Breaking Interest Rates News

By: Jessica Darnbrough

Over 80 per cent of brokers believe lending policy is tighter than it was a year ago, according to a recent poll.

The Adviser’s latest weekly straw poll, 80.5 per cent of brokers believe lending policy is tighter, while 10 per cent think it is more flexible and 9.5 per cent says it is on par with this time last year.

Smartmove broker Michael Letts told The Adviser that the banks had tightened their policy in all areas, but particularly in the “high risk” areas including High LVR loans.

“The banks are definitely becoming more wary of lending to anyone that requires lenders mortgage insurance,” he said.

“But I don’t think this is a bad thing for the industry, rather it encourages brokers to get all the right documentation in place the first time so that the loan is approved.”

1st Street broker Jeremy Fisher told The Adviser that with the costs of funds rising, he wouldn’t be surprised to see the majors tighten policy further in the future.

But while the majors are obviously tightening policy under the strain of the GFC, not all lenders feel the need to follow suit.

Some non-bank lenders are becoming more competitve, edging back into areas they had been sourced out of by the GFC.

Earlier this month, Australian First Mortgage launched its Complete Option self-employed lite doc loan, suggesting funding for the self-employed market was starting to open up.

And AFM is not alone. NMC and Provident Capital both recently expanded their product suite.

AFM’s national director of sales and marketing Iain Forbes told The Adviser that non-bank lenders were stepping into to fill the gaps created by the majors.

“While the banks continue to tighten their funding criteria, non-banks are stepping up to the plate in a bid to cater to the demand for high risk products,” Mr Forbes said.

By: Staff Reporter

Residential property price growth is expected to tumble over the coming 12 months, new research has found.

According to NAB’s Residential Property Survey, Australian house price expectations have slipped to just 1.4 per cent growth – down from 5.2 per cent recorded in the March quarter.

Following very rapid growth over the past 12 months, Melbourne has seen the most notable change, leading last quarter’s expectations at 5.8 per cent but now finishing last nationally at 0.7 per cent.

Sub $500,000 properties are tipped to outperform the market, with properties valued over $2 million expected to fall.

Foreign buyers are expected to account for around 9 per cent of all residential purchases over the next 12 months.

Properties traditionally favoured by first home buyers, those within the $250,000 to $500,000 price range, are expected to realise the highest percentage capital growth over the next 12 months, for both housing and apartment stock.

In contrast, homes and apartments over $2 million are considered the worst investment options, according to NAB’s survey participants.

By: Staff Reporter

Despite widespread speculation that the RBA will keep interest rates on hold when they meet early next week, one mortgage broker believes more borrowers will look to take out a fixed rate mortgage.

Data from Loan Market Group has found that borrowers are still nervous about the future of standard variable rates and may prefer the stability of a fixed rate mortgage.

In addition, the brokerage’s national operations and risk manager Ivan Karamatic said the fixed rates market had become highly competitive in recent months with several lenders offering big cuts on their fixed rate products.

“Some fixed rate packages on offer are only slightly higher than some of the basic variable rates,” he said.

“In some instances the difference between a three-year fixed rate and that of a basic variable is as little as 0.25 per cent.

“That’s only one RBA interest rate hike away from mortgage holders being potentially better off with a fixed rate loan.”

Mr Karamatic said Loan Market had received a growing number of enquiries about fixed rates.

“To some people, a fixed rate can offer peace of mind in an unpredictable interest rate environment,” he said.

By: Jessica Darnbrough

To complement its recent decision to move into the mortgage lending market, LJ Hooker real estate group has launched a brand new website.

The website pulls the real estate groups four key areas: residential, commercial, rural and finance, under the one roof.

LJ Hooker Financial Services general manager Peter Bromley told The Adviser that the website was developed to support its broker channel.

“Previously, the LJ Hooker Financial Services has been seen as a secondary or sister company to LJ Hooker,” he said.

“Now and with the launch of the new website, LJ Hooker is proactively informing clients that mortgages are one of their key offerings.”

Mr Bromley said the real estate group was fast becoming a one stop shop for potential home buyers.

Yesterday, the real estate group announced it had joined forces with Firstfolio to launch a new LJ Hooker Classic Home Loan which will be distributed through LJ Hooker Financial Services.

By: Staff Reporter

Australia’s strong economy is helping to boost satisfaction levels, with almost 90 per cent of all Australians confirming they are satisfied with their lives.

According to AMP’s latest Income and Wealth Report, a strong local economy and the natural optimism of Australians has gone a long way to boosting satisfaction levels.

“As a nation we managed our way out of a recession well before our global peers, not only because of good economic management but also because of our optimistic outlook on life that has seen us through the tough times,” AMP Financial Services managing director Craig Meller said.

Mr Meller said Australians that had realised the dream of home ownership were, on the whole, a lot happier than non-homeowners.

Some debts like those associated with credit cards and overdue bills can lead to lower levels of happiness but larger debts above $100,000 like mortgages linked to more valuable assets can positively influence happiness.

“Many Australians are realising their dream of owning their own home and enjoying the perks of a relatively affluent lifestyle leading to higher satisfaction levels. However more and more people are working longer hours to support their standard of living,” Mr Meller said.

“The report shows being financially better off can lead to greater happiness but wealth alone does not determine happiness. Managing finances wisely – by paying off smaller debts, investing in a home and putting money in the bank or saving through superannuation – can help improve satisfaction at any stage.”

By: Belinda Luc

Rising rates are finally starting to bite down on borrowers, as mortgage credit demand falls to a six year low.

According to Veda Advantage's quarterly Consumer Credit Demand Index (CDI), released yesterday, demand has not yet returned to pre-GFC levels, with mortgage applications down 20.3 per cent compared to the same April to June period in 2009.

This follows on from a 15 per cent fall in the January to March quarter of 2010 year-on-year.

Veda Advantage head of external relations Chris Gration said rising interest rates and a 'saving rather than spending' mentality was the reason behind the credit demand drought.

"Australian consumers appear to be continuing the saving habits adopted during the 2009 downturn,” Mr Gration said.

“Evidence suggests many people continue to focus on paying down debts rather than extending their credit," he said.

According to Mr Gration, first home owner stimulus activity levels buoyed the market in 2009, so mortgage demand naturally tapered off after the incentives of last year.

According to the CDI, mortgage applications fell steeply in all states year-on year, but most predominantly in Queensland (down 28 per cent), New South Wales (down 23 per cent), Tasmania (down 22 per cent) and Western Australia (down 21 per cent).

By: Jessica Darnbrough

LJ Hooker is the latest in a growing number of groups to focus on marketing its own branded products.

The franchise real estate group has joined forces with Firstfolio to launch its new LJ Hooker Classic Home Loan which will be distributed through LJ Hooker Financial Services.

The launch of the new variable loan, which has an interest rate of 6.65 per cent, follows a successful pilot offering within the LJ Hooker network during the past two months that resulted in the company writing over $30 million in home loans.

LJ Hooker’s move into the lending market is part of a growing trend among brokerages and aggregators that are looking to take greater control of their funding lines by offering their own branded products.

Earlier this month, AFG made the decision to rebrand its own label mortgage division as AFG Home Loans.

And there have been similar moves from FAST and Choice in recent months while Aussie has also beefed up the emphasis on its own products.

LJ Hooker Financial Services general manager Peter Bromley told The Adviser that there was growing demand among brokers for lenders with a strong service focus and credit appetite that will meet the needs of their customers.

“Our long-term goal is to increase our market position and we believe offering home buyers and property investors new products such as home loans at a competitive rate and with more features than the big banks offer will help us achieve that,” he said.

Mr Bromley said once the product had found its feet, LJ Hooker would take the necessary steps to improve and tweak the home loan in accordance with consumer demand.

"Once we have our first product right, we will look to extend our reach and ultimately create a full suite of home loan products."

By: Jessica Darnbrough

The RBA will more than likely keep rates on hold when it meets next week, after better than expected inflation data.

According to ABS data, released yesterday, the Consumer Price Index (CPI) was lower than market expectations and offered no evidence of inflationary pressures getting out of hand.

Housing Industry Association chief economist Harley Dale said the data would suggest that the RBA will keep rates on hold in August – if not for the next few months.

“It is appropriate that rates are kept on hold in light of mounting evidence that the new home building recovery will run out of steam and on-going uncertainty regarding the post-stimulus trajectory of the domestic economy.”

The headline Consumer Price Index increased by 0.6 per cent over the June 2010 quarter, compared to a market expectation for a 1 per cent rise.

The annual rate was 3.1 per cent – just outside the RBA’s target range.

Mortgage Choice chief executive officer Michael Russell said with core inflation only nominally outside the RBA’s target band, there would be little reason to lift the official cash rate over the coming few months.

“Consumer sentiment is still volatile so the Reserve Bank needs to do all that it can to protect the positivity of Australians. We cannot risk any deterioration in the confidence of everyday consumers and business owners, which will in turn have a negative effect on the economy,” Mr Russell said.

"We have not yet seen the full extent of the impact of a quick succession of interest rates from October to May. Nor do we understand the impact of global economic turbulence that continues today."

By: Staff Reporter

Club Financial Services is opening its doors in a bid to help brokers meet the standards imposed by the new legislation.

The mortgage originator will host a two week course for brokers to ensure they boast the appropriate credentials and have the skills to provide borrowers with a range of services and products.

Club Financial Services director David Garner said regulation was an important milestone for the industry as it would make brokers more accountable for their work.

“While the most successful mortgage broking companies have had their own minimum standards in place for a long time, there has been great scope for variation across the industry,” Mr Garner said.

“A good broker will provide a transparent and tailored service that educates their clients as to the best options for them, while also meeting all of the legislative requirements - and that’s a large part of what we’re instilling into Academy participants.”

The Club Academy will run in Adelaide from 6 – 17 September, 2010 and is open to everyone.

By: Staff Reporter

Investors have officially filled the gap created by first home buyers, new research has found.

According to Australian Property Monitor’s Quarterly Housing Report, Australia recorded solid house price growth over the June quarter as investor activity mitigated the fall in demand from owner occupiers and FHBs.

Nationally, annual house price growth remained strong – sitting above 15 per cent.

APM’s economist Matthew Bell said the strong results came as a surprise, given the six interest rates rises in recent months.

“Most markets around the country saw modest growth for the quarter, contributing to the continuing high year-on-year figures,” Mr Bell said.

In what was the fifth consecutive quarter of house price rises for Sydney, house prices increased by just over 2 per cent and unit prices were up by almost 3 per cent, pushing annual growth to over 13 per cent – well above the long-term trend.

The current Sydney median house price now sits above $625,000 and the median unit price above $435,000.

Melbourne was another star performer; despite quarterly growth falling to the lowest rate since March 2009, a result of over 4.4 per cent has meant that Melbourne is still a relatively hot market.

Canberra remains the second strongest housing market in the country with the annual rise in median house price coming in at over 16.5 per cent, with the median house price fast approaching $600,000.

“APM expects further price growth moderation in the next three to six months as the low levels of housing finance and the risk of further rate increases weigh on the market. However, the medium-to-long-term outlook for property prices remains strong, and we expect the 2010 annual rate of national house price growth to settle in the eight to 10 per cent range,” said Mr Bell.