Major World and Dutch bank ABN AMRO has withdrawn its backing of a takeover bid from Barclays and said it was no longer formally recommending offers from the British bank or a Royal Bank of Scotland-led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But it has now effectively withdrawn its recommendation even after Barclays sweetened its offer to buy ABN last week to include more cash.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
Monday, July 30, 2007
Sunday, July 29, 2007
Housing supply research and data collection proposed
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
"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
Thursday, July 26, 2007
Wespac Boss says the big banks need scale to compete globally
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
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
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
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
Tuesday, July 24, 2007
Former Queensland property marketeer is broke
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
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
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
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
Wide Bay Building Society makes offer to buy MacKay Permanent Building Society
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
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
Thursday, July 19, 2007
Mortgage brokers and the mortgage industry targeted as the problem behind home loan defaults
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
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
Monday, July 16, 2007
Mortgage and personal credit slowdown tipped as Australians are at "debt capacity" according to the Commonwealth Bank
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
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
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
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
Sunday, July 15, 2007
Are property prices, demand and mortgages to be driven by DIY superannuation?
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
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
Saturday, July 14, 2007
Lowering credit statndards may create difficulties for some new home buyers
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
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
Monday, July 09, 2007
Mortgage rip off victims of Sample & Partners can claim compensation. Here's how.
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.
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
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
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
Saturday, July 07, 2007
Property Investors stand to lose half a billion dollars
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."
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."
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