Demand for home loans misses forecasts

Demand for home loans misses forecasts

DEMAND for home loans rose in July, official data showed, but by much less than expected, as loans for owner-occupied homes slipped in the month.

According to the Australian Bureau of Statistics, the number of home loans granted in July rose 0.3 per cent in seasonally adjusted terms to 52,251.

Economists surveyed by Bloomberg had expected the number of housing finance commitments to rise by 1 per cent in the month.

Demand for home loans misses forecasts

Total housing finance by value rose 2.7 per cent in June, seasonally adjusted, to $28.571 billion.

The value of investor lending surged 6.8 per cent in the month to $11.513bn.

The number of loan approvals for refinancing rose by 2.4 in July.

Loan approvals for owner-occupiers, excluding refinancing, fell by 0.7 per cent in the month, to be also be 0.7 per cent lower over the year.

At 12.2 per cent, first-home buyers accounted for the smallest share of housing finance in the history of the data.


Story:   Mitchell Neems   Source:

Australian banks focus on real estate at expense of business

Australian banks focus on real estate at expense of business

A report from analysts at UBS highlights just how focused Australian banks have become on real estate.

Looking at lending data from the Australian Prudential Regulation Authority, the UBS banking analysts Jonathan Mott and Adam Lee say the vast bulk of new loans have gone to property in the period since the US Federal Reserve launched its latest stimulus program – the so-called QE3 – in September 2012.

The analysts estimate that 95 per cent of lending growth has gone into residential or commercial property, with only 2.6 per cent of new lending, or $3 billion, going to non-property related business loans.

Credit growth has remained subdued over the period at just 6 per cent, but half of this new lending has gone to owner-occupied housing.

Australian banks focus on real estate at expense of business

The boom in property investment has seen another 37 per cent of new loans going to residential investors.

The only strong area of business lending growth has also been in real estate, with commercial property loans accounting for 8 per cent of total credit growth.

The UBS analysts conclude that the concentration of bank loans into real estate is not a danger yet, but could cause problems later.

“We believe the changes to the banks’ loan books and further concentration into resi and commercial property are likely to lead to issues down the track,” the report cautions.

“However, near term, with ongoing improvements in asset quality, the banks’ earnings outlook remains robust.”

Story:   Michael Janda    Source:

Home loans rise, led by investment finance

Home loans rise, led by investment finance

Home loan approvals rose for the ninth time in 10 months as the housing sector strengthens, benefitting from record low interest rates.

Home loan approvals rose 1.0 per cent in October, and the value of home loans rose 4.1 per cent, the Australian Bureau of Statistics said.

JP Morgan economist Tom Kennedy was encouraged by the increases in housing finance for the purchase of new dwellings, and the construction of dwellings.

“When you look at the breakdown it was fairly broadbased,” he said.

“Construction loans, which is the one that the Reserve Bank of Australia has been targeting, trying to get a bit of a lift in that sector, they were up about one per cent and that is its third consecutive monthly increase, there are tentative signs of life in that sector.

“This is really representative of strength in the housing market and the continual demand for property.”

Home loans rise, led by investment finance

Mr Kennedy expects the housing sector to continue strengthening in the new year but should not have much of an impact on future RBA interest rate decisions, with the next one not being until February.

“We don’t think at this stage that the uptick in house prices has been too much of a concern for the RBA and activity is coming off pretty low levels, so we think it has a while to run,” he said.

The value of home loans for owner occupied housing rose by 1.7 per cent in October and the value of investment housing rose by 8.2 per cent.

CommSec chief economist Craig James said the key to the rise in housing investment is what is being bought.

“The good news is that investors aren’t just buying established dwellings and driving up home prices, but money is being ploughed into new house and apartment developments and adding to housing supply and economic activity,” he said.

“It is clear that home construction will play a key role in driving the broader economy in 2014, taking over from the mining sector. And arguably more industries and regions will feel the benefit of increased home building rather than mining construction.”

Mr James said an increase in housing investment is also good news for renters.

“Many young Australians are banking on investors funding new housing developments, given that preferences have shifted to renting rather than buying in recent years,” he said.

“Home supply is rising and that will keep growth in rents under control.”

Story:  Reported by AAP     Source:

Australians focus on repaying home loans over retirement savings

Australians focus on repaying home loans over retirement savings: Survey

The message being pushed by mortgage brokers and consumer advocates that borrowers should maintain their current mortgage repayments when interest rates fall and pay off their home loans sooner has well and truly been absorbed by home owners.

Nearly seven out of 10 mortgage holders (68%) surveyed by Nielsen said their number one financial goal was to pay off their home loans, confirming the view that Australians regard owning their home outright as key for their financial future.

This is despite a home not being able to generate any income in retirement apart from when it is sold, meaning future retirees could find themselves debt-free but cash poor.

In a Property Observer webinar on property and wealth-creation, WHK financial adviser Peter Handberg advised investors against investing extra income in paying off their mortgages but to consider putting the money into a balanced income-generating retirement portfolio made up of a mix of shares, property, bonds and cash.

“You can’t sell a bedroom,” says Handberg.

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How to lose the mortgage millstone

How to lose the mortgage millstone

Here’s a challenge. How fast could you pay your mortgage off? The sad realisation hit me earlier in the year that I’m not likely to get rich anytime soon. I know – why did I even think that would happen?

The only path to financial freedom is going to be to make sacrifices – some pretty big ones – and slash the mortgage as soon as possible. Then compound interest and investing will be able to actually earn us money. The sooner the mortgage is gone, or at least significantly reduced (given the size of mortgages these days!), the more money we will have to enjoy life.

Yes, it can be a little boring trying to pay a slab off the mortgage. But once you owe a lot less you’ll be able to use that spare money to do things that you want, instead of feeding it to the bank all the time. If you’re in deposit saving mode, the tips below will also be helpful.

#1 Stop Spending. Sounds simple, but do you find yourself wondering where all your money went? Does it leak out of your wallet like a bucket with a hole in the bottom? We’ve tried budgeting before but it just seemed too complicated. After a couple of weeks we’d get bored and the whole thing would go out the window. So now we’ve just decided to stop spending on pretty much everything – except the essentials, and a couple of luxuries we just can’t live without.

#2 No new clothes. In fact no new anything. Terrifying for some, I know. But we’ve decided to put a ban on buying any new clothes for two years, and most other goods too. I already have enough threads to dress the people of a smallish nation so it really shouldn’t be too much of a challenge. It’s just the boredom factor, really. Second-hand op-shop bargains are allowed and it has become surprising to see what you can actually find, if you have the time to look. And given we’re not heading out to pubs and cafes anymore, we have to do something with our time.

We’ve got little kids so obviously they can’t wear the same clothes for two years, unless we put bricks on their heads. But we’ve made it known that we welcome all hand-me-downs, and have also made a habit of perusing the op shops and second kids’ clothing markets. It’s amazing how many near-new clothes you find for just a few dollars, or items that even have the tags still attached.

#3: Lose the pay TV. It’s a luxury that is costing you a pretty penny. With the growing number of channels on free to air, there’s a lot more choice for nix on the box these days. And if you do the sums, you’ll probably find that even hiring a few DVDs a month is a lot cheaper than pay-TV. If there is something you must watch – sport for example – try to arrange to see it at a friend’s house who has got pay TV. As a last resort head out to the pub to see it – but be careful your beer bill doesn’t cost you more than your monthly pay-TV would have!

#4: Join the library. Now that you’re not watching as much pay TV you might have more time to read books – and you can do it for free from your local library. Check out their DVDs and CDs too. If your library doesn’t have what you want you can ask them to bring it in from another public library. In many areas this is free. In others they’ll charge about $2 or $3 to do it. Recently my three-year-old wanted me to get him a Gruffalo audio book. Instead of buying it, we asked at the library, and they got it from another library for us. We had to wait about two weeks, but it provided some great anticipation for my son, and cost us nothing.

#5 Quit the gym. Go for a walk/run/ cycle/swim instead. Now we are coming into spring, there should be ample chance to get out and about and exercise without having to pay for it. If you need motivation, try to arrange with a friend to exercise with. Make a date for something active, such as tennis, swimming or walking.

#6: Ditch the car. Get a bike, or opt for two feet and a heartbeat. I don’t mean sell the car, I just mean avoid using it when possible. Of course if you have two cars and think you can survive with just one, it might be worth offloading your second. Otherwise keep your fuel costs down by jumping on a bike when you can or for very short trips, walk. We have a Christiana trike, which is great for carting the kids around and also for heading to the markets on a weekend. If you live in an area where there are organised car pooling groups, it might be worth checking them out as an alternative to owning your own car.

#7: Entertain at home. Going out can be pricey, especially if you are buying alcohol too.


Entertaining at home can be just as much fun, and stress-free (and cheap) if you ask everyone to bring a little something to contribute. If you do head out for a meal, look for cheaper restaurants where you can BYO alcohol for a low corkage fee.

#8: Home brew is a go-go. Since my hubby started home brewing a year ago, I reckon we’ve saved a small fortune in beer. If you’ve got a green bent, it’s potentially better for the environment too, because you’re reusing the bottles and not paying for all that heavy ready-made beer to be shipped about. If you are a wine drinker, try to save money by buying wine in bulk.

#9: Holiday close to home. Look for cheap options, such as camping, staying in caravan parks, or house-sitting for friends and family. Try to get something with kitchen facilities where you can make most of your meals – eating out can be a significant cost of holidays.

#10: Grow a few vegies. It can be pretty simple to grow some herbs in the garden (or pots) and a few basics such as spinach, lettuce and tomatoes. Pottering about watering and weeding them can also be relaxing after a stressful day at work.

#11: Babysitting circle. If you’ve got young kids, considering swapping babysitting services with friends. We have a magnet system where we use magnets as payment. Each family starts with four magnets. We often babysit the kids in their own home, in the evening. So one parent stays at home with their own children, while the other minds the second family’s children. It works a treat. You can arrange for the circle to work with several families or you could have your own arrangements with a couple of different families, as we do.

#12: Limit your mobile phone calls. If you’re bursting out of your mobile phone plan each month it might be time to examine your habits. Can you limit your conversations or cut down your texting to save money? Or could you email or skype someone instead?

#13:  Pre-made is pre-paid. Go for fresh with food where you can. Don’t get caught out buying pre-made things such as soup. It’s pretty easy to chuck a few vegies in a saucepan along with some stock powder and boil it up. Pre-made sauces (the add meat and vegies variety) can also be an expensive choice that could be replaced with a few basics such as stock powder, cornflour and garlic. It’s always good to make sure you’ve got a few basics in the fridge or cupboard so you’re not tempted to get take-away – even if it’s as simple as tinned fish, a cheap packet of pasta and sauce, or baked beans on toast as a stopgap.

#14: Buy a water bottle – and use it. Buying bottled water is crazy when you can refill from a tap. And resisting soft drinks, juice and flavoured milk will also save you plenty of money over time. Drink some water and eat an orange instead. It’s a lot cheaper, and better for your waistline too.

#15: Pack your own. Whether it’s work or an outing, there’s no doubt that food brought from home is going to be cheaper than lunch on-the run. It can get a bit tedious at times, so allow yourself to go really wild on occasion and buy takeaway. Otherwise bring your own and watch your mortgage start to be whittled away.

Original story by Carolyn Boyd, a property journalist and keen follower of Australia’s housing market.

Pedlars of House Price Doom off the Mark

Pedlars of House Price Doom off the Mark

The level of household debt in Australia has risen over the past three decades from less than 50 per cent of household disposable income to about 150 per cent.

Ric Battellino, the Reserve Bank of Australia deputy governor, has sought to allay concerns that this indebtedness means we face a risky unsustainable outlook. He said that 75 per cent of household debt was held by the upper 40 per cent of income-earners.

The bank’s governor, Glenn Stevens, had earlier given the RBA’s estimate of Australia’s dwelling price-to-income ratio, which found that dwelling prices in capital cities were typically 4.8 times disposable household incomes – about half the ratio put by the doomsaying international survey Demographia.

The Commonwealth Bank chief executive, Ralph Norris, was asked after the bank announced a $6 billion profit last week whether the housing doomsayers were nuts.

”I wouldn’t go as far as to say they’re nuts but I think that it’s very easy to make assertions based on averages,” he said. ”You come to a different view when you look at the fact that the incomes based around averages are not relevant to the average person that has a mortgage.

”So you know, we’re in a situation here where, in my view, the housing market in Australia is healthy.

”There will obviously be variations in price and we shouldn’t be surprised if there are, you know, drops of 5 per cent or 10 per cent, as there are obviously increases in value.

”But I think the range of value is not going to be anything that suggests a bubble and a collapse of the housing market in Australia.”

Deutsche Bank issued a research paper last week suggesting Australia’s house prices were not as vulnerable as doomsayers argue.

While acknowledging that on many comparisons Australia had a high house price-to-income ratio and high levels of household debt, the Deutsche Bank economists Phil O’Donaghoe and Adam Boyton argued the vulnerability of Australian housing was ”overblown”.



”The housing market is perhaps the most common vulnerability we are asked about in the Australian economy,” the said.

”Combined with the role played by the US housing market in the financial crisis, investor awareness and suspicion of this key asset class is perhaps understandable.

”But we have long held the view that a broader assessment of the Australian housing market offers a more sanguine conclusion.”

The Deutsche Bank report noted that mortgage debt obligations in Australia were fully recourse loans and borrowers’ mortgage obligations extend beyond the mortgaged property, therefore providing a greater incentive for repayment relative to the United States.

Battellino suggests the strongest evidence on the sustainability of household debt was the low level of arrears. This was evident again this week in housing repossession data.

Repossession actions lodged in the NSW Supreme Court for the first six months of 2010 totalled 1198.

There were 3800 last year and 4000 during 2008. The peak year was 5300 in 2006.

Foreclosures in the US rose 4 per cent from June to July, exceeding 300,000 for the 17th month in a row, according to RealtyTrac.

The number of foreclosure activities, which incorporates all phases of foreclosure including default notices, scheduled auctions and bank repossessions, totalled 325,229 in July.

Lenders seized 92,858 properties last month, the second highest monthly total since RealtyTrac began tracking repossessions in 2005. Total foreclosure activities reached 1.65 million in the first six months of 2010.

Deutsche Bank noted that Australian house price concerns were ebbing. ”The pulse in housing finance has moderated in line with rises in the cash rate. The housing cycle points to a steady moderation in price pressures.

”Elements of the market which had been described by the RBA earlier this year as demonstrating elements of ‘considerable buoyancy’ have moderated. Auction clearance rates have also slowed.” From a peak of 72 per cent at the end of last year, auction clearance rates had fallen by last month to 61 per cent, Deutsche said.

Story by Jonathan Chancellor

Fixed rate demand dives below 3% once again

Fixed rate demand dives below 3% once again

Standard variable loan popularity hits 18-month high

Despite the cost difference between fixed and variable interest rates dropping, June saw a higher percentage of Australians turning their backs on locking in their home loan rate.

According to the latest loan approval data from Mortgage Choice, Australia?s largest independently-owned mortgage broker, only 2.6% of new borrowers chose a fixed interest rate for their home loan. This compared to 3.3% in May and 1.8% in April.

“Many people in the industry were expecting a rise in fixed rate demand last month but that hasn’t happened with our customers. Instead we’ve seen this product’s popularity reduce by one fifth,” said Mortgage Choice senior corporate affairs manager, Kristy Sheppard.

“Further, our June data shows fixed rate loans have represented less than 5% of all new approvals for the past 10 months and less than 10% of approvals for two years now.

“It was interesting to note the proportion of fixed loans to new borrowers dropped in all states apart from Western Australia, which was a complete reversal of last month’s trend.

Fixed rate demand dives below 3% once again

“So, although we’ve seen a swift rise in rates from October through to March and the cost of fixing a loan continues to decrease, demand for variable interest rates remains at near-record highs. Perhaps the price tag is still too high when potential borrowers weigh up the advantages and disadvantages of fixed versus variable.

“Or perhaps whispers of a much steadier cash rate are seeping through and wielding influence over borrowers? decision processes.”

Standard variable loan demand reached 50.1% of June loan approvals, which was an increase on 47.8% in the month prior and the highest level reached since October 2008.

One of the key reasons for the popularity of standard over basic variable loans is the plethora of quality professional packages’ on offer with these products, which attract customers with benefits such as rate discounts, ‘Gold’ credit cards and other special features.

Other key home loan choice trends for the first month of winter were:

  • Basic variable: fell to 41.9% from 43.5%.
  • Line of credit (often popular with investors): fell to 5.3% of approvals from 5.4%.
  • Bridging (for those selling property while purchasing another): remained well below 1%.

Note: Mortgage Choice’s annual loan approvals are approximately 40,000 nationally and therefore provide a clear insight into the product preferences of housing loan borrowers generally.

Story from

Home prices chipping away at fairness

Home prices chipping away at fairness: Ratings executive

S&P credit ratings expert confirms the strength of the housing sector but questions the benefit of high home prices for society

A managing director of a credit ratings agency responsible for scoring the quality of Australia’s mortgage debt has questioned the social impact of the nation’s soaring house prices, even while she confirms the strength of the sector.

Standard & Poor’s managing director of rating services Fabienne Michaux said the strength of Australia’s mortgage quality is a success on the capital markets but the high valuation of homes underlying the debt presents a long-term risk to the basic fairness in society.

“The social implication of house prices in the longer term is a key issue,” she said. “One of the things people were proud of was that (Australia) was fairly egalitarian and even and everybody had basic rights to housing and basic education and good healthcare.”
“Those are the sorts of things that start to chip away when you’ve got people who can’t afford to actually to find somewhere to put a roof over their head.”



The median national city median home price was $468,000 in May, according to RP Data-Rismark, following years of nearly uninterrupted increases in value, driven by a shortage of available new land, a cumbersome building approvals process and tax incentives that reward owners to purchase and hold second homes.

There is an estimated 200,000 home shortage in the nation, expected to worsen as a recovery in building stalls. Ratings agencies such as Standard & Poor’s grade the quality of the mortgage debt that is repackaged and on-sold by local lenders to institutional investors.

While confirming the strength of assets underlying Australia’s residential mortgage backed securities market, which has issued $352 billion since 2000, Ms Michaux noted home owners are unwise to take too much satisfaction in becoming property millionaires.

“Ultimately the utility of the house is still that you’re living in it,” she said. “When you pass it on, it’s still one house. If you’ve got two kids you’ve got half a house each.”

Story by Chris Zappone Fairfax Digital

The Next RBA Move will be Downwards

The Next RBA Move will be Downwards

When yours truly was on Seven’s Sunrise back in May it was acknowledged by both David Koch and myself that the Reserve Bank of Australia (RBA) would be unlikely to lift rates that day, with the knowledge that things were looking worse in Europe and there were already signs of a slowdown on housing here. We were wrong.

The RBA lifted rates that day by yet another quarter point to 4.5 per cent. At the time it was largely expected by economists.

However, I believe it was a serious mistake to lift cash rates; similar to the mistake made in 2008 when the RBA thought lifting rates was a prudent idea in the first half of that year.


Now, sure, the RBA board members do not have a crystal ball and can only go on present information at hand. So it was not to know of the events on Wall Street and in Europe later in the week (the so-called “flash crash”).

However, Europe had been simmering for some time before May and as each week had gone by in March, and then in April, the situation was becoming worse and worse.

Yet the RBA moved rates higher in May largely on the belief the housing market was still surging ahead. This belief was due to, among other factors, auction clearance rates.

But, as I have stated before, there has been an increasing number of passed-in auctions failing to make it into the official results and clearance rates.

The problem with this is that the RBA has been relying on auction clearance rates to get an indicator of the market. Naturally, to think that it may have lifted interest rates in May partly based on incorrect data is a disturbing thought.

Now, not much more than a month later, the banks are starting to cut their fixed rates. And banks only tend to do that when they are sure cash rates have peaked.



Even the real estate spruikers have been stating the housing market is slowing. You know the market is seriously slowing when they do that.

The positive news in all this is that the probability of further interest rate rises this year has all but been eliminated. And I believe the next move is actually going to be down.

That is because the RBA was lifting rates to stop a potential housing bubble. Now that risk has gone and, indeed, the risk has increased for house price falls, the RBA can accommodate a cut and will likely make a cut if Europe drags us down and/or house prices retreat.

The RBA will never admit it, but it made a mistake in May. And that’s why I believe the probabilities have risen that the next move will be down.

Louis Christopher is the managing director of SQM Research and the head of property at Adviser Edge.

Reserve Bank Interest Rate Announcement

Reserve Bank Interest Rate Announcement

The Reserve Bank has opted to keep interest rates steady at its board meeting today.
It was a widely expected move and will give mortgage holders another welcome breather from the six rate hikes they have endured since September last year.

“It looks as though the earlier interest rate hikes are already biting,” says blogger Carolyn Boyd. “Auction clearance rates are down and house price growth is cooling. Real estate agents are also reporting there are less people looking to buy.”

Reserve Bank Interest Rate Announcement

Each 0.25 per cent interest rate rise adds another $50 to the monthly cost of an average mortgage. Australian mortgage holders are already paying about $300 more per month in repayments than they were in September last year.
Mortgage holders on variable interest rates are currently being charged about 7.4 per cent by their lenders.