Is 2012 a year for lower home loan rates?

Recent press reports have indicated there is a good chance of the RBA droppping rates further this year.

However will the Banks pass on the rate cuts? Possibly not.

Also in the press, Fitch the rating agency, has expressed concerns about the current ratings of the big four banks, mainly as they borrow a lot of their funds from overseas including Europe. If Europe has a squeeze on, this will flow onto our Australian banks.

So there migjht be lower rates, but we are not immune to what is happening in Europe.

Update: Australian Housing Affordability

Iden Money presents excerpts from the REIA Deposit Power Housing Affordability report for the September quarter 2010.

(This article is an update on the original article on Housing Affordability and looks at housing affordability on a national basis for September 2010 quarter. Click here to see the original article.)

The year to September 2010 recorded the largest annual decline in housing affordability since the beginning of the decade, with the proportion of income required to meet loan repayments increasing 5.8 percentage points to 34.8% over the year.

Over the September quarter, housing affordability decreased 0.2 percentage points nationally. Despite the decline, some states and territories experienced a moderate improvement in affordability over the quarter, with the exception of the Australian Capital Territory, Queensland and Victoria where declines were evident.

During the quarter, the Reserve Bank of Australia’s (RBA) cash rate remained on hold at 4.5%. Whilst the average quarterly standard variable rate remained unchanged during the quarter, average quarterly fixed rates declined moderately, albeit enough to record the largest quarterly decrease observed during the year.

The Australian Capital Territory recorded a decline in housing affordability, but it remained the most affordable state or territory to own a home, with the proportion of income required to meet loan repayments increasing 0.8 percentage points to 18.8%; 16.0 percentage points below the national average. Read More »

Iden Money launches Xmas Special

On 1st December Iden Money and Property launched a low, low interest rate special on its Balanced Variable home loan.

Iden Director Brian Rowe said this offer would last until 31st January and was offered with a variable rate of just 6.87%, no application fee. The loan would also be offered as a combination loan with a low 2 year fixed rate of just 7.27%.

He said that this was a quality offer which included an offset account and discounted fixed rates between 1 and 5 years. Borrowers considering refinancing their existing loans would benefit greatly by obtaining their approval prior to the end of January.

Click here to visit our Specials page to see this offer.

Housing affordability hits new low

Housing affordability in Australia has hit a new low, according to the Real Estate Institute of Australia.

The REIA’s Deposit Power Housing Affordability Report, released today, shows that the proportion of income required to meet mortgage repayments increased 5.8% to 34.8% over the year.

Over the third quarter, housing affordability nationwide decreased 0.2%, though some states and territories experienced moderate improvements.

“Compared to the same quarter of the previous year, all states and territories recorded a decline in housing affordability. The largest decreases were evident in New South Wales and Victoria where the proportions of income required to meet loan repayments increased 6.5 and 7.5 percentage points respectively,” REIA president David Airey said.

The total number of loans excluding refinancing fell 2.9% over the quarter, and have declined 28.3% over the year. The REIA has said this represents the largest annual decline since March 2001. The third quarter also saw the lowest quarterly participation of first home buyers since 2004.

“These all-time lows are extremely concerning. Not only is affordability on the decline, but loans being issued are down and first home buyer participation in the market is the lowest it has been in six years,” Airey said.

Source: BrokerNews website, 8 Dec 2010

RBA defends banks

The Reserve Bank of Australia has defended the move by Australia’s banks to increase interest rates beyond the .25% increase announced by the RBA on Melbourne Cup Day. Nearly all lenders have increased their variable rates between .25% and .45% with the Commonwealth Bank rising by .45%, closely followed by NAB at .43%.

Reserve Bank deputy governor Ric Battellino said banks are not increasing their profit margins on the back of rate rises. He told members at a Perth business lunch yesterday that bank margins have not changed in the past six years – remaining in the range of 2.25% and 2.5%. Read More »

Exit fees not a big issue – Brian Rowe

Iden Money Director Brian Rowe said today that he didn’t consider exit fees to be a major issue for borrowers provided the borrower carefully weighed up the advantages and disadvantages of loan products prior to settling on one.

Most lenders continue to have exit fees, some larger than others. Under the new ASIC guidelines the fees are not outlawed but must be justified.

It has been widely reported that non banks have higher exit fees than many of the banks however in most cases this is a symptom of the system in which non banks work. Exit fees charged by non banks are mostly put in place to cover the fee paid to the broker who wrote the loan, if the loan discharges in the first 4 years. Often, this fee reduces as time goes by and the lender has earnt margin income on the loan. Once the loan has run for a pre determined period the fee is no longer charged. This may not be the case with banks, who may charge a non reducing, pre-set exit fee out to 5 years. Read More »

Major banks could face rate freeze

Australia’s major banks could face a 24-month freeze from raising rates outside of RBA movements should the Green party successfully steer new legislation through parliament.

In an e-mailed statement released early this week, the party announced it would be introducing the ban in the lower house, along with rules that banks pass along decreases to the official central bank rates and scrap some small fees.

“The Banking Amendment (Delivering Essential Financial Services for the Community) Bill 2010 provides legislative protection for customers including a ban on unfair A$2 bank ATM fees, ensuring basic fee-free bank accounts, capping the level of mortgage exit fees, and introducing a variable rate mortgage product (“Fair Price Mortgages”) that will only permit genuine changes to the lender’s cost of funds to be passed on to customers,” said Senator Bob Brown in a statement. Read More »

RBA’s rate hike dampens home buyer spirit

The RBA’s latest rate hike significantly dampened home buyer spirit over the weekend.

Data from Australia Property Monitors found just 7.1 per cent of properties cleared in Brisbane over the weekend – significantly down on the 38.2 per cent achieved this time last week.

The news was just as sour in Melbourne, Adelaide and Sydney.

In Sydney 53.8 per cent of properties cleared – down from the 67.4 per cent achieved this time last year.

The dearest property sold in the capital city over the weekend was a three bedroom house in Newtown, which went under the hammer for a cool $13.9 million.

The cheapest property sold was a one bedroom unit in Fairfield which went under the hammer for $135,000.

Source – The Adviser

Be careful what you wish for on exit fees

It looks so obvious. And easy. Abolish, reduce or limit so-called ‘exit fees’. What you pay to terminate your mortgage early. But usually payable, only very early, like in the first four years of a mortgage.

It might appear to get to the heart of the problem. You are unhappy with Bank A putting up its mortgage interest rate; you want to move to Bank B; but that exit charge might wipe out the benefit.

So if there’s only a low exit fee, or better still no exit fee, people will be — literally — free to move.

To, as the prime minister creatively put it, take their money and go elsewhere. Actually with a loan, it’s not your money. Read More »

Spotlight on major banks after the rate rise

All eyes will be on the majors in light of CBA’s decision to lift its standard variable rate 20 basis points above the RBA.

While CBA took less than one hour to announce its rate hike, the other major lenders have been a little slower off the mark.

Federal Treasurer Wayne Swan branded CBA’s rate hike as a “cynical cash grab” and vowed to introduce reforms to boost competition between the lenders.

But while CBA’s decision managed to appal Mr Swan, it failed to shock the industry, with both CBA and Westpac consistently warning that higher funding costs would cause them to step out of cycle with the RBA.

If all the majors move this week, it could open up sound opportunities for the non-bank sector. Read More »