Australian Mortgage and Loan Information

My opinion is that the RBA may have raised rates too quickly, home loan approvals have now fallen for 5 straight months.

Speak to your mortgage broker, find out what your borrowing capacity is. Prepare to take advantage of some bargains as people try to offload homes in the mortgage belts. 2010 may just be the year to start your residential property investment journey.

I received the following email from my mortgage broker today. Because of my diverse income streams I used lo doc for one of my loans. He is touting for business I am sure, but the letter also drives home the fact that we have a very different lending environment going forward into 2010.

Here’s the letter:

“I am sending you this email to advise you of some SIGNIFICANT changes that have occurred in the Low Doc market over the last few months.

4/ If you want to buy another Investment property”

I personally think we are returning to the nasty old days like in the 70′s, this means less people able to get loans and a stagnant property sector. I hope I am wrong. Take a look at interest rates in the 70′s, they are high, but not that bad. People just could not get a loan and banks were stupidly tough with lending. However the bankers of that day did not enjoy the extreme bonuses of their counterparts today, so I am guessing the rouges of Martin Place and Collins Street will find a way to gain from others misery.

Now, may just be the time to fix some of your loans for a year or two.

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.