In March the RBA kept rates on hold, however most of the major banks moved rates, so it will be interesting to see what happens in April. Over the next few days we will find out which lenders will adjust rates.

My take is that, banks and other major lenders have now entered a competition cycle and they will all be trying win more business. Look out for good deals on the fixed interest side and also the application fee.

Up until recently average Australian Housing Lending Rates have closely followed the official interest rate as issued and declared by the Reserve Bank of Australia. The graph included in this post illustrates this correlation. Please note the margin between the rates is getting larger.

Historical Australian Housing Lending Rates

Australian Housing Lending Rates 2012

As the margin gets larger, so does the need for demanding better service from your lender. Lenders make a lot of clerical mistakes and hope you do not notice. It is very important that you keep all your loan statements and check them for errors regularly. You can set up your own excel spread sheet or purchase one of the many, mortgage checkers available these days.

Key Fact Sheet

Ask your lender for a copy of your loans “Key Fact Sheet”. I have written a post on these important documents previously. Keep a copy of this fact sheet with your home loan statements, just in case you get into a dispute with your lender. You have to ask for it, they will not readily supply it, as the Government forced these sheets onto the lenders and they don’t like being told how they should conduct their business.

From the web:

One banking reform to make the choice of home loans easier for customers is being delayed by banks.

The requirement for banks to publish home loan ”key fact sheets” by September could be delayed because they are struggling to meet the government-imposed deadline.

As part of Treasurer Wayne Swan’s banking reforms, lenders must give potential customers one-page documents that set out the costs of a loan in a consistent format that allows them to compare rival deals.

Banks have strongly opposed the planned changes, arguing there is ample information available for consumers to make comparisons on loans and credit cards.

Ask for a key fact sheet and keep it with your statements. I know I just repeated myself, but it was worth repeating.

Loansense.com.au sitemap

Unless soaring house prices abate somewhat, expect more rate rises in the very near future.

Reading the recently published RBA board minutes, it seems the RBA has pinned part of the blame for soaring house prices on the state and local governments. The RBA thinks most state governments have lacked the desire to address the fundamental tightness of housing markets. They are not releasing land for development, and most don’t have a long term strategy for future release. More land needs to be released now, developers and investors need to be encouraged.

The very landscape of Australian society will change for the worse if we do not act now. You never know, we may soon have our own “shanty towns” and the edge of the major cities. Population growth among recent immigrants is fantastic and will not be curbed by assimilation to our “old growth” population habits.

The RBA makes a pointed reference about local and state government in the latest minute release.

“Information on the housing market suggested that conditions remained buoyant. Nationwide capital city price growth was running at around 1 per cent per month in early 2010, and auction clearance rates had remained high in March, especially in Melbourne. Members discussed the factors contributing to the recent strong price growth. On the demand side, population growth was strong, households had confidence about future income growth, and mortgage rates were at below-average levels. At the same time, the supply of new housing was not expanding sufficiently, partly because of the land usage policies of local and state governments and also because of the tightness of finance for developers. Members also noted that the current price growth was somewhat at odds with the falls in housing loan approvals over recent months.” (www.rba.gov.au, Minutes of the Monetary Policy Meeting of the Reserve Bank Board Sydney – 6 April 2010)

Maybe it is time to diversify your home loan. Perhaps a mix of fixed rate and variable with a full offset against the fixed rate. Even an offset against both loans would be handy. Make friends with a reputable mortgage broker get the inside information about your home loan provider instead of just the sales speak.

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.

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.

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.

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.

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?

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 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.
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