Australian Mortgage and Loan Information

Bank errors can occur at all stages of your home loan application and administration. Home Loan Bank Errors are costly.

A little bit of homework before you commit to a home loan can save you hundreds of dollars per month on your mortgage payments. Using free home loan calculators like the Commonwealth Banks home loan calculator will help you get a quick understanding of your required budget and provide some evidence in case a bank tries to overcharge.

Playing around with the figures will also let you know the result of future interest rate rises.

There are other free calculators available including personal loan and debt consolidation all worth a look.

Another calculator that can save you money is the Mortgage Watchdog home loan statement checker. You can download a free trial and check your statements for errors very easily.

Have we seen the last of the RBA interest rate rise’s for 2010? I hope so. Yes, homes are more expensive, but I now think wage’s will adjust.

Australian’s that I come in contact with seem to have overcome their addiction to retail therapy.

If you are working in retail, you may find you will be doing more hours and being asked by your boss to do some unusual promotion.

From the media releases › 2010 › Statement by Glenn Stevens, RBA Governor: Monetary Policy Decision:

“With the risk of serious economic contraction in Australia having passed some time ago, the Board has been adjusting the cash rate towards levels that would be consistent with interest rates to borrowers being close to the average experience over the past decade or more. The Board expects that, as a result of today’s decision, rates for most borrowers will be around average levels. This represents a significant adjustment from the very expansionary settings reached a year ago.

The Board will continue to assess prospects for demand and inflation, and set monetary policy as needed to achieve an average inflation rate of 2–3 per cent over time.”]

The message is mixed, but my gut feeling is the board think the economy is in a boom/bust wave. The RBA understands that “Mining” is not a sustainable industry. It produces very few real jobs and uses massive amounts of public sponsored infrastructure. When the ore runs out or a new product replaces the old “made from iron”, the mining executives will probably go back to banking and the workers on the dole. Property price’s will adjust and a new cycle will start.

As home buyer’s and a property investor’s we can only deal with our own micro economies. We have to talk to our mortgage brokers and bankers and get the best deal we can for our circumstances.

Oh! And please check your loan statements for errors. I recently got charged twice for a line fee on one of my loans. It took three weeks to get it refunded. Interest rate increases are a prime time for lenders to make errors.

Reputable Mortgage Broker.

Mortgage Watchdog Software.

Please watch the video, if you have not seen it, you will be shocked!!

I highly recommend this software. Go to the website and check it out for yourself and try it for free.

Free trial, no catches.

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Mortgage Watchdog.com.au

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Big Bank Rip-Off Exposed

The bad news of the day is that the RBA has increased its cash benchmark
rate by 25 basis points (to 4.25%).

The RBA has been spooked by real-estate data indicating an Australia wide increase in property prices.

Making it hard to borrow or hard to repay is one way to curb home owner or prospective home buyer enthusiasm.

So what can we do? Already Australia’s biggest home lender the Commonwealth Bank, has announced that it will increase its variable rate by the .25% starting this Friday. The rest of bailed out banks will no doubt follow suit in the days ahead.

Try and pay off all your loans and credit cards as quickly as possible. Chop up your card if you can, or at least take some time to understand how a debt consolidation loan may help. Sell your second car, car pool or take the bus. Switch to Naked DSL instead of a land telephone line. Search for a cheaper power supplier or embrace solar energy. Put in a water tank. Grow a veggie garden. Start jogging instead of going out. (You can meet some really interesting people jogging on the beach.) Brew your own beer. Get the idea? I think we are headed for a big recession, but the RBA thinks it has some divine providence after it flukes the idea of dropping of interest rates in 2008 and 2009.

Better to be ready, and who knows, luxury items and big TV’s may be cheaper next year.

Foot note: When rates go up banks make mistakes. Check your Home loan statements

Reflecting on the fees charged on a clients home loan I thought I would look up the RBA to see if there was any info on how much bank fees had increased over the last decade.

What I found makes interesting reading in light of the massive cuts to local jobs and outsourcing to foreign countries the banks and other financial institutions have proudly touted as the reason we “Australians enjoy the best value for money banking in the world.”

From the Reserve Bank Of Australia, Statistical Tables:

Average home loan fee income per Australian Household.

1997 $302 per household

2008 $1045 per household

That is a 246% increase in 11 years. 22.5% per year!

I guess loans are bigger now, but this is fees, not interest.
If you are getting gouged by high home loan fees consider refinance.

Transaction account fees per Australian Household.

1997 $431 per household

2008 $1792 per household

That is a 315% increase in 11 years. 28.5% per year!

Increase must be for all the convenient services they offer? We are being gouged.

Credit Card Fees per Australian Household.

1997 $135 per household

2008 $332 per household

That is a 146% increase in 11 years. 13% per year!

Competition is keeping these fees under relative control.

Total bank Fees for all Accounts and Loans per Australian Household.

1997 $1160 per household

2008 $4845 per household

That is a 317% increase in 11 years. 29% per year!

So the big four major banks cry poor, do not pass on RBA interest rate cuts, increase home loan rates above RBA increases, continue to send jobs off shore and use 1950′s like lending practices. So much for CPI and the reasons we need high home loan rates. Bank fees are a catalyst, just like fuel costs, for bringing inflationary pressure to bear on home buying Aussie battlers. I say we need more competition in the banking sector.

Please check your loan statements for errors, I recommend you do it every month. If you get your statement six monthly, get access to transactions on-line and check them monthly. Fee income as you can see is a bounty for banks, don’t let them pirate more of your hard earned income than they are entitled too.

The RBA controls interest rates to an extent, and historically rates are not that volatile compared to other developed countries.

CBA to increase fixed rate lock loans by 60 basis points!

Should I lock the rate on my home loan?
This is an interesting question, and given the recent press leaks from the experts on what we should be paying for our home loans, it seems rates are unlikely to go lower. Even the RBA seems to have joined the: rates have bottomed chorus, so we are likely at the bottom of low rate the cycle. So maybe it is worth doing your sums on a rate lock.

Check with a reputable mortgage broker what rates are on offer before you jump, you may be wise to kick your old bank to the curb and find a new lender.

The main benefit of a rate lock is certainty. You will at least know what you have to pay for the period of fixed rate you choose. You may also be getting a jump on the banks, as they are likely to increase rates further if they think the market will handle it.

The downside is if rates drop further. Check out the history of rates for the last fifty years.

And finally check your loan statements, banks make mistakes every minute, make sure you are not getting ripped off. Click here for more info on loan checking software.

Home Loan Mortgage Offset Account

A few extra dollars a month paid off your mortgage can result in substantial reduction in your overall payments and home loan term. However, if you have a good regular income and can save. Why not consider a home loan with a FULL offset facility. This quick and simple option helps you keep your financial eggs in slightly separated baskets giving you a lot more control over your financials.

How does it work?
A home loan mortgage offset savings account is simply a bank account linked to your loan account. The balance of this account is offset against the amount you owe on your mortgage. With a full offset account, you effectively only pay mortgage interest on the difference. On partial offset accounts, the offset may be only 50%. Check with your lender. Generally the features of this offset account are similar to a statement savings account, meaning you can come and go as you please, however some lenders require you to meet a minimum balance requirement.

Over time, savings in your offset account can help to reduce the loan principal, allowing you to pay off your loan sooner or build substantial equity.

Example: Obama and Michelle have a $500,000 mortgage and $100,000 in their linked 100 per cent offset account. The principal of their $500,000 loan is reduced by the $100,000 in the offset account to $400,000. As a result, interest only accumulates on the $400,000 balance of the loan. Obama and Michelle continue to make their normal repayments on their entire $500,000 principal and interest loan. Over a number of years, both the principal and interest on their loan are repaid faster. At the same time they have a savings account they can use for emergencies or for retirement planning.

If you don’t have this facility, find a lender who will work with you who does offer this feature.

Reputable Mortgage Broker

Once again, the popular media is full of claims that many home loan statements contain massive calculation errors. They say the simple mistakes banks and other lenders make are costing home loan borrowers big time. Incorrect date on entries, wrong interest rate, doubling up on fees and missing deposits seem to be the main culprits.

I feel like shouting at the TV when this stuff rears its head again. Get yourself some loan checking software please.

The software has been seen on…
A Current Affair
Money
7:30 Report
4 Corners
Today Tonight

If you don’t want to check your statements, be aware you may be paying a lot more of your hard earned cash to the bank than you need to. For goodness sake keep a close eye on your home loan statements.

Private sector house approvals fell 13.1% in December 2008 according to the Australian Bureau of Statistics.

Why is this good news? Less new dwellings being built, mean tighter supply and a probable increase in value for current stock, well that’s the theory anyway.

The reality is Australian home affordability is out of kilter with wages and incomes.
So instead of home ownership being right of all Australians, it is for now, an elite privilege.

I also see the Government’s tax revenue (It’s major income source) is down 19% for the September 08 quarter, yet it’s expense’s rose across the board. The Governments credit card is close to maxed out. Tax revenue will have to increase, or we may find the government shedding jobs. What will that do for property values?

My research into commercial properties has revealed the market to be dead in the water. Sellers are asking premium price, buyers in the main are adopting a wait and see policy.
Drive around a factory precinct near you, count the deserted properties. My gut feel is for a 50 to 60% drop in values for these properties shortly.

It is time to re-evaluate your banking, you want to cut fees, consolidate your debts, check out better deals, whatever saves you money. Get some loan checking software and use it to check your credit cards, business loans and home loans.