The home affordability crisis is driving first-time home buyers to seek out low deposit or even no deposit mortgage lenders to break into homeownership.
Average deposits for first-time buyers have shrunk to between three and six per cent in recent years compared with the traditional 10 to 20 per cent, Raine and Horne Financial Services said.
"Very few applicants have a 20 per cent deposit," said Gary Lees who is the general manager of Raine & Horne Financial Services.
Shrinking deposits highlight how housing affordability is increasingly out of reach for more people across Australia.
Would-be buyer are tapping a growing supply of mortgages that require little or no deposit in return for higher interest rates at a time when slumping vacancy rates are driving up rents.
"For many, especially those who are renting, this is a hopelessly difficult target," Mr Lees said.
Median house prices climbed 1.2 per cent in Sydney to $526,158 during the fourth quarter of 2006 compared with the previous three months, according to Australian Property Monitors.
By comparison the median price in Melbourne was $366,415 in the fourth quarter - up 1.4 per cent. The popularity for low and no-deposit loans may also be a driven by the supply of the loans as well as impatience among young or the so called Generation Y who don't want to take the time to save.
"There has been a real explosion of those type of products over the last couple of years," said Paul Lahiff, who is the managing director for mortgage broker Mortgage Choice.
"Gen Ys are 'I want it now'.
"They want to do everything and they want to do it yesterday.
Mr Lahiff says that he has not seen a higher rate of delinquency on low or no-deposit mortgages.
Even so, three interest rate rises last year has sparked record bankruptcies after some people got too heavily in debt buying properties during the last property bubble that ended in 2003.
Trouble is some areas to the west and south of Sydney have seen prices slide since then.
Bankruptcies surged 9.5 per cent since the final three months of 2006 to 6585, the highest since the June quarter of 1998, according to data this month from Insolvency and Trustee Service Australia .
In NSW bankruptcies rose 7.1 per cent to 2404, while in Victoria they were up 7.8 per cent 1491 - both records.
The growing preference for low and no deposit home loans are not limited to lower income buyers, Raine & Horne's Lees said.
"Even in Sydney's more affluent areas like the eastern suburbs, a large percentage of first homebuyers are using no deposit home loans," he said. Source: AAP
Friday, April 27, 2007
Wednesday, April 25, 2007
Mortgage home loans to become a lifelong commitment
Housing affordability is at a record low so mortgage lenders are devising new loan products to bridge the gap for first-time home buyers eager to get a start.
Yesterday Savings & Loan Credit Union started to offer 40 year home loans to customers, taking us one step closer to Japan's multi-generation property loans.
And the appearance of shared equity loans such as that offered by Adelaide Bank/Rismark is another attempt to bridge the affordability gap for potential home buyers at a time when rents are also soaring.
Sceptics claim that the housing market will quickly absorb any affordability short cuts, much as the first home owners grant quickly resulted in prices inflating by a similar amount.
The first independent analysis of shared equity loans disagrees with this idea.
Financial researcher Cannex found that shared equity products are unlikely to have any effect on property prices unless they become very widespread.
Even then, the effects are likely to be modest "because by using this form of loan a borrower with affordability issues has quite different needs from a property upgrader who can suddenly afford one more bedroom.''
The shared equity loan lowers the bar for home ownership by funding 20 per cent of the house with an interest free equity finance mortgage (EFM).
A conventional home loan and deposit covers the remaining 80 per cent of the house value.
The catch is that the issuer of the EFM gets to keep up to 40 per cent of the capital growth on the house.
Surprisingly, Cannex found this sort of a deal can work in the home owner's favour, particularly in times of low to moderate house price growth.
The first saving is in mortgage insurance, which might otherwise have been required if a very large proportion of the property price was being borrowed.
Using historic prices, Cannex found that buyers who used a shared equity loan would have been ahead in the muddling main markets of Sydney, Melbourne and Brisbane but way behind in the faster growing markets like Perth and Darwin.
So the trick is to only used shared equity in markets which are unlikely to experience sharp price growth.
Savings & Loans chief Greg Connor said the new 40-year loans came after requests from members who could not break into the property market.
He said they would reduce the minimum payment on a $250,000 loan by as much as $95.21 a month.
"We see extended terms as a stepping stone for most borrowers who can move to a standard length mortgage after becoming established,'' said Mr Connor.
Of course the price of a 40-year loan term is that it takes a lot longer to start making a dent in the loan principal and you pay interest for a lot longer.
Source: The Herald Sun
Yesterday Savings & Loan Credit Union started to offer 40 year home loans to customers, taking us one step closer to Japan's multi-generation property loans.
And the appearance of shared equity loans such as that offered by Adelaide Bank/Rismark is another attempt to bridge the affordability gap for potential home buyers at a time when rents are also soaring.
Sceptics claim that the housing market will quickly absorb any affordability short cuts, much as the first home owners grant quickly resulted in prices inflating by a similar amount.
The first independent analysis of shared equity loans disagrees with this idea.
Financial researcher Cannex found that shared equity products are unlikely to have any effect on property prices unless they become very widespread.
Even then, the effects are likely to be modest "because by using this form of loan a borrower with affordability issues has quite different needs from a property upgrader who can suddenly afford one more bedroom.''
The shared equity loan lowers the bar for home ownership by funding 20 per cent of the house with an interest free equity finance mortgage (EFM).
A conventional home loan and deposit covers the remaining 80 per cent of the house value.
The catch is that the issuer of the EFM gets to keep up to 40 per cent of the capital growth on the house.
Surprisingly, Cannex found this sort of a deal can work in the home owner's favour, particularly in times of low to moderate house price growth.
The first saving is in mortgage insurance, which might otherwise have been required if a very large proportion of the property price was being borrowed.
Using historic prices, Cannex found that buyers who used a shared equity loan would have been ahead in the muddling main markets of Sydney, Melbourne and Brisbane but way behind in the faster growing markets like Perth and Darwin.
So the trick is to only used shared equity in markets which are unlikely to experience sharp price growth.
Savings & Loans chief Greg Connor said the new 40-year loans came after requests from members who could not break into the property market.
He said they would reduce the minimum payment on a $250,000 loan by as much as $95.21 a month.
"We see extended terms as a stepping stone for most borrowers who can move to a standard length mortgage after becoming established,'' said Mr Connor.
Of course the price of a 40-year loan term is that it takes a lot longer to start making a dent in the loan principal and you pay interest for a lot longer.
Source: The Herald Sun
Mortgage home loans to become a lifelong commitment
Housing affordability is at a record low so mortgage lenders are devising new loan products to bridge the gap for first-time home buyers eager to get a start.
Yesterday Savings & Loan Credit Union started to offer 40 year home loans to customers, taking us one step closer to Japan's multi-generation property loans.
And the appearance of shared equity loans such as that offered by Adelaide Bank/Rismark is another attempt to bridge the affordability gap for potential home buyers at a time when rents are also soaring.
Sceptics claim that the housing market will quickly absorb any affordability short cuts, much as the first home owners grant quickly resulted in prices inflating by a similar amount.
The first independent analysis of shared equity loans disagrees with this idea.
Financial researcher Cannex found that shared equity products are unlikely to have any effect on property prices unless they become very widespread.
Even then, the effects are likely to be modest "because by using this form of loan a borrower with affordability issues has quite different needs from a property upgrader who can suddenly afford one more bedroom.''
The shared equity loan lowers the bar for home ownership by funding 20 per cent of the house with an interest free equity finance mortgage (EFM).
A conventional home loan and deposit covers the remaining 80 per cent of the house value.
The catch is that the issuer of the EFM gets to keep up to 40 per cent of the capital growth on the house.
Surprisingly, Cannex found this sort of a deal can work in the home owner's favour, particularly in times of low to moderate house price growth.
The first saving is in mortgage insurance, which might otherwise have been required if a very large proportion of the property price was being borrowed.
Using historic prices, Cannex found that buyers who used a shared equity loan would have been ahead in the muddling main markets of Sydney, Melbourne and Brisbane but way behind in the faster growing markets like Perth and Darwin.
So the trick is to only used shared equity in markets which are unlikely to experience sharp price growth.
Savings & Loans chief Greg Connor said the new 40-year loans came after requests from members who could not break into the property market.
He said they would reduce the minimum payment on a $250,000 loan by as much as $95.21 a month.
"We see extended terms as a stepping stone for most borrowers who can move to a standard length mortgage after becoming established,'' said Mr Connor.
Of course the price of a 40-year loan term is that it takes a lot longer to start making a dent in the loan principal and you pay interest for a lot longer.
Source: The Herald Sun
Yesterday Savings & Loan Credit Union started to offer 40 year home loans to customers, taking us one step closer to Japan's multi-generation property loans.
And the appearance of shared equity loans such as that offered by Adelaide Bank/Rismark is another attempt to bridge the affordability gap for potential home buyers at a time when rents are also soaring.
Sceptics claim that the housing market will quickly absorb any affordability short cuts, much as the first home owners grant quickly resulted in prices inflating by a similar amount.
The first independent analysis of shared equity loans disagrees with this idea.
Financial researcher Cannex found that shared equity products are unlikely to have any effect on property prices unless they become very widespread.
Even then, the effects are likely to be modest "because by using this form of loan a borrower with affordability issues has quite different needs from a property upgrader who can suddenly afford one more bedroom.''
The shared equity loan lowers the bar for home ownership by funding 20 per cent of the house with an interest free equity finance mortgage (EFM).
A conventional home loan and deposit covers the remaining 80 per cent of the house value.
The catch is that the issuer of the EFM gets to keep up to 40 per cent of the capital growth on the house.
Surprisingly, Cannex found this sort of a deal can work in the home owner's favour, particularly in times of low to moderate house price growth.
The first saving is in mortgage insurance, which might otherwise have been required if a very large proportion of the property price was being borrowed.
Using historic prices, Cannex found that buyers who used a shared equity loan would have been ahead in the muddling main markets of Sydney, Melbourne and Brisbane but way behind in the faster growing markets like Perth and Darwin.
So the trick is to only used shared equity in markets which are unlikely to experience sharp price growth.
Savings & Loans chief Greg Connor said the new 40-year loans came after requests from members who could not break into the property market.
He said they would reduce the minimum payment on a $250,000 loan by as much as $95.21 a month.
"We see extended terms as a stepping stone for most borrowers who can move to a standard length mortgage after becoming established,'' said Mr Connor.
Of course the price of a 40-year loan term is that it takes a lot longer to start making a dent in the loan principal and you pay interest for a lot longer.
Source: The Herald Sun
Saturday, April 21, 2007
CommBank says earnings on track
Australia's second largest bank Commonwealth Bank of Australia Ltd says it remains on track to deliver cash earnings per share (EPS) growth that meets or exceeds the average of its peers.
In a third quarter trading update the bank said trading conditions and underlying credit growth remained favourable.
"The earnings momentum of the first half has been maintained in the third quarter of the group's 2007 financial year," it said.
During the quarter, CBA said trading conditions in its retail bank business had remained relatively strong, supported by steady housing growth and continuing favourable credit quality.
"In Australia, the retail bank continued to target profitable growth in each of its key products," it said.
Home lending balance growth has been in line with market.
In credit cards, recent growth rates had also been in line with market even though the bank continued to avoid zero rate balance transfer offers.
"Retail deposit growth, which has been influenced by normal seasonal factors, has been in line with system with continuing strong inflows into Netbank Saver," it added.
"Consumer credit quality has remained sound."
CBA said there had been some seasonal increase in arrears.
"Loss rates in unsecured lending - which includes credit cards - are trending slightly below expectations," it added.
The bank also said its institutional banking business had delivered strong balance growth with stable margins and that the global markets and treasury units had performed well.
"The local business banking market remained competitive, however margins have been stable," it said.
"Overall credit quality in the corporate book remains good, although there has been a slight increase in the level of impaired assets."
The wealth management business continued to benefit from a positive investment environment and strong retail funds flows.
Funds under management at March 31 totalled $130.8 billion, up 10.2 per cent for the nine months and two per cent for the quarter.
"It is pleasing to see that our focus on profitable growth is continuing to deliver results," chief executive Ralph Norris said.
"Not only have we maintained the earnings momentum from the first half, but we are continuing to make good progress with our key strategic initiatives.
"With good underlying credit growth and sound credit quality, I remain positive about the outlook and am confident in the ability of the group to again deliver strong earnings per share growth for the full year."
Source : AAP
In a third quarter trading update the bank said trading conditions and underlying credit growth remained favourable.
"The earnings momentum of the first half has been maintained in the third quarter of the group's 2007 financial year," it said.
During the quarter, CBA said trading conditions in its retail bank business had remained relatively strong, supported by steady housing growth and continuing favourable credit quality.
"In Australia, the retail bank continued to target profitable growth in each of its key products," it said.
Home lending balance growth has been in line with market.
In credit cards, recent growth rates had also been in line with market even though the bank continued to avoid zero rate balance transfer offers.
"Retail deposit growth, which has been influenced by normal seasonal factors, has been in line with system with continuing strong inflows into Netbank Saver," it added.
"Consumer credit quality has remained sound."
CBA said there had been some seasonal increase in arrears.
"Loss rates in unsecured lending - which includes credit cards - are trending slightly below expectations," it added.
The bank also said its institutional banking business had delivered strong balance growth with stable margins and that the global markets and treasury units had performed well.
"The local business banking market remained competitive, however margins have been stable," it said.
"Overall credit quality in the corporate book remains good, although there has been a slight increase in the level of impaired assets."
The wealth management business continued to benefit from a positive investment environment and strong retail funds flows.
Funds under management at March 31 totalled $130.8 billion, up 10.2 per cent for the nine months and two per cent for the quarter.
"It is pleasing to see that our focus on profitable growth is continuing to deliver results," chief executive Ralph Norris said.
"Not only have we maintained the earnings momentum from the first half, but we are continuing to make good progress with our key strategic initiatives.
"With good underlying credit growth and sound credit quality, I remain positive about the outlook and am confident in the ability of the group to again deliver strong earnings per share growth for the full year."
Source : AAP
Monday, April 16, 2007
Mortgage loans become lifelong interest
40-year home loans being offered.
With housing affordability officially at record lows, financial engineering is reaching out to close the gap for first-time home buyers eager to get a start.
Yesterday Savings & Loan Credit Union started to offer 40 year home loans to customers, taking us one step closer to Japan's multi-generation property loans.
And the appearance of shared equity loans such as that offered by Adelaide Bank/Rismark is another attempt to bridge the affordability gap for potential home buyers at a time when rents are also soaring.
Sceptics claim that the housing market will quickly absorb any affordability short cuts, much as the first home owners grant quickly resulted in prices inflating by a similar amount.
The first independent analysis of shared equity loans disagrees with this idea.
Financial researcher Cannex found that shared equity products are unlikely to have any effect on property prices unless they become very widespread.
Even then, the effects are likely to be modest "because by using this form of loan a borrower with affordability issues has quite different needs from a property upgrader who can suddenly afford one more bedroom.''
The shared equity loan lowers the bar for home ownership by funding 20 per cent of the house with an interest free equity finance mortgage (EFM).
A conventional home loan and deposit covers the remaining 80 per cent of the house value.
The catch is that the issuer of the EFM gets to keep up to 40 per cent of the capital growth on the house.
Surprisingly, Cannex found this sort of a deal can work in the home owner's favour, particularly in times of low to moderate house price growth.
The first saving is in mortgage insurance, which might otherwise have been required if a very large proportion of the property price was being borrowed.
Using historic prices, Cannex found that buyers who used a shared equity loan would have been ahead in the muddling main markets of Sydney, Melbourne and Brisbane but way behind in the faster growing markets like Perth and Darwin.
So the trick is to only used shared equity in markets which are unlikely to experience sharp price growth.
Savings & Loans chief Greg Connor said the new 40-year loans came after requests from members who could not break into the property market.
He said they would reduce the minimum payment on a $250,000 loan by as much as $95.21 a month.
"We see extended terms as a stepping stone for most borrowers who can move to a standard length mortgage after becoming established,'' said Mr Connor.
Of course the price of a 40-year loan term is that it takes a lot longer to start making a dent in the loan principal and you pay interest for a lot longer.
Source: The Herald Sun
With housing affordability officially at record lows, financial engineering is reaching out to close the gap for first-time home buyers eager to get a start.
Yesterday Savings & Loan Credit Union started to offer 40 year home loans to customers, taking us one step closer to Japan's multi-generation property loans.
And the appearance of shared equity loans such as that offered by Adelaide Bank/Rismark is another attempt to bridge the affordability gap for potential home buyers at a time when rents are also soaring.
Sceptics claim that the housing market will quickly absorb any affordability short cuts, much as the first home owners grant quickly resulted in prices inflating by a similar amount.
The first independent analysis of shared equity loans disagrees with this idea.
Financial researcher Cannex found that shared equity products are unlikely to have any effect on property prices unless they become very widespread.
Even then, the effects are likely to be modest "because by using this form of loan a borrower with affordability issues has quite different needs from a property upgrader who can suddenly afford one more bedroom.''
The shared equity loan lowers the bar for home ownership by funding 20 per cent of the house with an interest free equity finance mortgage (EFM).
A conventional home loan and deposit covers the remaining 80 per cent of the house value.
The catch is that the issuer of the EFM gets to keep up to 40 per cent of the capital growth on the house.
Surprisingly, Cannex found this sort of a deal can work in the home owner's favour, particularly in times of low to moderate house price growth.
The first saving is in mortgage insurance, which might otherwise have been required if a very large proportion of the property price was being borrowed.
Using historic prices, Cannex found that buyers who used a shared equity loan would have been ahead in the muddling main markets of Sydney, Melbourne and Brisbane but way behind in the faster growing markets like Perth and Darwin.
So the trick is to only used shared equity in markets which are unlikely to experience sharp price growth.
Savings & Loans chief Greg Connor said the new 40-year loans came after requests from members who could not break into the property market.
He said they would reduce the minimum payment on a $250,000 loan by as much as $95.21 a month.
"We see extended terms as a stepping stone for most borrowers who can move to a standard length mortgage after becoming established,'' said Mr Connor.
Of course the price of a 40-year loan term is that it takes a lot longer to start making a dent in the loan principal and you pay interest for a lot longer.
Source: The Herald Sun
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