Mortgage Shopper

Australian Mortgages: Why we're finding them easier to manage

Australian Mortgages in 2011 from the rear view mirror

The fact that Australian mortgage delinquencies have declined in the third quarter in Australia points to the fact that the worst of mortgage stress may be over.

The return of the saver, and the virtue of saving

This year has seen more Australian households reining in their expenditures, and the biggest fatality of all this is the credit card. Australians seem to be shunning credit card debt like the plague as well as mortgage debt. This year has been credit card debt reduction as the biggest shift to saving has occurred.

That has to be a good thing for everyone, except retailers who have been milking Australians with over priced goods for generations.

The rise and rise of online sales

This year we have seen online sales surge to the point of critical mass, as Australians are starting buy online in a big way, and that has to mean better retail pricing and services in 2012. Even grumpy old Gerry Harvey has capitulated, and has online offers. [Not convinced Gerry, Sorry] If you want to buy superceded stock at new retail prices, shop Harvey Norman is may motto. His ads can shout at me all they like. I have only ever bought duds from Gerry. THat's why I never shop there anymore. But there is a suckerborn every minute, right Gerry?

The 2011 Christmas shopping season

This is one reason I feel that Christmas is going to be challenging for retail. Spending money you are yet to earn is becoming very unwise to savvy Australian shoppers, and those waiting for the Christmas sales to spend their holiday wages are being tempted with ever more attractive pre Christmas sales. And our high dollar means overseas spenders are less likely to come, and have less money to spend if they get here. At the same time cashed up Aussies are flying out and spending on holidays and spending their money overseas. But Australians know that the family home is more important than tinsel and glitter, and so only people with cash in hand seem to be shopping these days.

The banks are a multi-channel money machine

The banks however are doing OK, despite the loss of credit card revenues, and that is due to business loans growing to replace the shrinkage in credit card debt and home mortgage loans applications, which continue to fall away.

So mortgage delinquencies may have fallen, which is good for the banks, but that does not mean that new people want to be roped into 30 years of debt, so we are seeing a fall in housing prices in all capital cities, as interest rates fall and wages rise.

Did Real Estate become a Ponzi Scheme? I think so.

The combination of rising wages, full employment, lowering mortgage rates and falling house prices tells me that Australians have learnt the lesson from the US finance collapse. That Real estate prices can and do get ahead of themselves and must eventually collapse when they grow out of kilter with the wages and supply.

In this respect I feel that real estate price growth has been a massive Ponzi scheme, and that has deflated slowly in Australia, unlike what has occured in the US, the UK and Europe where house prices are down for possibbly a generation.

Suddenly a house is not an investment anymore, it is a way of securing your accommodation for the long haul. Isn't that what a home should be about?

So what will happen to Australia's 1.7 million residential home investors who lose more on their investment every year in the hope of seeing capital gains? Well they are the victims of their own folly. As tax rates have fallen, the attractiveness of these negative gearing schemes was only shored up by one off growth spurt on the early 2000's, and that was on the back of sales pitches historical housing figures that will not be repeated. So all this fluff and puff is behind us.Like all ponzi schemes, the ones holding the baby when the music stops carries the lose, as those out early get to spend their money. What a beautifu swindle! It's not legislation as a crime! So the perpetrators get out scott free.

What's ahead for Mortgages in 2012?

Whats ahead? A flat house market and steady house prices. Maybe a little more price easing. Hopefully a big fall in land prices that is the real problem in home prices.[Ever wonder why the biggest donations to political parties were from Property Developers? Hmmmm.]

Expect to see house price inflation in country areas where the mining boom is happening. Other areas will see falls in house prices I predict. Its already happening in residential land prices in the towns across Australia. If I were buying a home in a country town, I would want a 10 year mortgage with comfortable repayments. Otherwise renting would be my option. A thirty year mortgage only makes sense in the capital cities of Australia today, because are economy and our society is so dynamic, and mobile. You can't shift real estate.

Australia: Experts in Digging Holes and turning dirt into Gold

The great thing about Australia is that most of it is lousy for growing things, but the soil is rich in minerals. So we have become more into digging holes and shipping the dirt off for Gold. Not a bad earner.

What we have also become is the beacon for climate change and hopefully we can transform this into an energy creation earner. More renewal energy means less imports of oil, and less pollution. Can we export energy so produced, or at least the kit to make it happen. I hope so. My Crystal ball is telling me is that energy, clean air, clean water and food will all be at a premium in the years ahead. We should position the Nation for this inevitable future World.

The cost of money will rise in 2012

The banks are trying to warn people, but the Government is pretending not to listen. The Euro crisis, and in particular, the fact that the UK does not want to touch their baby [smart brave move], will mean that France's banks is caught holding that particular baby, so expect to hear the music stop anytime soon. Once that happens we will have a credit crunch, lower RBA cash rates, not all passed on by the banks because the cost of their borrowing will zoom up.

2012? A good time to be a Saver. A good time to be in Australia. Have a good one!

Source: Rick Adlam, Mr Mortgage

Housing Market Flat, Retailing Down = a RBA interest rate cut?

With the Housing Market flat & Retailing sales falling will the Reserve Bank of Australia give another interest rate cut on Tuesday?

New home sales flat

Home buyers have not moved with the last interest rate cut

Home buyers are fence sitting and recent interest rate cuts have not given them enough reasons to commit to buying a home. The result is a housing market bouncing along the bottom.

So will the RBA drop rates again on Tuesday? I have been saying so for 2 weeks. The Housing Industry Association having been pleading for more interest rate relief, as housing starts are still weak. Now there are other experts joining the chorus for a further rate cut.

Another interest rate cut alone will not fix housing or retailing

News homes are too dear because land prices are too high. I have been saying this for years.

Nor will a rate cut suddenly change the buying habits of Australians. They have collectively moved to savings mode, but it will made buying decisions easier for home buyers, and if banks pass the rate cuts through to homeowners, small business and credit cards, it may help retailers too.

Homes are still selling but not in the prestige category

That is not to say that homes aren't selling. They are.

Its just that home sellers have to realise that the state of the market means that home prices are down, and a house will no longer fetch the kind of money they did 2 years ago.

What experts are saying about the housing market Rismark managing director Ben Skilbeck said housing affordability was improving. ''The combination of interest rate reductions, declining home values and disposable income growth has significantly improved affordability. Since dwelling values peaked in November 2010, they are down by 7.6 per cent, the RBA cash rate has fallen from 4.75 per cent to 3.75 per cent and disposable income per household has increased by over 5 per cent,'' Mr Skilbeck said.

Across Australia home values dropped 1.4 per cent in May, while Canberra values have slipped even lower.

Its these falling house values have some analysts predicting another interest rate cut when the Reserve Bank meets on Tuesday.

Prestige homes are not selling

If it's a prestige home you want to sell, then you may have be taking a big hit in home values, as some Prestige homes are not where people are looking.

5 years ago modest homes were struggling to sell, and prestige home sales were rampant, to the extent that many real estate agents chose to specialize in that prestige or waterfront area of the market.

Now we are seeing the opposite, with top end homes sales down between 40% to even 70% in Australia's Capital Cities. So the price drop may be mainly happening in the big end of town, with the modest home values not being affected to the same levels.

The Real Estate Wealth factor

There is no doubt in my mind that real estate values are a barometer of how people "feel" about their personal wealth status. When real estate values are up, then people feel wealthier, and many people are constantly checking home values by suburb to see what their property might fetch.

So when real estate prices are rising, so is consumer sentiment and so are retail sales.

In fact in the US and in Australia to a lesser extent, many people used the equity in their homes to feed this wealth feeling, putting cars, holidays and swimming pools on the home mortgage, effectively treating the home equity as a bank account to be drawn on.

This idea that real estate prices were always going to rise was validated by constantly rising real estate values and from that the notion that home values could never come down.

The need versus the greed in home buyers

Well the last 5 years have punched holes in that notion, and homebuyers are now buying for the need, not the greed.

In other words they understand that they need a home, and buying a home has benefits other than capital gain.

The noise that is distracting homebuyers right now include:

• Putting off starting a family. [No need for a long termcommitment in real estate right now]
• Falling demand for homes, and falling or flat house prices. [The wrong time to invest in real estate, if profit is your motive]
• Euro uncertainty. Will the euro survive? I and many others say no, because it does not make sense.
• Will Greece stick to its bargain? Have they in the passed?
• Will Spain need to be bailed out?

The Euro issues are like a revolving door with no exist. They just keep coming around and around.

Local issues.Is the media the problem?

We have a strange set of circumstances in Australia.

• We have unemployment at 4.9%. that's low. But we also see places going belly up on the news daily. Obviously these are in the minority.
• We have a high Dollar in historic terms and that has hurt farmers and manuafcturers, tourism, but has been a boom to outbound travel and retailers buying from overseas.
• Yet retailers are losing sales volumes and customers are choosing to save money and pay down debt.

My any comparison Australia is a great place right now, but the Media seems hell bent on trying to crash the Australian Government? There is something that stinks in the Australian media. They hate reporting any good news, yet there is plenty of that

Summary

• People are not going to feel more wealthy till house prices start to rise. Maybe people in the media are the ones most hurt by falling real estate prices and that's why they are so angry? 
• The retreating value of the Australian dollar will help Australia's non-mining related economy, and
• an interest rate cut by the RBA on Tuesday will accelerate that retreat in the Australian Dollar.
• If the banks start passing through the full rate cuts, in home loans, then we will see a rise in new home construction and homes sales generally. And the two are interconnected.
•  If the banks pass on rate cuts to card holders, then we should also see increased retail spending.

We have a well managed economy and a good Government, despite the relentless negativity spruiked by the Opposition and echoed by the media.

The media seems to think that supporting the coalition non policies is a good move for their advertisers? I believe its killing their advertisers chances of making decent profits. A balanced reporting of the facts would help retail sales and home sales.

The Rupert Murdoch owned media seemed to think that they could topple a minority Labor Government, with the constant support of in my opinion, a parliamentary thug. But they didn't count on the tenancity of Prime Minister Julia Giilard. Inthe end, they are hurting their own client base in my opinion, and if I were an advertiser in a Murdoch owned media, I would be complaining, or even sueing for loss of profits.

There are two things that I am ceratin of.

1. Julia Gillard is the best person to run Australia, and will win the 2013 election.
2. Interest rates have to be lowered by the RBA and be passed through by the banks to help the retail industry, small business and real estate values and new home sales.

 Author: Mr Mortgage

Credit Access: 3 million Australians not good enough for a $3,000 emergency loan

Nearly 3 million Adult Australians do not have access to fundamental financial services, including credit cards, bank accounts & car insurance

Australia's banks need to take a good hard look at themselves

Got a $3,000 emergency? Save yourself the embarrassment of a decline and don't ask your bank!Your family and friends are more likely to respond to your emergency than a bank.

Payday lenders, who will charge much higher rates will fill the gap. And a little known source for smaller amounts can be centrelink, if you are a client.

How can you operate without a bank account today? Move to Woollongong or the ACT!

Parts of NSW have the highest number of people without even a basic bank account.
But the Wollongong region tops the nation, with 7 per cent of adults without a bank account.
The number of adults in Sydney's southern suburbs and the ACT without a bank account is running at 5 per cent, with the National Australian average of 3 per cent of adults.

And that excludes Aborigines and Torres Strait Islanders. If you add those, then up to 43 per cent operating outside the mainstream banking system.

Why do people have problems getting credit or insurance?

Main issues in credit exclusion cited were:

• The cost of basic financial services remains too high.
• The average annual combined cost of banking, credit card and either car or home insurance is $1794. 
• The level of documentation needed to establish an account can often be a hurdle, 
• Many banks won't lend less than $5000 as a personal loan, instead steering customers to credit cards.

National Australia Bank says Australia's banks need to lift their game

The National Australia Bank were part funders of this survey, and NAB chief executive Cameron Clyne says the banking industry needed to "lift its game" by providing affordable products to more people.

"The absence of access to mainstream financial services does preclude people from advancing socially and economically,'' Mr Clyne said yesterday.

When the fridge, telly or car breaks down or someone needs to get to a job interview the banking system needs to improve financial inclusion and community spirit.

Access to credit is improving

While efforts to improve access to basic bank accounts & to promote low-cost credit products are being made, more needs to be done.
The Government has recently chipped in with Federal Treasurer Wayne Swan brokering an agreement with the banking industry to provide free ATM transactions for indigenous people in remote communities. That still leave millions left to help.

Source: Mr Mortgage