Australian Mortgage and Loan Information

For you current and potential investment property borrowers I have put together a short survey of the one year fixed rate offerings from the major lenders.

I am not suggesting this is the best type of loan in these uncertain times, this survey is just to provoke some thought about your current loan structure. Home Loan rates are trending down as the Government tries to soften the blow from the impending recession or depression.

Please find below the results of a quick Interest Only Home Loan survey for Investment purpose:

Major Australian Lenders.
Investment property home loans, Interest only, best rate, one year fixed interest rate.

No comparison rates are supplied as the rate is for investment purpose only. Borrowing costs and other fees may be tax deductible over one or several years.

Lender, rate, max LVR with MI, application fee, monthly fee.
ANZ…….6.79%……..97%………………$600…………….$10
CBA…….7.14%……..95%………………$600……………..$8
NAB…….6.89%…….100%……………..$600……………..$8
St G……7.39%………95%……………..$600……………..$10
Wpac….7.19%……..100%……………..$750……………..$8

Figures are gleaned from individual enquiry from each lender.
This is just a snapshot to give you an idea of what’s currently available, the terms and conditions of each loan are available from your mortgage broker or direct from the lender. Products may vary from lender to lender, but are for one year fixed, interest only, investment home loans advertised by the lender as at 07/11/2008. Remember, your home loan funding is an important part of your plan to create wealth through property investment. Interest only home loans can give you the edge. Consider interest only when you refinance your home loan mortgages.

All the major banks have announced further cuts to their standard variable mortgage interest rates in recent days.

Most have bought their rates down by .21%. I take this as proof that the Federal Government’s bail out of the finance sector has eased the pressure within the lending community. Ahmed Fahour, chief executive of The National Australia Bank is even quoted as saying he thought “further home loan mortgage rate cuts were possible in the near future“.

The banks have changed the names and descriptions of their variable or basic home loan product many times in recent years. So how do you tell if you have one of these loans and will you benefit from the rate cut? It is not easy.

For example ANZ offer home loans under the banners of: “Simplicity Plus” or just straight “Variable” the current rate is 8.57% with a comparison rate of 8.69% for the “Variable” and 7.87% and 7.92% for the “Simplicity Plus”. Both are touted as being variable. I remember my loan was variable, but which one do I have, my statement does not tell me much?

Now, I actually know which one I have, but my point here is, we should not only be aware of what type of home loan mortgage we have, but we must also know what sub category or name it is known by. The banks and other lenders will do their best to confuse, as it helps them justify the fees and charges on various products. The media reports only standard variable rates for convenience, so they are really no help. To understand our individual historcal home loan rates, we have to narrow down our focus or get help to make sense of the mumbo jumbo of home loan talk.

A competent mortgage broker will help you sort the wheat from the chaff when it comes to home loan mortgages. Get friendly with one as soon as possible. You don’t need to be refinancing to use their service, a good mortgage broker will help you anyway. You can then reward them by referring friends or transferring your loan administration to their “book” if you like their service.

Home Loan Rates in the 5% range not out the question.

Continued pessimism and low clearance rates for property sales in Australia has led to a chorus of economists predicting official interest rates will be near zero by 2010. Home loan rates are linked to official rates, so it would appear we could be in for some welcome news and lower mortgage stress over the next few years. Analysts expect the Australian cash rate to be close to 3.75% by March 2009, so home loan rates could be as low as 5.75%. Historically they have been lower, in fact as low as 5% in my lifetime.

Whilst many politicians and media pundits have publicly lauded the Australian Governments bail out of our economy, privately there is pessimistic talk that the global financial system meltdown will drag on for years and our economy may still require a further injection of cash to prop it up over the long term. I for one hope Mr Rudd increase’s the age pension or at least the rental subsidy for non home owner age pensioners. I would also like him to consider our manufacturing sector. We need jobs in our cities.

Whatever the Government decides to do with interest rates and pensions, people still want to come to Australia and live. They will need accommodation, This means opportunity for property investors. It is time to do some homework. Visit your local council, find out what new developments they are planning. Are they planning to change the zoning regulations in an old industrial area?

Is The Main Stream Media Talking The World Economy Down for Better Ratings

The main stream media has been responsible for a lot of unhelpful babble in recent days, especially in the relentless, unthinking, 24/7 TV media. The pretty talking heads continually drop doom and gloom prophecies as if they were experts. The truth is they are just filling the gap between commercials. But the panic they cause and the harm they do at grass roots level is criminal. Ordinary peoples super funds diminish because of their ill informed, trivial, bs banter.

Don’t listen to them property owners. Rates have come down, lending will resume, shops will sell stuff, people will buy new cars, bread. milk and need a roof over their heads.

Mortgage holders rejoice for there will be less mortgage stress. Start planning your next property move, Ring your mortgage broker and refinance for a lower rate if you can,visit your land agent or just tour an area you think has growth potential. Laugh in the face of all this media frenzy. They will have an expose on the plight of gay whales, some new financial disaster or a new war to highlight soon and will go back to their ridiculous reporting of the daily fluctuations on wall street. Please ignore the hype. Property was and will always be the king of assets.

To quote Denny Crane: Never Lost, Never Will”. That’s how I feel about property. (That’s property with some land under it, that may, if need be, developed.)

The Reserve Bank has come to the rescue of big business, now Mr Rudd please come to the rescue of the less fortunate.

The Board of The Reserve Bank of Australia today decided to lower the official Government cash interest rate by 1% from 7.0% to 6%, effective Wednesday 8 October 2008. For standard variable home loan mortgage borrowers, this drop may translate to a 0.5% to 0.8% reduction in their individual rate.

This huge drop is a direct response to the turmoil in world financial markets. The Bank in my opinion, is attempting to stimulate lending in both business and home loan sectors. Both benefit the bank executives and the top end of town. The benefit to ordinary home owners is a fortunate side dish winner for a government craving credibility, and wondering what will become us if China stop buying our commodities at an obsene rate. The drought has ment our ability to produce food for export is diminished and our manufacturing sector is almost dead after decades of neglect by sucessive governments. I guess we still have mountains of gold somewhere in the outback.

I hope the radical rate drop works, despite my misgivings for its reason, but I for one would also like to see an increase in all Centrelink payments, including the age pension and newstart allowance. This act will stimulate the economy, as the less fortunate will spend their money giving a boost to our biggest industry, retail.

If your Bank or Lender does offer to reduce your rate, please check their work. Banks and other financial institutions make huge profits and sometimes huge errors. Get some mortgage checking software, keep them honest.
Stumble It!

Non-resident property purchase? Why not Australia?

If you are residing out side Australia and love property like I do, but are wary about a new purchase due to the credit crisis, I have some good news for you. There is a strong rental market in Australia that could provide steady returns for you as an overseas investor.

Australia has a strong economy, is politically stable and safe with strict consumer protection laws. A Residential Tenancy Act of Parliament offers protection for both tenant and landlord, so you get plenty of quality people renting. There are also considerable tax incentives in Australia for landlords. There is also a Privacy Act in Australia that protects consumers. This Act stops unwanted marketing or soliciting. The Australian Competition and Consumer Commission and the Office of Fair Trading are the legal watchdogs appointed by the Government to make investment safe and reduce risk.

Experts agree that as an increase in rental demand pushes rents upwards, Sydney, Melbourne and Brisbane/Gold Coast will have the best rental return potential and capital growth over the next few years. They are also great places to live.

There is one small prerequisite for non-residents investing in Australian property: All non-residents who would like to invest in Australian property have to apply for Foreign Investment Review Board approval. If you have been granted Permanent Residence or citizenship in Australia you will be exempt from this prerequisite. One rule you need to be aware of is that as a non-resident you can only buy new properties and not second-hand properties. A second-hand property is one that has been registered in someone else’s name other than a developer before the non resident purchases it. I suggest you contact the Foreign Investment Review Board for an exact explanation of this rule. The laws of Australia are based on British law which means that the laws behind real estate title are similar.

Experienced property investors can capitalise on the tax incentives in Australia and clean up for years to come. Our home loan interest rates are a little higher than the US, but have generally been fairly stable over the last fifty years and our reputable mortgage brokers and most of the lenders love overseas borrowers.

So consider Australia for your next property investment, better still emigrate here, we would love to see you.

Australian Property, Boom or Bust on US crisis?

Could Australian property prices collapse and go bust as part of a domino effect from the US Sub Prime crisis and credit default swap dilemma?

Last week many popular media outlets reported that the US credit markets may be headed for the drain. Maybe it could happen, and maybe Australian property owners and mortgage holders would be hit with more mortgage stress. Well that was until the US government stepped in with a so called “conservatorship” of the two giant us domestic mortgage providers Fannie Mae and Freddie Mac in a bid to avert what many doomsayer’s prophecy as a global financial system meltdown. The US government as I understand it have taken over the running and financial backing of these two companies.

What a great move. In the past all I have ever seen is governments selling off public assets in a time of crisis. Literally, throwing billions of potential income to the private sector. Buying private assets when they are cheap? This surely is a move in the right direction. This purchase may give the government of the US the largest public ownership of housing outside the China and Russia. You see in the US, mortgage holders are not as personally liable for the mortgage debt as they are in Australia, they can simply just hand back the keys to the house and walk away, leaving the bank to worry about the mortgage and the house. People are dying to get to the USA to improve their lives, and they will want the American dream. Watch out China, this could be the catalyst for the USA economy and its people to resurrect the great boom nation and move it to a new higher plain of economic strength.

If sanity prevails and greed is good as the fictitious Gordon Gecko from the movie Wall Street extols, the worlds debt security markets should be back on track in no time. The US government and therefore tax payers may even make some profit from the recovery. Please be assured, someone will profit big.

Historical Australian Mortgage Interest Rates may indicate more than you think? Cast your mind back to when our Australian Mortgage Interest Rates were 18%. I am sure some people got rich in property, by making a few sacrifices? Recent financial media speculation centres around our Australian Mortgage Interest Rates moving down. I hope they are right. With the downward move I expect an improvement in the liquidity of Australian Property, but maybe not a price increase. The US credit situation will continue to dampen enthusiasm.

My advice? Start scouting for your next property. Some folks will get scared with all this media doom and gloom and sell up, in that case you could find some bargains in the Australian Property market very soon. Make an appointment with your mortgage broker or mortgage home loan coach and be prepared to move quickly before everybody gets on the property boom band wagon again.

By now you will have realised that I am extremely bullish regarding the Australian residential housing market.

I believe Australian residential property is the very best place to invest your money for consistent long term growth. I am also a great believer in keeping a cash reserve or having a line of credit home loan with unused limit available to cover periods unforseen financial or mortgage stress. I also believe every property investor should have a valid will, various power of attorney’s, as much life insurance as your budget will bear and a mortgage checker program. I don’t think I need to spell out why you should consider these products, you are smart, you are considering a residential property investment!

All the risk management products mentioned above are available online, so there is no excuse if you have made the decision to be wealthy, start today, effectively managing your risks is a priority.

Historical evidence backs up my belief in residential property, and the longer you can keep a property in our capitalist society the wealthier you will become. However, there are a couple of myths about residential property I would like to clear up.

Myth 1. “Australian Residential House Prices Will Never Fall”

I would like to continue to proliferate that myth, but the facts don’t allow me too. The sad fact is House price’s have fallen in the past and a fluctuation in pricing is just a fact a of life that mortgage holders and property investors, rental property owners have to learn to live with while they make a fortune. When demand is high, prices will rise. If demand is low some prices will continue to rise (Location, location), but on the whole prices will tend to slide, but you will still have the rent. Factors that effect demand like interest rates, job’s, business sentiment, government interfering and population will always be present. The underlying factor that drives my confidence in Australian Residential Property is the simple fact that usable land is a finite resource, especially in our capital cities.

Myth 2. “Any Home Loan Mortgage Will Do”

“Just get me the lowest interest rate. I have found the place I want.” My Mortgage Broker bemoans this statement every time we talk about property investment finance. He generally agrees with the notion that his client has the ability to choose a suitable investment property, but he takes exception with the direction to find the lowest mortgage interest rate. The lowest interest rate home loan does not always match with the clients needs and the ideal mortgage loan for the clients circumstance may need to include features that demand a higher interest rate. So there is always a trade-off between cheap and right or quality. Right and quality should always win, because the property investor should be in it for the long haul, and the quality will last. The cheap will probably need to be replaced. (This is why I like my guy, he tells the truth, except for a recent mortgage for a purchase, my loans are all over five years old. Some mortgage brokers would rather churn your loans every three years and make a fat commission every time.)

So I say anytime is a good time to acquire a residential home or investment property. After all you have made the decision to wealthy haven’t you? Plan to keep it for a generation if you can. Cover yourself with the various insurance’s and estate protection legal device’s. Find a trustworthy mortgage broker mortgage coach, a competent lawyer, conveyancer, accountant, builder, real estate agent, insurance broker, planner, quantity surveyor, mortgage statement checking software and friendly property investment mentor. Get it happening, now!

Good news for home buyers mortgage holders, mortgage stress relief on the way.

The Reserve Bank of Australia Board have cut the official cash rate by 1/4 of a percent. Home loan rates have historically followed cash rates. The press release from the RBA is below.

STATEMENT BY GLENN STEVENS, GOVERNOR
MONETARY POLICY
“At its meeting today the Board decided to lower the cash rate by 25 basis points to 7.0 per cent, effective 3 September.

Inflation in Australia has been high over the past year in an environment of limited spare capacity and earlier strong growth in demand. In these circumstances, the Board has been seeking to restrain demand in order to reduce inflation over time.

As a result of increases in the cash rate last year and early this year, additional rises in market interest rates and tougher credit standards, financial conditions have been quite tight. Some further tightening has occurred over the past couple of months. Conditions in international financial markets remain difficult, with heightened concerns over credit persisting.

The evidence is that the tight financial conditions, in conjunction with other factors including higher fuel costs and lower asset values, have exerted the needed restraint on demand. Indicators of household spending have recorded subdued outcomes over recent months, and credit expansion to both households and businesses has slowed. Surveys suggest a softening in business activity and growth in production has slowed. Indicators of capacity utilisation, while still high, are declining and there have also been some signs of an easing in labour market conditions.

The rise in Australia’s terms of trade that has occurred is working in the opposite direction, adding substantially to national income and ability to spend. Fixed investment spending by businesses continues to be very strong. At the same time, high prices of oil and a range of other commodities have added to global inflationary risks. They are also dampening growth in a number of countries.

Given the opposing forces at work, considerable uncertainty has surrounded the outlook for demand and inflation. On balance, however, it is looking more likely that household demand will remain subdued and overall economic growth slow over the period ahead. Inflation is likely to remain relatively high in the short term, with the CPI affected by the high global oil prices in mid year and other increases in raw materials prices. But looking further ahead, the outlook for demand suggests that inflation in both CPI and underlying terms is likely to decline over time, provided wages growth remains contained. The Bank’s forecast remains that inflation will fall below 3 per cent during 2010.

Weighing up the available domestic and international information, the Board judged that there was now scope for monetary policy to become less restrictive. The Board will continue to assess prospects for demand and inflation over the period ahead, and set monetary policy as needed to bring inflation back to the 2-3 per cent target over time.”

Make an appointment with a reputable Mortgage Broker to check out all the new refinance deals once the dust settles on the announcement. Now is a good time to check your mortgage statements for errors. Any change in interest rate is an opportunity for Banks and other Major Lenders to make mistakes. Don’t get ripped off. Get some reputable mortgage checking software asap.