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
Tuesday, December 19, 2006
Sunday, December 10, 2006
Low doc home loans on par with income verified interest rates
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
"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
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
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
Monday, December 04, 2006
Mortgage lender goes for broke to expand results.
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
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
Tuesday, October 31, 2006
First time home buyers will struggle with house prices
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
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
Friday, October 20, 2006
Mortgage interest rate rise in November on the cards
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
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
Friday, October 13, 2006
National Australia Bank to bid for RAMS home loans
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?
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?
Wednesday, October 11, 2006
National Australia Bank says home loan interest rates on hold until 2007
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.
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.
Sunday, September 03, 2006
Mortgage Manager and Financial Services Giant adds fees to build bottom line
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.
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.
Friday, July 28, 2006
Suicide Loans?: Piggyback Mortgages Default by up to 50%PR
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
"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
Sunday, July 16, 2006
Late mortgage repayments not widespread
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
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
Thursday, July 13, 2006
One in ten have an investment property
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.
Saturday, June 10, 2006
Personal finance: House finance up, leasing finance down
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
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
Friday, June 09, 2006
Australia's average mortgage is now $300,000
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."
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."
Wednesday, June 07, 2006
Sydney mortgage broker charged
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.
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.
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