Breaking Interest Rates News

While many brokers dismiss the online channel as an immediate threat there is growing indication that it is rapidly gaining appeal with borrowers.

Speaking to The Adviser yesterday UBank general manager Alex Twigg said that they had been overwhelmed by the number of borrowers wanting to apply for a mortgage online.

“We have 200,000 borrowers and surprisingly, 100 per cent of them applied for a mortgage via the online channel,” he said.

“When we started UBank four years ago, we saw opportunity in the online space, but we thought people would still want to talk with someone.

“Surprisingly, this hasn’t been the case.”

But while it is clear that there is a growing willingness amongst Australians to arrange finance online, the internet is still viewed by many as a research tool.

RFi’s Alex Boorman stressed that brokers without an online presence risked losing relevance.

“There are opportunities online. But while I don’t think securing a mortgage via the internet will ever truly pose a threat to brokers, if they are not online, they are already behind.”

Mr Boorman believes that brokers should focus on how they can strengthen their online presence as a tool for generating leads and providing information in conjunction with traditional broking practices.

“The internet has not taken off [for buying mortgages] as many thought it would.

“People still want to talk to someone with expertise – that might be someone in a branch, or it might be a mortgage broker. Whatever the case, borrowers are after reassurance,” he said.

“At the end of the day, borrowers want someone they can talk to – after all, this is the biggest financial decision they will make.”

Staff Reporter

Building approvals fell for the third time in four months at the end of 2011, adding further weight to the need for another rate cut.

“Building approvals for both detached houses and ‘other dwellings’ are at very weak levels and now is the time to further lower interest rates and implement fiscal stimulus measures,” Housing Industry Association chief economist Harley Dale said.

According to Mr Dale, the weak building approval data suggests housing starts will fall to a level below what was experienced during the depth of the GFC.

“The new home building sector is a key indicator of the health of the domestic economy and has a significant multiplier effect in terms of output and employment,” he said.

“New housing activity doesn’t need to fall further, that situation can be averted. Such aversion requires further interest rate cuts starting next week, full pass through of those rate cuts by the banks, and government measures to both stimulate new home building activity and reignite action to address the high and inefficient tax base which applies to new housing.”

In the month of December 2011, total seasonally adjusted building approvals fell by 1 per cent to be 24.5 per cent lower than in December 2010.

For the December 2011 quarter total building approvals were down by 12.8 per cent, reflecting a 27.0 per cent drop in other dwellings and a 3.5 per cent fall for detached houses.

In a boon for brokers, mortgage sales soared 40 per cent in January 2012 in comparison to the same time last year.

According to the latest AFG Mortgage Index, sales in Queensland were up 80.6 per cent, 84.5 per cent in South Australia, 37.4 per cent in Western Australia, 25 per cent in Victoria and 14.5 per cent in NSW.

January also saw WA take over from NSW as the most popular state for first home buyers.

Almost one in five new mortgages in WA was arranged for first home buyers compared to 14 per cent in NSW.

Through the second half of last year, NSW led the country as the most active first home buyers market.

However NSW retains its position as the most popular state for investment, with 40.2 per cent of loans there arranged for investment purposes, compared to 36.8 per cent in Victoria, 34.9 per cent in Queensland, 32.6 per cent in Western Australia and 32.0 per cent in South Australia.

"While markets across the country have recovered from last year's natural disasters, right now we have a strong sense that borrowers are playing wait and see on rates. Will the RBA cut rates, and if so, how much of this will be passed on by lenders? It seems that we are moving to a new paradigm where there is less and less linkage between the cash rate and mortgage rates. An RBA cash rate cut will not automatically translate into improved consumer confidence," AFG's general manager of sales and operations Mark Hewitt said.

Vivienne Kelly

Brokers should carefully monitor the documentation they submit to lenders and their aggregators to ensure there are no delays in commission payments, according to FrontRunner Consulting Group’s director Doug Mathlin.

Speaking to The Adviser, Mr Mathlin said up to 50 per cent of brokers have submitted loans in the past where something has been missing, which delays the deal and slows the commission process.

“Brokers need to make sure that the quality of the deals they submit is perfect,” said Mr Mathlin.

Mr Mathlin said anything from missing payslips to signature errors could delay the process.

“These are all things that even a broker with three months experience has to know. If a deal is submitted with not everything on the checklist completed, that’s a quick way to get a delay,” said Mr Mathlin.

“If you want to get paid quickly and if you want your deals approved quickly – quality is absolutely key. In the banking world 'near enough is good enough' doesn’t work."

Staff Reporter

1300HomeLoan managing director John Kolenda has called on the Reserve Bank to cut the official cash rate in both February and March.

Mr Kolenda said it was now essential for the Reserve Bank to keep cutting rates beyond February in a bid to deliver real relief to homeowners.

"Economists are speculating that this month will be the last cut until mid-year but if that happens it will be a disaster because the banks have made it pretty clear that they intend to largely absorb the February cut to offset their higher funding costs," he said.

A majority of economists expect that the RBA will cut interest rates when the board meets for the first time this year on February 7, probably by 0.25 per cent to 4.0 per cent.

Banks have already trimmed rates by 0.25 per cent in both November and December but consumer spending and the housing market remain weak.

Mr Kolenda said that that with inflation running at lower than expected levels and the world economy still weakening it was vital to put money into homeowner's pockets as soon as possible.

"There are still too many downside risks to the Australian economy right now so we really need to ensure that adequate relief is passed on to borrowers," Mr Kolenda said.

Simon Parker

First home buyers are thin on the ground, at least in the NSW city of Wollongong, a local real estate principal has said.

Greg Chadwick, principal at Dougmal Harcourts Wollongong, told The Adviser that he hadn’t seen a first home buyer since last year.

He put this down to the NSW government’s decision to remove stamp duty exemptions for first home buyers purchasing existing dwellings.The change, which came into effect on January 1, means first home buyers are liable for stamp duty on all but new dwellings worth up to $600,000.

Mr Chadwick said in the months leading up to Christmas, it was common for up to four groups of first home buyers to be bidding for the one property, helping to drive up some house prices to levels that weren’t justified.

Mr Chadwick said it would have been preferable if the government had simply tweaked the exemption scheme, reverting to a system where buyers had a few years to pay off the duty.

“They need to do something,” he said, referring to the state government. He added that the first home owner grant (FHOG), which currently stands at $7,000, wasn’t enough to prompt first home owners to buy in markets where the price of a home was around $450,000.

“The stamp duty expense is more important,” he said.

Only recently, the Real Estate Institute of Australia (REIA) called on the federal government to increase the FHOG to $15,000 as part of the next budget.

“When the FHOG was introduced in July 2000, the Australian quarterly weighted average median house price was $220,443,” the REIA said in its submission to the government. “The Australian weighted average median house price in the most recent quarter for which data is available, September 2011, was $521,238.”

“The lack of financial assistance to first home buyers is an issue that requires considerable attention to ensure that property is affordable for young Australians and that they can one day aspire to own a home," REIA president Pamela Bennett said

Leanne Pilkington, Laing+Simmons general manager, had expected to see a similar result across her company’s 50 predominantly Sydney-metro based offices.

Instead, Laing+Simmons principals were reporting continuing interest from first home buyers, particularly in Sydney’s western suburbs.

This coincided with a report in The Adviser’s sister publication Smart Property Investment, which included Western Sydney as one of the key hotspots in its recent Fast 50 report.

Mia Santoromito

NCCP will help brokers grow their market share, general manager NAB Broker distribution John Flavell has claimed.

“While brokers have found NCCP to be more onerous in terms of time and effort, the rewards far outweigh any the effort,” he said.

“Consumers feel a lot more comfortable about the industry now that it is licensed and regulated. So while there are complexities associated with licensing, I think it positions brokers very well in the eyes of the consumer," Mr Falvell told The Adviser.

Mr Flavell said the more professional brokers are perceived to be by borrowers, the more likely these borrowers will be to utilse their services.

Moving forward, Mr Flavell thinks brokers will be in the ideal position to take advantage of licensing to provide borrowers with “true financial guidance and advice”.

“NCCP represents a huge opportunity for brokers. Those that provide guidance and support are well positioned to take some of the direct-to-bank customers and grow their share of the mortgage market.”

Westpac’s general manager mortgage broker distribution Tony McRae agreed and said while some brokers were still trying to adapt to the changes that have come about as a result of licensing, there were many positives to be taken from NCCP.

“NCCP has forced brokers to change and adapt. Those who embrace NCCP as part of their service offering and work within the guidelines of their lender partners, will create greater opportunities to provide more positive experiences to their clients and help lift the overall professionalism of our industry,” he said.

The flat property market has made line of credit mortgages increasingly unpopular, new research has revealed.

According to data from RateCity, line of credit loans currently account for 4 per cent of all mortgages – a 13 year low.

Back in December 2005, line of credit mortgages peaked at 10 per cent.

Speaking to The Adviser, RateCity's chief executive Damian Smith said Australians had become increasingly cautious when it comes to spending money.

"If you're not confident in the economy you're less likely to increase your borrowing," he said.

"Similar to the way in which general borrowing has declined in the last couple of years, line of credit loans have also declined.

"Nervous borrowers are conservative investors."

In addition, Mr Smith said the flat property market had also effectively hindered the popularity of line of credit mortgages.

"If asset values start going up consistently (that's property) – then people will start borrowing again," Mr Smith said.

But, according to several economists, it will be more than a few years before Australia sees any dramatic growth in property prices.

Director of Deloitte Access Economics Chris Richardson told The Adviser that property price growth would be limited to 5 per cent for the foreseeable future.

"The property market will largely flat line in 2012," he said.

"Then, in 2013, depending on what happens in the economy, both domestically and globally, we will see growth in the range of 5 to 6 per cent."

With this in mind, Damian Smith said it was unlikely that we would see an increase in line of credit mortgages in the near future.

Staff Reporter

Established property prices fell by 1 per cent over the December quarter, new research has revealed.

According to the latest ABS Index of Established House Prices, properties prices are now, on average, 4.8 per cent lower than December 2010.

“The ABS existing house price series reveals annual declines in established house prices for all eight capital cities, and quarterly declines with the exceptions of Perth, Hobart, and Canberra,” Housing Industry Association chief economist Harley Dale said.

“Today’s update does bear some resemblance to the annual declines evident in late 2008 and early 2009. There are, of course, enormous variations in house prices within and across cities (and regions) in Australia, but as was the case in 2008/09, the widespread price plunge portended by some for 2011 predictably never emerged.”

Mr Dale said lower interest rates would ultimately feed into an improved environment in 2012, although he does not expect to see a return to widespread strong house price growth.

Loan Ave has launched a new home loan product in a bid to raise awareness about childhood disease.

For every borrower that takes out a Loan Ave Heartkids SA loan, the lender will donate a portion of the income received to the charity that supports children born with CHD.

For example on an average loan balance of $350,000, Loan Ave will donate $100 upfront and $350 per year for every home or investment loan.

This would equate to $1850 to HeartKids SA over 5 years.

Loan Ave founders Paul and Michelle Collins said they were inspired to support the childhood charity after becoming friends with a very special "HeartKid", Lewis Harrison, who is currently battling a severe heart defect called tetralgogy of fallot.

"Lewis's story and so many others we have heard about and met have touched our lives personally and we wish to provide support that helps, grows and enriches our community," Michelle Collins said.