The residential home rental market in Canberra Australia is now almost impossible to break in to and it's going to get even harder as rents climb, the Real Estate Institute of Australia (REIA) says.New REIA market figures show Canberra has the tightest vacancy rate in Australia, with just 1.1 per cent of properties vacant currently.
Across Australia, vacancy rates are extremely low, in Sydney the rate is 1.7 per cent, in Adelaide 1.5 per cent and the highest rate is in Perth at 2.1 per cent.
REIA ACT President Peter Blackshaw said he has never seen such a shortage of accommodation in the Australian Capital Territory.
"At the moment it's very, very tight - it's certainly the tightest that I've known it and I've lived in Canberra for nearly 20 years and the really alarming thing is it's going to get a lot worse,'' Mr Blackshaw told ABC radio today.
The market is so tight, he said, because there are not enough people investing in residential property, instead they are putting their money into the stock market or other investments.
"The local government takes such a big proportion of the rent through land tax and rates that (residential property) just doesn't make sense as an investment,'' he said.
One way to fix the situation would be to abolish land tax, he said, or at least start cutting it back. If the Government does not start cutting back land tax, Mr Blackshaw said there was a risk some really serious social problems would arise.
"The people who are going to be hurt in this situation are the low income earners because they're going to be outbid by people coming in from outside of Canberra.''
And the difficulty in finding a rental property will not be the only problem for Canberrans, Mr Blackshaw also said rents are starting to rise significantly.
The next time a lease expires or a property becomes vacant, he said, landlords will be able to demand a significant increase on rent, in some instances more than ten per cent.
ACT Chief Minister John Stanhope said the real reason for the low vacancy rate in the ACT is that the economy is so strong.
"The fact is, we are now dealing with the pressures of a busting, booming economy and I think it's fantastic,'' Mr Stanhope told ABC radio.
"I must say I find it ironic that here we are complaining about the incidence that we have this enormously strong economy.''
Mr Stanhope said he was investigating the possibility of reducing land tax and was awaiting advice from both the Skills Commission and the Affordable Housing Taskforce.
Source: AAP
Monday, December 18, 2006
Sunday, December 10, 2006
Mortgage approvals back slide
Demandfor mortgages was subdued in October, data released today showed, as rising interest rates and a patchy housing market curbed enthusiasm from consumers to borrow.
Housing finance approvals for owner occupied housing fell for a second month in a row, easing 0.1 per cent in October, seasonally adjusted.
Market economists had expected a flat result.
The data takes into the account the May and August interest rate rises, but precedes the November rate hike.
source: AAP
Housing finance approvals for owner occupied housing fell for a second month in a row, easing 0.1 per cent in October, seasonally adjusted.
Market economists had expected a flat result.
The data takes into the account the May and August interest rate rises, but precedes the November rate hike.
source: AAP
Property gives the best returns overall
Investors should be devoting at least 20 per cent of their investment portfolio to direct property assets in the retail, office and industrial sectors, a study shows.
The study commissioned by the Australian Direct Property Investment Association (ADPIA) found increasing the direct, or commercial, property component in an investment portfolio significantly reduced risk and the chance of investment loss.
The research looked at the performance of 11 different asset classes over 10 and 20 year periods, such as local and overseas shares, residential and listed property, Australian fixed interest and cash, and managed funds.
"ADPIA's view is we should have at least 20 per cent in direct property," ADPIA immediate past-president and executive committee member Richard Cutler said.
Mr Cutler, who also heads up Macquarie Bank's Direct Property division, said there was a very significant mismatch between the findings and what was happening in the market, with the allocation to commercial property from investors and their advisers declining since the 1980s.
"It (property) is the financial wealth of the world and ... we've got a very low and decreasing allocation to it," he said.
"So common sense says we've got it back to front and this research will really flesh that out."
Atchison Consultants managing director Ken Atchison, who carried out the study for ADPIA, said the decline was caused by a lack of available research, as well as behavioural finance.
"A market goes bad and everybody withdraws – that's the time when you should invest ... it's a classical psychological reaction," Mr Atchison said.
Investment in direct property peaked in the property boom of the late 1980s and early 1990s.
He said the research showed direct property provided strong total returns of 9.5 per cent in the 20 years to June 30, 2006, and 10.5 per cent over the 10-year period, with industrial and retail assets the best performers.
In the 10 years to June 30, direct property also produced the highest levels of income return of any other asset class, at 7.2 per cent, the report found.
According to the study, the asset class also exhibited the lowest volatility of income returns over both periods, a valuable characteristic that made a significant difference to long-term returns because it reduced the chance of making a timing error entering or exiting the market, Mr Atchison said.
He said a fully diversified property portfolio should be made up of "four states, three sectors", being NSW, Victoria, Queensland and Western Australia, and across the office, retail and industrial sectors.
ADPIA represents property industry professionals such as fund managers, custodians and financiers and was set up as the peak industry body in 1999.
Source: AAP
The study commissioned by the Australian Direct Property Investment Association (ADPIA) found increasing the direct, or commercial, property component in an investment portfolio significantly reduced risk and the chance of investment loss.
The research looked at the performance of 11 different asset classes over 10 and 20 year periods, such as local and overseas shares, residential and listed property, Australian fixed interest and cash, and managed funds.
"ADPIA's view is we should have at least 20 per cent in direct property," ADPIA immediate past-president and executive committee member Richard Cutler said.
Mr Cutler, who also heads up Macquarie Bank's Direct Property division, said there was a very significant mismatch between the findings and what was happening in the market, with the allocation to commercial property from investors and their advisers declining since the 1980s.
"It (property) is the financial wealth of the world and ... we've got a very low and decreasing allocation to it," he said.
"So common sense says we've got it back to front and this research will really flesh that out."
Atchison Consultants managing director Ken Atchison, who carried out the study for ADPIA, said the decline was caused by a lack of available research, as well as behavioural finance.
"A market goes bad and everybody withdraws – that's the time when you should invest ... it's a classical psychological reaction," Mr Atchison said.
Investment in direct property peaked in the property boom of the late 1980s and early 1990s.
He said the research showed direct property provided strong total returns of 9.5 per cent in the 20 years to June 30, 2006, and 10.5 per cent over the 10-year period, with industrial and retail assets the best performers.
In the 10 years to June 30, direct property also produced the highest levels of income return of any other asset class, at 7.2 per cent, the report found.
According to the study, the asset class also exhibited the lowest volatility of income returns over both periods, a valuable characteristic that made a significant difference to long-term returns because it reduced the chance of making a timing error entering or exiting the market, Mr Atchison said.
He said a fully diversified property portfolio should be made up of "four states, three sectors", being NSW, Victoria, Queensland and Western Australia, and across the office, retail and industrial sectors.
ADPIA represents property industry professionals such as fund managers, custodians and financiers and was set up as the peak industry body in 1999.
Source: AAP
Sunday, December 03, 2006
Mortgage lenders defies trend to post a big profit
Australian Mortgage Lender Aussie Home Loans Group's aggressive expansion has helped bump up its annual profit despite stagnant east coast housing markets.
The mortgage lender and broker formed by John Symond yesterday posted a 44 per cent rise in net annual profit for 2005-06 to $19.7 million.
Aussie said it processed more than $10 billion worth of housing loan applications throughout the year, with the average loan size increasing to $242,000, which is higher than the Australian Bureau of Statistics average of $221,000.
Mr Symond told AAP that even though the Perth residential property market was "going gangbusters", challenging conditions in NSW had made the overall situation tough.
But he said the unlisted Aussie Home Loans was able to maintain profit growth, employing more people and rolling out more branches. "Our mortgage writers don't write any more business but there's more of them and we're touching more people," Mr Symond said.
In the year to June 30, Aussie increased its sales force by 19 per cent to 600 mortgage advisers.
"We have also very successfully rolled out about 14 new franchise businesses at a rate of about one a month," Mr Symond said.
"These have mostly been in parts of regional Australia we have not serviced before, so more consumers are being touched by the Aussie brand."
Aussie's credit card business was also growing fast and now had more than 100,000 customers, Mr Symond said.
Aggressive growth would continue in 2007 through the rollout of more franchise businesses and the establishment of new products.
Capital expenditure over the next 12 months was expected to hit about $10 million.
As for the group's future profitability, Mr Symond said Aussie had a "confident view of the medium term".
This month's quarter of a percentage point interest rate rise to 6.25 per cent had caused more caution in the housing market, Mr Symond said.
But he felt another rate rise was unlikely.
"We might have reached the top of the cycle this time and I'm hopeful the Reserve Bank will see no reason for an increase next year - unless of course inflation gets ugly again.
"And if the economy was to slow I don't think they'll hesitate in bringing rates back down.
"The market is certainly going to hurt for a few years to come.
"Consumer debt is at astronomical levels, so people won't go out and randomly spend.
"That's what the RBA want and that's what the RBA will probably get."
AAP
The mortgage lender and broker formed by John Symond yesterday posted a 44 per cent rise in net annual profit for 2005-06 to $19.7 million.
Aussie said it processed more than $10 billion worth of housing loan applications throughout the year, with the average loan size increasing to $242,000, which is higher than the Australian Bureau of Statistics average of $221,000.
Mr Symond told AAP that even though the Perth residential property market was "going gangbusters", challenging conditions in NSW had made the overall situation tough.
But he said the unlisted Aussie Home Loans was able to maintain profit growth, employing more people and rolling out more branches. "Our mortgage writers don't write any more business but there's more of them and we're touching more people," Mr Symond said.
In the year to June 30, Aussie increased its sales force by 19 per cent to 600 mortgage advisers.
"We have also very successfully rolled out about 14 new franchise businesses at a rate of about one a month," Mr Symond said.
"These have mostly been in parts of regional Australia we have not serviced before, so more consumers are being touched by the Aussie brand."
Aussie's credit card business was also growing fast and now had more than 100,000 customers, Mr Symond said.
Aggressive growth would continue in 2007 through the rollout of more franchise businesses and the establishment of new products.
Capital expenditure over the next 12 months was expected to hit about $10 million.
As for the group's future profitability, Mr Symond said Aussie had a "confident view of the medium term".
This month's quarter of a percentage point interest rate rise to 6.25 per cent had caused more caution in the housing market, Mr Symond said.
But he felt another rate rise was unlikely.
"We might have reached the top of the cycle this time and I'm hopeful the Reserve Bank will see no reason for an increase next year - unless of course inflation gets ugly again.
"And if the economy was to slow I don't think they'll hesitate in bringing rates back down.
"The market is certainly going to hurt for a few years to come.
"Consumer debt is at astronomical levels, so people won't go out and randomly spend.
"That's what the RBA want and that's what the RBA will probably get."
AAP
Monday, October 30, 2006
Home loan mortgage Interest rates could go higher
The stage is set for a November home loan interest rate rise and possibly another rise in mortgage rates in 2007, with a solid rise in consumer prices in the third quarter pointing to inflation pressures in the domestic economy.
An Australian Bureau of Statistics (ABS) report showed the nation's consumer price index (CPI) rose 0.9 per cent in the quarter, for an annual rate of 3.9 per cent. In the June quarter, the CPI rose 1.6 per cent. The median market forecast for the headline CPI was for a rise of 0.8 per cent in the CPI in the September quarter, for an annual pace of 3.8 per cent.
Commonwealth Bank chief economist Michael Blythe said the suggested the central bank would raise rates next month. "Clearly we're still waiting to see what those key underlying measures are, but all indications are that it will be high enough to tick off that November rate rise," he said.
Westpac bank senior economist Andrew Hanlan said the figures confirmed that inflation was a challenge for the economy and the Reserve Bank of Australia (RBA).The RBA's inflation comfort zone for inflation is 2 to 3 per cent. The RBA would likely have to adjust rates following its November 7 board meeting, Mr Hanlan said."We need to see the Reserve Bank nudge things higher and we expect that in November," he said.But depending on how entrenched inflation is in the economy, Mr Hanlan said there is still a risk still that the central bank could raise rates again in February.Mr Hanlan said inflation is being impacted by rising global prices."Those rising global prices are feeding through to the whole pricing chain and we saw that earlier in the week with the producer price index rising quite a bit," he said. RBC senior economist Su-Lin Ong also said the results would put pressure on the RBA to raise rates for a third time this year. "The data and the details today support another hike from the Reserve Bank, most likely in November," she said.
"It (would be) a pretty prudent move given that there are clearly some underlying pressures in the economy." Source AAP
An Australian Bureau of Statistics (ABS) report showed the nation's consumer price index (CPI) rose 0.9 per cent in the quarter, for an annual rate of 3.9 per cent. In the June quarter, the CPI rose 1.6 per cent. The median market forecast for the headline CPI was for a rise of 0.8 per cent in the CPI in the September quarter, for an annual pace of 3.8 per cent.
Commonwealth Bank chief economist Michael Blythe said the suggested the central bank would raise rates next month. "Clearly we're still waiting to see what those key underlying measures are, but all indications are that it will be high enough to tick off that November rate rise," he said.
Westpac bank senior economist Andrew Hanlan said the figures confirmed that inflation was a challenge for the economy and the Reserve Bank of Australia (RBA).The RBA's inflation comfort zone for inflation is 2 to 3 per cent. The RBA would likely have to adjust rates following its November 7 board meeting, Mr Hanlan said."We need to see the Reserve Bank nudge things higher and we expect that in November," he said.But depending on how entrenched inflation is in the economy, Mr Hanlan said there is still a risk still that the central bank could raise rates again in February.Mr Hanlan said inflation is being impacted by rising global prices."Those rising global prices are feeding through to the whole pricing chain and we saw that earlier in the week with the producer price index rising quite a bit," he said. RBC senior economist Su-Lin Ong also said the results would put pressure on the RBA to raise rates for a third time this year. "The data and the details today support another hike from the Reserve Bank, most likely in November," she said.
"It (would be) a pretty prudent move given that there are clearly some underlying pressures in the economy." Source AAP
Sunday, October 22, 2006
Home loans grow as UK house prices hit new high.
Mortgage sizes grow as house prices in England and Wales surged an annual 11.5 per cent in October, taking asking prices to a record high, a survey showed today, in a further sign higher borrowing costs have not stifled demand.
The Rightmove house price index showed prices rose 2.0 per cent in October month-on-month, pushing the annual rate to its highest level this year. The figures were not adjusted to take into account seasonal changes in the market.
The asking price for an average house rose to 218,954 pounds (AU$541,232) in October, up from 214,566 in the previous month and beating the previous record of 217,580 pounds set in July.
The Rightmove data is in tune with other surveys showing the housing market shrugging off a Bank of England rate rise to 4.75 per cent in August. Most economists expect benchmark borrowing rates to rise further to 5.0 per cent next month.
"We have never (before) had a sustained low inflation, low interest rate economy combined with widespread home ownership," said Miles Shipside, commercial director at Rightmove, a leading property Web site.
"These unique conditions help push prices higher and higher. However, supply of houses coming onto the market is dropping as prices increase, because fewer home owners can afford to trade up."
Rightmove said the rise in prices was driven by a growing shortage of supply but added many first-time buyers are being priced out of the market given wage rises under five per cent while house price inflation runs above 10 per cent.
Asking prices in London and the southeast continued to lead the pack. Average London prices rose an annual 19 per cent to 335,507 pounds.
City bonuses and a surge in foreign interest have exaggerated gains in London's most desirable boroughs.
Rightmove said the cost of an average home in London's exclusive neighbourhood Kensington and Chelsea.
Source: Reuters
The Rightmove house price index showed prices rose 2.0 per cent in October month-on-month, pushing the annual rate to its highest level this year. The figures were not adjusted to take into account seasonal changes in the market.
The asking price for an average house rose to 218,954 pounds (AU$541,232) in October, up from 214,566 in the previous month and beating the previous record of 217,580 pounds set in July.
The Rightmove data is in tune with other surveys showing the housing market shrugging off a Bank of England rate rise to 4.75 per cent in August. Most economists expect benchmark borrowing rates to rise further to 5.0 per cent next month.
"We have never (before) had a sustained low inflation, low interest rate economy combined with widespread home ownership," said Miles Shipside, commercial director at Rightmove, a leading property Web site.
"These unique conditions help push prices higher and higher. However, supply of houses coming onto the market is dropping as prices increase, because fewer home owners can afford to trade up."
Rightmove said the rise in prices was driven by a growing shortage of supply but added many first-time buyers are being priced out of the market given wage rises under five per cent while house price inflation runs above 10 per cent.
Asking prices in London and the southeast continued to lead the pack. Average London prices rose an annual 19 per cent to 335,507 pounds.
City bonuses and a surge in foreign interest have exaggerated gains in London's most desirable boroughs.
Rightmove said the cost of an average home in London's exclusive neighbourhood Kensington and Chelsea.
Source: Reuters
Thursday, October 19, 2006
Low mortgage interest rates drive gain in new home starts
Low mortgage interest rates are boosting the new home buyers and home building companies. The construction of new privately-owned residences increased nearly six percent last month compared to August, according to a joint report by the U.S. Census Bureau and the Department of Housing and Urban Development. The report also showed housing starts to be 19.9 percent below the August 2005 rate.
New home starts have slowed from the unsustainable levels of the last few years but the market has proven to resilient.
As long a long-term mortgage rates remaining low and there is a continued job growth across most industries the housing marketing will be in good shape, especially at the high end of the market.
New home starts have slowed from the unsustainable levels of the last few years but the market has proven to resilient.
As long a long-term mortgage rates remaining low and there is a continued job growth across most industries the housing marketing will be in good shape, especially at the high end of the market.
Thursday, October 12, 2006
Queensland bank, investment and insurance group Suncorp-Metway looks set to secure one of the largest takeovers in Australian corporate history with its $7.9 billion bid for general insurer Promina Group.
The board of Promina - which owns brands such as AAMI and Australia's Pensioners Insurance Agency - has said it is "favourably disposed" to the conditional offer.
The Brisbane, Queensland based bank, insurance and wealth management group has offered 0.2618 of its shares and $1.80 cash per Promina share, valuing Promina at $7.87 billion.
The news pushed Promina shares into new record territory, with the stock jumping almost 19 per cent to an intraday high of $7.70. The shares were up 66 cents at $7.14 at 1534 AEST.
Suncorp gained 90 cents or 4 per cent to $23.20 by that time.
If approved, it will be the largest takeover in the financial services sector since the Commonwealth Bank's $9.1 billion purchase of Colonial Ltd in 2000.
Outside of that sector, the size of the deal compares with BHP Billiton's $9.2 billion buyout of WMC Resources in 2005.
Both insurers remained tight-lipped about the deal today short of issuing statements confirming the bid, after market speculation about a possible takeover pushed Promina shares more than 6 per cent higher yesterday.
Suncorp has said the merger gives it an expanded national presence, improved geographic diversity and a significant boost to its presence in the wealth management and life insurance markets.
"The proposal is in line with its strategy to pursue value accretive acquisitions which meet its investment criteria, create value for shareholders and enhance earnings per share," Suncorp has said.
The offer brings a sense of confirmation to months of speculation about a round of consolidation among Australia's top four insurers.
However, Suncorp itself was considered one of the more likely takeover targets.
With Promina eager to move ahead with the merger, the companies are progressing with due diligence and negotiations for a formal merger agreement.
But approval from Australian and New Zealand regulators could still remain potential barriers to the acquisition.
CommSec analyst Carlos Castillo has said there are unlikely to be many rival bids emerging from the woodwork with competition constraints likely to keep most players at bay.
"This has been something that's been in the pipeline for quite a while," he said.
"It's (the market) obviously not factoring anyone else coming in and making a bigger offer and trumping Suncorp.
"I think that's pretty unlikely because Suncorp is the one that can extract the most synergies out of an acquisition of Promina.
"Any other potential bidders, if they want to pay more, then they're really going to be doing so for strategic reasons not because they feel they can get more value out of the acquisition than Suncorp."
The move will have ramifications for the broader financial sector with Insurance Australia Group (IAG) - Australia's second largest insurer by earned premium behind QBE - standing to benefit from the transaction.
"If this takeover goes ahead then it's hard to see anyone being able to buy IAG without further competition concerns being raised unless they're an offshore person who has no participation in the market at the moment," Mr Castillo said.
Deutsche Bank analyst James Coghill has said the disruption a merger is likely to cause Promina and Suncorp would improve IAG's attractiveness in the medium-term.
"In terms of alternative bids, we see limited scope given competition constraints for IAG, and lower synergy potential from QBE, Wesfarmers and Allianz," Mr Coghill said.
"Furthermore, both QBE and Allianz have the ability to acquire offshore at more attractive multiples."
Bank of Queensland managing director David Liddy has said the merger is good news for his bank.
"It's a positive from our point of view, we stick to the view that we are a bank and what we are trying to do is get more Bank of Queensland customers in Queensland," he said.
Mr Liddy has said the regional bank performed well after Suncorp's $1.26 billion acquisition of general insurance business GIO from AMP in 2001.
Source: AAP
The board of Promina - which owns brands such as AAMI and Australia's Pensioners Insurance Agency - has said it is "favourably disposed" to the conditional offer.
The Brisbane, Queensland based bank, insurance and wealth management group has offered 0.2618 of its shares and $1.80 cash per Promina share, valuing Promina at $7.87 billion.
The news pushed Promina shares into new record territory, with the stock jumping almost 19 per cent to an intraday high of $7.70. The shares were up 66 cents at $7.14 at 1534 AEST.
Suncorp gained 90 cents or 4 per cent to $23.20 by that time.
If approved, it will be the largest takeover in the financial services sector since the Commonwealth Bank's $9.1 billion purchase of Colonial Ltd in 2000.
Outside of that sector, the size of the deal compares with BHP Billiton's $9.2 billion buyout of WMC Resources in 2005.
Both insurers remained tight-lipped about the deal today short of issuing statements confirming the bid, after market speculation about a possible takeover pushed Promina shares more than 6 per cent higher yesterday.
Suncorp has said the merger gives it an expanded national presence, improved geographic diversity and a significant boost to its presence in the wealth management and life insurance markets.
"The proposal is in line with its strategy to pursue value accretive acquisitions which meet its investment criteria, create value for shareholders and enhance earnings per share," Suncorp has said.
The offer brings a sense of confirmation to months of speculation about a round of consolidation among Australia's top four insurers.
However, Suncorp itself was considered one of the more likely takeover targets.
With Promina eager to move ahead with the merger, the companies are progressing with due diligence and negotiations for a formal merger agreement.
But approval from Australian and New Zealand regulators could still remain potential barriers to the acquisition.
CommSec analyst Carlos Castillo has said there are unlikely to be many rival bids emerging from the woodwork with competition constraints likely to keep most players at bay.
"This has been something that's been in the pipeline for quite a while," he said.
"It's (the market) obviously not factoring anyone else coming in and making a bigger offer and trumping Suncorp.
"I think that's pretty unlikely because Suncorp is the one that can extract the most synergies out of an acquisition of Promina.
"Any other potential bidders, if they want to pay more, then they're really going to be doing so for strategic reasons not because they feel they can get more value out of the acquisition than Suncorp."
The move will have ramifications for the broader financial sector with Insurance Australia Group (IAG) - Australia's second largest insurer by earned premium behind QBE - standing to benefit from the transaction.
"If this takeover goes ahead then it's hard to see anyone being able to buy IAG without further competition concerns being raised unless they're an offshore person who has no participation in the market at the moment," Mr Castillo said.
Deutsche Bank analyst James Coghill has said the disruption a merger is likely to cause Promina and Suncorp would improve IAG's attractiveness in the medium-term.
"In terms of alternative bids, we see limited scope given competition constraints for IAG, and lower synergy potential from QBE, Wesfarmers and Allianz," Mr Coghill said.
"Furthermore, both QBE and Allianz have the ability to acquire offshore at more attractive multiples."
Bank of Queensland managing director David Liddy has said the merger is good news for his bank.
"It's a positive from our point of view, we stick to the view that we are a bank and what we are trying to do is get more Bank of Queensland customers in Queensland," he said.
Mr Liddy has said the regional bank performed well after Suncorp's $1.26 billion acquisition of general insurance business GIO from AMP in 2001.
Source: AAP
Reverse Mortgages. Are they a cause for concern for our aged?
vphSeveral consumer groups are calling for better protection for aged homeowners being sold reverse mortgages to fund their retirement.
Australia's ageing population are mostly asset rich but cash poor. And most have one asset that has doubled or trebled in value in the last few years, and that’s the family home.
Reverse mortgages have been available in the US for decades, and some banks tried to market them in Australia in the nineties with limited success.
Their time and need has now come, as the cash strapped baby boomers head to retirement with little superannuation or other assets to support them in retirement.
In 2004, about $250 million was lent through reverse mortgages. Last year, it was $650 million. According to Kieran Dell, executive director of the industry body Senior Australians Equity Release Association of Lenders (SEQUAL), that's just the beginning.
"It wouldn't surprise me if it exceeded a billion dollars in this calendar year," he says, adding that it could reach up to $5 billion in the next few years.
"You won't see the rump of those baby boomers hitting retirement and then spending their superannuation for another 10 years. So it's going from a small base but it is growing very fast."
But the Australian Consumers Association has called for regulation of the sector, concerned that pushy selling practices could put them in an unfair position.
Launched during the boom when house values were screaming up, many property markets are now falling while interest rates are rising.
"Reverse mortgages are an emotive issue," says Denis Orrock, the general manager of InfoChoice.
"Slogans such as 'nothing to pay till you die' hardly aid the industry's quest for recognition as a legitimate financial tool for senior citizens."
Horror stories from Britain of aged pensioners being evicted from their homes as their reverse mortgage debt exceeded the homes' value stalled the market here in the 1980s. Yet new demographics and lifestyle considerations are pushing more people to consider going back into debt.
Life expectancy is longer, lifestyle expectations are higher and Australia's ageing population needs more money to live on. There are a lot of retirees who own their own homes and many who are under-funded for retirement. People leaving the workforce now have an average of only $125,000 in super, so borrowing against the family home can look like an attractive option.
But in doing so, borrowers take on a major risk. In an environment of sluggish property growth and higher interest rates, the debt compounds rapidly and may leave once-secure home owners with little to call their own or pass on to their beneficiaries.
Depending on how the funds are accessed, Centrelink may assess the money under the income test and reduce the age pension.
Any mortgage broker can sell a reverse mortgage, whether or not they submit to an Australian Securities and Investments Commission-approved dispute resolution system such as the Banking and Financial Services Ombudsman. Sales are commission-based, which means the bigger the loan, the greater the broker fee. Commission figures are closely guarded, but those the ACA knows about average from 1.2 to 2.3 per cent. If there is a combination of an upfront commission and a trail fee, the inital fee may be 0.7 to 1 per cent and the ongoing trail 0.2 to 0.4 per cent.
"You don't want a situation where inappropriate advice is given by a broker or a planner because of the size of the commission they're earning," says Nick Coates, an ACA senior policy officer.
In the absence of regulation, best practice in the area is guided by a voluntary industry code developed by SEQUAL, which represents about 95 per cent of providers. It requires members to include a no-negative equity guarantee in their contracts. This is meant to ensure that no one will lose their home over a reverse mortgage.
Because it's a voluntary code, a proven breach doesn't carry the force of law. The penalty is expulsion from SEQUAL or, as Dell puts it "a public relations disaster".
But the equity guarantee is not iron-clad. It is conditional on a borrower meeting all the terms and conditions of the loan, which may include, for example, maintenance and regular home valuations at the borrower's cost.
"We still have concerns that there are ways in which the contracts can avoid a no-negative-equity guarantee if the customer was found to be in default," Coates says.
"If you hadn't done some simple administrative tasks like paid your council rates or reported on the state of your property each year you could technically be in default, which means they could reserve the right to say the [guarantee] doesn't apply.
"Most financial institutions when questioned about that say, we're reasonable and won't apply it. Sure, they may well be reasonable but it still provides a gap for those that aren't reasonable. There's no guarantee."
The products are complicated, and many borrowers have trouble understanding all their ramifications. Dianne Carmody, general manager, Banking and Financial Services Ombudsman, says it has received only a small handful of complaints relating to reverse mortgages from SEQUAL members but all related to borrowers misunderstanding the terms and conditions.
Paul Gillett, a solicitor with the Consumer Legal Service in Victoria, has had many calls from clients who don't understand the products. "They're a relatively new product and people are prone to misunderstanding their nature," he says. "The negative side is that providers may be taking advantage of people in this regard."
SEQUAL's code requires people to consult a lawyer, and strongly encourages them to seek licensed financial advice and to talk to their beneficiaries as well. The association argues that making financial advice mandatory could actually disadvantage certain people. Some consumer groups agree, concerned that unscrupulous planners may push higher loan amounts or products people don't need. In addition, the financial advice would be yet another cost borne by the borrower.
With reverse mortgages, it's a case of borrower beware. "The borrower needs to understand the structure of the loan, the impact it may have on future equity and the impact it will have on their estate,'" Orrock says. "They also need to ensure that they only draw down the amount they require and not be coerced into taking a large lump sum.
"The lenders should at all times provide the borrower with an accurate picture as to how the loan will perform under conservative conditions moderate property growth and a higher interest rate environment. This will ensure the borrower can understand the concept of capitalisation of interest.
"Finally, the borrower needs to seek independent legal and financial advice."
Impact on Centrelink benefitsThe first $40,000 is not counted as an asset for 90 days. If the money is placed into a bank account, it is subject to the deeming provisions of the income test. Where more than $40,000 is borrowed, the amount in excess is counted as an asset with the $40,000 being counted after 90 days. If the whole amount is immediately spent, the rule will not apply unless the funds are spent on assets or an income stream. Where the loan is drawn down on a regular basis there is no effect on the income. Some reverse mortgage providers offer regular payments by holding the proceeds of the loan in an offset account. The balance of the account is classed as an asset and subject to the deeming provisions but the interest charged on the loan may be reduced.
Source: The Institute of Chartered Accountants in Australia
Australia's ageing population are mostly asset rich but cash poor. And most have one asset that has doubled or trebled in value in the last few years, and that’s the family home.
Reverse mortgages have been available in the US for decades, and some banks tried to market them in Australia in the nineties with limited success.
Their time and need has now come, as the cash strapped baby boomers head to retirement with little superannuation or other assets to support them in retirement.
In 2004, about $250 million was lent through reverse mortgages. Last year, it was $650 million. According to Kieran Dell, executive director of the industry body Senior Australians Equity Release Association of Lenders (SEQUAL), that's just the beginning.
"It wouldn't surprise me if it exceeded a billion dollars in this calendar year," he says, adding that it could reach up to $5 billion in the next few years.
"You won't see the rump of those baby boomers hitting retirement and then spending their superannuation for another 10 years. So it's going from a small base but it is growing very fast."
But the Australian Consumers Association has called for regulation of the sector, concerned that pushy selling practices could put them in an unfair position.
Launched during the boom when house values were screaming up, many property markets are now falling while interest rates are rising.
"Reverse mortgages are an emotive issue," says Denis Orrock, the general manager of InfoChoice.
"Slogans such as 'nothing to pay till you die' hardly aid the industry's quest for recognition as a legitimate financial tool for senior citizens."
Horror stories from Britain of aged pensioners being evicted from their homes as their reverse mortgage debt exceeded the homes' value stalled the market here in the 1980s. Yet new demographics and lifestyle considerations are pushing more people to consider going back into debt.
Life expectancy is longer, lifestyle expectations are higher and Australia's ageing population needs more money to live on. There are a lot of retirees who own their own homes and many who are under-funded for retirement. People leaving the workforce now have an average of only $125,000 in super, so borrowing against the family home can look like an attractive option.
But in doing so, borrowers take on a major risk. In an environment of sluggish property growth and higher interest rates, the debt compounds rapidly and may leave once-secure home owners with little to call their own or pass on to their beneficiaries.
Depending on how the funds are accessed, Centrelink may assess the money under the income test and reduce the age pension.
Any mortgage broker can sell a reverse mortgage, whether or not they submit to an Australian Securities and Investments Commission-approved dispute resolution system such as the Banking and Financial Services Ombudsman. Sales are commission-based, which means the bigger the loan, the greater the broker fee. Commission figures are closely guarded, but those the ACA knows about average from 1.2 to 2.3 per cent. If there is a combination of an upfront commission and a trail fee, the inital fee may be 0.7 to 1 per cent and the ongoing trail 0.2 to 0.4 per cent.
"You don't want a situation where inappropriate advice is given by a broker or a planner because of the size of the commission they're earning," says Nick Coates, an ACA senior policy officer.
In the absence of regulation, best practice in the area is guided by a voluntary industry code developed by SEQUAL, which represents about 95 per cent of providers. It requires members to include a no-negative equity guarantee in their contracts. This is meant to ensure that no one will lose their home over a reverse mortgage.
Because it's a voluntary code, a proven breach doesn't carry the force of law. The penalty is expulsion from SEQUAL or, as Dell puts it "a public relations disaster".
But the equity guarantee is not iron-clad. It is conditional on a borrower meeting all the terms and conditions of the loan, which may include, for example, maintenance and regular home valuations at the borrower's cost.
"We still have concerns that there are ways in which the contracts can avoid a no-negative-equity guarantee if the customer was found to be in default," Coates says.
"If you hadn't done some simple administrative tasks like paid your council rates or reported on the state of your property each year you could technically be in default, which means they could reserve the right to say the [guarantee] doesn't apply.
"Most financial institutions when questioned about that say, we're reasonable and won't apply it. Sure, they may well be reasonable but it still provides a gap for those that aren't reasonable. There's no guarantee."
The products are complicated, and many borrowers have trouble understanding all their ramifications. Dianne Carmody, general manager, Banking and Financial Services Ombudsman, says it has received only a small handful of complaints relating to reverse mortgages from SEQUAL members but all related to borrowers misunderstanding the terms and conditions.
Paul Gillett, a solicitor with the Consumer Legal Service in Victoria, has had many calls from clients who don't understand the products. "They're a relatively new product and people are prone to misunderstanding their nature," he says. "The negative side is that providers may be taking advantage of people in this regard."
SEQUAL's code requires people to consult a lawyer, and strongly encourages them to seek licensed financial advice and to talk to their beneficiaries as well. The association argues that making financial advice mandatory could actually disadvantage certain people. Some consumer groups agree, concerned that unscrupulous planners may push higher loan amounts or products people don't need. In addition, the financial advice would be yet another cost borne by the borrower.
With reverse mortgages, it's a case of borrower beware. "The borrower needs to understand the structure of the loan, the impact it may have on future equity and the impact it will have on their estate,'" Orrock says. "They also need to ensure that they only draw down the amount they require and not be coerced into taking a large lump sum.
"The lenders should at all times provide the borrower with an accurate picture as to how the loan will perform under conservative conditions moderate property growth and a higher interest rate environment. This will ensure the borrower can understand the concept of capitalisation of interest.
"Finally, the borrower needs to seek independent legal and financial advice."
Impact on Centrelink benefitsThe first $40,000 is not counted as an asset for 90 days. If the money is placed into a bank account, it is subject to the deeming provisions of the income test. Where more than $40,000 is borrowed, the amount in excess is counted as an asset with the $40,000 being counted after 90 days. If the whole amount is immediately spent, the rule will not apply unless the funds are spent on assets or an income stream. Where the loan is drawn down on a regular basis there is no effect on the income. Some reverse mortgage providers offer regular payments by holding the proceeds of the loan in an offset account. The balance of the account is classed as an asset and subject to the deeming provisions but the interest charged on the loan may be reduced.
Source: The Institute of Chartered Accountants in Australia
Saturday, September 02, 2006
More Homeowners are changing over to fixed interest rate mortgage loans
The number of home-buyers locking in their mortgages to a fixed interest rate, rather than the variable rate, to avoid the possinblity of a still higher interest rate burden has nearly doubled during the past year.
Australians borrowed a total of $20.53 billion during June in a sign of a rebound in the national property market. The surge was led by people buying investment properties to take advantage of the tax breaks on offer last year.
The property finance results showed people borrowed 2 per cent more during June compared with the month before.
Nearly 64,000 houses were bought despite the Reserve Bank of Australia raising rates just one month earlier.
The number of new mortgages taken out and fixed for two years has started to climb, according to the Australian Bureau of Statistics' figures.
During June, 10,963 loans were fixed, which accounted for 16.7 per cent of all the mortgages.
The result was up from just 10.3 per cent last year, showing home-buyers were concerned about the future movements of interest rates.
Economists said yesterday the 2 per cent rise in borrowing levels was further justification for the RBA's August rate rise.
The double blow of two rate increases is expected to cool the national appetite to borrow money.
TD Securities chief economist Stephen Koukoulas said there was room for growth in the housing market over the next few months. "Housing finance commitments are continuing to power ahead," he said. "The level of interest rates were no constraint to stronger levels of activity."
Mr Koukoulas said the level of investment in housing should move even higher later this year.
But one downside in the finance figures was a sustained fall in the number of first home buyers.
Of all of the purchases, 17 per cent were first-time buyers - the lowest for a year. CommSec economist Craig James said the size of mortgages was forcing those who rent to stay put.
The average home loan is now $227,800 in Australia.
The value has fallen over the past six months and is growing at the slowest rate in nearly five years.
"First home buyers are heading for the exit doors, with the exodus likely to continue in coming months," Mr James said.
"First home buyers are caught between a rock and a hard place. Mortgages are more expensive, causing buyers to retreat to the sidelines."
Economists said the growth in borrowings would not overly concern the RBA because it would have factored it into the decision to raise rates. The next rate movement is still expected to be in November.
Souce: Newscorp
Australians borrowed a total of $20.53 billion during June in a sign of a rebound in the national property market. The surge was led by people buying investment properties to take advantage of the tax breaks on offer last year.
The property finance results showed people borrowed 2 per cent more during June compared with the month before.
Nearly 64,000 houses were bought despite the Reserve Bank of Australia raising rates just one month earlier.
The number of new mortgages taken out and fixed for two years has started to climb, according to the Australian Bureau of Statistics' figures.
During June, 10,963 loans were fixed, which accounted for 16.7 per cent of all the mortgages.
The result was up from just 10.3 per cent last year, showing home-buyers were concerned about the future movements of interest rates.
Economists said yesterday the 2 per cent rise in borrowing levels was further justification for the RBA's August rate rise.
The double blow of two rate increases is expected to cool the national appetite to borrow money.
TD Securities chief economist Stephen Koukoulas said there was room for growth in the housing market over the next few months. "Housing finance commitments are continuing to power ahead," he said. "The level of interest rates were no constraint to stronger levels of activity."
Mr Koukoulas said the level of investment in housing should move even higher later this year.
But one downside in the finance figures was a sustained fall in the number of first home buyers.
Of all of the purchases, 17 per cent were first-time buyers - the lowest for a year. CommSec economist Craig James said the size of mortgages was forcing those who rent to stay put.
The average home loan is now $227,800 in Australia.
The value has fallen over the past six months and is growing at the slowest rate in nearly five years.
"First home buyers are heading for the exit doors, with the exodus likely to continue in coming months," Mr James said.
"First home buyers are caught between a rock and a hard place. Mortgages are more expensive, causing buyers to retreat to the sidelines."
Economists said the growth in borrowings would not overly concern the RBA because it would have factored it into the decision to raise rates. The next rate movement is still expected to be in November.
Souce: Newscorp
Sunday, July 16, 2006
Home builders slide in soft market
Shares of
The Dow Jones U.S. Home Construction Index, a barometer for home-building stocks, was 4.9 percent down at 570.02. It hit a two-year low and has lost half its value since peaking a year ago.
Yet, the drop came as no surprise to investors, who had for the past few years resisted awarding home-builder stocks higher valuations, despite pleas from the companies themselves.
"This means that investors have anticipated that earnings for the companies would come down," said Victory Capital Management analyst Michael Koskuba.
For about the past three years, as they repeatedly turned in double-digit profit growth,
And over the past two years, the average P/E of large
"Essentially investors thought that earnings would come down for these companies," Koskuba said.
The large, publicly traded home builders argued they were no longer cyclical stocks. They said they had grown so big that when the market soured, they could increase their earnings by taking market share away from the smaller private builders.
But investors didn't buy the theory.
"Although they were posting extremely high growth for that five-year period, they were not afforded market multiples because in the back of investors' minds was always the fact that home building was cyclical," Koskuba said.
Because investors never pumped up the P/Es, the fall hasn't been as dramatic, and the average for the top home builders is now about 4.85.
Horton shares fell as much as 11 percent to a two-year low, and were down 7.2 percent at $21.21 in late Friday trading. It was among the top losers on a down day for
Following Horton's announcement late on Thursday, on Friday morning the
Among
In the options market, defensive trading is being seen throughout the housing sector, with increasing put volume in Toll Brothers Inc.(TOL.N: Quote, Profile, Research), Beazer, The Ryland Group Inc.(RYL.N: Quote, Profile, Research) and Pulte, said Frederic Ruffy, analyst at Optionetics, a California-based options education firm.
Investors often turn to equity puts, which give the right to sell the stock at a preset price and time, to protect existing stock holdings or bet on further weakness in a stock.
"At some point they will be attractive again," Koskuba said. "But as long as the numbers keep going down, investors are still scared of going back in."
Source: Reuters New York
Wednesday, July 12, 2006
Bank of Japan look to raise interest ates for first time in six years
The Bank of Japan will probably raise interest rates for the first time in almost six years this week as the world's second-biggest economy emerges from a decade-long battle with deflation.
Governor Toshihiko Fukui and his policy-board colleagues will increase the key overnight rate between banks by 0.25 percentage point on July 14, according to all 16 economists surveyed by Bloomberg News.
Japanese companies including Matsushita Electric Industrial Co. have completed the job cuts, factory closures and debt reorganization that followed the bursting of the bubble economy in the early 1990s and now plan to increase investment at the fastest pace in 16 years. Fukui said last month he's concerned that prolonging the zero-rate policy could promote unnecessary investment and kindle inflation.
"The ending of zero rates will be testament that Japan's long struggle with excess is now over and that the economic cycle is back to normal,'' said Glenn Maguire, chief Asia economist at Societe Generale in Hong Kong. ``We look for the economy to enter a sweet spot as it fully transits from deflation to inflation.''
Sixteen central banks raised interest rates in June, including the U.S. Federal Reserve, the European Central Bank and those of South Korea and India.
Japan's largest companies plan to increase investment this year at the fastest pace since 1990, the Bank of Japan's Tankan business confidence survey showed last week.
Consumer Prices
Matsushita, the world's-biggest consumer electronics maker, is building the world's biggest plasma display factory to increase production. Honda Motor Co. said in May it would build its first car plant in Japan in 30 years.
Other evidence supports the bank's contention that economic growth will be sustained as companies divert rising profit to expansion rather than debt repayment.
Japan's consumer prices rose for a seventh month in May when the unemployment rate fell to an eight-year low of 4 percent, and in June bank lending climbed the most in a decade, recent reports showed.
"Companies are cranking up spending plans and it's hard to anticipate that momentum will slow any time soon,'' said Akio Makabe, professor of economics at Shinshu University. ``A recovery of the job market will help boost household spending.''
The yen rose to a four-week high this week on speculation an interest-rate increase will lure investors to yen-denominated assets. The Nikkei 225 Stock Average has rebounded more than 8 percent since June 13, when it set a seven-month low amid concern a spate of global interest-rate increases would stunt world economic growth.
Business Support
The government's opposition to an interest-rate increase has eased. The Cabinet Office on July 7 said the gross domestic production deflator, a broad measure of price changes in the economy, will turn positive in 2006 for the first year in eight.
Prime Minister Junichiro Koizumi on July 4 said the bank should make its own decision on interest rates, dropping previous calls for the bank to act cautiously.
The government opposed the bank's last rate increase in August 2000. Seven months later, the bank had to cut rates back to near zero as an Internet-led global economic boom faltered, allowing the government to accuse it of making a policy mistake.
Businesses are getting used to the idea of higher borrowing costs. Only 3.6 percent of companies polled by the Mainichi Newspaper said they consider a rate increase this week would be too soon, according to a July 9 poll, and 89.9 percent said a rate increase would be acceptable as long as the bank exercised appropriate judgment.
Second Rate Increase
"The necessary economic conditions mentioned by the Bank of Japan for a rate hike are taking shape,'' Fujio Mitarai, head of the Japan Business Federation and chairman of Canon Inc., said on July 10.
The central bank will keep rates low even after a first rate increase because the pace of economic expansion will slow next year and inflation will be subdued, economists said.
Nine of the 15 surveyed economists said the bank won't make an additional increase this year. Eight said the key rate will be capped at 0.75 percent or below by the end of next year.
"The Bank of Japan will likely attempt a second rate hike this year, but there is no guarantee that upcoming economic data will justify such a move,'' said Teizo Taya, advisor to the Daiwa Institute of Research and a former central bank policy board member.
The bank will this week also raise its discount rate, with which it makes overnight loans directly to financial institutions, and cap a gain in the interbank overnight loan rate to between 0.4 percent and 0.5 percent from 0.1 percent, the surveyed economists said.
Source: Bloomberg
Governor Toshihiko Fukui and his policy-board colleagues will increase the key overnight rate between banks by 0.25 percentage point on July 14, according to all 16 economists surveyed by Bloomberg News.
Japanese companies including Matsushita Electric Industrial Co. have completed the job cuts, factory closures and debt reorganization that followed the bursting of the bubble economy in the early 1990s and now plan to increase investment at the fastest pace in 16 years. Fukui said last month he's concerned that prolonging the zero-rate policy could promote unnecessary investment and kindle inflation.
"The ending of zero rates will be testament that Japan's long struggle with excess is now over and that the economic cycle is back to normal,'' said Glenn Maguire, chief Asia economist at Societe Generale in Hong Kong. ``We look for the economy to enter a sweet spot as it fully transits from deflation to inflation.''
Sixteen central banks raised interest rates in June, including the U.S. Federal Reserve, the European Central Bank and those of South Korea and India.
Japan's largest companies plan to increase investment this year at the fastest pace since 1990, the Bank of Japan's Tankan business confidence survey showed last week.
Consumer Prices
Matsushita, the world's-biggest consumer electronics maker, is building the world's biggest plasma display factory to increase production. Honda Motor Co. said in May it would build its first car plant in Japan in 30 years.
Other evidence supports the bank's contention that economic growth will be sustained as companies divert rising profit to expansion rather than debt repayment.
Japan's consumer prices rose for a seventh month in May when the unemployment rate fell to an eight-year low of 4 percent, and in June bank lending climbed the most in a decade, recent reports showed.
"Companies are cranking up spending plans and it's hard to anticipate that momentum will slow any time soon,'' said Akio Makabe, professor of economics at Shinshu University. ``A recovery of the job market will help boost household spending.''
The yen rose to a four-week high this week on speculation an interest-rate increase will lure investors to yen-denominated assets. The Nikkei 225 Stock Average has rebounded more than 8 percent since June 13, when it set a seven-month low amid concern a spate of global interest-rate increases would stunt world economic growth.
Business Support
The government's opposition to an interest-rate increase has eased. The Cabinet Office on July 7 said the gross domestic production deflator, a broad measure of price changes in the economy, will turn positive in 2006 for the first year in eight.
Prime Minister Junichiro Koizumi on July 4 said the bank should make its own decision on interest rates, dropping previous calls for the bank to act cautiously.
The government opposed the bank's last rate increase in August 2000. Seven months later, the bank had to cut rates back to near zero as an Internet-led global economic boom faltered, allowing the government to accuse it of making a policy mistake.
Businesses are getting used to the idea of higher borrowing costs. Only 3.6 percent of companies polled by the Mainichi Newspaper said they consider a rate increase this week would be too soon, according to a July 9 poll, and 89.9 percent said a rate increase would be acceptable as long as the bank exercised appropriate judgment.
Second Rate Increase
"The necessary economic conditions mentioned by the Bank of Japan for a rate hike are taking shape,'' Fujio Mitarai, head of the Japan Business Federation and chairman of Canon Inc., said on July 10.
The central bank will keep rates low even after a first rate increase because the pace of economic expansion will slow next year and inflation will be subdued, economists said.
Nine of the 15 surveyed economists said the bank won't make an additional increase this year. Eight said the key rate will be capped at 0.75 percent or below by the end of next year.
"The Bank of Japan will likely attempt a second rate hike this year, but there is no guarantee that upcoming economic data will justify such a move,'' said Teizo Taya, advisor to the Daiwa Institute of Research and a former central bank policy board member.
The bank will this week also raise its discount rate, with which it makes overnight loans directly to financial institutions, and cap a gain in the interbank overnight loan rate to between 0.4 percent and 0.5 percent from 0.1 percent, the surveyed economists said.
Source: Bloomberg
Sunday, June 11, 2006
Korean mortgage rates are set to rise over the next months
Households face heavier interest costs from this month as banks are set to raise mortgage borrowing rates following the Bank of Korea’s (BOK) increase in the key short-term call rate last Thursday.
The interest rates for mortgage loans are expected to keep rising in the months to come as the central bank, in an apparent move to fight growing inflationary pressures, has signaled a further call rate hike.
The rate rise may pressure households to tighten their belts to cover rising interest costs. Banks expect the rise to decrease demand for new loans and thus help stabilize the volatile real estate market.
Last week, Woori Bank, a state-owned lender, raised borrowing rates for its housing collateral loans 0.23 percentage points to 5.29-6.59 percent, immediately after the BOK hiked its call rate by 25 basis points to 4.25 percent. That means a household borrowing 100 million won from Woori should pay 230,000 won more interest annually.
Hana Bank, the country’s fourth-largest lender, also slightly increased its mortgage loan rates. The bank said it plans to raise mortgage loan rates for those owning apartments in volatile areas by 0.5 percentage points, making it clear it will take stronger action to help curb real estate speculation.
Other banks, such as Kookmin and Shinhan, will follow Woori and Hana to increase mortgage loan rates from today.
Banks tend to link mortgage loan rates to the rates of certificates of deposit (CDs). CD rates have risen steadily as the central bank has tightened its monetary policy since late last year, but banks have cut mortgage loan rates to draw more loan-seekers.
``The government’s real estate policymakers see the banks’ mortgage loan policies as fueling property demand and helping destabilize the market,’’ a BOK official said. ``Cooling down the property market has been the top priority of the government’s real estate policy, but banks refused to follow by maintaining low interest rates for mortgage loans.’’
But the situation is a lot different now. If banks raise mortgage loan rates, policymakers believe demand for loans will fall, and this will ultimately help ease the property bubble. However, market watchers point out the rate hikes will give households a greater financial burden and will thus negatively affect the reviving household spending.
According to Barclays Capital, growing household debt has spurred domestic consumption in South Korea. However, as banks are tightening lending policies for mortgage loans, consumer spending may fall, negatively affecting the country’s economic growth, the bank said.
During a meeting with bank CEOs on May 19, BOK Governor Lee Seong-tae said the government’s tighter anti-speculation measures, in place since March 30, are now affecting the borrowing patterns of housing loan seekers. Demand for mortgage loans has remained strong, but the measures will slow the pace of their growth.
Affected by the government’s real estate policy, commercial banks are instead focusing more on corporate client loans. Most banks plan to expand loans to small and medium-sized enterprises (SMEs) in a bid to diversify their income sources.
Source: Korea Times
The interest rates for mortgage loans are expected to keep rising in the months to come as the central bank, in an apparent move to fight growing inflationary pressures, has signaled a further call rate hike.
The rate rise may pressure households to tighten their belts to cover rising interest costs. Banks expect the rise to decrease demand for new loans and thus help stabilize the volatile real estate market.
Last week, Woori Bank, a state-owned lender, raised borrowing rates for its housing collateral loans 0.23 percentage points to 5.29-6.59 percent, immediately after the BOK hiked its call rate by 25 basis points to 4.25 percent. That means a household borrowing 100 million won from Woori should pay 230,000 won more interest annually.
Hana Bank, the country’s fourth-largest lender, also slightly increased its mortgage loan rates. The bank said it plans to raise mortgage loan rates for those owning apartments in volatile areas by 0.5 percentage points, making it clear it will take stronger action to help curb real estate speculation.
Other banks, such as Kookmin and Shinhan, will follow Woori and Hana to increase mortgage loan rates from today.
Banks tend to link mortgage loan rates to the rates of certificates of deposit (CDs). CD rates have risen steadily as the central bank has tightened its monetary policy since late last year, but banks have cut mortgage loan rates to draw more loan-seekers.
``The government’s real estate policymakers see the banks’ mortgage loan policies as fueling property demand and helping destabilize the market,’’ a BOK official said. ``Cooling down the property market has been the top priority of the government’s real estate policy, but banks refused to follow by maintaining low interest rates for mortgage loans.’’
But the situation is a lot different now. If banks raise mortgage loan rates, policymakers believe demand for loans will fall, and this will ultimately help ease the property bubble. However, market watchers point out the rate hikes will give households a greater financial burden and will thus negatively affect the reviving household spending.
According to Barclays Capital, growing household debt has spurred domestic consumption in South Korea. However, as banks are tightening lending policies for mortgage loans, consumer spending may fall, negatively affecting the country’s economic growth, the bank said.
During a meeting with bank CEOs on May 19, BOK Governor Lee Seong-tae said the government’s tighter anti-speculation measures, in place since March 30, are now affecting the borrowing patterns of housing loan seekers. Demand for mortgage loans has remained strong, but the measures will slow the pace of their growth.
Affected by the government’s real estate policy, commercial banks are instead focusing more on corporate client loans. Most banks plan to expand loans to small and medium-sized enterprises (SMEs) in a bid to diversify their income sources.
Source: Korea Times
Friday, June 09, 2006
Bank's mortgage customers to get money back
Canada's Bank of Montreal will refund a total of $7.1 million, including interest, to about 28,000 mortgage customers who overpaid penalties on certain mortgage pre-payment and early-renewal transactions, the bank announced on Friday.
The bank said it identified an inconsistency between in the way some mortgage contracts explained how interest penalties were calculated and the way the calculations were actually done.
Some customers paid less than their contract called for, but the bank said it would not attempt to recover the funds they should have paid.
Customers who want more information or who believe they may have been affected but who have not received a cheque by June 23, should contact the bank's dedicated customer service line at 1-866-895-3760.
Bank of Montreal shares traded Friday at $61.62, down nine cents, at the Toronto Stock Exchange.
Source: Toronto Star
The bank said it identified an inconsistency between in the way some mortgage contracts explained how interest penalties were calculated and the way the calculations were actually done.
Some customers paid less than their contract called for, but the bank said it would not attempt to recover the funds they should have paid.
Customers who want more information or who believe they may have been affected but who have not received a cheque by June 23, should contact the bank's dedicated customer service line at 1-866-895-3760.
Bank of Montreal shares traded Friday at $61.62, down nine cents, at the Toronto Stock Exchange.
Source: Toronto Star
Study finds most US property executives plan to invest outside US
More than 60% of real estate executives, investors and other experts expect to invest in properties or land outside the U.S. in the next 12 months, according to a new study released this week. The Bryan Cave Real Estate Executives Forecast Survey found 61% of real estate professionals plan to park cash outside the U.S., with the greatest interest being in Mexico and China. The survey, which polled 343 professionals, including public and private real estate company executives, investors, opportunity funds, commercial mortgage bankers, lenders and brokers, showed 15% consider Mexico as a key investment market, while another 15% named China. Other countries of interest included the U.K., Canada and Japan, where 12%, 8% and 8%, respectively, of those surveyed plan to invest in land or property. The results appear to echo the views of a number of real estate executives attending the National Association of Real Estate Investment Trusts investor conference in Manhattan this week. A growing number of real estate investment trusts, such as ProLogis (PLD), Simon Property Group Inc. (SPG), Kimco Realty Corp. (KIM), Public Storage Inc. (PSA), Host Hotels & Resorts Inc. (HST) and Vornado Realty Trust (VNO) have been either expanding or looking to expand outside the U.S. In some cases, such as ProLogis, the expansion is aimed at meeting the needs of tenants who wish to have a global presence. It's "business driven" and "customer driven," allowing the company to leverage its customer relationships and operating platform on a global basis, ProLogis Chief Executive Jeff Schwartz said. Public Storage's decision to acquire rival Shurgard Storage Centers Inc. (SHU) will move the company into the global arena, thanks to Shurgard's well-established international platform. For others, such as Vornado, it's a chance to make selective opportunistic investments in markets where returns may be higher than those in the U.S. However, President Mike Fascitelli said his company is starting small and using joint venture partners. "We made a total investment of $25 million in India, and we'd like to invest more there," Fascitelli said. "While international is something we aspire to and look at, I think it's going to be small initially unless we find a distressed opportunity." Many see opportunity in China but are cautious about making big investments there. "There's so much capital chasing deals there," Simon Property Chief Executive David Simon said. "I think you're going to see a number of high-profile mistakes." He speculates some will wind up building or acquiring properties that wind up being bad investments. Host Hotels Chief Executive Chris Nassetta concurs he sees opportunity in Asia but said the lack of transparency and glut of capital chasing after deals is making him cautious. "We're going to be there over the next five years, but we're going to be really, really cautious because of the transparency issues, particularly in China," Nassetta said. "There are more crains in China right now than anywhere else in the world," which could lead to overbuilding problems. If this happens, there could be opportunistic ways to enter the market. Sam Zell, chairman of Equity Office Properties Trust (EOP), Equity Residential (EQR) and Equity Lifestyle Properties Inc. (ELS), said he sees the biggest growth in real estate over the next 10 years coming overseas. "Growth and opportunity is going to be much more focused outside the U.S. than it is here," as countries adopt REIT structures and real estate securitization. "Brazil, Mexico, Russia, China and India will produce five times as much real estate in the next 10 years as will be done in the U.S.," Zell said. But Zell said he has no interest in expanding his publicly traded REITs over there, as he doesn't believe the tax structures and other factors would benefit U.S. REITs. Instead, Zell said he is seeking out international investment through his private entities. The Bryan Cave survey, which was conducted between March 15 and March 27, also asked respondents about the domestic real estate market. The study found 63% believe the U.S. real estate market will strengthen in the next 12 months, 47% think it will stay the same, and 35% believe it will weaken.
Source: Market Watch
Source: Market Watch
London home buyers require a savings ethic
London first time home buyers saving for a deposit may not achieve their goal before 2012, when infaltion, house price increases and wages are considered.
With house price inflation continuing to grow, aspiring homeowners must save for longer to put down the deposit for their first home, data from the Co-operative Bank reveals.
Presuming the current inflation rate of 3.6 per cent per year remains stable, first time buyers saving £307.50 per month, half the current average mortgage repayment, would be saving for six years and two months for the ten per cent deposit of £25,183 required in London by 2012.
David Newman, director of marketing at Co-operative Bank, said: "This data reveals the problems new home buyers face in what is clearly for many a marathon rather than a sprint when running up a decent deposit."
Aspiring first time buyers must get into the savings habit quickly and take some advice "sooner rather than later", Mr Newman continued.
"There are many alternatives available to help first time buyers onto the property ladder, from no deposit or low deposit mortgages, to parental guarantor schemes and packages for graduates."
The findings come as F&C asset management claims that indebtedness in the UK is at record levels, with money being cycled into different types of products rather than saved.
With house price inflation continuing to grow, aspiring homeowners must save for longer to put down the deposit for their first home, data from the Co-operative Bank reveals.
Presuming the current inflation rate of 3.6 per cent per year remains stable, first time buyers saving £307.50 per month, half the current average mortgage repayment, would be saving for six years and two months for the ten per cent deposit of £25,183 required in London by 2012.
David Newman, director of marketing at Co-operative Bank, said: "This data reveals the problems new home buyers face in what is clearly for many a marathon rather than a sprint when running up a decent deposit."
Aspiring first time buyers must get into the savings habit quickly and take some advice "sooner rather than later", Mr Newman continued.
"There are many alternatives available to help first time buyers onto the property ladder, from no deposit or low deposit mortgages, to parental guarantor schemes and packages for graduates."
The findings come as F&C asset management claims that indebtedness in the UK is at record levels, with money being cycled into different types of products rather than saved.
UK mortgage rates stay put for tenth month straight
The Bank of England has kept interest rates at 4.5 per cent for the tenth consecutive month.
Amid signs of economic growth and fears of growing inflation, economic analysts have warned that the bank may increase rates in a month's time.
Frances Walker, a spokesperson for Consumer Credit Counselling Service advised first time buyers and aspiring homeowners that although a potential rise in interest rates would not have an immediate effect, people will "have to plan to find more money to repay their mortgages and if your mortgage goes up you'll have to think how you can manage".
"If you have a fixed-rate mortgage, which most people have, it won't have any impact on you in the short-term," Ms Walker continued.
First time buyers who are not on a fixed-rate mortgage and are repaying on a debt management plan would have to pay more for their mortgage and reduce the amount of unsecured debt they repay.A spokesperson for Citizen's Advice said first time buyers with variable mortgages would feel the impact of a rise in interest rates most, with the anticipated 0.25 per cent increase leading to a £40 or £50 rise in monthly repayments.
"But some people may be speculating if there is a rise in interest rates that potentially might lead to an increase in mortgage arrears or possibly repossessions," the spokesperson continued.
Amid signs of economic growth and fears of growing inflation, economic analysts have warned that the bank may increase rates in a month's time.
Frances Walker, a spokesperson for Consumer Credit Counselling Service advised first time buyers and aspiring homeowners that although a potential rise in interest rates would not have an immediate effect, people will "have to plan to find more money to repay their mortgages and if your mortgage goes up you'll have to think how you can manage".
"If you have a fixed-rate mortgage, which most people have, it won't have any impact on you in the short-term," Ms Walker continued.
First time buyers who are not on a fixed-rate mortgage and are repaying on a debt management plan would have to pay more for their mortgage and reduce the amount of unsecured debt they repay.A spokesperson for Citizen's Advice said first time buyers with variable mortgages would feel the impact of a rise in interest rates most, with the anticipated 0.25 per cent increase leading to a £40 or £50 rise in monthly repayments.
"But some people may be speculating if there is a rise in interest rates that potentially might lead to an increase in mortgage arrears or possibly repossessions," the spokesperson continued.
Home mortgage and home equity loan changes pose a risk
Rapid change in the home mortgage and home equity lending industry raises fundamental issues about fairness and levels of risk, Federal Reserve Governor Mark Olson said on Wednesday.
Olson did not address the outlook for the U.S. economy or interest rates in comments to a Federal Reserve Board public hearing on the home equity market.
The Chicago hearing will be the first of four to be staged over the next month, and Olson noted it has been four years since the Fed last held such hearings.
"In those four years it is hard to believe so much change has taken place in the industry," he said.
The growth in nontraditional loan products such as adjustable rate mortgages "certainly is the most significant change that has taken place in the marketplace and it has raised some real issues," Olson said.
The central banker said the rise of the secondary mortgage market has created a "voracious appetite" for loan products and that "it is not clear we have the same checks and balances, and that underwriting is done as carefully."
The fundamental asymmetry of knowledge between mortgage lender and recipient also creates "a real responsibility for mortgage lenders not to be abusive of that process," he said.
"Every time I have sat down to close my own mortgage loan I have felt at a disadvantage in terms of my understanding; so I can imagine what a first time buyer must feel," Olson said.
Source: Reuters
Olson did not address the outlook for the U.S. economy or interest rates in comments to a Federal Reserve Board public hearing on the home equity market.
The Chicago hearing will be the first of four to be staged over the next month, and Olson noted it has been four years since the Fed last held such hearings.
"In those four years it is hard to believe so much change has taken place in the industry," he said.
The growth in nontraditional loan products such as adjustable rate mortgages "certainly is the most significant change that has taken place in the marketplace and it has raised some real issues," Olson said.
The central banker said the rise of the secondary mortgage market has created a "voracious appetite" for loan products and that "it is not clear we have the same checks and balances, and that underwriting is done as carefully."
The fundamental asymmetry of knowledge between mortgage lender and recipient also creates "a real responsibility for mortgage lenders not to be abusive of that process," he said.
"Every time I have sat down to close my own mortgage loan I have felt at a disadvantage in terms of my understanding; so I can imagine what a first time buyer must feel," Olson said.
Source: Reuters
First time buyers are flat out winners
Flats from £130,000? Susan Emmett spots a bargain development in the South East Kennet Island is attracting first-time buyers with its contemporary architecture. It would have scored higher if the houses on the development were as well designed as the flats
Finding a home that first-time buyers can afford gives a whole new meaning to the term househunting. As property prices are well beyond the reach of most aspiring homeowners, this is no ordinary search.
In London and the South East the average home costs about £165,000, and though the number of homes being built is increasing, 70 per cent of all new homes are now priced at more than £150,000. It is no surprise, then, that when the Kennet Island development in Reading went on sale, most of the available homes sold almost instantly. Buyers camped out overnight to snap up flats that started at £130,000. All that remains of the first 41 homes put on the market are four three-bedroom, three-storey houses with a £265,000-plus price tag.
The £200 million scheme by St James Homes is huge and will even include a set of lakes for wildlife. Once finished, Kennet Island will have 850 flats and houses, as well as shops and cafés around a central square. It is all happening on the ultimate brownfield site: the former sewage works along the A33 relief road that links Reading to the M4. Set on the edge of Whitley, the area is known for its large spreads of council housing and problems with vandalism and antisocial behaviour. But do not let that put you off. Though Kennet Island is Reading’s largest single-site development, it is also part of a much bigger picture. The so-called A33 corridor in the southwest of town is a new neighbourhood in the making. Other builders are putting up pubs, restaurants, a four-star hotel with a gym and loads of new offices. There are plans for a private hospital. Near by are two large retail parks, where you will find a Morrisons supermarket, PC World and a B&Q. Madejski Stadium, home to Reading Football Club, is also a neighbour.
The scheme has proved a magnet to first-time buyers, who have been priced out of towns along the M4, and some investors aiming to let the homes to students at Reading University. In response to the early demand, the next batch of properties to be put on the market in the next few weeks will all be flats.
In the long term, however, the aim is to create a mixed communtiy with properties of all shapes and sizes. One-bedroom flats cost between £130,000 and £165,000; two-bedders fetch between £160,000 and £195,000. Two- bedroom houses will cost between £195,000 and £220,000; a three-bedroom will sell from £265,000; and a four-bedroom house will start at £275,000.
All the homes have a contemporary feel. The flats are eye-catching and the design includes wood and white render on the balconies to add interest. But the houses tend to be lacklustre, offering nothing but the price to excite the buyer.
St James, which was born out of a joint venture between Thames Water and the Berkeley Group in 1997, promises high quality at an affordable price. Gerry McCormack, of St James, which usually operates at the top of the market, speaks of applying “the same principles we use in our luxury housing”. But don’t get too excited by the glossy marketing. By this he means that the development pays attention to detail and includes good-quality fittings, but not an expanse of parquet flooring or indoor swimming pools.
You do, however, get a few extras that are not normally included in the sales price at new developments, such as household appliances. The other bonus is that even the smallest one-bedroom flat tends to be a little larger than starter homes offered by competitors. Barratt’s iPads, launched with much fanfare earlier this year, are just 380 sq ft, compared with the 519 sq ft for a one-bedder at Kennet Island.
The real attraction is the location and the potential capital growth. In a competitive market, successful developers must have an edge. St James is offering these properties at keen prices in the hope of creating a buzz and attracting enough people to build a new community. This will enable the builder to charge more for future homes on the site. It will also mean that those who get in early are likely to reap decent returns in the long term.
In the short term, however, buyers will have to put up with living in a building site. The scheme is huge and will not be finished for about ten years. If you cannot put up with builders for a decade, there are more pleasant parts of town to choose.
Source: The Times
Finding a home that first-time buyers can afford gives a whole new meaning to the term househunting. As property prices are well beyond the reach of most aspiring homeowners, this is no ordinary search.
In London and the South East the average home costs about £165,000, and though the number of homes being built is increasing, 70 per cent of all new homes are now priced at more than £150,000. It is no surprise, then, that when the Kennet Island development in Reading went on sale, most of the available homes sold almost instantly. Buyers camped out overnight to snap up flats that started at £130,000. All that remains of the first 41 homes put on the market are four three-bedroom, three-storey houses with a £265,000-plus price tag.
The £200 million scheme by St James Homes is huge and will even include a set of lakes for wildlife. Once finished, Kennet Island will have 850 flats and houses, as well as shops and cafés around a central square. It is all happening on the ultimate brownfield site: the former sewage works along the A33 relief road that links Reading to the M4. Set on the edge of Whitley, the area is known for its large spreads of council housing and problems with vandalism and antisocial behaviour. But do not let that put you off. Though Kennet Island is Reading’s largest single-site development, it is also part of a much bigger picture. The so-called A33 corridor in the southwest of town is a new neighbourhood in the making. Other builders are putting up pubs, restaurants, a four-star hotel with a gym and loads of new offices. There are plans for a private hospital. Near by are two large retail parks, where you will find a Morrisons supermarket, PC World and a B&Q. Madejski Stadium, home to Reading Football Club, is also a neighbour.
The scheme has proved a magnet to first-time buyers, who have been priced out of towns along the M4, and some investors aiming to let the homes to students at Reading University. In response to the early demand, the next batch of properties to be put on the market in the next few weeks will all be flats.
In the long term, however, the aim is to create a mixed communtiy with properties of all shapes and sizes. One-bedroom flats cost between £130,000 and £165,000; two-bedders fetch between £160,000 and £195,000. Two- bedroom houses will cost between £195,000 and £220,000; a three-bedroom will sell from £265,000; and a four-bedroom house will start at £275,000.
All the homes have a contemporary feel. The flats are eye-catching and the design includes wood and white render on the balconies to add interest. But the houses tend to be lacklustre, offering nothing but the price to excite the buyer.
St James, which was born out of a joint venture between Thames Water and the Berkeley Group in 1997, promises high quality at an affordable price. Gerry McCormack, of St James, which usually operates at the top of the market, speaks of applying “the same principles we use in our luxury housing”. But don’t get too excited by the glossy marketing. By this he means that the development pays attention to detail and includes good-quality fittings, but not an expanse of parquet flooring or indoor swimming pools.
You do, however, get a few extras that are not normally included in the sales price at new developments, such as household appliances. The other bonus is that even the smallest one-bedroom flat tends to be a little larger than starter homes offered by competitors. Barratt’s iPads, launched with much fanfare earlier this year, are just 380 sq ft, compared with the 519 sq ft for a one-bedder at Kennet Island.
The real attraction is the location and the potential capital growth. In a competitive market, successful developers must have an edge. St James is offering these properties at keen prices in the hope of creating a buzz and attracting enough people to build a new community. This will enable the builder to charge more for future homes on the site. It will also mean that those who get in early are likely to reap decent returns in the long term.
In the short term, however, buyers will have to put up with living in a building site. The scheme is huge and will not be finished for about ten years. If you cannot put up with builders for a decade, there are more pleasant parts of town to choose.
Source: The Times
US Hud reforms aim to reduce closing and settlement fees
WASHINGTON, June 8 - The U.S. Housing and Urban Development Secretary Alphonso Jackson said on Thursday he expected to finalize long-awaited reforms to mortgage settlement regulations by the end of the summer.
Jackson, speaking to reporters after a speech to a home ownership conference, said the reforms would be submitted in a proposed rule that would still be subject to congressional and industry comment.
The action would end a more than two-year hiatus in HUD's efforts to reform regulations under the 1974 Real Estate Settlement Procedures Act, or RESPA, which governs all U.S. home purchases.
Jackson declined to discuss the contents of the proposed rule.
"I think we have taken the input -- the good and the bad -- and we've tried to put it in that rule," he said. "I think the bulk of the industry groups and Congress will be pleased with what we've come out with."
Jackson in March 2004 withdrew a proposal made by his predecessor, Mel Martinez, to launch reforms intended to give buyers more clarity on their actual mortgage settlement costs, which often are criticized as confusing and surprisingly high when consumers get to the closing table.
Americans spend more than $55 billion a year on closing costs and fees that can boost the cost of buying a home by thousands of dollars. Changing the way these fees are determined and disclosed has been a contentious issue for the mortgage and settlement services industry.
Among reforms in the last RESPA proposal, made in 2002, were proposed changes to HUD's good faith estimate settlement cost disclosures, changes to the way lender payments to brokers are recorded and disclosed, and changes to allow mortgages and settlement services to be "bundled" into guaranteed-cost packages
Jackson withdrew the proposal in order to hold a series of round-table discussions with industry group.
Brian Levy, general counsel for Shelter Mortgage Inc. In Milwaukee and president of the Real Estate Services Providers Council, a trade group representing mortgage and services firms such as title insurers, said meaningful changes will still be problematic because stakeholders in the home buying industry have too many diverging interests.
He said changes in industry practices, including guaranteed-cost alternatives to packaging of services, have made the need for reform less urgent.
"The perceived consumer abuses in the marketplace have been largely addressed by predatory lending legislation that wasn't on the radar when RESPA first got targeted for reform," Levy said.
Source: Reuters
Jackson, speaking to reporters after a speech to a home ownership conference, said the reforms would be submitted in a proposed rule that would still be subject to congressional and industry comment.
The action would end a more than two-year hiatus in HUD's efforts to reform regulations under the 1974 Real Estate Settlement Procedures Act, or RESPA, which governs all U.S. home purchases.
Jackson declined to discuss the contents of the proposed rule.
"I think we have taken the input -- the good and the bad -- and we've tried to put it in that rule," he said. "I think the bulk of the industry groups and Congress will be pleased with what we've come out with."
Jackson in March 2004 withdrew a proposal made by his predecessor, Mel Martinez, to launch reforms intended to give buyers more clarity on their actual mortgage settlement costs, which often are criticized as confusing and surprisingly high when consumers get to the closing table.
Americans spend more than $55 billion a year on closing costs and fees that can boost the cost of buying a home by thousands of dollars. Changing the way these fees are determined and disclosed has been a contentious issue for the mortgage and settlement services industry.
Among reforms in the last RESPA proposal, made in 2002, were proposed changes to HUD's good faith estimate settlement cost disclosures, changes to the way lender payments to brokers are recorded and disclosed, and changes to allow mortgages and settlement services to be "bundled" into guaranteed-cost packages
Jackson withdrew the proposal in order to hold a series of round-table discussions with industry group.
Brian Levy, general counsel for Shelter Mortgage Inc. In Milwaukee and president of the Real Estate Services Providers Council, a trade group representing mortgage and services firms such as title insurers, said meaningful changes will still be problematic because stakeholders in the home buying industry have too many diverging interests.
He said changes in industry practices, including guaranteed-cost alternatives to packaging of services, have made the need for reform less urgent.
"The perceived consumer abuses in the marketplace have been largely addressed by predatory lending legislation that wasn't on the radar when RESPA first got targeted for reform," Levy said.
Source: Reuters
Mortgage rates fall on weak employment figures
Mortgage rates in the US fell as a weaker-than-expected employment report helped ease concerns about inflation.
Mortgage lender Freddie Mac reported that rates on 30-year, fixed-rate mortgages averaged 6.62%, down from 6.67% last week, the highest level in nearly four years.
Rates on 15-year, fixed-rate mortgages fell this week to 6.23% from 6.26%. Rates on one-year adjustable-rate mortgages declined to 5.63% from 5.68% and five-year adjustable-rate mortgages dropped to 6.2% from 6.26%.
The rates do not include add-on fees known as points.
Source: Associated Press
Mortgage lender Freddie Mac reported that rates on 30-year, fixed-rate mortgages averaged 6.62%, down from 6.67% last week, the highest level in nearly four years.
Rates on 15-year, fixed-rate mortgages fell this week to 6.23% from 6.26%. Rates on one-year adjustable-rate mortgages declined to 5.63% from 5.68% and five-year adjustable-rate mortgages dropped to 6.2% from 6.26%.
The rates do not include add-on fees known as points.
Source: Associated Press
Wednesday, June 07, 2006
Mortgage Fraud Sting catches Atlanta woman a second time
An Atlanta woman out on bond for mortgage fraud charges has been arrested again after getting caught in a second mortgage fraud sting.
The U.S. Attorney's Office reported late June 5 the May 30 arrest of Lanmasha Weslanda Mixon-Hampton of Atlanta in connection with an FBI sting involving a co-conspirator from her prior mortgage fraud case and the interstate transportation of stolen travelers checks, fraudulent credit cards and false identifications.
Mixon-Hampton was previously arrested at the closing table on Feb. 17 in an FBI mortgage fraud sting where the stolen identity of a disabled retiree was used in at attempt to obtain a million-dollar refinance loan for 940 Glengate Place in Atlanta, where Mixon-Hampton then resided. Mixon-Hampton was released on bond and indicted for the mortgage fraud and aggravated identity theft on March 14.
"The sting operations that resulted in both arrests of this defendant are examples of the tools now used by law enforcement to fight identify theft and mortgage fraud schemes that continue to adversely effect Atlanta citizens and their neighborhoods," said U.S. Attorney David E. Nahmias. "Such proactive initiative by law enforcement is one of the reasons that Georgia's mortgage fraud national ranking has recently decreased from number one to number three."
A criminal complaint charges Mixon-Hampton with mail and wire fraud, interstate transportation of stolen goods and commission of these offenses while on release for mortgage fraud offenses. Mixon-Hampton allegedly caused $50,000 worth of stolen American Express Travelers Cheques to be sent to her in Atlanta from Hawaii, which she then attempted to negotiate using a false identity and forwarded the remainder to Florida for sale and negotiation. Mixon-Hampton was arrested in an FBI sting on May 30, when cash "proceeds" from the stolen checks and the fraudulent credit card she had ordered were delivered to her, while she was on bond on the earlier mortgage fraud charges.
After appearing before U.S. Magistrate Judge Linda T. Walker on June 5, Mixon-Hampton was ordered to be detained without bond.
The U.S. Attorney's Office reported late June 5 the May 30 arrest of Lanmasha Weslanda Mixon-Hampton of Atlanta in connection with an FBI sting involving a co-conspirator from her prior mortgage fraud case and the interstate transportation of stolen travelers checks, fraudulent credit cards and false identifications.
Mixon-Hampton was previously arrested at the closing table on Feb. 17 in an FBI mortgage fraud sting where the stolen identity of a disabled retiree was used in at attempt to obtain a million-dollar refinance loan for 940 Glengate Place in Atlanta, where Mixon-Hampton then resided. Mixon-Hampton was released on bond and indicted for the mortgage fraud and aggravated identity theft on March 14.
"The sting operations that resulted in both arrests of this defendant are examples of the tools now used by law enforcement to fight identify theft and mortgage fraud schemes that continue to adversely effect Atlanta citizens and their neighborhoods," said U.S. Attorney David E. Nahmias. "Such proactive initiative by law enforcement is one of the reasons that Georgia's mortgage fraud national ranking has recently decreased from number one to number three."
A criminal complaint charges Mixon-Hampton with mail and wire fraud, interstate transportation of stolen goods and commission of these offenses while on release for mortgage fraud offenses. Mixon-Hampton allegedly caused $50,000 worth of stolen American Express Travelers Cheques to be sent to her in Atlanta from Hawaii, which she then attempted to negotiate using a false identity and forwarded the remainder to Florida for sale and negotiation. Mixon-Hampton was arrested in an FBI sting on May 30, when cash "proceeds" from the stolen checks and the fraudulent credit card she had ordered were delivered to her, while she was on bond on the earlier mortgage fraud charges.
After appearing before U.S. Magistrate Judge Linda T. Walker on June 5, Mixon-Hampton was ordered to be detained without bond.
Source: Atlanta Business Chronicle
Irish pay third of their income on their mortgage
First time buyers spending third of income on mortgage.
Couples buying their first home spend up to a third of their income on a mortgage, a survey showed today.
According to a new Affordability Index by EBS Building Society and DKM Economic Consultants average monthly repayments begin at over €1,300 and top €1,700 in some parts of Dublin.
Nationally mortgages cost on average 27% of earnings while those in the capital will be hit harder by the continued property boom spending 32% of what they make.
The figures show a 3% jump on last year.
Dara Deering, EBS head of mortgages, said: “First time buyers make up a very important segment of the overall mortgage market and are expected to contribute €8.5bn to the market this year.
“With rising property prices and interest rates, affordability is the key issue for many first time buyers.”
Ms Deering also warned that house price growth is impacting on affordability and said EBS expected to see stronger than forecasted growth this year.
She said: “Future affordability should be a key factor in the choice of a mortgage and lenders need to take a responsible approach to affordability and encourage consumers to consider the impact of possible interest rate rises in the future.”
EBS financiers noted mortgage rates have been on an upward path since December last year with further increases in the pipeline over the remainder of the year.
And they said the Index demonstrates the adverse impact on net mortgage repayments, which will be particularly difficult for first-time buyer couples with every 0.25% increase in rates resulting in a monthly €14 rise or €168 a year for every €100,000 borrowed.
Annette Hughes, director of DKM Economic Consultants, said the Index can be seen as an indication of a couple’s mortgage-paying commitments in the early years, each on average earnings.
“Affordability is the most important barometer as to whether the property market is reaching saturation point. The general consensus is that we will see further interest rate increases over the remainder of 2006,” she said.
“While the amount of any individual increase may not impact significantly on borrowers, combined increases in mortgage rates over the next 18 months could have a significant impact on housing affordability.”
The EBS said it expects 47,000 first time buyers will take out a mortgage this year with the average price nationally at the moment at €292,000 and €388,000 in Dublin.
Source: Ireland Online
Couples buying their first home spend up to a third of their income on a mortgage, a survey showed today.
According to a new Affordability Index by EBS Building Society and DKM Economic Consultants average monthly repayments begin at over €1,300 and top €1,700 in some parts of Dublin.
Nationally mortgages cost on average 27% of earnings while those in the capital will be hit harder by the continued property boom spending 32% of what they make.
The figures show a 3% jump on last year.
Dara Deering, EBS head of mortgages, said: “First time buyers make up a very important segment of the overall mortgage market and are expected to contribute €8.5bn to the market this year.
“With rising property prices and interest rates, affordability is the key issue for many first time buyers.”
Ms Deering also warned that house price growth is impacting on affordability and said EBS expected to see stronger than forecasted growth this year.
She said: “Future affordability should be a key factor in the choice of a mortgage and lenders need to take a responsible approach to affordability and encourage consumers to consider the impact of possible interest rate rises in the future.”
EBS financiers noted mortgage rates have been on an upward path since December last year with further increases in the pipeline over the remainder of the year.
And they said the Index demonstrates the adverse impact on net mortgage repayments, which will be particularly difficult for first-time buyer couples with every 0.25% increase in rates resulting in a monthly €14 rise or €168 a year for every €100,000 borrowed.
Annette Hughes, director of DKM Economic Consultants, said the Index can be seen as an indication of a couple’s mortgage-paying commitments in the early years, each on average earnings.
“Affordability is the most important barometer as to whether the property market is reaching saturation point. The general consensus is that we will see further interest rate increases over the remainder of 2006,” she said.
“While the amount of any individual increase may not impact significantly on borrowers, combined increases in mortgage rates over the next 18 months could have a significant impact on housing affordability.”
The EBS said it expects 47,000 first time buyers will take out a mortgage this year with the average price nationally at the moment at €292,000 and €388,000 in Dublin.
Source: Ireland Online
Tuesday, June 06, 2006
Reserve Bank of Australia leaves rates unchanged
The Reserve Bank of Australia has left official interest rates unchanged at 5.75 per cent.
The central bank lifted interest rates by 25 basis points to 5.75 per cent last month.
Economists were unanimous in their expectation that interest rates would not be changed following the RBA's board meeting yesterday.
Commsec chief equities economist Craig James said rates were rising around the world.
He said the Reserve Bank would continue to look for any inflation signals in the domestic economy.
"They'll be looking at growth overall in the economy, wages pressures particularly. If wages are starting to creep up that may lead businesses to pass that through in terms of higher prices," he told Sky News.
"The rising price of crude oil puts upward pressure on the headline rate of inflation, and if that starts to get passed through to generalised price measures, then again the Reserve Bank is concerned."
Economists and the Federal Government will now turn their attention to the March national account figures due out today.
Analysts are tipping a quarterly increase of around 0.7 per cent, which would give Australia annual GDP growth of 2.7 per cent.
Macquarie Bank economist Daniel McCormack said it was too soon to expect another rate hike from the central bank.
"The RBA would like to sit back and assess the impact of the May hike before they decide whether another move is necessary," he said.
There has been no post-hike data yet released so the bank is is wait-and-see mode, he said.
However, Mr McCormack said markets are pricing in a chance of another move over the second half of this year.
"We expect the earliest window for a move is August after the next CPI [inflation] release in late July but we don't expect any move before then," he said.
Westpac senior economist Anthony Thompson said the decision was no surprise.
"The market was unanimous in expecting the rates would be left on hold after the surprise move in May," he said.
"We think clearly the bank will want to give some time to see the full effect of the May increase before contemplating their future direction."
Westpac expects interest rates will be left on hold for the rest of the year.
The central bank lifted interest rates by 25 basis points to 5.75 per cent last month.
Economists were unanimous in their expectation that interest rates would not be changed following the RBA's board meeting yesterday.
Commsec chief equities economist Craig James said rates were rising around the world.
He said the Reserve Bank would continue to look for any inflation signals in the domestic economy.
"They'll be looking at growth overall in the economy, wages pressures particularly. If wages are starting to creep up that may lead businesses to pass that through in terms of higher prices," he told Sky News.
"The rising price of crude oil puts upward pressure on the headline rate of inflation, and if that starts to get passed through to generalised price measures, then again the Reserve Bank is concerned."
Economists and the Federal Government will now turn their attention to the March national account figures due out today.
Analysts are tipping a quarterly increase of around 0.7 per cent, which would give Australia annual GDP growth of 2.7 per cent.
Macquarie Bank economist Daniel McCormack said it was too soon to expect another rate hike from the central bank.
"The RBA would like to sit back and assess the impact of the May hike before they decide whether another move is necessary," he said.
There has been no post-hike data yet released so the bank is is wait-and-see mode, he said.
However, Mr McCormack said markets are pricing in a chance of another move over the second half of this year.
"We expect the earliest window for a move is August after the next CPI [inflation] release in late July but we don't expect any move before then," he said.
Westpac senior economist Anthony Thompson said the decision was no surprise.
"The market was unanimous in expecting the rates would be left on hold after the surprise move in May," he said.
"We think clearly the bank will want to give some time to see the full effect of the May increase before contemplating their future direction."
Westpac expects interest rates will be left on hold for the rest of the year.
Source: AAP
Bank account fees are being flattened
Bank customers can save on transaction account fees providing they read the fine print.
Turned off by the high cost of a la carte banking services, account holders are switching to "all-you-can-eat" accounts. These come at a modest fixed price no matter how often you transact.
However, Nick Coates, the senior policy officer with the Australian Consumers Association, says: "Four or five dollars a month doesn't sound like much, but you need to read the fine print to assess whether these accounts suit you,"
When the Commonwealth Bank unveiled its Streamline e-Access and Streamline Unlimited accounts recently, it became the last major bank to add flat-fee transaction accounts to its product mix.
Streamline e-Access is a transaction account with unlimited electronic transactions including CBA ATMs, self-service telephone banking, NetBank and Eftpos for $4 a month.
Streamline Unlimited gives unlimited electronic transactions coupled with unlimited branch and agency withdrawals, cheques written and assisted telephone banking for $6 a month.
Denise Orrock, the general manager of researcher InfoChoice, says CBA had in the past shown a reluctance to introduce this style of account because of the workload involved in moving customers to new accounts.
"Saying that, the ANZ has been very successful with its own accounts in the all-you-can-eat space for quite a number of years," he says, "[and] it's rare that any initiative that achieves a degree of success is not adopted by the balance of the banking powers."
However, even CBA admits that consumer resistance to rising fees played as much a part as competitive pressures. A recent Nielsen Media Research survey showed CBA had the lowest customer satisfaction rating - in a year when satisfaction with banks overall had sunk to a three-year low.
Michael Cameron, CBA's group executive of retail banking services, says the two new flat-fee accounts complement other initiatives designed to woo disgruntled customers, including the introduction of a low-rate credit card and the removal of "everyday" transaction fees on NetBank.
"We have heard our customers loud and clear when it comes to fees and services," he says. "There will be a significant benefit to customers by providing them with the ability to reduce the transaction account fees that they pay."
Such accounts mean customers no longer have to ration their transactions and worry about costs each time they key in their PIN. However, some transactions are excluded or limited.
Turned off by the high cost of a la carte banking services, account holders are switching to "all-you-can-eat" accounts. These come at a modest fixed price no matter how often you transact.
However, Nick Coates, the senior policy officer with the Australian Consumers Association, says: "Four or five dollars a month doesn't sound like much, but you need to read the fine print to assess whether these accounts suit you,"
When the Commonwealth Bank unveiled its Streamline e-Access and Streamline Unlimited accounts recently, it became the last major bank to add flat-fee transaction accounts to its product mix.
Streamline e-Access is a transaction account with unlimited electronic transactions including CBA ATMs, self-service telephone banking, NetBank and Eftpos for $4 a month.
Streamline Unlimited gives unlimited electronic transactions coupled with unlimited branch and agency withdrawals, cheques written and assisted telephone banking for $6 a month.
Denise Orrock, the general manager of researcher InfoChoice, says CBA had in the past shown a reluctance to introduce this style of account because of the workload involved in moving customers to new accounts.
"Saying that, the ANZ has been very successful with its own accounts in the all-you-can-eat space for quite a number of years," he says, "[and] it's rare that any initiative that achieves a degree of success is not adopted by the balance of the banking powers."
However, even CBA admits that consumer resistance to rising fees played as much a part as competitive pressures. A recent Nielsen Media Research survey showed CBA had the lowest customer satisfaction rating - in a year when satisfaction with banks overall had sunk to a three-year low.
Michael Cameron, CBA's group executive of retail banking services, says the two new flat-fee accounts complement other initiatives designed to woo disgruntled customers, including the introduction of a low-rate credit card and the removal of "everyday" transaction fees on NetBank.
"We have heard our customers loud and clear when it comes to fees and services," he says. "There will be a significant benefit to customers by providing them with the ability to reduce the transaction account fees that they pay."
Such accounts mean customers no longer have to ration their transactions and worry about costs each time they key in their PIN. However, some transactions are excluded or limited.
Source, The Age , Denise Cullen
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