Category Archives: mortgage broker

RBA Interest Rates on Hold

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Rates on hold

Tuesday, 06 March 2012

Staff Reporter

The Reserve Bank of Australia has left the official cash rate on hold for the second consecutive month.

In the minutes of the Monetary Board Meeting, the Board said that “the expectation that the world economy will grow at a below-trend pace this year, but does not suggest that a deep downturn is occurring.

“Most information on the Australian economy continues to suggest growth close to trend overall, with differences between sectors and considerable structural change. Labour market conditions softened during 2011 and the unemployment rate increased slightly in mid year, though it has been steady over recent months. CPI inflation has declined as expected and will fall further over the next quarter or two.”

“Interest rates for borrowers have generally risen slightly since the Board’s previous meeting, but remain close to their medium-term average. Credit growth remains modest. Housing prices have shown some sign of stabilising recently, after having declined for most of 2011, but generally the housing market remains soft.”

The decision was largely expected, with most economists now expecting rates to stay on hold until mid-year.

RP Data’s research director Tim Lawless said capital city home values were down just 0.2 per cent over the three months leading up to the interest rate decision.

“A return to stability in the housing market is precisely the outcome the RBA have been aiming for with respect to housing market conditions,” Mr Lawless said.

“The full impact of the rate cuts from November and December last year is yet to be seen, however to date there has seen a subtle improvement in transaction numbers prior to the Christmas slow down.

“Housing finance data from the ABS has also been trending upwards suggesting we are likely to see the number of home sales continue to show modest increases over the coming months.

“Based on the recent data flows it is becoming increasingly clear that the housing market is likely to be less of a concern to the RBA.

“Mortgage arrears appear to be in check, home values are stabilising and transaction volumes are starting to tick up.”

Mr Lawless said any future downwards movement in the cash rate is likely to be more reflective of ongoing global uncertainty rather than a response to a further slowdown in housing market conditions.

“In fact, we believe that the RBA is likely to be quite comfortable with the current state of Australian housing market but will continue to closely monitoring conditions over the coming months to measure the ongoing affect of the interest rate environment on borrowing and value movements.”

Source – The Advisor. Industry news for mortgage and finance brokers

NFC National Finance Corporation Pty Ltd – Mortgage Broker www.nfc.com.au

Banks May Lift Rates Regardless of RBA

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Banks to move regardless of RBA

Tuesday, 06 March 2012

Jessica Darnbrough

Regardless of what the Reserve Bank does when the Board meets later today, Australia’s banks could lift their rates for the second consecutive month.

Speaking to The Adviser, Advantedge’s general manager distribution, Brett Halliwell, said the costs of funds have risen by approximately 100 basis points in the past few months, which is having a huge impact on Australia’s banks.

“On average, banks source approximately 30 per cent of their funds from markets that have seen costs of funds rise by 100 basis points at least,” he said.

“That is why we have seen out of cycle rate hikes and I wouldn’t be surprised to see more still as the banks look to pass on the higher costs of funds.”

ANZ was the first lender to move out of cycle last month, lifting the interest on its standard variable rate by 6 basis points.

All of the three remaining majors then followed suit, with Westpac and CBA both lifting their standard variable rates by 10 basis points, while NAB increased its SVR by 9 basis points.

ANZ’s monthly rate meeting is set to take place again this Friday, with many industry watchers now predicting the lender will look to lift rates for the second consecutive month.

If this comes to pass, it will be interesting to see whether or not the other lenders follow suit given they lifted their rates by more than ANZ last month.

Source – The Adviser. Industry News for Mortgage and Finance Brokers

RBA Meeting March 2012

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No ‘material softening’ to prompt RBA today

Rates could remain on hold for months to come as the RBA is tipped to leave the cash rate at 4.25% when it meets today.

Despite new inflation figures leaving the Reserve Bank leeway to cut rates, a survey of 24 economists by Bloomberg has shown the unanimous prediction that the RBA will not move on the official cash rate today. The TD Securities – Melbourne Institute Monthly Inflation Gauge posted only a 0.1% rise in February, leaving trimmed mean inflation at 2.1%, at the bottom range of the bank’s target band. TD Securities has claimed the result still will not provide the Reserve with enough motivation to cut rates.

"For the RBA Board meeting today, members will note that there has been next to no evidence of a ‘material softening of domestic demand’ in the last four weeks, the Bank’s clearly stated hurdle for further easing," TD Securities head of Asia-Pacific Research Annette Beacher said.

Beacher said employment, housing finance and exports had provided "upside surprises". And while fourth quarter GDP is expected to be flat, Beacher said an "outsize resource-led private investment boom" would remain on track into the next year.

"The easiest decision is to leave the cash rate at neutral for another month, and indeed it is increasingly likely to remain the case for several months to come," Beacher said.

Source – Key Media. Australian Broker News. By Adam Smith

Home Loans to 100% LVR

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One of Brisbane’s leading mortgage management companies, Barnes Home Loans is able to offer home loans to approved applicants to just under 100% Loan Valuation Ratio (LVR).

This table is a summary of how we achieve this –

Purchase Price $620,000
Deposit – 5% $31,000
Lenders Mortgage Insurance Capitalised $18,475
Total Loan $607,475
Plus Secured Visa at Home Loan Interest Rate $12,500
Total Borrowings $619,875
End LVR 99.98%

Call Warren Schrodter to find out if you qualify on 07 3356 8132 or email warren@schrodter.com.au . Warren Schrodter has been a mortgage broker since 1997 and knows how to achieve this results. The average Australian Bank now will only consider to 97% LVR in some cases.

NFC Mortgage Broker Special Offer

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I have received confirmation this week from one of Australia’s top 3 mortgage lending banks that I can offer a greater discount on Professional Package loans than what is advertised. In Australia there are somewhere between 11,000 and 13,000 mortgage brokers registered and this special offer is only available to a select few hundred brokers nationally.

Not all Mortgage Brokers are the same. Banks now reward Mortgage Brokers that have superior expertise and submit quality applications.

For a limited time, we can offer a standard variable interest rate discount of 0.8%. Loan valuation ratio and loan limits apply so please call NFC now on 1300 663 632 or email info@nfc.com.au for more details.

Mortgage Broker Training

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Further to my article yesterday regarding mortgage brokers Refund Home Loans, I would like to also highlight that the issue of recruiting non-finance background people has been quite common. As rightly commented on the article, buyer beware! Buyers have certainly become much more aware about banking and finance and general lending principles over the last 10 years. There is more education out there however the media are still missing the boat in what to report to truly help consumers. I will cover more about this on my next post.

Recruitment of mortgage brokers and bank staff alike has probably lacked some quality during recent years. I know when I worked at a major Australian Bank, one of the managers was employed from outside banking and quickly given authority to approve home loans with little experience. When Aussie Home Loans first came to the market I found a significant portion of their consultants were from unrelated backgrounds. I also use to conduct training sessions for existing and new brokers at a government accredited training course and for aggregators Australian Finance Group (AFG), Northern City Finance (now First Chartered) and various smaller groups. I know how difficult the transaction was after 11 years in banking to become a proficient mortgage broker.

So what is the point here? Broker training has been lacking as it has in Australian banking. What always reminds me of this is a lady that went to auction based on a so called pre-approval to attend an auction from lets say Apac? She was successful at auction on a 30 day settlement contract here in Queensland. I met this lady around day 14 into the 30 day contract in tears that Apac had declined her loan because they didn’t factor into account that her income was casual. The conditional approval clearly states subject to the banks final approval so who is responsible? Technically the borrower so again be very aware. Moral obligation? Well I think that is pretty clear but the banks generally will not recognise this. I fortunately was able to set this application with another major bank but the lesson was clear. Reliability of the mortgage finance industry is clearly dependant on the person you engage whether it is bank employee or mortgage broker. I have many more examples of this to come over the following months.

The answer? No definitive answer or advice to give but I can provide some leading questions before you decide –

  • Time in industry
  • Background prior to current role
  • Investment and property experience
  • Provide detailed summary of what you initially think you need and await a response. The response probably says more than all the points above.

As you are spilling all to obtain your loan, a true finance professional will have no problem in sharing with you the points I have raised above. You need a mortgage broker that can provide quality information and responses that make sense. If they do not, then obtain a second opinion.

Refund Home Loans Television Advertisement

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In March 2010, I recall seeing Refund Home Loans on The Today Show and Kerri-Anne. Apart from obviously advertising the brand, what concerned me was the way they publicly acknowledge they recruit people to become mortgage brokers that have no real financial or banking experience. In 2010 all mortgage brokers need to apply for a new licence from ASIC to continue to trade or enter the industry. In this process, ASIC consider training, experience, compliance and background of all applicants. In my view, this appears to be a last minute recruitment drive prior to licensing taking effect. I welcome the new licensing regime as in theory it will improve the standard and quality of true mortgage broker professionals.

I believe that everyone deserves an opportunity to become a mortgage broker. However, I still have grave concerns about any organisation that recruits from outside the industry sends them on a 2 or 4 week training course then sets them loose on the public. Bear in mind that we are dealing with your money and have a large role in the success or failure of your new purchase. If I wanted to become a builder tomorrow I would have to do a 4 year apprenticeship. Since commencing in banking in 1986 I bear some frustration in the previous lack of minimum entry standards that are within our mortgage broking industry.

An example I saw of this 2 weeks ago is yet another example of an inexperienced mortgage broker almost shattering the dreams of a home owner. Commonwealth Bank and Westpac had declined the loan application to purchase a home in Brisbane for around 750K. A loan amount of 90% of the purchase was sought with mortgage insurance (LMI) to be capitalised (see more on LMI at Mortgage Insurance Australia). Due to the tightening of lending policy in Australia after the fallout of the GFC during 2009, I could easily see the issue CBA and Westpac may have had. By understanding the tightening these banks have had, I simply went back to grass roots mortgage broking by checking LMI qualification and confirming details with connections I have with the mortgage insurers. The loan qualified with the mortgage insurers so we simply selected a lender that would accept the LMI qualification. If it wasn’t for the fact we knew the process and the real estate agent knew we could solve the issue, this purchaser would have missed out on buying her new home.

I should say at this point that CBA and Westpac have generally been in our top 3 lenders for several years but since the GFC they are always not the answer. Interest rates and fees are vitally important but getting the loan for the home of your dreams is even more important. The non-bank and secondary bank lenders have been hammered since the commencement of the GFC but now they have emerged with market competiveness not on price but on policy and servicing levels.

My parting words of advice are always to check the experience and quality of your mortgage broker. This also applies to people that still deal with a bank directly. The consumer is much more aware of this today I believe so if unsure get a second opinion. It may just save you!