Discount home loans you need to know about

Banking packages that used to be called professional packages, that combine a mortgage, transaction account and credit card with the one institution are the best value on the home-lending market.
These packages offer a discount to the advertised rate and the saving on the interest more than covers the package fee. The bundling of services also offers convenience. They also tend to lock you in.
More than half of all new mortgages written by the major banks are "super sized" to packages these days.
Borrowers like them because they get the features of a standard variable-rate loan (and, increasingly, other types of loans) at the discounted price of a basic variable-rate loan.
Discounts are 0.4 to 0.7 percentage points, depending on the size of the loan. At one stage last year some brokers were given discretion to offer discounts of as much as 0.9 percentage points for loans over $300,000, but with the general tightening in the market, those deals are now hard to find.
Traditionally aimed at typical home-buyers, package banking has broadened its appeal to attract property investors and the self-employed.
Investors value loan options such as interest only, line-of-credit and discounts. Those who own their own business usually need a package with a good low-doc loan.
The top variable-rate packages are Adelaide Bank's Executive Offer, Newcastle Permanent's Premium Plus Package, Commonwealth Bank's Wealth Package and AMP Banking's Select Package.
The top five fixed-rate packages were offered by Commonwealth Bank, HSBC, BankSA and St George. [We do not recommend fixed rate mortgages at this time].
When taking out a package loan, there is a requirement to take other products, usually a deposit account and a credit card. This is attractive because the annual fee is bundled into the package's annual fee.
However, if the product offered in the package does not suit, there is no obligation to use them.
The type of credit card does vary between institutions. Many will offer their standard credit card but some, such as St George, offer a platinum card.
But there are some things to watch out for. Westpac includes its Altitude Gold card but the card fee is waived in only the first year rather than for the life of the package.
ANZ offers the choice of a rewards Visa gold card or a frequent flyer Visa gold card. The annual fee is waived but the rewards program fee is not.
We feel that home buyers shopping for a package should focus on the features of the home loan, making sure it offers a good rate and has plenty of flexibility, such as redraw and offset.
Property investors should look for deals that incorporate line-of-credit and interest-only options.
Some lenders offer discounts on fixed-rate loans, which could be useful.
Self-employed people will need a package with a low-doc mortgage at a reasonable price.
One very important trend of which borrowers should take note is that the major banks have used the credit-market turmoil of the past year to reassert their role as price-setters in the mortgage market - a role they have not played since specialist home-loan originators entered our market a decade ago.
The package-rate discount comes off the standard variable rate and should bring the cost of the loan close to rates on basic home loans. The only downer are the casts of teh addons which can erode the benefits of these discounts when the loan amounts are smaller.

Queensland property sales slump causes real estate sales people to walk

In a sign that price expectations of home sellers are above the market, the Real Estate Institute of Queensland (REIQ) says hundreds of real estate sales staff are leaving the property sales industry as the property market slows across the state.
This ahs also reflected on the Mortgage industry in homes sales transactions, but has a lesser effect in the mortgage industry due to te fact that mortgage lenders can help people with refinancing existing loans when property transactions fall.
The REIQ says this year's sales are down by between 20 and 50 per cent in parts of Queensland and that has led to at least a 25 per cent drop in the number of staff.
It says many of those who have walked away could not cope with the current conditions or the loss of income.
REIQ chairman Peter McGrath says a lot of those who have left have only had experience during a property boom.
"A lot of them haven't got the income they had this time last year and secondly, they find doing the hard work in some cases just too hard for them," he said.
"We were overstaffed to a degree to service the very hectic demands of particularly this time last year, but a lot of those people will come back into the industry.
"This time last year, we were on the most extreme high of turnover that this state has ever seen, so we are feeling the drop.
"We are back to sales levels of 2002/03, which were still reasonable years I must point out, but compared to 2007 they looked very lean years."

Mortgage rate fixers are homeowners biggest losers

Mortgage interest fixed-rate borrowers face hefty fees if they want to switch to a standard variable loan right now. The horse has bolted and the banks have to set their rate and costing long term to fix a rate. (
A further massive mortgage interest rate cut this week has made more than 43,000 home borrowers who chose to fix their rate, Australia's biggest mortgage losers.
The costs of exiting an average fixed-rate mortgage jumped to $18,000 because break fees for the loan rise as interest rates fall.
Banks charge break fees to exit fixed-rate home loans so they can meet interest payment obligations to term deposit customers.
The Reserve Bank of Australia (RBA) on Tuesday announced it would slash official interest rates by 100 basis points point to a six-and-a-half year low of 4.25 per cent.
The 43,632 borrowers who opted for fixed-rate mortgages between March and August this year, when interest rates were at a decade-high peak, face hefty fees if they want to switch to a standard variable loan.
Official interest rates would have to fall to the lowest levels since February 1965 for these borrowers to recoup the cost of switching out of a fixed loan through cheaper mortgage repayments. [This is on teh cards according to Mr Mortgage]
A further home loan rate cut of .5% is expected in February, and there could be more to come to assist home sales and home owners to weather the storm and have money to spend to get the economy from sliding into recession.
We are in for some interesting mortage times ahead!

Helensvale, Gold Coast tops the mortgage stress list

Hevensvale, on the Gold Coast, has been named as the most mortgage-stressed suburb in Australia by the global ratings agency Fitch Ratings.
The Gold Coast and Sydney's Vaucluse have joined southwestern Sydney as the areas suffering the most from mortgage stress and loan defaults.
More than 840,000 residential mortgages - valued at $140 billion - were outstanding at the end of September, with interest rate rises in late 2007 and 2008 to blame.
Australian mortgage delinquency rose in the six months between April and September this year, Fitch Ratings said.
Southwestern and western Sydney remain the nation's mortgage stress hotspots, but there have been significant changes in the suburbs of Perth, southeast Queensland and New South Wales regional areas, such as Wollongong, Newcastle and the Central Coast.
One of the nation's most affluent addresses - Vaucluse - is rated seventh worst by loan value.
The top 10 suburbs and towns listed as suffering the most mortgage stress are: Helensvale (Queensland), Nelson Bay (NSW), Raymond Terrace (NSW), Katoomba (NSW), Greenacre (NSW), Guildford (NSW), Vaucluse (NSW), Fairfield (NSW), Cessnock (NSW) and St Marys (NSW).
Mortgage performance is expected to continue to deteriorate on the back of the Christmas spending season and the rapidly slowing economy, Fitch says.
"On a national basis, Australian mortgages, by value, that missed one or more payments, increased to 2.13 per cent from 1.88 per cent," said Ben McCarthy, from Structured Finance, who authored the Fitch report.
However a finding in the report suggests loans made between 2002 and 2007 are easier to service today than when the loan was first taken out.
"From this point of view if unemployment can remain subdued the Australian mortgage market will continue to perform well," Mr McCarthy said.

Citigroup heads south as it warns consumer loan losses rise

Citigroup stocks took a bath in the wake of its warning that losses in its consumer loan portfolio could rise between $US1 billion and $US2 billion each quarter from now through the first half of next year, according to chief executive Vikram Pandit's speech notes released on the banking giant's website.The notes reveal "buried" details about company's expectation that consumer credit losses will be substantially higher, said Bernstein Research analyst John McDonald, who alerted his clients to the disclosure.
Citi's consumer credit losses in its third quarter were $US4.6 billion ($7.1 billion), meaning the guidance in the speech notes suggests the bank's quarterly losses on the portfolio could reach $US10.6 billion by the second quarter of next year.
Shares of Citigroup, which plans to slash 50,000 jobs worldwide, had declined 9.5 per cent to $US8.05 with just under an hour of trading remaining on Wall Street.
A Citi spokeswoman declined to comment on Mr McDonald's report, and referred other questions to the 13 pages of speech notes released on the company's website.
Mr McDonald cut his price target on Citi shares to $US11 from $US20 based on the higher credit losses outlined in the speech notes. He also widened his fourth-quarter loss expectation to US61c a share from US41c and cut his 2009 earnings forecast to US22c a share from US63c.
Citigroup also revealed in Mr Pandit's notes its plans to change its accounting for a large portion of its risky, written-down assets. It will move about $US80 billion of the assets from its trading portfolio to either its held for investment, held to maturity or available for sale categories on its balance sheet.
Mr Pandit said $US80 billion in assets had been marked down appropriately and that the realised losses on the loans would be greater than the level they'd been marked down to already, according to the notes.
He said the purpose of the accounting change "reduces the earnings volatility that these assets could pose," and that it allows Citi to benefit from a return on equity from any upside to the assets.
Bernstein's Mr McDonald said the $US80 billion comprised most of Citi's $US88 billion in risky collatoralised debt obligations, leveraged loans, mortgage securities and auction rate securities.
Once the assets are moved out of Citi's trading portfolio, any future write-downs would no longer follow through Citi's income statement unless it sells them, or recognises an "other than temporary impairment charge" against them, he said.
However, Mr McDonald estimated that Citi would still have to write-down $US3.5 billion on the assets in its fourth quarter when it makes the accounting change.
Mr Pandit delivered a speech based on the notes and a slideshow, which was released on the company's website.
Mr Pandit told those at the employee-only meeting on Monday that the company's capital position was strong and it was moving ahead with restructuring plans, which include an additional 50,000 job cuts.
Citi reported last month a $US2.8 billion net loss in its third quarter; its losses over the last four quarters totalled more than $US20 billion.

Aussie banks safe as houses

Australian Prime Minister Kevin Rudd reassured Australians and said that Australia's retail banks were among the safest in the world.
The Opposition Liberal party has warned of the danger of bank runs in Australia which could destroy smaller banks and credit unions.

Mr Rudd said that the World Economic Forum had yesterday released a report rating Australia's banks the fourth most sound in the world in a ranking of 134 nations.
While the road ahead was rocky, Mr Rudd said the nation's economic fundamentals remained solid. "We have a strong budget surplus as a buffer for the future, and to be used to meet the challenges of the future," he said.

Mr Rudd has suggested his Government might move to protect up to $20,000, but Mr Turnbull said guarantees had to be provided for $100,000.

Opposition Leader Malcolm Turnbull said the Government must back bank deposits to assure individuals and small businesses that at least the first $100,000 of their savings was safe. Australia and New Zealand are the only OECD countries without a direct government-backed guarantee on bank deposits.

Mr Turnbull said the crisis had already sparked a shift towards the Big Four banks at the expense of smaller players.
"There is a real risk at present that depositors will shift their savings from smaller institutions such as regional banks and credit unions to the Big Four banks," he said. "This has the potential to considerably strengthen the big institutions' competitive position at the expense of their smaller rivals."

Mr Swan said that Australia's well regulated, well capitalised banking system would provide a bulwark from the fallout.

The silver lining from all of this is the increasing certainty that interest rates could fall by as much as 2 per cent more [to a cash rate of 4%pa] by mid next year.
This will be the sort of solution that mortgage payers want to see happen.

Commonwealth Bank to buy Bankwest with Suncorp next

The Commonwealth Bank (CBA) says it will buy Australia's largest wholesale bank, BankWest from cash strapped parent British Bank HBOS for AU $2 billion.
This is just a few months after BankWest announced plans to roll out 100's of bank branches in NSW and QLD to consolidate its position in these markets. At the time it was noted that they would not be able to find suitable retail space in a then bouyant retail sector.
The Commonwealth Bank will pay more than $2 billion for BankWest and its wealth management business, St Andrews Australia.
The Commonwealth Bank says it will raise the $2 billion by selling shares to institutional investors to fund the deal.
The CBA also says it has held high level discussions with Queensland's Suncorp which wants to sell its banking business.
The purchase of BankWest will allow the CBA to expand its presence in the lucrative Western Australian market, which is being driven the the region's resource boom.
There are fears that the takeover will result in job losses.
BankWest has an extensive network of branches in WA and last year launched a program to open 160 branches nationwide.
It also has call centres and other administrative operations based in Western Australia.
According to Mr Mortgage the CBA will have to deal with relatively small losses as a result of the US financial crisis, including a $100 million loss as a result of its exposure to collapsed US investment bank, Lehman Brothers.