rates by 400 basis points since September, and the federal government's stimulus package for first home buyers, would get new home buyers into the housing market.
The only downer is the fear of unemployment that is creeping into the scenario.

JP Morgan forecasts the RBA will lower the cash rate by 50 basis points at their next meeting in February, and by another 25 basis points in March to a 3.5 per cent rate, lowest rate since 1965.
Others are now saying that another 100 basis point reduction in February is on the cards.

Mortgage Brokers and your mortgage are in for a hell of a ride in 2008

2009-01-20T11:40:00.004+10:00

When it comes to mortgage rates, 2008 may be remembered as the year the market went haywire.
Near the start of the year, some long-term mortgages were around 6 percent, but by July the average rate approached 7 percent. In October, rates jumped by half a percentage point during one seven-day period, then dropped by the same amount the next week, only to surge again a week later.
"We thought the refinancing boom of the late '80s was a wild time," said Sharon Heitman, the owner of the Heitman Group, a mortgage consulting firm. "But I've truly not seen anything like this."
In years past, Heitman noted, mortgage rates followed fairly predictable trends. They would generally increase toward the end of a year, then hold steady through midwinter. By late February or early March, they would head lower and remain in a range until late fall.
But those patterns seemed to change about six years ago, she said, as lenders began aggressively packaging loans as investment securities. While that may have added financing sources, it also caused volatility.
The credit crunch and financial crisis have dried up the market for mortgage-backed securities, leaving many lenders with little or no money for borrowers.
Interest rate swings, meanwhile, grew more pronounced as Fannie Mae and Freddie Mac, the government agencies that buy mortgages from lenders, began increasing the fees they charge to help shore up their own finances.
Rates on 30-year fixed-rate mortgages, the most commonly held home loans, opened 2008 at 6.07 percent, with some lenders offering rates even lower, according to Freddie Mac. In the Northeast, rates were hovering slightly higher, at 6.14 percent.
By late December, the national average had dropped to roughly 5.1 percent, with some lenders offering rates just below 5 percent.
In many weeks in between, there was a huge spread.
Heitman, who receives interest-rate data daily from mortgage lenders, said that in years past the highest and lowest rates on a given day might have been separated by about a tenth of a percentage point. If a lender reported an interest rate significantly higher than the prevailing market rate, she said, she would call the company. "And it was usually an error," she added.
In recent months, however, the spread stretched to half a percentage point on some days. The higher rates reflected some lenders' concerns about whether borrowers would be able to repay their loans in a souring economy, or whether banks could resell the loans to investors anytime soon.
For borrowers, though, 2008 highlighted the importance of shopping around - a habit that mortgage industry executives say is still not practiced widely enough.
Because a mortgage broker typically sells loans on behalf of perhaps 10 lenders, at most, a borrower could be offered a range of loans that does not include the market's lowest.
Loan officers working at banks can sometimes offer other lenders' products, but they typically give borrowers fewer loan options than brokers.
This is not to say that borrowers can afford simply to skip banks in favor of brokers - last year, local banks offered some of the lowest mortgage rates on the market.
Borrowers might simply do well to exercise considerable patience while shopping around, and hope that the mortgage roller coaster slows down in 2009.

Will property values ease in Australai

2008-12-15T22:33:00.000+10:00

If the investment cycle still works and some say its broken, then we need to expect to see property prices to fall next year. This will then herald the start of a new cycle.
A few months ago industrial stocks were being hammered but the overall impact was cushioned by strong resource shares. Commodity prices were holding up because of the supposed strong future economic growth in China. That now has collapsed, by the way.
Many investment experts were still preaching the China story as the reason why Australia would be immune from the US credit crunch. At the time I explained that this rationale was fundamentally flawed because simple logic says if China's biggest customer slows then China will follow. Unless China develops infrastructure and their domestic market then they will follow and we are in trouble. Probably something between the two scanarios will play out and we will still have a soft ride ahead.
If US consumers stop spending at big retailers like Walmart, Walmart in turn will not order as much from their Chinese manufacturers, who won't need to buy as much steel from their Chinese steelmaker, who won't buy as much coal or iron ore from their Australian miners - and certainly not at the boom prices of previous years.
But they are building power stationsat a rate of two a week and that suggests to me that domestic demand will soak up a lot of chinese production.
So are property market may fall, but to a lesser degree than in the US, where 3 million properties have been repossessed and there are predictions of another 1 million to come.
The key Standard & Poor's/Case-Shiller housing index of the top 20 US cities came out last week and the results were ugly.
Home prices had their biggest annual drop in July. Average home prices were down 16.3 per cent for the year and more than 20 per cent since their peak in July 2006.
Las Vegas home prices were down 30 per cent, Phoenix by 29 per cent and Miami by 28 per cent. Almost one-third of US households will have negative equity in their homes by the end of the year.
It is very unlikely the Australian residential property market will plunge by anywhere near as much as in the US because we haven't been through a huge construction boom, borrowers haven't leveraged themselves to quite the same extent and we have strong immigration to underpin demand.
But - and it is a big but - the tightening of bank finance will have an impact on residential property values.
The banks are already starting to ration credit, making it more difficult for people to borrow. The banks are lifting their standards. We're starting to see the old-fashioned request for a 25 per cent deposit on a home loan and demands that mortgage repayments be less than 30 per cent of the borrower's income.
Tightening the criteria for home loans means fewer borrowers will be eligible.
There will be fewer potential buyers and less competition in the market.
On the other side of the coin, because of the fall in the sharemarket, more existing homeowners will be under pressure from their banks to boost the level of security behind their loans and may even be asked to sell their properties.
Fewer bidders combined with more homes on the market equals a softening of prices. That is all ahead of us.
At the top end of the market, the tightening of finance is already starting.
The Government support for the non bank lending may soften this credit squeeze by lenders.

Massive market opens for mortagge brokers to ease the pain.

2008-12-08T18:53:00.000+10:00

over half the recipients of a recent survet said they were hurting under mortagge stress. The recent mortgage rate reductions would have eased this a little, but this shows how much mortgage brokers who can assist these homeowners are needed right now.
Clients are particularly looking for ways to reduce monthly finance costs and give them some kind of buffer should they need it in the uncertain times ahead.
More than half of the respondents admitted that their mortgage repayments were more than 30 per cent of their gross household income. This used to be the acid test for the maxium borrowing capacity, but these have been stretched to dangerously high levels in the past four years as competition with the banks against mortgage brokers hotted up.
And half of those were feeling mortgage stress. That's about 25% of the total mortgage borrowers.
The Problem is house prices
In the last decade, house prices in Australia had risen to almost nine times the average income. This is from 3 times the average income 40 years ago.
This had left borrowers at significant risk when interest rates rose sharply and house prices remained constant or fell.
The risk could be mitigated by the greater availability of land supply, the use of employment continuation insurance, shared equity mortgages or salary-adjusted mortgages.
But that is for new home buyers.
Mortgage brokers would do better focusing on the needs that already exist. The mortgage stressed homeowner.

UK Northern Rock using 125% mortgage loans will be facing arrears trouble

2008-11-26T13:43:00.000+10:00

Arrears on controversial home loans of up to 125% of the value of a property are driving Northern Rock's repossession rate. "Together" deals account for a third of the the Rock's mortgage book, but half of the number of mortgages in arrears and three-quarters of repossessions.
But Rock bosses told a committee of MPs they wanted to lead the way in helping people avoid losing their homes.
Buy-to-let specialist Bradford and Bingley was also under the spotlight. The two nationalised bank's management teams faced a Treasury Committee banking inquiry hearing.
High-value deals Northern Rock came under particular scrutiny over claims that the lender was "aggressive" in its repossessions policy.
This claim was strenuously denied by chief executive Gary Hoffman, although he warned that rising unemployment and falling house prices would increase the numbers in arrears. Northern Rock's Together mortgages - which offered loans of up to 125% of a property's value - were heavily criticised when the bank was nationalised. I believe you have inherited a shambolic organisation with a giant headache
John McFallTreasury Committee chairman about B&BMr Hoffman said that these mortgages had worked well in getting first-time buyers on the property ladder during the booming market. But now with some customers struggling to repay these mortgages, because they are often less well-off, Northern Rock's repossession rate has risen above the national average. Latest figures showed the proportion of Together mortgage customers in arrears for more than three months stood at 3.1%, whereas the industry average was 1.33%.
Mr Hoffman said he wanted the bank to lead the way in creating schemes to help people avoid repossessions, but the bank had to act in the same way as the rest of the industry. "We want to make sure customers stay in their home.
Repossession is a last resort," he said. Executive chairman Ron Sandler said only 1% of the repayment of the debt to the government was funded by repossessions, so there was no benefit in trying to push up the repossession rate for that purpose.
He said there would be no return of the bank to private ownership in the near future, with the economic situation making it more difficult. Buy-to-let 'closed' The Rock is doubling the number of staff dealing with arrears. The same trend can be seen at Bradford and Bingley (B&B), which has dominated the UK buy-to-let mortgage market in recent years.
Job losses at Bradford and Bingley will happen over timeB&B executive chairman Richard Pym said he expected the number of staff dealing with arrears inquiries to double, from the 200 employed in August, by the time arrears levels hit their peak next year. He added that the buy-to-let housing market was "closed". So many deals had been withdrawn that the market was completely different to a year ago. B&B, which had its mortgage business nationalised in September, has a £40bn loan book.
Some 60% of these mortgages are buy-to-let customers and another 20% are self-certified mortgages, which are common among people such as the self-employed. Mr Pym told the committee that at the end of September the proportion of borrowers in arrears on their mortgages stood at 3%, higher than the industry average.
One independent report suggested that, taking falling house prices into account, B&B could lose about £1.2bn.
The buy-to-let market is expected to be worse hit than the residential mortgage market. Mr Pym, however, said the recent cut in the Bank rate to 3% would have a "significant effect" in assisting landlords, assuming rents did not also fall dramatically. Job losses At the end of August, B&B had 3,100 staff, the committee heard.
This dropped by 1,700 following the transfer of the savings business to Abbey, and another 300 jobs went when business was closed to new mortgages. Mr Pym said it was "mindful of its obligations" to the community in West Yorkshire. Any further job losses would be phased, with 50 to 100 voluntary redundancies in the pipeline.
An agreement with the government means there will be no compulsory redundancies before 31 March next year. Yet he was unable to give a final level of job losses by the end of next year. Former chairman Rod Kent said the board was "deeply sorry" that the bank needed to be nationalised. Mr Pym said that there were only queues at four branches at the height of the crisis, and every customer who wanted to move savings could do so when the outflow of customers' funds reached £200m online.
Committee chairman John McFall, closing the session, told Mr Pym: "I believe you have inherited a shambolic organisation with a giant headache." Mr Pym confirmed he would step down from his job next summer, without any compensation, but having picked up a guaranteed cash bonus of £326,000 spread over two years.

Big homes become hard to sell and finance

2008-11-24T08:40:00.000+10:00

The new stimulas that flooding the Australian property market is not flowing up to the top of the market.
Melbourne house values are down about 2 per cent across the board over the past few months, but recent rate cuts and additional first-home buyer support, will make that sector more buoyant than other parts of the residential property market, valuer WBP says.
For example, Narre Warren, a typical first and second-home owner's suburb in Melbourne, has a very strong market in properties priced below $320,000, while the market from $320,000 to $500,000 is weaker.
WBP also says recent valuations in the blue-ribbon suburbs of Camberwell and Balwyn suggest the market has fallen between 10 and 15 per cent for properties priced at more than $1million, while those below $500,000 are less affected.The prestige sector, after being immune to 12 consecutive rate rises, is not faring well amid cuts to executive bonuses, a volatile share market, corporate profit downgrades and the increasing pressure of margin loans.Knight Frank Research, in its annual review of the prestige residential market released this month, says all these factors will affect prices.
The prestige sector generally held up well over the 2007-8 financial year. But even though it feels like ancient history now, sales volumes started falling in the first two quarters of 2008 in most capital cities, as the hit to family wealth started to befelt.In Melbourne, there were 44 sales of more than $5 million each, totalling $294 million for the 2007-8 financial year.
But 60 per cent of these were in 2007, with a 34 per cent fall in the value of sales in the first two quarters of 2008. The suburbs of Brighton and Toorak recorded the highest volumes in this price bracket, with nine sales of more than $5 million in each suburb.
In the entry-level prestige sector, the value of properties sold for the year was $2.17 billion, but that was down nearly 32 per cent in the first part of 2008. Knight Frank makes the distinction between entry-level prestige property, between $2 and $5 million, and top-end prestige property above $5 million.
In Sydney, it says, there are two distinct prestige markets. The first is mainly owner-occupied -- suburbs such as Woollahra, Vaucluse and Point Piper in the east, and Mosman, Manly, Neutral Bay, Cremorne and Hunters Hill in the north.The second is the beach areas of the upper north shore and around Palm Beach and Avalon.
A large proportion of these are second homes or luxury weekend retreats for those in Sydney's financial services industry.Prices for prestige residential property in Sydney actually rose 4 per cent over 2007-08 year, as measured by the Knight Frank Prime International Residential Index. But again, all the growth was in 2007, with a slowdown in the first half of 2008. Knight Frank expects the very top of the market -- the $10million-plus bracket -- will remain stable, and says trophy properties, which are usually waterfront or have harbour views, will always be in demand.
Areas with a high proportion of second or holiday homes, and entry-level prestige properties will be in for a tough time.More second homes are likely to hit the market, and entry-level prestige properties values will fall, as has already happened in suburbs more dependent on the financial sector for purchasers.

Bank lending will end the credit crisis

2008-10-13T06:29:00.000+10:00

The head of the International Monetary Fund (IMF) says he hopes the actions taken by governments will be powerful enough to persuade banks to start lending again, and that he IMF is ready to lend to any country that needs help.
Speaking at the G20 meeting in Washington, Dominique Strauss-Kahn says this would bring an end to the credit crunch.
But he has warned that the global financial system is near to meltdown, saying the IMF has been calling for co-ordinated action on the crisis for some time.
Mr Strauss-Kahn says the crisis is not limited to advanced economies and the IMF is ready to lend to any country that needs help.
"The fund has asked for weeks, if not for months, for more co-ordination in action, arguing that in such a crisis that it was impossible to look for domestic solution," he said.
"Action taken in some countries without coordination with other countries can hurt more than it helps."
The G20 group of leading economies has agreed to coordinate efforts to respond to financial turmoil in world markets.
The group says it will use all means available to ensure the stability of the global financial system.
In a joint statement the group emphasised the need for nations to communicate to ensure that benefits to one country do not destabilise other economies.

Global wave of rate cuts could not save the stockmarkets

2008-10-11T15:34:00.000+10:00

The dramatic Australian official interest rate cut this week by the RBA was followed by smaller cuts by central bank around teh World, but has had little effect in confidence in the world's stock markets as shares have repeatedly fallen all week to make this week the worst for 21 years on Australian Markets.
Mr Mortgage said that the interest rate reductions would not solve the banks liquidity problems or the trust between banks that they will be repaid on funds advanced.
With so many failing institutions in the US and Europe the problem will take to work through.

PM supports banks not passing on the full rate cut

2008-10-08T14:41:00.000+10:00

Kevin Rudd supports tha banks not passing on the full cash rate reduction of 1% by the RBA yesterday.
According to Mr Mortgage there was an expectation by the RBA that the banks would not be in a position to pass on the full reduction, and that in his opinion was the reason for the anticipated 0.5% reduction being doubled to a 1.0% rate cut. So the mortgage belt should as a whole be well pleased with the outcome.
Where this will be enough to kickstart home buyers into making offers on homes in the near term remains to be seen.
I suspect that further cuts will be required to give new home buyers the confidence to move forward in this he feels.
Mr Rudd says he supports the banks' decisions this time, he has also urged them to pass on further cuts if conditions improve.
"As financial markets stabilise we expect the banks also to pass through the rest of the interest rates over time."
However, Mr Rudd conceded that his defence of the banks' position not to pass on the full cut to borrowers may be unpopular.
"My job, and sometimes it's going to be very unpopular, is to argue in defence of the stability of the Australian banking system," he said.
"That means making sure we get these decisions right."
Mr Rudd said "despite worsening global conditions there are strong grounds for Australia to remain optimistic about its economy but there must be a balance between a strong banking system and relief for borrowers."

Banks sidestep credit squeeze as business lending soars

2007-11-11T06:42:00.000+10:00

The five major Australian banks have shown resilience in the face of a global credit squeeze and reported combined cash earnings growth of 14.7 per cent in fiscal 2007, an industry survey found.
The PricewaterhouseCoopers (PwC) survey also predicts the major banks' underlying cash earnings will grow 11.2 per cent in the current financial year.
The study comes just hours after the last of the big Australian banks, National Australia Bank, reported a 4.2 per cent rise in net profit to $4.6 billion.
Mike Codling, PwC's banking and capital markets leader, said the big banks had side stepped the credit crunch.
"They haven't been exposed to any direct credit losses and because of their diverse funding base they haven't suffered much from the liquidity squeeze," he said.
In fact the major banks had worked themselves into a "sweet spot" by absorbing additional funding costs and keeping variable home loan interest rates on hold to win market share from smaller banks and non-banks, he said.
The major banks had also benefited from an uptick in deposits in a flight to quality, the PwC study concluded.
Recent volatility has seen investors fleeing equity markets, opting instead for the certainty and security of savings accounts with the larger banks, it said.
Mr Codling said the main driver of the banks' results in fiscal 2007 was the growth in lending volumes.
"Business lending has been a stand-out on the back of a very strong economy, with system growth at 23 per cent which we haven't seen for almost 20 years," he said.
Volume growth was partly offset by continuing margin compression, which was down by 10 basis points across the major banks.
Mr Codling said the continued decline in interest margins was largely due to the intense competition.
"But in the last few months the credit crunch has undoubtedly impacted the margins by driving up the cost of wholesale funding," he said.
However Mr Codling warned the credit environment was likely to turn down over the current year after a long benign period.
After rising interest rates and costs were weighed against full employment and a strong economy, it seemed likely credit losses would increase, he said.
"However they are coming off a very low base and what we'll likely see is a return towards more normal long-run averages.
"There are plenty of threats but there are also plenty of opportunities. I'd back the banks to have another strong year."
Source: AAP

RAMS sale to Westpac Bank fair value

2007-10-28T08:22:00.000+10:00

RAMS Home Loans Group Ltd has received independent expert approval for the fire sale of its franchise network, but its existing mortgage book remains in deep trouble.
The beleaguered non-bank lender has also revealed that its founder and chairman John Kinghorn, who made $650 million when RAMS listed earlier this year, was paid $80,000 in 2006/07.
Chief executive Greg Kolivos received a total remuneration of $625,000, which included a $200,000 cash bonus.
Westpac Banking Corporation Ltd's $140 million offer for RAMS' 92 branches, brand name, and all the future business it writes, was fair-value and in RAMS' best interests "given its current circumstances", a report by Deloitte Corporate Finance said.
As a further sweetener, Westpac on October 2 also agreed to provide RAMS with $1.5 billion to fund its existing mortgage book, which Westpac decided not to buy.
RAMS ran into trouble in August when the global liquidity freeze cut off more than $6 billion of funding that it sourced from the US extendable commercial paper (XCP) market.
Deloitte has valued RAMS' $14.6 billion loan book at between $213.7 million and $272.9 million, assuming RAMS can refinance its XCP programs.
This represents a value of between 60 and 70 cents per share.
But if RAMS can't refinance the programs, Deloitte has valued the book between $124 million and $152.6 million, representing a per share value between 35 cents and 43 cents.
RAMS shares closed one cent higher at 32.5 cents. They were offered in May at $2.50 each.
The firm confirmed that the $1.5 billion in funding from Westpac was conditional on RAMS forming a syndicate of lenders.
It also accepted it might not be able to find them by the time its XCP programs expire in February.
If it can't, RAMS said it will lose "all, or substantially all" of the economic benefit of the $6 billion plus worth of loans funded by the XCP programs.
As a double whammy, RAMS will also be obliged to pay trailing commission to brokers on those loans.
RAMS said it would be "optimistic" to believe that it could fund its loan book in residential mortgage-backed securities (RMBS) markets instead.
It also accepted that funding costs will be higher going forward, adding that XCP and RMBS market were still very hostile.
In its explanatory memorandum to shareholders, RAMS also revealed that it had tried all sort of ways to fund its mortgage book.
Market soundings for RMBS issues in the US and Europe fell on deaf ears.
Earlier this month, RAMS priced a $300 million RMBS issue in Australia, but it revealed the issue was planned at $1 billion.
RAMS also considered tendering the sale of all or parts of its business, but said such a move was "not deemed practicable in the circumstances and short time available".
Mr Kinghorn's $80,000 pay packet last financial year was the same as his pay a year prior.
Mr Kolivos was paid $570,000 in 2005/06 compared to his most recent pay packet of $625,000.
For 2006/07, RAMS booked a 49 per cent increase in net profit to $43.5 million.
RAMS shareholders will vote on Westpac's offer at the non-bank lender's annual general meeting on November 26.
Westpac, meanwhile, said it was happy with Deloitte's valuation of the franchise business of between $35.6 million to $167.5 million.
"I believe Westpac is well positioned to deliver a positive future for RAMS franchisees and employees," chief executive David Morgan said.
Source:AAP 2007

Analysts say any interest rate rise would stifle a much-needed recovery in housing investment

2007-10-23T06:45:00.000+10:00

All eyes will be on the Consumer Price Index (CPI) for the September quarter.
Any inflation spike could force the Reserve Bank of Australia's hand when the Board meets on Melbourne Cup day.
Meanwhile, the housing shortage brought on by a surge in migration is being cited as a major contributor to the official inflation result.
Economic forecaster BIS Shrapnel says any interest rate rise would stifle a much-needed recovery in housing investment.
BIS Shrapnel economist Jason Anderson says clearly not enough is being produced in terms of the rate of dwelling construction.
"There is a need now to articulate how governments are going to respond to an environment really which has changed very quickly in terms of that overseas migration and the population gain," he said.
"But it's now becoming much more important in terms of the outlook for inflation and we can't set aside yet as the temporary phenomenon.
"This is an issue that will be with us into the next couple of years at least."
Rental shortage
He says the rental shortage will continue to attract a lot more attention in the determination of the inflation number for some time.
"The real problem then is that any policy action to remedy or try and address the imbalance between supply and demand, will take quite sometime to come through, and in the meantime, there will certainly be an acceleration in rentals," he said.
"With that in mind, it's a difficult balancing act, I think, for the Reserve Bank, because it's contributing to acceleration in consumer prices, but on the other hand, any policy action will probably dampen still, the rate of dwelling construction and that of course then has feedbacks in terms of extending the imbalance between supply and demand."
He says depending on Wednesday's CPI result, the Reserve Bank decision is going to be very evenly balanced.
"I think there is a need to look at, obviously, the wider context in terms of consumer spending," he said.
"We have seen a reacceleration in terms of how spending growth.
"The housing market conditions, with the exception of Sydney, seem to have had life, new life breathed into them over the last six months and that would indicate that the impact of the rate rises that we had last year, obviously the evidence is yet to come through in terms of the August rise, have not been that substantial.
"So also when you add to that, the fact that the employment growth figures remain solid means that it's going to be quite a difficult decision."

Mortgage credit fears bite in Queensland

2007-10-18T18:11:00.000+10:00

Queensland real estate market changed personality last month, as buying a home becomes a more frightening issue for many Queenslanders.
That has led to an almost 21 per cent slump in the number of mortgages issued by Australian Finance Group, which holds about 13 per cent of the market.
It was the biggest slump so far recorded by AFG at a time when the market should be picking up.
Property analyst Michael Matusik now believes investors are the cause but he also believes share houses are about to get a lot more cramped as rents rise and people look to reduce the financial burden by bringing in boarders.
But he also thinks the capital gains of 15 per cent a year in some parts of Brisbane are at an end with probably half that expected for the present year.
Rising interest rates combined with the fallout from the US housing market and bad credit is creating nervousness, and with affordability already at historic lows it doesn't take much to change minds.
"We will see stop-start growth over the next 12 to 18 months as the world tries to figure out how it's going to cope with credit," Mr Matusik said.
He said investors were now finding it tough to get loans for 100 per cent or more of a property's value and that could mean dipping into their own pockets for things like stamp duty. Statistics also showed that many rental homes had one or more spare bedrooms and that was going to end.
"In the next 12 months renters will be forced to share. Spare rooms will disappear and then we will see another kick in the housing market," he said.
AFG's Mark Hewitt said fixed loans had also increased from 18 per cent in August to 20 per cent last month. He said last month's decline in mortgage sales was about double the normal September slump as concerns persisted over the global debt markets and the US subprime difficulties.
"On the positive side, we believe that the underlying market is very strong and these figures represent a blip rather than a change in direction," he said.
He added that this month had shown early indications of a small recovery.
In Queensland the average mortgage has gone up by 12 per cent in the past nine months to $318,000.Source: Courier Mail

Mortgage Lenders to go easy on borrowers in difficulty

2007-10-10T17:54:00.000+10:00

TheMortgage and Finance Association of Australia (MFAA) has introduced measures to encourage non-bank lenders, mortgage managers and brokers to assist borrowers in financial difficulty.
Under the new provisions, MFAA members can consider varying the terms of a loan repayment once they are aware that the borrower is having trouble meeting repayments.
Also, members can suspend action under the credit facility to recover due payments, and, if a default has not been listed already, the member can choose not to list a default against the borrower until the matter is decided.
MFAA also has urged its 13,000 members to consider encouraging borrowers to make payments they can afford.
"Essentially, our members must now consider whether it is appropriate to vary the terms of repayment on a loan once they are aware a borrower is in financial difficulty," MFAA chief executive Phil Naylor said.
Mr Naylor said about 55 per cent of all mortgages are written by non-banks, mortgage managers and mortgage brokers and it is appropriate that they assist borrowers who are in financial difficulty.
"It is crucial, however, that borrowers who are in some financial difficulty, to advise their lender or broker immediately to ensure the best result can be achieved," he said.
MFAA said that, under the credit facility, members must not require the borrower to apply for early release of their superannuation entitlements or to obtain funds from family, friends or other third parties, prior to the member considering whether to vary the payment terms. Source: AAP

Rogue mortgage broker found guilty of unconscionable conduct

2007-10-10T17:20:00.000+10:00

A mortgage broker has been found guilty of unconscionable conduct for writing loans a borrower was unable to repay, in a landmark decision expected to have far-reaching implications for the broking industry.
Federal Court judge Roger Gyles found Canberra mortgage broker Kelvin Skeers had engaged in "misleading and deceptive conduct" in writing a $360,000 low-documentation home loan for a 20-year-old man who was unemployed, dyslexic and homeless.
It is the first time a mortgage broker has been found guilty of unconscionable conduct for writing unjust loans, and the precedent could leave thousands of mortgage brokers open to action by the corporate regulator and state fair trading bodies.
According to a study by Fujitsu Home Loans released last month, 40,000 Australian households had been stung by "predatory lending" practices.
Those practices ranged from brokers lending to borrowers who were unable to repay loans, to brokers charging excessively high loan financing costs.
Yesterday's ruling follows a decision last week where Mr Skeers' employer Tonadale - trading as ACT Mortgages - was forced to pay $31,000 in compensation to the borrower.
The Australian Securities and Investments Commission is understood to be now pursuing criminal action against Mr Skeers. In yesterday's case, ASIC alleged Mr Skeers had misrepresented the borrower's financial position and misrepresented to the borrower what would be included in those loan application forms.
"This case highlights that unscrupulous conduct in the mortgage industry is not acceptable and that mortgage brokers can be held responsible," ASIC executive director of enforcement Jan Redfern said.
The unemployed borrower had inherited $240,000 and approached ACT Mortgages twice to borrow additional money to buy a home.
Mr Skeers arranged an initial loan for $360,000 and later a second refinancing loan for $400,000. Justice Gyles said the borrower was unable to repay either loan at the time.
Source: AAP

Westpac Bank throws RAMS a lifeline

2007-10-08T22:03:00.000+10:00

Westpac has bought the RAMS brand and franchise network of 92 stores around the country for $140 million - a fraction of what RAMS was worth when the company listed two months ago.
RAMS' share price crashed a month ago when the company revealed the United States credit squeeze was posing funding problems for some of its loans.
Analysts say while the deal would not be the first option for RAMS, it shows Westpac is confident of riding through the credit market crisis.
Good deal
The past two months for RAMS Home Loans have been disastrous.
Just three weeks after listing on the Australian Stock Exchange, its $2.50 share price had crashed to 55 cents.
The company revealed the United States credit squeeze was creating funding problems for $6 billion worth of its home loans.
But today RAMS has received a lifeline. Westpac chief executive David Morgan announced his company has bought the RAMS brand and its shop fronts and agreed to provide up to $2 billion to help the company's funding problems.
"I'm delighted to announce a significant transaction for Westpac, a transaction that expands our distribution reach and provides us with a new growth path," he said.
"On growth, we plan to introduce a broader range of products to complement the RAMS mortgage offering.
"This will initially include a broader set of mortgage products and items such as credit cards, personal loans and general insurance."
RAMS has 92 stores around the country, where customers can go in and purchase a home loan.
The brand is well recognised and the stores are in prime locations in both regional areas and capital cities. This is what a number of banks have been eying off for the past few weeks.
For $140 million, independent banking analyst William Ammentorp says it is a good deal.
"So the big thing is that branch network. A lot of the RAMS franchisees are small businesses operating in local communities," he said.
"They've been providing mortgages and getting people houses for a number of years.
"They pick up those shopfronts and it allows Westpac to perhaps sell Westpac product through those RAMS distribution outlets, but also the opportunity to have yet another outlet to sell through."
"I think Westpac commented it was a 10 per cent uplift in their branch network when this transaction settles."
Solid sector
Mr Ammentorp also says the deal could be a sign Australia has seen the worst of global credit market crisis.
"The larger organisations are doing very well," he said.
"They are very well-capitalised, very well-run, and in times like this it shows just the strength of the Australian banking sector.
"That's not to say there couldn't be difficulties. Northern Rock, the lines around Northern Rock with people withdrawing funds had absolutely no rational basis yet it happened.
"So I'm not suggesting it could happen here, but you never know what can happen in a marketplace.
"But certainly the Australian banking sector and Australian financial services are renowned around the world for being solid and very, very well-run."
The sale is now subject to shareholder approval and is expected to be finalised by January next year.Source: ABC

More mortgage pain ahead following credit issues in the US

2007-08-26T21:24:00.000+10:00

The CBA says mortgage rates to rise even if no RBA rise Non-bank lenders' rates likely to rise the most Australian stocks slumped almost 3% last week.
The nation's biggest home lender has warned that home-owners' mortgage rates will rise as the fallout from the US housing crisis continues to spread through global financial markets.
As the Australian stock market suffered another $48 billion plunge in value yesterday - taking its losses in the past three weeks to almost 10 per cent - Commonwealth Bank chief executive Ralph Norris said mortgage rates were likely to rise even if the Reserve Bank did not lift official rates.
Non-bank lenders most affected
Mr Norris said non-bank lenders - companies such as Bluestone, Wizard and Aussie Home Loans - would be more significantly affected by the credit crunch triggered by the crisis among poor-quality sub-prime home loans in the US.
He said the Commonwealth had no plans to lift rates, "but the market is driven by supply and demand, and if funding costs increase significantly, then we pass that on".
"The fact of the matter is the price of credit in the market internationally has moved, so there will at some stage be some increase in rates," he said.
"In regard to the level of those increases, non-bank lenders are going to be in a situation where they're going to have to pass on significantly greater increases than a bank like us."
Bluestone rates already raised above RBA rate
The Australian reported this week that Bluestone, hit by the higher cost of borrowing money to on-lend to its customers, had been forced to raise mortgage rates by 17-55 basis points.
Other lenders, particularly those offering low-documentation loans to customers with poor credit histories, are also likely to pass on the higher costs.
Aussie Home Loans' John Symond has warned rates will rise by about 0.25 percentage points.
And Mr Norris warned home-owners that he expected official interest rates to rise further after the Reserve Bank's increase of 0.25 percentage points last week to 6.5 per cent.
The sub-prime crisis continues to hurt international stock markets, with the Australian market, which took its lead from a falling Wall St, slumping almost 3 per cent yesterday.
The benchmark S&P/ASX 200 index, which yesterday fell 176.8 points to 5788 points, is down 9.9 per cent - just shy of the technical correction point of 10 per cent - since its record high of 6422.3 on July 24.
Aussie stock market falls
The Australian stock market, bolstered by the strength of its resources stocks, has in recent months been able to avoid following the big falls on Wall St.
But the Dow Jones Industrial Average is down just 7 per cent since the sub-prime crisis first broke three weeks ago, and in the past two trading sessions, the Australian stock market has suffered bigger falls than its New York counterpart.
Failures by mortgage lenders in the US, most of which were dealing in the riskier end of the housing market, have kept the US share market on tenterhooks for close to a month, and every day that provides a new financial hardship story pushes that market down further.
Investors in Australia's worst-affected hedge fund, Basis Capital's Yield Fund, were told yesterday by the fund's Sydney-based manager that they were now likely to lose more than 80 per cent of their money because of the sub-prime meltdown. Source: The Australian

Mortgage Broker sees credit crisis as an opportunity

2007-08-26T21:19:00.000+10:00

Mortgage broker Mortgage Choice sees ongoing concerns in global credit markets as an opportunity, rather than a risk to its business, the company's managing director Paul Lahiff said today.
The Sydney-based mortgage broker today reported a 9.7 per cent increase in net profit to a record $19.59 million for 2006/07, underpinned by an expansion of its business in states other than NSW.
Mr Lahiff said the result was achieved despite challenging market conditions.
"This result clearly demonstrates the strength of our national model," Mr Lahiff said.
"We were less reliant on what is currently a variable NSW housing market to provide the performance we were after.
"By contrast, Western Australia and Queensland have continued their strong growth off the back of the resources boom, while Victoria and South Australia performed in line with longer term historical trends.
"The results achieved underline the fact that Mortgage Choice has an extremely high quality, proven business model - one that is capable of delivering a sound performance even in challenging market conditions."
Mr Lahiff said ructions in financial markets stemming from problems in the US sub-prime mortgage sector had not impacted Mortgage Choice.
"We don't manufacture, we don't fund, we don't service the loans - that's the responsibility of the lenders.
"We don't have our own mortgage products which means we have no balance sheet or funding risk ... so (there's been) absolutely no impact from the events of the past few weeks."
Mr Lahiff said the company's role as a mortgage broker, rather than a lender, meant it would remain well insulated from any further fallout in credit markets.
"We don't have a direct exposure there because we don't have any funding or manufacturing capabilities ... there will be some waves that flow out from that (which) will inevitably touch us in some shape or form (but) we don't believe those to be significant.
"We also believe that while (some) organisations may tend to batten down the hatches, we see a good opportunity to go forward."
Mr Lahiff said the portion of "non-conforming" loans - the equivalent of a sub-prime loan - originated by Mortgage Choice was "incredibly low".
"The latest set of data (shows) that of the total loans that we booked, 0.67 per cent were non-conforming ... it's not a major part of our business," he said.
And while the ongoing global credit crunch is likely to impact on lending rates in Australia, chiefly in the non-bank sector, chief financial officer Tony Crossley said Mortgage Choice was in a position to take advantage.
"Essentially, in the short term, there's certainly upward pressure on interest rates ... the extent to which it's passed on is really a judgement call for the lenders," Mr Crossley said.
"From our point of view we think we are reasonably well placed to take advantage of any of that because (of our ability) to shift from one type of lender to another."
Mr Lahiff said that given the current environment, the company would "be alert to acquisition opportunities" but that organic growth would remain its chief focus.
"In this market, visibility, strong brand values, quality, consistency and track record are the keys," Mr Lahiff said.
"Lenders are increasingly basing rewards on quality, sustainability and performance." "We are confident that Mortgage Choice is well placed to achieve profitable growth in the coming year.
"Improved broker recruitment, an increasing commercial and retail office presence and through our invest-to-grow strategy, the ability to scale up the business will continue to be important going forward."
Mortgage Choice declared a final fully franked dividend of 8.5 cents per share, bringing the total ordinary dividend for the year to 14 cents per share.
Source: AAP

Interest rates, unemployment will soar under Labor, says Liberal funded report on workplace reform by Labor arch rivals Australian Chamber of Commerce

2007-08-12T18:06:00.000+10:00

A new report has warned that Labor's promise to abolish the Coalition's WorkChoices reforms if its wins government would push up mortgage interest rates and unemployment. Labor denies this as a false assumption, and the report is written by liberal pals ACC.
The Australian Chamber of Commerce and Industry (ACCI) commissioned the economic consultants Econtech to model the consequences if the industrial relations landscape of 1993 was restored.
Its study predicted that would result in a 1.3 per cent hike in inflation and interest rates would climb by 1.4 per cent, pushing up the average mortgage by $273 a month.
ACCI spokesman Peter Hendy says the axing of WorkChoices alone makes up a sizeable share of the predictions.
"You would see about a third of the results here, so a very, very significant impact on the Australian economy," he said.
Mr Hendy says the report also forecasts major job losses.
"If you reverse industrial relations reform, you will have a massive impact upon the job market," he said.
"There would be something like up to 316,000 jobs lost.
"We're sending a message to both major political parties that you cannot afford to roll back the industrial relations reforms we've had to date."
But deputy Opposition leader Julia Gillard has told Channel Nine the report does not make sense and is based on a false assumption.
"The key claim in it is that Labor's industrial relations system is somehow going to have pattern bargaining in it," she said.
The report is being officially released later today.
Source: ABC

Labor broadside at PM's mortgage rate blame game

2007-08-06T20:44:00.000+10:00

Labor has hit back at John Howard after he and Finance Minister Nick Minchin blamed the states for pushing up interest rates.
Ahead of an expected interest rate rise this week, federal Finance Minister Nick Minchin today said the Labor states were putting upward pressure on rates by accruing too much debt.
The Reserve Bank of Australia (RBA) is widely tipped to raise interest rates by one quarter of one per cent on Wednesday.
Senator Minchin said the Federal Government was minimising upward pressure on inflation and mortgage interest rates.
"Our fiscal policy settings are such that we are minimising the pressure on inflation and mortgage interest rates while we observe that the state Labor governments all going into deficit, racking up debts,'' he told the Ten Network.
"They're going to rack up $80 billion in debt over the next four years, so we are concerned about the extent to which state Labor governments are putting upward pressure on interest rates.''
Later, the Liberal Party launched an ad on internet video website YouTube called Labor can't manage money, attacking the states' escalating debt.
"Never forget, it is governments who borrow money and get into debt who put upward pressure in interest rates,'' the ad says.
Senator Minchin indicated he did not think the expected interest rate rise later this week was warranted, pointing out underlying inflation was running at 2.6 per cent.
"From our point of view, their job is to keep inflation between two to three per cent and that's where inflation is,'' he said.
However, National Australia Bank chief executive John Stewart today said he thought there was a 50/50 chance the RBA would lift rates this week.
Opposition Leader Kevin Rudd said Prime Minister John Howard and the Federal Government were trying to pass the buck.
"Mr Howard seems to now be saying that if there's a problem with interest rates in Australia, it's because of the states, it's because of anybody else apart from Mr Howard,'' he said.
"I find that a very interesting exercise in the blame game.''
West Australian Premier Alan Carpenter also accused the Federal Government of trying to shift blame ahead of the federal election.
"John Howard and Nick Minchin are asserting states are running deficits and that's affecting interest rates,'' Mr Carpenter said.
"It doesn't work that way.
"John Howard told people he'd keep interest rates down and he hasn't.
"So he's looking for people to blame - he's to blame.''
Senator Minchin today also responded to calls from the Real Estate Institute of Australia to double the first home buyers grant to $14,000 to give people a better chance of entering the market.
He said such a move would drive up housing prices unless state governments released more land for housing.
"I do caution against those advocating doubling it because that will end up just feeding into prices and no one will be better off,'' Senator Minchin said.
"The trouble with that is that it adds to demand.
"You would not want to double the first home owners grant unless you were sure there was going to be a supply response at the state level.''
Source: AAP

Subprime mortgage meltdown could hurt Macquarie Bank

2007-08-04T21:06:00.000+10:00

Australia's biggest investment bank, Macquarie, has become the latest local fund manager to confirm its potential exposure to the US subprime mortgage market. Two of its funds face losses of up to 25 per cent, or as much as $300 million.
Macquarie has made its name around the world for delivering big returns for investors.
That global reputation is a key selling point in Macquarie Fortress Investments (MFI), a retail arm managing high returns for small investors prepared to take a risk.
Some of that risk has been in the US mortgage market and last night, Macquarie told investors that two high-yield funds might be hurt by the widening crisis in subprime mortgage defaults.
In a statement to the Australian Stock Exchange last night, MFI director Peter Lucas said imbalances caused by a spillover from subprime defaults could mean losses of up to 25 per cent.
"While Fortress notes have no direct exposure to US subprime mortgages, the portfolio continues to be adversely impacted by price volatility in the US credit markets," a statement said.
Mr Lucas said while there was no reason to believe Macquarie would not be able to meet interest and principal payments, he was working to avoid a margin call when worried lenders call in their loans.
"As the market value of the portfolio has decreased further, it has become necessary for the investment manager to sell selected loans and apply the proceeds to reduce the leverage facility so that the loan-to-value ratio meets the applicable borrowing covenants," the statement said.
Macquarie's Fortress Investments joins two other Australian funds exposed to the US subprime crisis, Basis Capital and Absolute Capital, which have flagged potential losses over the past fortnight.
Wall Street losses
There was also more bad news at the subprime epicentre this morning.
The Dow Jones Industrial Average plunged more than 1 per cent in late trade after two home loan insurers said their billion-dollar stake in a subprime mortgage company might be worthless.
The late news caused a sell off in the banking sector, erasing earlier gains on Wall Street.
Still, market watchers like UBS senior economist Paul Donovan are continuing to focus on the fundamentals, such as a strong underlying US economy.
"It's essentially an issue of confidence - are investors willing to take risks or not?" he said.
But Mr Donovan says widening subprime mortgage defaults first need to be contained.
"If that spreads and we see lenders refusing credit elsewhere, it becomes more significant," he said.
Today's good news in the US was consumer confidence for June, which hit its highest level in almost six years.
But the next reading will be critical, and any sign that Americans are dramatically trimming household budgets on mortgage concerns could put a shadow across assurances that the world's biggest economy is in the best of health.

US credit market and subprime mortgage securities meltdown creates opportunities for scavengers

2007-08-03T20:55:00.000+10:00

Not everyone's afraid of the credit market meltdown. For some firms subprime slaughter has a whiff of opportunity to it. Now they're coming out to hunt.
They're working in scary territory. Tuesday analysts following insurance giant AIG calculated that the company might have lost as much as $2.3 billion from its holdings of securities backed by subprime mortgages. Macquarie Bank of Australia disclosed that two of its investment funds could lose up to 25%, or $300 million, of their value because of exposure to the market.
A third Bear Stearns fund had been closed to redemptions, a month after the bank, which happens to be among the biggest packagers of mortgage securities, shut down two of its other mortgage-laden hedge funds in June amid margin calls and redemptions.
Bear Stearns, whose shares were down more than 2% Wednesday and are at a 19-month low, also faces an arbitration suit by a 73-year-old investor who claims the firm misled investors about its exposure to subprime mortgages.
Still, it wasn't a complete bloodbath. Several firms came out to deny rumors of their imminent demise--Beazer Homes being one. The mortgage company denied it is approaching the bankruptcy abyss, refuting rumors that started after American Home Mortgage shares plunged 90% Tuesday when the company said it was having trouble getting funding.
Caxton Associates, an $11 billion New York hedge fund firm, said Wednesday that contrary to rumors on the Internet, its flagship fund is up 3.2% for the year after fees. Caxton did say the fund was down 3% in July and that it had moved to reduce its value-at-risk (how much it could lose at any one time under certain market conditions) to 0.5% of capital.
Caxton president Peter D'Angelo wrote in a letter to investors Wednesday that circulated on the Internet, "We believe that this market change will continue to provide renewed opportunities in the macro trading environment."
He's not the only one to think this subprime meltdown may lead to profits. Several funds specializing in buying up distressed debt are swooping in, hoping the paper was written down to artificially low levels and will rebound once investors regain their sea legs.
Citadel Investments, the Chicago hedge fund, bought the credit portfolio of Sowood Capital earlier this week after the troubled fund ran into problems with the repricing of assets in the subprime sector. Marathon Asset Management, a $9 billion New York fund firm, is said to be setting up a distressed subprime fund, seeing "significant" opportunity in the sector. Another fund that specializes in distressed assets, Harbinger Capital, is thought to have logged double-digit gains in July.
Official performance figures for hedge funds will be released next week by Hedge Fund Research, the Chicago firm that keeps track of the industry.
Fund managers who had sold short the shares of mortgage lenders and other financial firms over the last few months have also made money.
Charles Gradante, research director at the Hennessee Group, which advises clients on hedge fund investments, said many long/short hedge funds had earmarked 5% to 10% of fund assets to be short the lenders and the subprime index since last year. The group is up 9% year to date, one-third of that gain attributable to making the right bet on subprime.
But most funds aren't crazy enough to risk buying up the distressed debt and riding out the market, Gradante says.
Many hedge fund managers have been moving to cash until the panic subsides. "The fundamentals are still good, but the big unknown is how much the panic is building up," he says. "It's like a kettle with steam. You just don't know when it's going to blow."
On Wednesday, Fitch Ratings affirmed $20 billion worth of residential mortgage backed securities and downgraded $2.4 billion. It has been reviewing 170 deals, about $7 billion worth, and will be announcing its ratings action over the next two weeks. This first $2.4 billion batch was what was considered the worst performing of the 170 deals.
Credit markets have seized up in the last few weeks after a record first half of the year, when $452 billion worth of leveraged loans and $98 billion of high-yield bonds hit the market, according to Standard & Poor's. The average quality of those new issues was lower than in the same period last year--about 48% of it was rated B-minus or below, compared with 32% of new issues in the first half of 2006.
But some point out that the credit markets are not so much in severe distress as they are coming down off remarkably good times. Spreads between Treasurys and speculative grade credit are 417 points. But the longer-term average is more like 450 points, according to S&P, meaning spreads have a way to go to meet the average.
The widest spreads came after the dot-com bubble burst, when speculative grade credit traded at 1,000 basis points or more over Treasurys. "The market needed to be prepriced," says Diane Vazza, managing director of fixed income research at S&P. "But you can argue that the market has gone too far the other way, and we would say that is the case."Source: Forbes.com

APRA to change rules that will hurt fist home buyers and low income earners buying a home according to Mortgage Insurers PMI

2007-08-03T17:25:00.000+10:00

APRA may change the rules for first time home buyers and low-income borrowers making them pay a higher interest rate as a result of new capital rules announced by APRA, Australia's financial services industry regulator, according to one of Australia's two providers of lenders mortgage insurance, PMI.
PMI Australia chief executive Ian Graham condemned the proposed changes announced by APRA on Monday, which reduce concessions for the amount of regulatory capital required to be held by lenders in support of home loans protected by LMI cover.
With less incentive to use LMI, lenders were likely to lift interest rates for the more disadvantaged borrowers, Mr Grahame said.
The changes to the capital rules governing home loans from banks, building societies and credit unions are part of the so-called Basel II accord.
Basel II aims to harmonise principles governing regulatory capital and how lenders manage risk, with the overall objective of reducing volatility in the global financial system.
Mr Graham said PMI was concerned that the Australian Prudential Regulation Authority had taken a too narrow view of the proposed changes.
Source: The Australian

Macquarie bank stocks fall in credit confidence loss due to US subprime mortgage crisis

2007-08-02T07:24:00.000+10:00

The stocks of Macquarie Bank have fallen over seven per cent after it revealed last night that two of its funds faced losses related to the US sub-prime mortgage crisis of up to 25 per cent.
The listed Macquarie Fortress Notes fund has about $140 million of investors' money and the unlisted Macquarie Fortress Fund has about $80 million.
Neither fund has direct exposure to US subprime mortgages, but both have been hit by price volatility in US credit markets triggered by the sub-prime crisis.
Macquarie said it had been forced to sell some of the loans in the portfolio in a subdued market after receiving margin calls on the funds, which are highly geared at six to seven times.
The average price of assets in the two funds fell four per cent in June.
"We expect the impact of the price declines in July to result in a further deterioration in NAV (net asset value) for 31 July 2007 of approximately 20 to 25 cents,'' Macquarie said last night.
Source: Courier Mail

ABN AMRO pulls back from Barclays bid

2007-07-30T21:19:00.000+10:00

Major World and Dutch bank ABN AMRO has withdrawn its backing of a takeover bid from Barclays and said it was no longer formally recommending offers from the British bank or a Royal Bank of Scotland-led consortium.
The Netherlands' biggest bank, which faces competing offers of 65.6 billion euros ($A105.56 billion) from Barclays and 71 billion euros ($A114.25 billion) from the consortium of RBS, Fortis of Belgium and Spain's Santander, also reported a 7.1 per cent decline in quarterly net profit.
ABN originally backed Barclays when announcing a deal to merge with it in April.
But it has now effectively withdrawn its recommendation even after Barclays sweetened its offer to buy ABN last week to include more cash.
ABN's boards - the supervisory board and managing board - said they were currently not in a position to recommend the offers from Barclays or the consortium.
"ABN AMRO will further engage with both parties with the aim of continuing to ensure a level playing field and minimising any of the uncertainties currently associated with the offers with a view to optimising the attractive alternatives available to ABN AMRO's shareholders," ABN said in a statement.
Barclays' offer is formally conditional on a recommendation from ABN, but sources have told Reuters that it was unlikely to pull out of the race as a result of the move, and could instead revise that requirement.
ABN's fate would be decided by shareholders, who would tender their shares to either bidder after formal offers are launched.
The RBS-led offer, which would result in a break-up of ABN, is more than 90 per cent in cash and adds up to 38.1 euros per ABN share at current market prices - against Barclays' bid at 34.7 euros per share.
Barclays sweetened its offer with a cash portion, as China Development Bank and Singapore's Temasek took stakes in the bank, but its offer remains mostly in shares, and therefore vulnerable to recent market turbulence.
ABN reported a net profit of 1.13 billion euros ($A1.82 billion) in the second quarter, compared with 1.216 billion euros ($A1.96 billion) a year earlier and the 1 billion euros average forecast in a Reuters survey of five analysts. The figures excluded discontinued operations.
Source: AAP and Reuters

Housing supply research and data collection proposed

2007-07-29T20:39:00.000+10:00

A housing supply research council would be established if Labor wins power in the upcoming Federal election, a summit in Canberra was told today.
"The whole objective there is simply to provide better data for us all because we think that is the best way which you can shape public policy into the future," Labor Leader Kevin Rudd told the ALP-organised meeting.
The council would include representatives from state and territory governments, local government, Treasury, Reserve Bank, the housing property and finance sectors, welfare and community housing sector, as well as relevant research institutes.
"We want the best brains around to get the total data picture right," Mr Rudd said.
He said he did not want the summit to become an opportunity to blame the Government for problems in housing affordability.
"We would like to try and do what we can, through this summit today, to get the housing affordability question right," he said.
Property experts, economists, academics and business leaders joined state housing ministers at the conference inside parliament house today.
"Most of us accept the proposition that we do have a housing affordability crisis in the country," Mr Rudd said.
Mr Rudd said those attending the summit had to consider both demand and supply factors that were affecting housing affordability.
Supply issues included the impact of taxes, charges and levies.
Other factors included local government infrastructure for new housing developments, streamlining development approval processes, attracting investors to the affordable housing sector, and dealing with other cost pressures such as the skills shortage.
"On the demand side, of course interest rates are the topic of the day," Mr Rudd said.
The summit will also consider the best way to help first-home buyers enter the market, including a proposal for a deposit scheme.
Mr Rudd said more than one million households were in housing stress through rent and mortgages.
The number of first-home buyers as a proportion of all property purchasers had fallen from 22 per cent in 1996 to about 17 per cent today.
"All these indicators ... point to the fact that we have an emerging housing affordability crisis," Mr Rudd said.
The crisis was exacerbated by the 187,000 people on public housing waiting lists, he said.
Acting NSW Housing Minister Linda Burney she said issues like negative gearing needed to be considered but there were other more pressing issues.
"The more important thing for us today is to make it very clear that the way in which state and commonwealth relations have operated over the past 10 or 11 years is unsatisfactory," she said.
The Victorian and Northern Territory ministers agreed negative gearing should be discussed at the meeting.
"There are a number of proposals that have been floated around tax treatment, both negative gearing and some incentives for superannuation funds to get involved," Victorian Housing Minister Richard Wynne said.
"Those options should be considered."
Source: AAP

Wespac Boss says the big banks need scale to compete globally

2007-07-26T20:39:00.000+10:00

Wespac Banking Corp chief executive David Morgan says Australia' so-called 'four pillars' banking policy is a 'woolly mammoth" that is creating a problem for the domestic economy.
Dr Morgan says it's time for the federal government to abolish the policy, which prevents the top four banks - Westpac, ANZ, National Australia Bank and Commonwealth Bank of Australia - from merging.
"While everyone else is getting on with life in the marketplace, the banks are commanded forever to be blocks of concrete or marble - or salt," he said.
"It's the 'Lot's life' banking policy," Dr Morgan added, referring to the story of Lot in the Bible.
"Set against banking consolidation worldwide and the globalisation of services, the policy is an anachronism, a woolly mammoth dug from the Siberian tundra and shipped still frozen to Australia as a structure for banking."
Mr Morgan said the banks were arteries of the Australian economy.
"And who wants pillars for arteries," he said.
"To put it bluntly, the Australian majors need scale to compete with global banks that are a growing presence here."
Dr Morgan, who will retire from the bank later this year, was speaking at a Trans-Tasman Business Circle lunch in Sydney.
To a question from the audience, Dr Morgan said he was more confident than he had ever been that the four pillars policy would be abolished.
"I think there is a reasonable chance that in the life of the next parliament, that policy will be relaxed," he said.
Dr Morgan was a senior official of the Federal Treasury before joining Westpac.
Source: AAP

August rate hike tipped due to increased inflation and housing sales increases

2007-07-26T16:42:00.000+10:00

Mortagge rates could be on the way up again as soon as August, presenting Prime Minister John Howard with fresh political problems as housing affordability takes a tumble.
New inflation figures released yesterday came in at a higher than expected 1.2 per cent for the June quarter, sparking fears of an imminent rise. Annual inflation sits at 2.1 per cent, which is toward the bottom of the Reserve Bank's target range.
But the size of the increase - caused mainly by higher petrol and food prices, as well as rising rents - was likely to concern the bank's board.
Most economists agreed the price volatility would prompt a rates rise at the RBA's August meeting.
Mr Howard, who today celebrates his 68th birthday, suggested there was no need for an increase.
"What I'm saying to you and what is obvious is that it (inflation) is still well within that range,'' he said.
Home Buyer affordability to decline
A quarter of a percentage rise would push up the monthly loan repayment on a $300,000 mortgage by $50.
The increase would also be expected to flow through to the rental market .
Shadow treasurer Wayne Swan seized on the new inflation figures to warn householders were under growing financial pressure and the future was looking bleak.
"Apart from the possible implications for interest rates, mums and dads around the country will be concerned that the cost of the basics are going up and up,'' Mr Swan said.
The new inflation figures show in the three months to the end of June petrol prices rose 9 per cent, vegetables 6 per cent, rent 1.6 per cent while the cost of travel and computers fell.
The broad inflation rate of 1.2 per cent for the June quarter, and the core rate of 0.9 per cent, was well beyond market predictions.
Pain in the mortgage belt.
A rate hike could not come at a worse time for the Government as it struggles to peg back Labor's runaway lead in the polls.
Labor has made political capital out of declining affordability, including in the private rental market, and from the increasing cost of living.
Rental prices increased across all capital cities by 1.6 per cent, driven by continuing low vacancy rates.
Renewed speculation of an imminent interest rates rise dovetails conveniently with Opposition Leader Kevin Rudd's housing summit in Canberra today.
Labor remained tight-lipped yesterday on the possible outcomes of the meeting, which it says will examine the factors leading to higher prices and a lack of affordable rental housing.
Call to slash stamp duty
Treasurer Peter Costello called on the states to cut stamp duties on homes and release more land.
"Young homebuyers are paying more (stamp duty) than ever before . . . I expect an agreement to come out tomorrow from the Labor states to cut stamp duty,'' Mr Costello said.
Source: The Advertiser and The Courier-Mail

Former Queensland property marketeer is broke

2007-07-24T17:01:00.001+10:00

Former property marketing tsar Chris Bilborough has been declared bankrupt after a tussle with the Australian Taxation Office.
Mr Bilborough, 41, was a key figure in the Gold Coast property industry in the late 1990s – but had run-ins with regulators and politicians.
He has recently been linked to a property deal involving a company of former Australian Test cricketer Craig McDermott.
He said he had been hit with a $1.2 million bill from an initial $350,000 tax assessment.
He said he offered a $500,000 compromise. "They rejected it," he said.
A federal court in May ruled against attempts to seek a review of the ATO's rejection of the compromise for a bill stemming from a 1997 tax assessment.
In August, the ATO rejected the compromise for reasons including a lack of information to support his claims of an inability to fully repay tax debts.
Mr Bilborough was a director of companies, including National Asset Planning Corporation and Markfair (trading as Investlend Australia), which were involved in property sales to interstate investors. Markfair offered financial advice.
He was named in Parliament several times since 1998, on one occasion accused of being behind "scams".
Fair Trading Minister Margaret Keech said last December her office had recovered $240,000 from Mr Bilborough.
Mr Bilborough yesterday pointed out one of his critics – former fair trading minister Merri Rose – had been jailed over blackmail but he would not answer queries about other politicians' comments.
He has fought some actions by regulators. He previously said he was "cleared of selling any overpriced properties" in a federal case.
In 2005, The Courier-Mail revealed his involvement in a firm promoting a planned Warwick estate.
The Courier-Mail on Saturday reported Markfair was named in a 2004 court action over the sale of a property from McDermott Projects (Nut Tree Grove) Pty Ltd, in which Mr McDermott was a director.
The documents contained allegations from the buyers' lawyers of unconscionable conduct, and that Markfair and/or marketeers Asset Management Group were agents and/or joint venture partners for McDermott Projects.
Mr McDermott said he was unaware of the case, or any link with Markfair or Asset Management Group. No defence was filed and the action was abandoned.
Source: Courier Mail

Former Queensland property marketeer is broke

2007-07-24T17:01:00.000+10:00

Wide Bay Building Society makes offer to buy MacKay Permanent Building Society

2007-07-24T16:43:00.000+10:00

Building society Wide Bay Australia has launched a $46 million takeover offer for MacKay Permanent Building Society.
Wide Bay is offering Mackay shareholders $7.20 cash per share plus a fully franked dividend of 80 cents, or 0.6 of a Wide Bay share plus the 80 cent dividend.
"The combination of Wide Bay with Mackay Permanent would enhance our position as the largest financial institution based in fast growing Wide Bay, Central and North Queensland," Wide Bay chairman John Pressler said.
Bundaberg-based Wide Bay said it had already secured approval for its takeover proposal from 14.07 per cent of Mackay's shareholders.
In addition, Wide Bay currently has a 1.58 per cent holding in Mackay.
The acquisition is expected to be earnings per share accretive in the first year, Wide Bay said, and will be funded through existing facilities.
Wide Bay currently has 36 branches, with 34 of them in Queensland, and has total assets of $1.7 billion.
By 1036 AEST, Wide Bay shares were up 16 cents to $12.45. Mackay shares resume trading at 1100 AEST on Tuesday, having last traded at $7.
Source: AAP

Mortgage brokers and the mortgage industry targeted as the problem behind home loan defaults

2007-07-19T18:10:00.000+10:00

Innovative MortgageBrokers, Mortgage Funders and the mortgage industry generally seem to be targets of a Howard Government inquiry, with recommenadations that home buyers be required to put up a deposit of 20 per cent. This would mean the end of first home buyers.
The parliamentary economics committee has called the snap inquiry into home lending as the number of people defaulting on mortgages continues to rise.
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. [But no mortagge managers or mortgage brker groups who make up a growing part of the distribution of home loans.]
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.
"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: AAP

Mortgage and personal credit slowdown tipped as Australians are at "debt capacity" according to the Commonwealth Bank

2007-07-16T20:21:00.000+10:00

Commonwealth Bank chief Ralph Norris says Australia's debt-laden household sector had reached its capacity for debt and a slowdown in borrowing is expected for personal finance, including credit cards, persoanl loans and mortgage home loans.
Mr Norris said hopes his business banking division will counter an expected slowdown in personal lending over the next year.
Speaking at a business lunch in Melbourne yesterday, Mr Norris said Australia's debt-laden household sector had reached its capacity for personal loans.
"If you look at the capacity for people to borrow, it's obviously getting to very high levels of capacity and I think there will be a tempering of demand in regard to personal lending," he said. "We have reached capacity for people to borrow which would see them start to reduce their appetite for additional borrowing.
"So we'll see a slowing in growth for personal lending and an increase in growth for business lending."
Since Mr Norris took over the reins of the bank in September 2005, one of his priorities has been to improve CBA's share of the business-lending market.
Rival major banks and niche lenders have eroded CBA's business customer market share from 22 per cent to 13 per cent in the last decade.
One of the big changes Mr Norris has made has put business bankers back into branches.
Despite the bearish outlook , the Australian Bureau of Statistics yesterday released data showing that personal finance commitments rose by 2.2 per cent in May.
On a seasonally adjusted basis, the value of personal lending reached $6.7 billion -- slightly above the trend figure of $6.6 billion.
The ABS said the rise was driven by a 5.6 per cent increase in revolving credit, which included credit cards and overdrafts, offsetting a 1.4 per cent decline in fixed-term loans.
CommSec equities economist Martin Arnold said the rise in personal finance indicated that consumers still had confidence in their financial position.
He noted monthly changes in lending finance figures were often volatile and best viewed over a longer period.
He said the rise in personal finance in May consolidated falls in the previous months.
Personal finance commitments dropped by about 0.5 per cent in April and 0.6 per cent in March.
Mr Arnold said commercial finance picked up during May as the robust business environment encouraged companies to invest in construction projects and the property market.
"Business lending makes up over 60 per cent of total lending, so it is an encouraging sign for future growth that businesses continue to expand their working capacity," he said.
Source: AAP

Becton Property Group to buy real estate assets of failed real estate investment group Fincorp

2007-07-16T13:44:00.000+10:00

BectonProperty Group will acquire the property portfolio of collapsed funds manager and property investment firm Fincorp, after its offer was accepted by administrators KordaMentha.
Becton will acquire nine of the 10 Fincorp properties and invest up to $170 million to acquire a 10-year development pipeline, valued at more than $470 million.
The portfolio includes residential, retirement and commercial development sites and assets.
It includes the high profile Mernda town centre development site, 18 kilometres north of Melbourne.
The Sydney-based Fincorp went into administration in March owing its investors $201 million and its bank lenders a further $95 million.
The investment firm has more than 8,000 investors, whose average age is around 60.
As part of Becton deal, Fincorp investors will have the right to a cash out price of approximately 50 cents for each $1.00 originally invested in Fincorp.
They will also have the right to reinvest those proceeds in Becton's Office Fund at an effective price of approximately 55 cents for each $1.00.
The fund is a passive fund holding completed office properties.
In March, the administrators told aggrieved investors they could only expect to claw back 30 cents in the dollar.
Becton chief executive Hamish Macdonald said he hoped Fincorp investors would remain with the managed office fund.
"We believe that our offer provides significantly more value to Fincorp investors than would have been otherwise available from a straight liquidation,'' Mr Macdonald said.
"In this case, we were able to offer a significant 10 per cent premium to Fincorp first ranking/secured noteholders and have also provided a three-year capital guarantee if they choose to reinvest in the Becton Office Fund.''
The Fincorp portfolio includes two retirement village sites under development with a total of 379 dwellings in Hervey Bay and Mackay, Queensland.
As well, in Victoria, the portfolio holds a shopping centre site, the mixed-use site in Mernda and a completed bulky-goods property in Warrnambool.
Mr Macdonald said the acquisition will be earnings accretive for Becton from year one.
"The earnings accretion will be generated by the incremental increase in recurring earnings,'' he said.
"The development profits from the acquisition will strongly support our stated objective of producing $25 million of earnings before interest and tax per annum from our development and construction business.''
AAP

Are property prices, demand and mortgages to be driven by DIY superannuation?

2007-07-15T18:13:00.000+10:00

Far from depressing the property market, the changes to super might just spur it along.
Already real estate is picking up in Brisbane, Melbourne and even in the inner city and top end parts of Sydney, a victim of past excesses, and also a growth in mortgage loans.
As far as I can gather, DIY super funds were being topped up as much by flicking share portfolios as flogging investment properties. In any case, if the super changes really were a problem for property, they won't be after Saturday.
The question is no longer when property prices will recover but how high they'll go. That alos applies for mortgages.
Is this the start of a new boom? Not if you believe economists. But I'm not so sure. Perhaps they need to look at the recent speech by the governor of the Reserve Bank, Glenn Stevens. You would have heard all about his hint of an interest rate rise in a few months, but it was his comment about the property market that was the real eye-opener.
He said: "The number of dwellings being built looks to be below what is normally thought to be underlying demand arising from population growth and household formation."
In Reservespeak, they're fighting words. He's saying there's a shortage of housing and developers should get on with it.
Demand is outstripping supply because of soaring wages, job growth and a pick-up in immigration.
Stevens went on to explain how difficult this shortage of housing will be to fix because the economy is running at full capacity: labour and materials to build houses will have to come from mining or infrastructure.
The point is for that to happen, construction costs would soar, which can only boost the value of existing properties.
Meanwhile, rents are rising because vacancy rates are the lowest in a lifetime, and the sharemarket is distinctly pricey, so all those cashed-up DIY super funds would have to be running the ruler over real estate.
Source: Sydney Morning Herald

Lowering credit statndards may create difficulties for some new home buyers

2007-07-14T14:11:00.000+10:00

It is easier for homebuyers looking for a loan, but if things go wrong it can go hard on new home buyers struggling wit home repayments.
Australians taking advantage of fast easy cash loans are also risking increasing debt and insolvency.
Despite low unemployment figures, economic growth and high consumer confidence, personal bankruptcies went up by 17 per cent in the 2006-07 financial year.
David Tennant, chairman of the Australian Financial Counselling and Credit Reform Association, said more ordinary Australians were finding it difficult to make ends meet.
Over the last six months his Care Financial Counselling Service has recorded a ten per cent rise in people needing assistance.
"The debt explosion is not because people are necessarily leading an extravagant lifestyle it is because it has become much harder for ordinary households to make ends meet.
"The deeply disturbing trend ... is a subtle shift from low-income to now medium-low income households simply not having enough money to have the basic lifestyle."
Mr Tennant said it was a relief that housing affordability was now a national issue because his group had been trying to draw attention to it for years.
A spokeswoman from consumer advocacy group CHOICE said a drop in house prices also had inadvertently put borrowers in the red.
"It's very disturbing when people sell their house and still can't reach payments for the outstanding mortgage," she said.
"There is a huge amount of individual responsibility required but it is also very hard when people are presented with all these finance opportunities. People don't think something bad is going to happen and then someone falls ill or a car repair is required.
"Australian consumers are under a lot of pressure to buy homes, to have a family home. They are told they can have a dream home. It is good to have confidence but you can't extend yourself."
The spokeswoman said there were grave concerns with fast loans when there was only limited testing of borrowers' ability to pay.
Bob Cruickshanks, deputy officer receiver for the Insolvency and Trustee Service Australia, said financial institutions were relaxing their means tests because of greater competition.
"Super funds are awash with cash and when you look around in Sydney there aren't really big projects absorbing it, so there is more money available and greater competition for the smaller finance companies to compete for borrowers.
"But the Department of Fair Trading has been like a hawk stamping out dodgy credit companies," he said.
Source: AAP

Mortgage rip off victims of Sample & Partners can claim compensation. Here's how.

2007-07-09T20:01:00.000+10:00

A court ruling has found that Sample and Partners, a mortgage broker in three States misled borrowers on debt reduction schemes.

Sample and Partners, a mortgage broker exposed by "Money" for charging borrowers thousands of dollars in fees for a mortgage reduction scheme involving high-interest line-of-credit loans, may have to compensate borrowers following a court action.

But the NSW Consumer Credit Legal Centre's principal solicitor, Katherine Lane, says the mortgage broker should have been fined so a compensation fund could be established for borrowers. She says it is disappointing victims have to make a claim against the company in order to obtain compensation.

Federal Court orders obtained last month by the Australian Securities and Investments Commission found that George Matthew Sample (known as Matthew Sample) and Craig Kenneth Turrell deceived and misled borrowers about their mortgages and how quickly those loans could be paid off.

The court finding followed a three-year investigation by the regulator. Matthew Sample is principal and managing director of Sample and Partners, while Craig Turrell is general manager of the mortgage broking firm, which has offices in Sydney, Melbourne and Brisbane.

The scheme came with high fees and charges for line-of-credit loans that Sample and Partners promised could be repaid faster than a standard variable home loan.

Carolyn Bond, the co-chief executive of the Consumer Action Law Centre in Victoria, says: "Action by the regulator means that the industry is cleaning up its act a bit. You see less and less of these sort of loans on offer."

Bond says borrowers who were misled are entitled to compensation. "There's no reason why you shouldn't get funds covering fees and interest charges back."

ASIC's executive director of enforcement, Jan Redfern, says the court case sends a clear message to other mortgage brokerage firms marketing mortgage reduction schemes or line-of-credit loans that come with promises that the debt can be repaid quicker than debt on a standard, variable interest-rate mortgage. "It sets out clearly what we have found to be problematic or objectionable behaviour. The company has had to make undertakings to make good," she says.

The investigation by Money found interest rates on Sample and Partners' brokered home loans that were 0.6 to 1.5 per cent higher than a basic home loan. Fees for the debt reduction scheme ranged from $3000 to $8000 and involved line-of-credit loans.

After paying the high fees the original debts were enlarged and, coupled with higher interest rates, could not be paid off faster.

Unlike standard home loans, which require principal and interest repayments to reduce the debt, line-of-credit loans require interest payments only.

Lane says ordinary families have a lot of trouble paying off line-of-credit loans.

"At least with a normal home loan, it is forced saving. You have to make repayments. Five years after signing up for a line-of-credit loan you might not have paid anything off the loan," she says.

ASIC alleged that Sample and Partners' sales staff told borrowers that by switching to a Sample and Partners' loan they would save money and pay off their home loan sooner.

"But they failed to adequately explain that to obtain this benefit clients would need to make extra repayments," ASIC said in a statement released after the court's finding.

The court heard that Sample and Partners also used case studies that referred to people who had switched to Sample and Partners loans and saved money. These people did not exist.

The Sample and Partners brokers told borrowers they searched the market for the best possible loan when, in fact, they offered a limited range of home loans. Some borrowers also ended up with loans from a company called World Home Loans. Matthew Sample did not tell borrowers he was a director of Sample and Partners and a director and shareholder of World Home Loans Pty Ltd and World Home Loans Administration Service Pty Ltd.

The court declared the mortgage broker told clients that before they refinanced, it would consider their financial circumstances and whether or not they would benefit from changing loans.

Sample and Partners also told clients it had expertise to offer insurance advice and employed specialist staff including financial planners and solicitors when it did not.

The mortgage broker must write to all former clients within 30 days (of June 18) and tell them of the court order, and it must provide borrowers with documents to help them make a claim against the firm.

ASIC's Redfern says the court order includes the appointment to Sample and Partners of an independent compliance officer, who will monitor their handling of claims. The compliance officer will also report to ASIC on whether Sample and Partners is complying with the ASIC Act with regards to future clients.

The court orders prohibit Sample and Partners from engaging in this conduct in the future.

Sample and Partners agreed to the orders, which also involve the payment of ASIC's costs of $200,000.

"Choosing a home loan is likely to be one of the biggest financial decisions a person will make," Redfern says.

"Mortgage brokers, who are often relied upon to facilitate and help people through this process, have important responsibilities to ensure that the information they provide is accurate and truthful."

Sample and Partners' director of corporate services, Michael Crouch said in a written statement that "as a company we look forward to working with all regulators both state and federal to ensure ongoing compliance in our industry".

How to make a claim
The Consumer Action Law Centre in Victoria and the NSW Consumer Credit Legal Centre will help borrowers make a claim against Sample and Partners.

Their lawyers believe that borrowers should be able to mount a case to have fees and charges as well as high interest payments returned.

The only way to reduce a home loan faster is to make extra repayments - paying off as much as you can, as often as you can, on a low interest loan.

For help, phone the Consumer Credit Legal Centre in NSW on 1800 808 488 or in Victoria, phone the Consumer Action Law Centre (03) 9629 6300. For the court declarations on the case, visit ASIC's website at www.asic.gov.au.

ANZ bank buys 10% stake in Vietnamese bank

2007-07-09T18:56:00.000+10:00

ANZ Banking Group Ltd has continued its widespread geographical expansion in Asia, acquiring a 10 per cent stake in Vietnam investment bank Saigon Securities Incorporation for $US88 million ($102 million).

It is the second acquisition in Vietnam for Australia's third largest bank, which took a 10 per cent stake in retail bank Sacombank in the market in 2005 for $US27 million ($A31.52 million).

Established in 2002, Saigon Securities is Vietnam's largest broker, holding a 27 per cent slice of the market.

It provides broking and investment banking services like corporate advisory, financing and research to more than 30,000 customer accounts.

ANZ set up its first ANZ-branded Vietnamese branch in Hanoi in 1993 and opened a second branch in Ho Chi Minh City in 1996.

Both continue to cater to Australian travellers and businesses coming into Vietnam.

"ANZ was one of the first foreign banks to open in Vietnam and regards expansion in the country as one of its highest priorities," ANZ said.

ANZ and Saigon Securities had already been cooperating for some time on corporate bond issues for large Vietnamese companies, buoyed by a Vietnamese economy that has averaged GDP growth of more than 7.5 per cent in the last five years.

ANZ has made no secret of its plans to expand into Asia.

Outgoing chief executive John McFarlane said in April ANZ's acquisition priorities lay in Asia because opportunities were limited in Australia.

In November 2006, ANZ paid $383 million for an initial 13.5 per cent stake in Malaysia's fifth-largest bank, AMMB Holdings Berhad.

That same month, ANZ disclosed that it had acquired a 19.9 per cent interest in China's Shanghai Rural Commercial Bank (SRCB) for $328 million.

In March this year, ANZ took a 60 per cent stake in a Laotian bank.

ANZ has announced its intention to expand its international franchise in Malaysia, China, Guam and Laos.

ANZ also is interested in India and Thailand.

ANZ rival Commonwealth Bank of Australia Ltd is also active in the region, currently holding interests in the Hangzhou City Commercial Bank and Jinan City Commercial Bank in China.

It also has an Indonesian subsidiary, PT Bank Commonwealth.

Source: AAP

Property Investors stand to lose half a billion dollars

2007-07-07T19:28:00.000+10:00

18,000 investors stand to lose half a billion dollars.
Many Bridgecorp investors knew of risks: analyst (AM) Related Story: Bridgecorp collapse a 'wake-up call' for financial services With the full extent of this week's collapse of the Bridgecorp property group yet to become apparent, it has emerged that many investors were at least partly aware of the company's problems and knew the risks they were taking.

Investment analysts in New Zealand had long regarded Bridgecorp as a ticking time bomb - simply because its troubled property ventures particularly in Australia and Fiji have been disclosed in prospectuses.

But about 18,000 investors on both sides of the Tasman who did not heed the fine print now stand to lose half a billion dollars.

One veteran analyst who had flagged the Bridgecorp risk is Brian Gaynor of Milford Asset Management, and he spoke with our business editor Peter Ryan.

"A lot of investors were very much aware, but mainly I guess equity investors," he said.

"[But] it seems that the fixed interest investors were disconnected. They didn't seem to pay any attention to the company's share price, which was indicating that Bridgecorp was at risk and it did have some problems.

"So it was only the mum and pop investors who put their money into Bridgecorp, who didn't seem to understand that a low share price was indicative of a company that had problems."

Bridgecorp's interest rate wasn't actually that much more than what you would get by going with a traditional bank. Is that surprising?

"No, well that's certainly a characteristic in New Zealand, where one could argue that Bridgecorp's interest rates were very low given the risk.

"You know, the prospectus had pretty full disclosure. I've got to say that if one is critical of Bridgecorp, one can't be critical of its level of disclosure.

"One would've thought, given that, investors would have demanded much higher interest rates, but they were quite willing to invest in the company, which had well-identified problems at pretty low interest rates, not that much above what the major banks were offering in New Zealand.

"Admittedly, the disclosure was quite complicated, but if one read through the prospectus it was all very clear. But it does seem that most people just didn't pay much attention to it."

Any thoughts about the level of bad news creditors could receive at the meeting next week?

"We are aware of probably up to 15 per cent of the company's assets, which are going to be very difficult to get back.

"Given the fact that only 30 per cent of Bridgecorp's lending was secured against first mortgages, one would imagine that there will be more bad news as well.

"So I don't think investors will get an awful lot of very positive news next week."

Sydney robbed of Monopoly money

2007-06-05T19:44:00.000+10:00

THE BAROSSA Valley has taken the top spot in the new Australian version of Monopoly, nudging out some of the nation's most recognised landmarks.

The new Australian “Here and Now” version of the famous Monopoly board was launched this morning, with the Barossa Valley and Adelaide taking residency in the highly sought-after dark-blue property spaces.

While the “Mayfair” space could be bought by players in the original version of the game for $400, players would have to fork out $4 million in Monopoly money to buy the Barossa Valley property.

Barossa’s head of tourism Julian Maul said the placement was a great coup for the South Australian region.

“Monopoly is Australia’s and the world’s best loved game and we have no doubt that this will lift the profile of our beautiful region and be a boost for tourism,” Mr Maul said.

The places on the board were decided in a nationwide poll which recorded nearly 17 million votes earlier this year.

South Australia recorded the largest number of votes with about eight million wanting their favourite landmark in the game.

More than two million of those votes were in favour of having the Barossa Valley as the most expensive property on the board.

The traditional boot, top-hat and dog tokens were also replaced with a ute, surfboard and thongs in the new game.

Western Australian centres Kalgoorlie, Broome and Perth claimed the slightly less expensive green squares, while Victoria’s Sovereign Hill, the Great Ocean Road and Melbourne landed on the yellow squares.

Queensland’s Sunshine Coast and the Great Barrier Reef were placed in the cheapest squares in the game, after a late surge of votes for ACT landmarks Anzac Parade, Lake Burley Griffin and Cotter Reserve.

But the nation’s biggest city, Sydney, didn’t receive enough support from voters and failed to claim a spot on the board, leaving Broken Hill, Tamworth and the Snowy Mountains to represent New South Wales.

Tasmania’s Launceston, Cradle Mountain and Hobart; along with the Northern Territory’s Katherine Gorge, Devils Marbles and Kakadu also made it into the game.

Hasbro’s marketing manager Amanda Blackhall said that although it was the first time in 25 years that the board game maker had revised an Australian edition, the results of the vote were unexpected.

“While the somewhat surprising results will no doubt be disappointing to those that didn’t make it onto the board, there are no real losers in those that did,” Ms Blackhall said.

“To secure any one of the spots on the new Australian board of the world’s most famous game is a great achievement.”

Source: AAP

GE Money profits down as bad debt grows

2007-05-28T15:03:00.000+10:00

In a clear sign that credit conditions have taken a turn for the worse, a blowout in bad debts has resulted in a profit slump for the local consumer and business finance operations of GE

Loan impairment losses for GE Capital Finance Australasia, which bought AGC from Westpac five years ago, jumped 54 per cent from $185 million to $285 million.

Along with a higher tax bill, this contributed to a 31 per cent slide in net profit from $159 million to $109 million.

The GE division, with total loans and advances of $13 billion, up from $12 billion, represents only part of the fast-growing group in Australia.

Apart from AGC, the unit includes credit-card services, the Custom Fleet leasing and fleet management business purchased from National Australia Bank for $550 million, and general and life insurance activities. It does not include Wizard Home Loans.

GE representatives were unavailable for comment on the accounts, lodged yesterday with the Australian Securities and Investments Commission.

However, the GE Capital Finance numbers are consistent with warnings from the nation's big-bank chief executives in the recent interim profit reporting season that the credit cycle had turned, with stresses appearing in unsecured lending and credit-card operations, in particular.

ANZ boss John McFarlane said he expected provisions to be higher in the second half, with the first half unusually low due to recoveries.

NAB chief executive John Stewart said he was most concerned about the consumer space.

"The consumer is getting overextended with debt in certain pockets and that will always come out in danger areas like credit cards and unsecured lending," Mr Stewart said.

JP Morgan banking analyst Brian Johnson said yesterday personal lending loss rates were rising "quite dramatically", as shown by provisions at the GE unit rising to 219 basis points (as a percentage of total loans and advances).

Comparative rates for the big-four banks were far lower, at less than 20 basis points, but this was because of their massive, low-risk home lending books.

Mr Johnson estimated credit-card losses were running at about 260 basis points.

"Westpac's sale of AGC is now shown to be a pretty good decision, despite the short-term dilution in earnings per share at the time," he said.

"The banking industry is now exiting the optimal part of the cycle, and things will get worse from here."

GE's tax bill in 2006 was sharply higher, up from $18 million to $70 million. Unlike 2005, when it took a $39 million benefit from paying too much tax previously, the business had to stump up an extra $6 million.

Total assets at the end of last year came to $17.1 billion, up from $14.5 billion.

Finance income was relatively steady at $1.62 billion, but non-interest income doubled from $387 million to $767 million.

The biggest contributor was operating lease rental income, largely from Custom Fleet, which surged from $74 million to $223 million.

Custom Fleet contributed $167 million in revenue and a net loss of $2 million to the group from August 1 last year.

The total asset base for the GE group in Australia is estimated to be about $40 billion, up from $8 billion five years ago.

GE Capital Finance directors said they expected to grow the business further this year.

Source: Australian

US Mortgage Brokers and Mortgage Brokers blame each other for the sub-prime meltdown

2007-05-23T16:37:00.000+10:00

It got nasty between mortgage bankers and brokers were at loggerheads Tuesday over who's to blame for the housing market's woes.

[The Mortgage Bankers seemed to have "lost their rag" by trying to infer that Mortgage Brokers were somehow to blame for the difficulties that some people have found themselves in by taking on sub prime loan arrangements. After all who determined Mortage Brokers compensation as commission, who pays the commission, and who verifies the facts of the loans before issuing documents? And don't the Mortgage Bankers make money on sub-prime loan mortgages? If not why are they in the business? Surely the Mortgage Bankers have the ultimate say, and so should be ultimately responsible and accountable. ]

The head of the mortgage banking industry's trade group claimed brokers profited from a home loan boom but didn't do enough to examine whether borrowers could repay.
Amid increasing evidence of financial distress for homeowners with weak, or sub prime, credit histories, John Robbins, chairman of the Mortgage Bankers Association, says he is "mad as hell" at "a few unethical actors" that have sullied his profession's reputation.
"Unethical people, they're responsible for this mess," Robbins said. "The short-term folks. People who get a commission when the deal happens. For them, it's the number of loans that counts. Good loan? Bad loan? Who cares? For them it's all about their commission."
In reaction, the president of the National Association of Mortgage Brokers, e-mailed a statement that said: "It is truly unfortunate (Robbins) has attempted to shift blame away from Wall street, federally chartered banks, state-chartered lenders and underwriters for the sub prime situation we find ourselves in today."
Harry Dinham, president of the brokers' group, added that congressional hearings have shown that "most residential mortgage loans are quickly sold into the secondary market - in fact most lenders are really just brokering the transaction but afraid or ashamed to admit it," he added.
In a lunchtime speech at the National Press Club, Robbins called for a national licensing system for mortgage brokers, which would help weed out "scam artists."
The industry's woes are confined to a small segment of the market, he said. About 5 percent of homeowners have sub prime adjustable-rate loans that feature low "teaser" rates which can move sharply higher later. He estimates about half of those homeowners will be able to avoid default or foreclosure. If so, foreclosures among sub prime borrowers will amount to 0.25 percent of U.S. homeowners, Robbins said.
"No seismic financial occurrence is about to overwhelm the U.S. economy," he said.
Yet RealtyTrac Inc., an industry research firm, said last week that mortgage lenders foreclosed on 62 percent more U.S. homes in April than a year ago.
Home prices are falling too. The national median existing single-family home price in the first quarter was $212,300, down 1.8 percent from a year ago when the median price was $216,100, according to the National Association of Realtors. The median is a typical market price where half the homes sold for more and half the homes sold for less.
Earlier this month, Sen. Charles Schumer, D-N.Y. and two other senators introduced a bill that would mandate tougher federal standards for mortgage lenders. No hearing date has been set and the bill is under review by the Committee on Banking, Housing and Urban Affairs. House lawmakers are talking about introducing their own reform bill this summer.
Robbins warned against an overreaction by lawmakers that could cause the country to "revert to a time when without perfect credit you couldn't buy a home."
His speech comes a day after the Mortgage Bankers Association and four other industry trade groups banking industry trade groups endorsed mortgage reform principles.
Any legislation or new regulations should focus on lenders only being permitted to issue high-risk, home loans - if they "reasonably believe" at the time the loan is made that borrowers have the ability to repay, the statement said. Mortgage terms should be "clearly disclosed" to consumers, and estimates of monthly payments that could quickly jump in later years should be made clearer, the groups said.
Banks say they are already stepping up efforts to assist borrowers who face default or foreclosure and tightening loan standards.
Federal Reserve Chairman Ben Bernanke last week said the central bank is considering tougher rules to reduce abusive home loan practices even though he believes the economy should escape without significant harm from the problems in the sub prime mortgage market.
In March, the Fed and the other four federal agencies that regulate banks, thrifts and credit unions proposed guidelines that call for strict evaluations of a borrower's ability to repay and caution when lenders make sub prime mortgage loans.
The guidelines have not yet been made final. The Fed plans a mid-June hearing on ways to curb abusive lending practices.

Source: Forbes and AP

Mortgage foreclosures four times higher than reported

2007-05-22T08:59:00.000+10:00

The number of home foreclosures around the nation is up to four times higher than reported figures show, because lenders are disguising the nature of forced sales to prop up property prices.
Australia's biggest private debt collector, Prushka, yesterday said about three-quarters of sales forced by bank and non-bank lenders were co-ordinated with the consent of home owners, meaning they were not recorded in court repossession figures.
"By far the most popular way for lenders is to sell the property with the consent of the borrower to avoid advertising the property as a forced sale," Prushka chief executive Roger Mendelson said.
"The idea is to work with the seller because if they sell the property as a mortgagee in possession that will slaughter the price because you're going to attract the bargain hunters."
Mr Mendelson said statements by Peter Costello yesterday that Australia had a low home loan "default rate" - where borrowers can't meet mortgage repayments - failed to address the impact of increasing unreported levels of repossessions.
During a discussion about US default rates hitting an all-time high in the first quarter of 2007, the Treasurer had told Macquarie Regional Radio: "The default rate in Australia is much, much lower than it is in the US ... in fact, we have one of the lowest default rates in the world."
Experts said rising interest rates, coupled with the prevalence of low-documentation loans that do not force borrowers to disclose their income, had caused a spike in mortgage defaults in Australia.
Ian Graham, chief executive of PMI Mortgage Insurance, which insures about one million home loans, said Australia had no register for compiling total home repossessions.
"We would like to see a register introduced - I think the Reserve Bank would be one body in particular that would benefit from more complete data," Mr Graham said.
State "writs of possession" registers record only sales where lenders are forced to apply for repossession orders.
Sydney's outer western suburbs are being hardest hit by the surge in repossessions.
In NSW, 5363 writs of possession were issued last year - up 10 per cent on 2005.
Figures from the Victorian Supreme Court show there were 2791 repossession claims lodged last year, up from 2578 in 2005. The figure has more than doubled since 2003, when there were 1225.
"In southwest, west and northwest Sydney, property prices are weakest and in forced-sale situations property price declines of between 20 and 25 per cent are not unusual," Mr Graham said.
Dara Dhillon, principal of Dhillon Real Estate in Ingleburn in Sydney's outer southwest, said 90 per cent of properties coming to the market were forced sales, and the number of homes hitting the market was rising.
"It's actually getting worse by the month - in one family I was working with, the elderly mother had to return to work to keep a roof over their heads," he said.
But he said that with high employment and healthy wages growth, it was last year's interest rate rises and lax lending policies of non-bank lenders - especially "low-doc" loans where borrowers are not required to prove their income - that were to blame for the current fallout.
"It's a joke - if it was my money I wouldn't lend it but I believe lenders are still doing it," he said. "Low-doc, no-doc, whatever doc - doc doesn't even come into the picture."
Source: The Australian

Home values grow above inflation but Sydney struggles to keep up

2007-05-14T08:03:00.000+10:00

House prices grew 1.1% in the March quarter
Over the year, house prices jumped 8.6%
Sydney is lagging national gains

House prices are going back up after a long lull with strong gains recorded in most capital cities as the nation leaves the property downturn well and truly behind. Over the year house price median rose 8.6 percent. Howver Sydney is lagging other property hot-spots.

Average house prices grew by an average 1.1 per cent across Australia in the first three months of the year, according to the Australian Bureau of Statistics's House Price Index, which takes the average of the nation's eight capital cities.

Over the year, house prices jumped 8.6 per cent .

Most capital cities posted strong gains.

The mining boom propped up Perth prices, with house values rising a further 2.1 per cent in the first three months, to be up a whopping 32.1 per cent over the year. While house price growth has slowed, Perth house prices are still growing at the fastest pace in the nation.

Over the quarter, Hobart led the way with a 3.8 per cent quarterly increase in house prices, with values up 10.5 per cent over the year.

Brisbane followed with prices up 2.9 per cent over the quarter and 10.2 per cent over the year.

In Darwin, house prices jumped 2.8 per cent over the quarter and surged 15 per cent from a year ago.

In the south, house prices climbed 1.7 per cent in Adelaide over the quarter and 6.1 per cent over the year.

In Melbourne, prices rose 1.5 per cent and 7.4 per cent over the year.

Sydney lags gains, but also rebounding
But Sydney house prices continue to struggle. Prices in Sydney, Australia's largest housing market, fell by an average 0.4 per cent in the first quarter, and grew at a meagre 1.5 per cent over the past year.

Louis Christopher, head of property research at Adviser Edge, said house prices were rebounding around the nation, including a modest recovery in Sydney, with property investors flocking back to the market given rising rents.

Despite modest growth in the first quarter, Mr Christopher expects Sydney house prices to grow 10.5 per cent in 2007.

"I think what we will see from the June quarter onwards is the median house price numbers will move towards the numbers we're forecasting," he said.

Around Australia
Mr Christopher expects prices to rise between 5 per cent and 8 per cent in Melbourne this year, around 8 per cent in Brisbane and 4 per cent to 6 per cent for Adelaide.

"We expect Perth house prices to record flat to negative house price growth.

"If there were further interest rate rises of 50 basis points or higher, it is likely Perth will record steeper house price falls of between 7 per cent to 15 per cent for the 12-month period after the rate rises.

"Conversely, a sustained downturn in commodity prices would also trigger further house price falls," he said.

In Canberra, house prices are forecast to rise by 10 per cent to 13 per cent in 2007, assuming no more than a 25 basis point rise in interest rates by June.

Mr Christopher said there were increasing signs that after a three-year downturn there was a housing recovery underway on the east coast of Australia.

Auction clearance rates in Sydney, Brisbane, Canberra and Melbourne are higher than this time last year and indeed at their highest levels since the downturn commenced in late 2003.

Improved rental yields and affordability in some cities was helping to push up house values, he said.
Source: AAP

Central Equity is back in the Melbourne apartment building industry after recently leaving the sector

2007-05-05T12:45:00.000+10:00

Central Equity, Melbourne's biggest apartment developer, is back in the apartment business less than 18 months after leaving the sector because of poor sales.
The then publicly listed Central Equity quit apartments in late 2005 as the inner Melbourne market crumbled in a slump described by chairman Eddie Kutner as likely to continue until the end of the decade. Delisted from the Australian Securities Exchange midway through last year, Central Equity retreated to the suburbs in an attempt to reinvent itself as a residential estate builder.
But with Melbourne's once oversupplied apartment market making a dramatic - and unexpected - turnaround earlier this year, the developer has returned to its old Southbank stomping ground with plans for a 36-storey tower that will cost around $50 million to build and include six levels of office space.
Melbourne's apartment recovery was confirmed last month in Australian Bureau of Statistics figures showing that 1079 apartments were approved in February this year, more than double the 535 approved in the same time last year.
Located at the corner of City Road and Power streets, the planned 317-apartment complex will be known as Vue Grand.
After only three weeks of selling, and with a display suite on the site still under construction, Central Equity is understood to have found buyers for more than 50 apartments.
Some two-bedroom apartments in the mid-levels of the tower have asking prices of more than $800,000, while five penthouses are on the sale block for between $1.5 million and $2.5 million.
The building will also provide new offices for Central Equity.
It intends to occupy all six levels of office space, vacating leased offices at 95 Queen Street. The now privatised Central Equity group, controlled by Mr Kutner and joint managing directors John Bourke and Dennis Wilson, singlehandedly created Melbourne's largest apartment precinct in Southbank, building dozens of towers worth over $2.5 billion since the mid-1990s.
Central Equity could not be contacted yesterday but is understood to be planning to start work on Vue Grand by the end of the year. It is expected to be finished by late 2009.Source: The Australian

Mortgage rate threat hits home builders and new housing market

2007-04-28T15:34:00.000+10:00

The mere hint of a mortgage interest rate rise has stumped a recovery in the housing market, an industry group said today.
The Housing Industry Association (HIA) survey showed new home sales were flat in March, holding level at 8191 dwellings.
Private detached house sales increased by a 0.2 per cent in the month, while the sale of multi-units fell by two per cent.
Sales in the first quarter of 2007 were 16 per cent lower than in the three months to March 2006.
HIA said speculation of an interest rate increase had discouraged would-be buyers and investors, and any upward momentum in new home sales had now stalled.
HIA chief economist Harley Dale said higher levels of home buyer interest, usually seen early in the year, were already giving way in 2007 to the large gap between the desire for home ownership and the ability to afford it.
Insufficient state and federal government action to address low housing affordability were preventing a sustained recovery in the housing sector, Mr Dale said.
"The recent threat of higher interest rates has only served to reinforce the urgency required in addressing the hefty structural barriers to home ownership," he said.
New home sales rose in December, January and February.
The sales tally for March is below the level of a year earlier when about 10,000 dwellings were sold.
HIA's new home sales survey is compiled from a sample of the largest 100 residential builders. Source: AAP

More mortgage legs in baby boomer generation

2007-04-26T08:26:00.000+10:00

There seems to be an emerging new mortgage market as seniors borrowed $560 million in reverse mortgages in 2006 to spend their children's inheritance.
Older Australians took out $560 million in reverse mortgages in 2006 - a lift of 80 per cent over 2005 , according to a study released yesterday.
Despite what appeared to be rapid growth, Keiren Dell, executive director of the Senior Australian Equity Release Association of Lenders (SEQUAL), said it was at the lower end of his expectation.
"I had expected growth to be at least 100 per cent," he said, adding that the volume of lending in reverse mortgages could easily double in the next two years.
"The first baby-boomers reached 60 a couple of years ago and some had started to take out equity from their home for renovation or buy a new car."
Funding retirementIn fact, the fastest-growing segment (albeit from a low base) was the 60-69 age group, said Trowbridge Deloitte partner James Hickey, who led the reverse mortgage study for SEQUAL. However, the largest group of borrowers were in their 70s.
"We estimated 1 to 1.5 per cent of seniors in Australia use reverse mortgage," said Mr Hickey.
The total number of households taking out reverse mortgage is 27,000. They took out an average of $54,200.
Mr Hickey said they borrowed 70 to 75 per cent of what they could borrow on their homes.
While lump sums remained popular, Mr Hickey said about 20 per cent of the loans were taken out as "income streams" in regular drawdowns.
Mr Dell said variable rates were the most popular type of loan currently used.
But 25 per cent of new loans were written at a fixed rate, up from 22 per cent in 2005.
With new entrants - including Bluestone, Macquarie Bank, ABN AMRO and Australian Seniors Finance - Mr Hickey said the market was set to grow.
Lending is based on the age of the borrowers and the value of the property, ranging from between 10 and 15 per cent of equity for those aged 60, to 40 per cent for people over 80.
NSW leads borrowingThe study found that 41 per cent of reverse mortgages were taken out in NSW, compared with 20 per cent each in Victoria and Queensland.
It said that 80 per cent of the loans were made to borrowers living in capital cities and that houses made up 80 per cent of assets used in the transactions.
Source: The Australian

Property investors are the growth market in mortgage finance

2007-04-21T18:31:00.000+10:00

A record one in three new mortgages were sold to property investors, figures reveal.
The AFG Mortgage Index for March shows there is "rapidly increasing confidence in property", says AFG sales and operations general manager Mark Hewitt.
While good news for investors, the figures are likely to add weight to speculation that the Reserve Bank of Australia will raise interest rates next month.
In NSW, 34.4 per cent of new mortgages were sold to investors, a level not reached since May 2005.
"While one should be cautious about reading too much into a single month's data, it would seem that we're at last seeing the long-awaited return of confidence to the NSW property sector," Mr Hewitt said.
"Even Victoria is coming out of the gloom.
"If this trend continues over the next few months, we could be in the golden scenario where property markets, coast to coast, are powering forward."
In Western Australia, 46 per cent of all new mortgages were for investment purposes in March, while in Queensland the figure was 31.2 per cent.
Victoria, at 25.5 per cent, was well below the national average (of 32.9 per cent) but significantly up on its March 2006 rate of just 18.9 per cent.
In South Australia, 27.4 per cent of new mortgages were sold to investors.
The AFG Mortgage Index revealed that the average new mortgage, nation-wide, now stands at $308,038 - up slightly on the previous high of $307,665 in November 2006.
The average mortgage in NSW is $370,161, representing 66.9 per cent of the property's value.
The second-most expensive mortgages are in WA, with an average of $345,440, representing 56.8 per cent of the property's value.
While AFG's index is not definitive, it is usually strongly indicative of more comprehensive figures released later each month by other institutions.
© 2007 AAP Brought to you by Mr Mortgage

Big growth in seniors cashing out mortgge equity

2007-04-16T21:22:00.000+10:00

The value of Australia's reverse mortgage settlements grew almost two thirds last year as retirees tapped home equity to supplement income, a study showed.
Settlements of new loans grew to $520 million as of December 31 compared with $315 million a year earlier, according to a reverse mortgage study co-authored by actuarial and consulting firm Trowbridge Deloitte.
Some 27,500 reverse mortgages, where lenders make advance payments to owners against the value of a property, were made last year in a market now worth some $1.5 billion, according to the study.
The results highlight how a growing number of product providers and distribution channels has helped the loans gain wider acceptance, said James Hickey, a partner at Trowbridge Deloitte.
"This growth coincides with an increase in the number of product providers, providing improved product flexibility and wider distribution channels," he said.
Brokers boost lendingThe study showed use of mortgage brokers to secure the loans was growing.
While 72 per cent of all outstanding loans sales were still direct with the lender, some 46 per cent of loans made in 2006 were through brokers. That was up from 38 per cent a year earlier.
The average age of borrowers was steady at 74, while the average age of new borrowers last year was 72, the study showed.
Lump sum advances made up 80 per cent of loans with regular draw downs accounting for the remainder.
That shows many home owners are using reverse mortgages to supplement pensions, said Kieren Dell, executive director of Senior Australian Equity Release Association of Lenders (SEQUAL) which co-sponsored the study.
"An increasing number of Australian retirees are recognising the benefits of reverse mortgages," Mr Dell said.
"The increasing use of regular draw downs indicates that these seniors are using the funds more and more to supplement their pensions rather than using their equity for one-off spending."
Source: AAP

New home sales go fronm strength to strength, as new home buyers shrug off interest rate concerns

2007-03-31T22:51:00.000+10:00

The number of new homes sold around Australia has risen for the third month in a row, with February's increase underpinned by a rebound in the hard-hit NSW market.

Sales in NSW increased 16.9 per cent from a month earlier.

However, financial markets are speculating that the Reserve Bank could use the improved sales figures to raise rates again as early as next week, when it holds its next monthly meeting.

Other surveys released yesterday point to more rough patches for owners and renters.

A Fujitsu-JP Morgan Australian Mortgage Industry survey found almost a quarter of home owners had to trim spending to meet mortgage repayments after three interest rate rises last year.

And one of Australia's biggest rental agencies, RUN, also released anecdotal figures showing the pace of rental increases had doubled for Sydney and Melbourne in the past four months, compared with the previous four months.

RUN, which manages 20,000 rental properties, said rents on relet properties in the two cities rose 4 per cent or $53.50 for the four months to October, but this had accelerated to 8.62 per cent, or $109.27 higher, for the four months to February.

While bad news for renters, it is a sign of some health returning to the overall housing market, where low rent returns and falling prices had kept investors away.

Commentators yesterday said the outlook for the housing sector, particularly for first-home buyers and investors, would be dictated by interest rates.

JP Morgan chief economist Stephen Walters said that if rates did rise, it would worsen the market in depressed areas such as western Sydney and outer Melbourne, where three to four out of 10 house sales were forced.

"We are not forecasting a rates rise this year, but eight or nine other economists are going for a rate rise," he said.

Fujitsu/JP Morgan found that of the 1500 people surveyed who were thinking about buying a property for the first time, 30 per cent said they could not afford it. The figure is up from 17 per cent at the same time last year.

In contrast, rising interest rates would have little impact on upper to middle housing markets around the country. "If rates do rise, it is likely to be next month, otherwise we are into the May budget and an election later this year," Mr Walters said.

Housing Industry Association executive director Simon Tennent said that with housing affordability still low, further interest rate rises might stymie the recovery in new-home sales.

Sales of private detached houses rose 3.9 per cent in February, while sales of units fell 4.2 per cent, the association said.

Western Australia had the second-fastest rise in new-home sales, with an increase of 11.2 per cent, while sales in Queensland fell 3.4 per cent in February.

The overall sales volume last month was still 5.2 per cent lower than a year ago.
Source: The Australian

Bad debt is on the rise with debt strapped homeowners in the mortgage belt.

2007-03-29T21:32:00.000+10:00

A growing number of households are falling behind in the mortgage payments as record indebtedness, rising interest rates and high petrol prices continue to bite.

Moody's Investors Services has found that 30-day delinquency levels in the fourth quarter of 2006 were on the rise, particularly in December, when seasonal factors such as Christmas spending depleted borrowers' pockets.

Moody's said the availability of "easy money" and a relaxation of lending rules had led to many households incurring high levels of debt that were out of line with their ability to repay.

Moody's analyst and author of the report, Philip Wong, said that as a result of high debt levels, borrowers were much more sensitive to adverse movements in the cost of living and debt repayments.

"While interest rates appear to be on hold in the near term, the full impact of the most recent rate rises of 0.25 per cent in November, 2006 has not yet been reflected in borrower behaviour," Mr Wong said.

He said the housing loan market remains fiercely competitive between banks and non-bank lenders who are introducing new products such as no-deposit finance to drive volume and market share.

"The current trend of increasing issuer risk appetite and relaxation of lending rules may increase future delinquency and loss rates, especially during economic stress," Mr Wong said in the report.

The report said that rapid growth of house values, where borrowers benefited from significant equity build-up in their properties, had come to an end.

It said that while there were spectacular rises in Western Australia, property prices on the eastern seaboard were flat.

"Furthermore, disparities can be observed within cities themselves, with increased levels of mortgagee repossession in troubled areas like southwestern Sydney but continued property appreciation in premium areas such as Sydney's north shore and eastern suburbs," the report said.

The chief executive of the Australian Banker's Association, David Bell, said the percentage of delinquent home loans for banks was at very low levels, particularly when compared with non-bank mortgage lending.

"The Moody's data shows that the delinquency performance of non-bank lenders' loans is much higher than for banks," Mr Bell said.

According to Moody's, non-conforming lenders' delinquency rate is 2.15 per cent for loans 30 days past due, while the banks' rate is 0.78 per cent.

"There is a large and growing segment of non-conforming lenders in the mortgage marketplace," Mr Bell said.

"They are not prudentially supervised and often need to act more quickly on a mortgage default than a bank."

He said if a customer could make payments on their loan they should speak to their bank as soon as possible.

"Generally, the bank will try to work out a solution, for example a different repayment schedule to accommodate temporary difficulties," Mr Bell said.
Source: AAP

Financial services and mortgage wholesaler group Challenger reports a record profit

2007-03-28T18:28:00.000+10:00

The finance company backed by billionaire James Packer has delivered a record result by more than doubling its first-half profit.
Challenger Financial Services Group yesterday reported a 117 per cent surge in interim net profit to $130 million, up from $60 million in the previous corresponding period.
That put the company in a position to easily eclipse its $134.3 million net profit result for the year to June.
Assets under management swelled 17 per cent to $46.4 billion over the six months to December, with net income growing 47 per cent to $324 million.
"The result was driven by strong revenue growth across each of our businesses," chief executive Mike Tilley said.
Three of the company's four divisions had met or bettered their return on net assets target of 18 per cent for the half, he said. Only the financial planning division failed to meet the benchmark.
"We are delivering a greater than 30 per cent return on net tangible assets from our businesses and achieving double- digit growth in earnings per share (EPS)," Mr Tilley said.
The firm has interests in funds management, property and infrastructure assets, mortgage financing and financial planning. Mr Packer is the biggest single shareholder with a 22 per cent holding.
Challenger plans to increase investments after starting two Australian property funds and forming real estate joint ventures in Japan and London.
Challenger declared a fully franked interim dividend of 5¢, double the amount from a year earlier.
Source: The Australian

Gold Coast Property Finance Group on a record profit run

2007-02-24T15:49:00.000+10:00

Gold Coast property finance group City Pacific has continued its run of record profits, yesterday posting an interim result of $24.25 million.
The net profit for the six months to December 31 is up 19 per cent on a year earlier, and sets the company on course for a full-year result of about $75 million.
The half-year result was struck on a $9.1 million drop in revenue to $108.5 million, largely due to rain-affected delays in construction at its Martha Cove project on Victoria's Mornington Peninsula as well as delays in property settlements. The company reaped big rewards from joint ventures, with its 26 per cent interest in Indigo Pacific Capital producing a net profit of $1.81 million, up from $21,474 a year earlier, and its 50 per cent joint venture Mirvac Pacific reaping a healthy $2.54 million.
Earnings per share have jumped 16.5 per cent to 18.68c, the company's fifth half-year record on the trot since listing in 2001.
The interim dividend has edged up 4c to 15c a share, payable on March 30. City Pacific chief Phil Sullivan said the profit result reflected the strong core fundamentals of the business, which is among the stock exchange's top 200 companies.
"City Pacific's operations will continue to benefit from a foundational platform of specialist skills in mortgage origination, property lending and development," he said.
"Our development pipeline, now over 7000 lots, will predictably provide increasing returns in coming years."
Among the company's major projects are the $650 million Martha's Cove waterfront development in Victoria and the $1 billion Ocean Terminal and Breakwater Cove project in Townsville.
City Pacific has also teamed up with property giant Mirvac to develop a 366ha site surrounding Gainsborough Greens golf course at Pimpama.
City Pacific yesterday reported a lift in its net tangible asset backing from 93.1c a share to $1.06 a share.
The company's shares rose 4c to close at $4.70.
Following the placement of 18.3 million shares earlier this month, City Pacific's market capitalisation yesterday stood at $705 million.

Perpetual Ltd to buy Wignalls Lenders Mortgage Services and be rebranded Perpetual Mortgage Lending Services

2007-02-24T14:08:00.000+10:00

The corporate trust division of Perpetual Ltd says it will acquire the business operations of Adelaide-based Wignalls Lenders Mortgage Service.
Wignalls is a national mortgage processing and settlement company with about 100 staff across five states.
Perpetual's group executive for the corporate trust division Phil Vernon said the purchase would strengthen the company's provision of services to the securitisation and lending markets.
"Securitisation market growth and increased outsourcing by bank and non-bank institutions has led to the demand for a provider who can meet all the needs of clients under one roof," Mr Vernon said.
"The acquisition of Wignalls adds an important capability to our service offering."
All Wignalls' employees will be offered jobs with Perpetual, and Wignalls will be rebranded as Perpetual Lenders Mortgage Services.
Perpetual company declined to reveal the cost of the purchase.

Source: AAP

Mortgage geared property investors cash out to switch to superannuation investment

2007-02-23T09:54:00.000+10:00

Property investors, many of whom are mortgaged heavily, have been quitting the Australian housing market to pour up to $1 million each into superannuation to take advantage of the generous contributions allowance before the super payout tax is abolished on July 1.
The superannuation regime, announced in the May 2006 budget and made even more attractive by allowing large sums to be invested now, has combined with rising interest rates and tax cuts to create a crisis in rental markets around Australia, experts say.
Borrowing for negatively geared property investment has plunged by 30 per cent since June, with the biggest falls in NSW, Western Australia and the ACT, the latest figures show.
At the same time, the rental vacancy rates around Australia have dropped from a long-term average of 2.9 per cent to 1.8 per cent, with families and young couples who thought that the high price of housing and mortgage repayments a barrier to entry, are now struggling to find somewhere to rent that they can afford.
As vacancies fall, asking rents are soaring, with official figures released yesterday showing a massive 6.9 per cent jump last year in Sydney. This does not take into account the recent practice of rental auctions where the highest bidder gets to be the proud tenant.
Investment property lending in NSW has plunged by 38.1 per cent since June, a much greater drop than that which followed the introduction of the ill-fated ``exit tax'' on property investors in that state in 2004.
In a clear sign that the West Australian property boom has run out of steam, investment property lending in the state has plunged 37.1 per cent in six months. In most other states it has dropped by about 20 per cent.
Housing Industry Association chief economist Harley Dale said yesterday the new superannuation rules, higher mortgage interest rates and tax cuts had combined to make negatively geared property investment less attractive.
"There was a recovery in the housing investment market until the middle of last year when we found we were in a higher interest rate environment,'' Mr Dale said.
"The impact of superannuation was not so evident until the last quarter of last year, once the new rules started coming on to people's radar.''
The tax cuts reduced the tax savings from negative gearing for anyone earning less than $150,000.
Mr Dale said the downturn in property investment was entirely due to individuals pulling out of the market. Commercial property development has only weakened slightly since rates started rising early this year.
But Treasurer Peter Costello does not accept that his superannuation reforms are contributing to the downturn in property investment.
A spokesman said yesterday he endorsed the view of the Reserve Bank in its latest economic review that it was unsurprising investors were unwilling to supply additional rental property, given high property costs and low rental yields.
The Government rejected industry requests to allow investment properties to be transferred in to superannuation.
Source: The Australian

Australian housing market struggles east to west as the Perth property boom ends and Sydney house prices continue to fall

2007-02-22T07:08:00.000+10:00

The West Australian capital Perth house price boom has ended and New South Wales capital Sydney house prices have dropped even further as the property downturn continues to bite, with analysts predicting months more pain for homeowners.
House price growth in Perth slowed to just 1.7 per cent in the December quarter, with property prices in the city now growing at the fourth-slowest rate in the country, according to Australian Bureau of Statistics figures.
In Sydney, median house prices fell 1 per cent in the quarter - reversing slight gains made earlier in the year - as the impact of last year's three rate rises was digested by the nation's weakest property market.
Housing Industry Association chief economist Harley Dale said housing affordability in NSW remained the lowest in the country, but flat or falling prices were slowly attracting first-home buyers and investors back into the Sydney market.
Mr Dale said the effect of last year's interest rate rises would continue to dampen house price growth until at least June.
National house price growth slowed to 0.9 per cent in the December quarter, resulting in annual growth of 8.3 per cent.
That slowdown was driven by the cooling Perth market, which had delivered total house price growth of 34.6 per cent in the first three quarters of last year as the state rode the resources boom.
Elsewhere in the country, house price growth remained relatively subdued in the December quarter except in Brisbane and Darwin, where prices grew by a respectable 3 per cent.
"We expect Brisbane will lead the housing recovery over the next two years," BIS Shrapnel senior analyst Jason Anderson said yesterday. "Brisbane is where rental growth has been strongest, it's where pressures are greatest and I think that's showing up in this price growth."
Mr Anderson said Perth prices were likely to fall 1 per cent this year because that market had "overshot" during the boom.
Macquarie Bank head of property Rod Cornish said interest rates were expected to remain on hold this year as inflation pressures eased.
And he predicted the Reserve Bank would probably cut rates early next year in an attempt to stimulate building activity in the floundering NSW and Victorian markets.
Mr Anderson said Sydney would remain a two-tier market, with house prices in the city's struggling outer-western suburbs expected to fall as much as 5 per cent this year, while inner-city areas could show slight growth.
"There's still this tug of war going on between what buyers are asking and what people are prepared to pay," he said.
In a sign of the weakness in Sydney's outer suburban housing market, Stockland - Australia's second-biggest property group - last week revealed only 96 of the 1900 blocks of land it had sold in the past six months were in NSW.

Source: The Australian

Mortgage Interest rates to stay steady

2007-02-06T18:23:00.000+10:00

Building approvals fell in December as higher mortgage interest rates hurt demand for housing while retail spending sagged, taking pressure off interest rates.
Housing approvals fell 1.9 per cent to a seasonally adjusted 12,395 units, from a downwardly revised 12,630 units in November, the Australian Bureau of Statistics said today.
RBC Capital Markets senior economist Su-Lin Ong said the result shows three interest rate rises last year were hurting the building market.
This should prompt the Reserve Bank of Australia (RBA) to keep rates on hold when it meets this week, she said.
"Households had been showing resilience but its looking like the higher interest rates are starting to take their toll," Ms Ong said.
"It points to the RBA keeping rates on hold this week and for the foreseeable future."
In the year to December, building approvals fell 1.5 per cent. Economists had forecast a fall of 2 per cent in the month.
Meanwhile, the value of retail sales rose at a slightly weaker than expected pace in December, suggesting that inflationary pressures would not be strong enough to prompt the central bank to hike rates in the near-term.
Australian retail trade at current prices rose 0.3 per cent in December to a seasonally adjusted $18.445 billion from a downwardly revised $18.397 billion in November, the Australian Bureau of Statistics (ABS) said.
Economists had forecast an increase of 0.4 per cent in the month.
Meanwhile, retail trade in chain volume measures rose 1.3 per cent to $53.188 billion in the December quarter.
Macquarie Bank senior economist Brian Redican said the retail sales figures were mixed, but spending was holding up.
"In the month, the results was weaker than the market had anticipated, and it does suggest that there is a bit of a weakening trend there in the retail sales series," he said.
"But offsetting that was a very healthy quarterly retail sales number."
Mr Redican said the results suggested that while spending was healthy, it was not adding to inflationary pressures.
"It doesn't suggest that the Reserve Bank will need to do anything further, but nor does it suggest that the economy is falling in a hole either," he said.

Source: AAP

Mortgage brokers try to pick banks interest rate trend after mixed signals amid asset quality decline concerns

2007-01-25T16:19:00.000+10:00

Mortgage brokers are scratching their trying to pick the way interst rates will pan out after receiving mixed signals from the Major banks mortgage interest rate decisons, depending whether the home loans are fixed interest or variable rate products.
The nation's biggest bank, the Commonwealth Bank, on Tuesday raised its one- and three-year fixed rates by 11 basis points to 7.35 per cent.
National Australia Bank yesterday lifted its introductory one-year fixed rate for the second time since December - up 9 basis points to 6.74 per cent. However, it left its three-year fixed rate unchanged at 7.18 per cent - the cheapest rate of the majors.
Westpac and ANZ increased their three-year fixed rates by 16 basis points to 7.35 per cent in December.
Cannex financial analyst Harry Senlitonga said that in "general the trend is moving up a bit" for three-year fixed rates. He said this was an indication the banks believed rates were on the way up.
He said three-year fixed rates had increased between 5 to 10 basis points.
Mr Senlitonga said that another factor that could be contributing to the higher fixed rates was demand.
"(For) a product which has a strong demand, they will price it higher," he said.
Major banks said last year that most of their customers were switching from variable to fixed rates.
A CBA spokesman said "fixed rates are not tied to any Reserve Bank movement, they fluctuate regularly in line with movements in the cash market".
He also said CBA was "competitive with all of the other banks" and that all of its fixed rate offerings were "competitive".
Since December, the money market three-year fixed rate has increased from 6.54 per cent to 6.68 per cent.
Going against the trend was St George Bank, which this week dropped its three-year fixed rate from 7.19 per cent to 6.95 per cent.
Credit ratings agency Fitch Ratings said it expected growth in the Australian banking sector to moderate in 2007 due to competition and slower growth in housing finance.
In a report released yesterday, Fitch said it also believed asset quality would come under pressure.
"For a number of years, asset quality at the Australian banks has been near pristine; this is clearly unsustainable in the medium term," said Fitch associate director Tim Roche.
Of bigger concern was the explosion of leveraged buyout activity by private equity firms in the Australian corporate sector and higher gearing levels.
"If this were to coincide with weaker economic conditions it may lead to an increase in unemployment which is likely to have a negative impact on bank asset quality," Mr Roche said.

Source: AAP

Sales of News home fall as home buyers stall

2006-12-19T16:36:00.000+10:00

New home sales fell in November as interest rates rose for the third time this year stalling new home buyers, new figures show.
The Housing Industry Association's new home sales figures showed that the sale of new homes and units among Australia's largest builders and developers dropped 5.3 per cent last month to 7097 dwellings.

The results follow a 1.3 per cent rise in October to 7434 dwellings.

HIA chief economist Harley Dale said the fall was due largely to the November rate rise, which pushed interest rates up to 6.25 per cent and followed rises in May and August.

"New home sales have well and truly had their wings clipped in 2006 as demand for new housing has suffered a second wave of weakness at the hands of a fresh set of rate rises,'' he said.

He said that, with affordability at record lows, there simply were not enough people who could afford to buy new homes.

The monthly HIA report showed that private detached house sales dropped by 7.5 per cent during the month, reflecting falls in the resource-poor states of NSW and Victoria.

Mr Dale said private, detached house sales were now at their lowest level since December, 2000.

Sales of multi-units rose 8.8 per cent, but were note enough to offset a 16 per cent fall in October.

Detached house sales dropped 28.6 per cent in Victoria and 14 per cent in NSW.

But they rose 14.5 per cent in South Australia, 12.3 per cent in Western Australia, and 4.3 per cent in Queensland.

The new home sales survey is compiled from a sample of the largest 100 residential builders in Australia and is the leading indicator on new housing activity.

Source: AAP

Low doc home loans on par with income verified interest rates

2006-12-10T19:43:00.000+10:00

Adelaide Bank, a major player in the lo doc [low documentation] home loan sector has issued an earnings downgrade after intensifying competition in the mortgage lending sector forced it to remove premium pricing on its low-documentation home loans. The regional bank revised its earnings per share (EPS) growth forecast for fiscal 2007 to between 6c and 9c a share, down from 10c. The downgrade surprised the market and its shares ended down 53c, or 3.9 per cent, at $13.05.
"Competition in the banking sector, in particular the mortgage markets, has continued to intensify this financial year," the bank said.
"As a consequence, the mortgage portfolio is being repriced at a faster rate than had been expected when the 2007 financial year budgets were formulated in May."
CEO-in-waiting Jamie McPhee said the loans affected were all low-documentation loans, which comprised about 35 per cent of the bank's mortgage loan book. "They have been priced historically at a premium to a standard product," Mr McPhee said. "Today's new business is no longer written at a premium and that's the big change."
Mr McPhee said Adelaide Bank was one of the first banks to offer low-documentation loans, which were popular among the self-employed who often did not have the documentation to support a loan application, unlike company workers.
"We were early into the low-doc space, but more of the market has offered them and that premium has been competed away," he said.
Mr McPhee said the bank was also exploring development options, which could impose a short-term burden on EPS growth but increase it in the medium term. "We think there's other opportunities for the bank to take hold of, and those things come at additional cost," he said.
Investments the bank is considering include acquisitions and new product developments.
Last year, AdBank bought Goldman Sachs JB Were's margin lending business and a portfolio funding business.
"These businesses have made a significant contribution to the bank's profit growth and their contribution for the 2007 financial year is in line with or exceeding expectations," the bank said.
AdBank reported a 13 per cent lift in net profit to a record $94.42 million for 2005-06 and achieved EPS growth of 13 per cent to 88.68c. Mr McPhee will replace outgoing AdBank chief executive officer Barry Fitzpatrick when he retires next month.
AAP

Mortgage brokers to become top lenders

2006-12-10T19:42:00.000+10:00

Mortgage brokers are becoming the first choice for home buyers when they're arranging a loan, a survey shows.

The Mortgage Industry Association of Australia(MIAA)/BankWest home finance survey released today showed more than 41 per cent of recent or intending homebuyers would go to a mortgage broker.

That figure compares with 37.5 per cent who regarded banks as their first preference.

MIAA chief executive Phil Naylor said the figures showed a rise in the public acceptance of brokers.
"Public awareness of brokers is now more than 90 per cent," he said.

It is the first time the survey has shown homebuyers prefer arranging their loan through a broker rather than going straight to a bank.

BankWest's head of broker sales, Phil Colton said the research highlighted that banks really couldn't afford to ignore the broking industry.

The research shows that borrowers preferred brokers mainly because they did all the legwork for customers, but also because they could offer a range of loan options from different lenders.
The MIAA/Bank West survey is conducted twice a year.

Source: AAP

Mortgage lender goes for broke to expand results.

2006-12-04T10:59:00.000+10:00

Australian Mortgage Broker and lender Aussie Home Loans Group's aggressive expansion has helped bump up its annual profit despite stagnant east coast housing markets.

The mortgage lender and broker formed by John Symond yesterday posted a 44 per cent rise in net annual profit for 2005-06 to $19.7 million.

Aussie said it processed more than $10 billion worth of housing loan applications throughout the year, with the average loan size increasing to $242,000, which is higher than the Australian Bureau of Statistics average of $221,000.

Mr Symond told AAP that even though the Perth residential property market was "going gangbusters", challenging conditions in NSW had made the overall situation tough.

But he said the unlisted Aussie Home Loans was able to maintain profit growth, employing more people and rolling out more branches. "Our mortgage writers don't write any more business but there's more of them and we're touching more people," Mr Symond said.

In the year to June 30, Aussie increased its sales force by 19 per cent to 600 mortgage advisers.

"We have also very successfully rolled out about 14 new franchise businesses at a rate of about one a month," Mr Symond said.

"These have mostly been in parts of regional Australia we have not serviced before, so more consumers are being touched by the Aussie brand."

Aussie's credit card business was also growing fast and now had more than 100,000 customers, Mr Symond said.

Aggressive growth would continue in 2007 through the rollout of more franchise businesses and the establishment of new products.

Capital expenditure over the next 12 months was expected to hit about $10 million.

As for the group's future profitability, Mr Symond said Aussie had a "confident view of the medium term".

This month's quarter of a percentage point interest rate rise to 6.25 per cent had caused more caution in the housing market, Mr Symond said.

But he felt another rate rise was unlikely.

"We might have reached the top of the cycle this time and I'm hopeful the Reserve Bank will see no reason for an increase next year - unless of course inflation gets ugly again.

"And if the economy was to slow I don't think they'll hesitate in bringing rates back down.

"The market is certainly going to hurt for a few years to come.

"Consumer debt is at astronomical levels, so people won't go out and randomly spend.

"That's what the RBA want and that's what the RBA will probably get."

Source: AAP

First time home buyers will struggle with house prices

2006-10-31T10:10:00.000+10:00

First time home buyers would find it increasingly difficult to purchase a home in Melbourne as property prices moved back to record highs, an industry group warned.
The higher house prices combined with further interest rate hikes being touted as a done deal, and the planned reduction in the state government assistance could see a movement back to regional areas where median prices fell significantly over the last quarter.
According to data released by the Real Estate Institute of Victoria today, the Melbourne real estate market has continued its steady appreciation with a rise in the median price of 1.5 per cent since the June quarter.REIV chief executive Enzo Raimondo said if this trend continued Melbourne's median house price would return to the all-time high of $380,000 recorded in December 2003.
The September Melbourne quarterly median price rose to $377,000 up $5,500 from a revised June quarter. "This quarter's price data shows that all the fundamentals of the Melbourne property market are on track, the median price is steadily appreciating, stock availability at auctions has increased 11 per cent on 2005 and the clearance rate is up five per cent," Mr Raimondo said.
However he said the news was not good for those trying to break into the market. "The steady appreciation continues to affect affordability," Mr Raimondo said. "The most recent ABS data showed that first home buyers have reduced from 19.88 per cent of the local market in June to 17.76 per cent in August. "Further (interest) rate increases, taxes and charges and the planned reduction in the state government assistance for first home buyers in the middle of next year will only make it harder for young families. "This could push young families back to regional areas like Greater Shepparton in the central north were median prices for properties dropped by almost five per cent.
Geelong's median house price fell by 4.6 per cent and Ballarat's dipped 0.5 per cent. Greater Bendigo's median house price was up 3.2 per cent.Newport in Melbourne's inner west was the only area to make the top 20 growth suburbs in both quarters.
Doncaster, a leafy eastern suburb, recorded the biggest increase in median house price up 16.1 per cent to $520,000 while Melbourne's northern suburb of Broadmeadows reported a 13.4 per cent increase to $216,000.

Article source: AAP

Mortgage interest rate rise in November on the cards

2006-10-20T22:05:00.000+10:00

The pace of Australia's economic growth is expected to pick up over the next few months, increasing the chances of another mortgage home loan interest rate rise this year, a survey reveals.
The Westpac-Melbourne Institute's leading index of economic activity, which indicates the likely pace of activity three to nine months from now, was rose 0.7 index points in August bringing the annualised rate of growth to 6.1 per cent, compared to 6.5 per cent in July.
Despite the moderation, the result was well above the index's long term trend of 4.1 per cent.
Westpac chief economist Bill Evans said the leading index pointed to strong growth in the economy over the next few months.
"The Reserve Bank has also alluded to surprising strength in tax receipts, which is also pointing to a stronger economy than depicted by the official national accounts that measured the pace of growth over the year to June 2006 as an insipid two per cent."
Mr Evans expects the central bank will lift the official rate by a quarter of a percentage point to 6.25 per cent following a board meeting on November 7.
Mr Evans said growth in the coincident index was being underpinned by rising employment. "Growth in the index has now almost returned to trend following a weak first half of 2006," he said.
"This is pointing to better growth conditions in the second half of 2006. Employment continues to be the real driver of the index."
Mr Evans also forecast economic growth in the second half of this year to pick up to around four per cent, as net exports add to growth for the first time in 19 quarters.
But as non-farm inventories are rebuilt, farm inventories will be drawn down and farm production will fall due to the current drought.
"The impact on growth from the drought could be as severe as 2002/03 when growth was reduced by around one per cent," Mr Evans said.
The index also showed that half of the four monthly components increased in August. Share prices grew by 2.6 per cent while real money supply gained by 0.9 per cent.
However, this was partly offset by a 12.6 per cent drop in dwelling approvals and US industrial production fell by 0.1 per cent.
Three out of the four quarterly components also increased. Overtime worked, core manufacturing material prices, and real corporate gross operating surpluses increased, while the productivity measure declined.
The growth rate of the coincident index, which provides information on a weighted average of six economic series that are typically coincident with economic activity, rose 0.7 index points in August to an annualised 3.1 per cent from 2.8 per cent in June.

Source: AAP

National Australia Bank to bid for RAMS home loans

2006-10-13T08:35:00.000+10:00

The National Australia Bank is said to to in the process of making a bid for Major Non bank home loan mortgage lender RAMS.
Most loans written by RAMS now comme from the mortgage broker channel, and this is of obvious interest to the NAB.
THis move could also give NAB the option of growing their mortgage business through the RAMS franchise model.
In any even Nab would benefit from greater distribution with many RAMS offices in Towns and locations where it is not currently represented.
NAB was one of the first Australian Banks to get into securitiesed lending when it bought into HomeSide in the US, and then brought the mortgage lending brand back to Australia.
And that brings up another question. What would happen to the HomeSide brand?

National Australia Bank says home loan interest rates on hold until 2007

2006-10-11T16:19:00.000+10:00

The National Australia Bank (NAB) says its latest analysis of the business climate consolidates the view that official mortgage home loan interest rates will remain on hold for the rest of the year.
For September, the bank's measure of business conditions indicates that they have recovered just a little after two months of decline.
A pick-up in the retail sector has been offset by weaker construction sector especially new homes, land development and building apartments and home units.
Some improvement in Victoria, including home building, has been balanced by softer conditions in New South Wales and Queensland.
Business confidence has remained unchanged after falling sharply in recent months.
So on balance the NAB feels that the official cash rate as set by the Reserve Bank of Australia will remain steady until at least the early part of 2007. This is good news for small business and homeowners with mortgages to repay as well as prospective home buyers.

Mortgage Manager and Financial Services Giant adds fees to build bottom line

2006-09-03T07:14:00.000+10:00

By increasing fee incomes, the James Packer-backed Mortgage Manager, Mortgage funder, and Funds Manager and is gaining traction as a mainstream financial services group.

Challenger Fiancial Services yesterday announced an increase of 28 per cent in statutory net profit, after tax and before significant items, to $153 million.
Funds management fees, a steady, predictable income stream, grew from $218 million, or 67 per cent of Challenger's net income, to $315 million.

"Fees now account for roughly 70 per cent of net income," said Michael Tilley, managing director of Challenger, trumpeting what he sees as one of the more significant achievements of his tenure.

Challenger now categorises its business into mortgage management, funds management, asset management and financial planning. It was formerly categorised under annuities, wealth management and mortgages.

Since he took over as CEO of Challenger in August 2004, Mr Tilley has made a concerted effort to break with the past.

The funds management group has diversified the portfolio, backing its annuities into more fixed income and infrastructure.

At the same time, it embraced Macquarie's specialist funds model, selling a listed and unlisted infrastructure fund. Yesterday, Challenger took another step in that direction when Mr Tilley said it was sounding out the market about the launch of a listed property trust, capitalised at over $500 million.

Challenger will take a stake of up to 40 per cent in the new fund, but the underlying purpose is to further rebalance the portfolio backing the company's annuity book. More than half is still invested in property, while Challenger has 21 per cent in infrastructure and the remainder mostly in fixed interest.

The target is to move to a mix where property, infrastructure and fixed interest take 30 per cent each, and equities take 10 per cent.

Funds management was another bright spot for Challenger. Chris Cuffe, who built Colonial First State's money management machine, spearheaded the growth of Challenger's funds management group until he quit in February to join not-for-profit microfinance group Opportunity Australia. Mr Cuffe said at the time he was leaving the group in good shape.

"We broke through the break-even point (with funds management)," Mr Tilley said yesterday. "In 2005, for more than half the year, we were losing money."

But after acquiring HSBC's local asset management operation and increasing assets organically, the funds management group gained sufficient assets to generate a profit.

Funds management earnings before interest and tax switched from a $10 million loss last year to a $24 million gain.

Suicide Loans?: Piggyback Mortgages Default by up to 50%PR

2006-07-28T09:07:00.000+10:00

Consumer Advocate and International Mortgage Reduction Expert, Harj Gill cautions,
"This is precisely what I have been warning the public about. It's the first sign of the tsunami of defaults and foreclosures that are coming," Gill, who is also the Founder, President and CEO of American Mortgage Educators, Inc., has been on a one-man crusade warning homeowners of the risks associated with exotic mortgages and urging them to take immediate action to avoid going into default.
According to Gill, piggyback mortgages, which are a combination of two loans packaged together and closed simultaneously, represent just one of many non-traditional mortgages that have put homeowners at risk of losing their homes.
Typically for people with little or no down payment, the amount for the first mortgage is set so it does not exceed 80% of the homes value. This allows the borrower to avoid paying Mortgage Insurance (MI). The remaining loan amount is financed as a second mortgage by way of a Home Equity Loan or a Home Equity Line of Credit (HELOC) and "piggybacked" onto the first.
"I have always said this is a good solution to avoid MI, but a terrible long term strategy," said Gill.
Gill's assertion is supported by the latest analysis by Standard & Poor's, an influential Wall Street ratings agency, which analyzed nearly 640,000 piggyback first-lien mortgages in bond pools. S&P discovered that first-lien mortgages connected with piggyback loans are 43% more likely to go into default than stand-alone first mortgages of comparable size. The default rate increases to a whopping 50% for borrowers with a FICO credit score of 660 or less.
According to SMR Research, lenders and mortgage brokers whose commissions are based on loan size, have aggressively promoted these loans because the first-lien portion of piggybacks tends to be larger than standard first mortgages.
Gill warns that borrowers with these loans should be ultra concerned because they are concentrated in metropolitan areas with the greatest risk of experiencing a fall in housing prices.
"If borrowers start to go into default in a declining property market, they will be committing financial suicide by having their credit destroyed and still being burdened with a debt well after they lose their homes," said Gill.
A 2005 SMR Research study confirmed that many of the largest U.S. counties in population and mortgage market size have huge portions of home loans as piggybacks, some by as much as 62%. These include California, Washington, Colorado, Virginia, Arizona, Nevada, Oregon, Illinois, Georgia, Massachusetts, North Carolina, Utah, Florida, Texas, and Missouri.
The danger, according to Gill, is that unlike standard mortgages with fixed-interest rates, borrowers with adjustable rate piggybacks are not prepared for rate hikes that increase their payments.
Gill's recommendation is for borrowers to immediately reduce their interest payments and get a forecasting tool to determine the critical interest rate at which they are likely to go into default.
He says those with HELOCs can use a little known Banking Principle to reduce their interest payments.
"Interest on your HELOC is calculated on the Daily Balance. So instead of having your income sitting in a checking account earning no interest, borrowers should 'park' those funds in their HELOC to immediately reduce the daily balance and thereby reduce the amount of interest they pay," advised Gill.
Of course borrowers need to ensure they have a HELOC with the right features and proper setup to take advantage of this strategy. For those without a HELOC, Gill recommends refinancing the second mortgage into one with features that enables this.
"By asking the right questions, you should be able to refinance the second mortgage at almost no cost," advises Gill.
To assist borrowers, he has prepared a Critical Report explaining how to apply this strategy and refinance the second mortgage on his Consumer Information Center http://www.mortgagefreeusa.com/
"I expect every mortgage broker, loan officer, lender and real estate agent that knowingly put a client into a piggyback mortgage to contact them and tell them to read this Critical Report," said Gill.
"Not doing this truly shows that you were only in it for the money and not to help your clients."
American Mortgage Educators, Inc. CONTACT: American Mortgage Educators, Inc., 800-605-4718

Late mortgage repayments not widespread

2006-07-16T18:31:00.000+10:00

Mortgage rates are rising, home prices are stalling in parts of the country, lots of people are taking out alternative home loans that barely existed five years ago and inflation seems to be picking up.

Guess which of the following scenarios is happening to homeowners:

A. They are falling behind in their mortgage payments. The delinquency rate -- in other words, the proportion of homeowners who are at least 30 days past due on their house payments -- is skyrocketing. Foreclosures are going up, too, but not as rapidly.

B. Homeowners actually are making fewer late payments than they were at the end of 2005. They're making more late payments than a year ago, but only because of Hurricane Katrina.

The correct answer is B, according to the Mortgage Bankers Association. The proportion of homeowners making late payments fell in the first three months of this year, compared to the last three months of 2005. The foreclosure rate dropped a teensy bit.

Welcome to Housing Market, U.S.A.
To visualize what's happening, imagine a town that represents the U.S. housing market. The town has exactly 10,000 owner-occupied homes with mortgages. In the first three months of this year, 441 of those homeowners were at least 30 days past due on their house payments, compared to 470 homeowners in the last three months of 2005. In other words, the delinquency rate fell to 4.41 percent from 4.7 percent.

In the same town, 98 homes were somewhere in the foreclosure process in the first three months of 2006, compared to 99 homes in similar straits in the final quarter of 2005. The foreclosure inventory fell to 0.98 percent from 0.99 percent.

In the unlikely event that you had been pondering delinquencies and foreclosures, you probably didn't think they were declining in number. A lot of news coverage has speculated that the combination of rising interest rates, alternative loans and falling home prices could force homeowners into foreclosure. But spikes in delinquencies and foreclosures haven't happened. Don't congratulate yourselves too much, America -- this isn't a sign that you've suddenly become more responsible.

Factors behind the drop in late payments include:

• Job growth.
• The recent vintage of many mortgages.
• The run-up in home prices over the last five years.
Source: BankRate.com

One in ten have an investment property

2006-07-13T21:28:00.000+10:00

Australian Investors still prefer property over other assets such as shares.

Property investment may be in the low ebb right now, and may spell a good time for new investors to enter the market that mortgage brokers need to take avantage of.

In May 2004, the Reserve Bank said that 10.3 per cent of Australian households had an investment property. Some believe that is now around 12 percent [one in eight households.]

So why do people buy property as opposed to shares or other investment prospects?

The simple answer is leverage. By using mortgage finance with tax incentives investors can leverage a bigger investment and manage to hold that for longer. And its time that makes any investment work. Mortgage brokers should be more active in this area.

As an example, $400,000 is a common price to pay for property. If it appreciates at 5%pa that $20,000 a year, compounding.

If people bought shares then a $30,000 investment would seem large, and with a 5% capital growth it would only deliver $1,500 yield.

Also a lot happens to a share price, and this volatility can make people nervous and leave the market at the wrong time. Property on the other hand is largely a sleeper; noone knows what its worth till its sold, and growth happens gradually, and then in spurts in boom years.

When this happens the investor can make a lot of money in a short time if you are holding a few properties.

Mortgage brokers need to realise that property investors can become repeat customers as they accumulate their portfolios and as they tend to hold one to the property for a long time, upfront commissions are secure and trail commissions continue longer.
Prime candidates for purchasing investment properties these days tend to fall into two groups. Not surprisingly, the first is the baby boomers, who have considerable equity in their homes, tend to have their finances sorted and have five to 15 working years left. Many are conscious they need to do something outside of superannuation to boost their retirement income.

An emerging group are single females aged between 20 and 30. Many female "generation Ys" are getting the saving habit and getting into the market early.

A recent Citibank survey showed that 21 per cent of people who have a mortgage see it as something that will supplement their retirement income.

This presents another opportunity for mortgage brokers to satisfy this market with reverse mortgages and other similar products.

Personal finance: House finance up, leasing finance down

2006-06-10T03:30:00.000+10:00

House purchases up 0.8 percentFrom: AAP June 09, 2006 TOTAL personal finance commitments rose 1.0 per cent in April, seasonally adjusted, to $6.865 billion compared with an unrevised $6.799 billion in March, the Australian Bureau of Statistics said today.
Total commercial finance, seasonally adjusted, fell 21.1 per cent in April to $27.411 billion from an downwardly revised $34.722 billion in March.The purchase of dwellings by individuals for rent and resale rose by 0.8 per cent, adjusted.
Lease finance fell 3.5 per cent in April, to $537 million compared with a downwardly revised $557 million in March.
Source: AAP

Australia's average mortgage is now $300,000

2006-06-09T19:55:00.000+10:00

The average Australian Mortgage is now over $300,000, according tpo the latest figures released by Australian Finance Group, which reveal that the average new Australian mortgage broke through the $300,000 mark in May 06. The average new mortgage in May was $301,000; up from $264,000 in May 05, This represents an 11% increase in the past 12 months.
Driving the trend is Western Australia, where the average new mortgage rose to $319,000 - a 35% rise over the past year. AFG, the nation's largest mortgage broker, also recorded its biggest ever proportion of mortgages advanced to investors in WA, where 48% of new loans were for investment purposes. Queensland figures also showed strong increases, with the average mortgage in that state sitting on $297,000, up from $243,000 in May 05. Other states showed less dramatic increases, with NSW shifting from $367,000 in May 05 to $371,000 in May 06. Victoria showed an upward trend from $248,000 last year to the current figure of $276,000.
The report also showed that for the first time, more than 20% of new borrowers are choosing fixed interest rate mortgages. This trend is not surprising as borrowers brace themselves against possible future rate hikes. Overall, however, it appears that May's interest rate rise has had little impact on the nation's mortgage market.
"We had our best month ever in May, so there's no sign at all that the rate rise has had an impact on our business," said Malcolm Watkins, executive director of AFG. "While the $300,000 may not be a definitive figure, it's strongly indicative of what the market is doing, especially with the continuing resource boom driving WA."

Sydney mortgage broker charged

2006-06-07T17:34:00.000+10:00

Sydney mortgage broker Mr Adrian Camilleri has been charged with managing a corporation while being banned from doing so, the corporate watchdog says.
Adrian Camilleri was charged with five counts of managing a company while disqualified, the Australian Securities and Investments Commission [ASIC] said today. It said the charges against Mr Camilleri, from Westmead in Sydney's northwest, related to five companies, includingExpress Loans and Finance Pty Limited.
Express Loans and Finance was a mortgage broking business, while the other companies were used to purchase investment properties.
Between February 2003 and July 2003, Mr Camilleri made decisions that affected a substantial part of the businesses connected to the five companies, ASIC alleged.
At the time Mr Camilleri was an undischarged bankrupt and was, therefore, disqualified from managing companies, it said.
The charges follow an ASIC investigation. The matter will next be heard in Downing Centre Local Court on June 20.