Bad Credit Loans, Bad Credit Home Loans – Bad Credit Finance Australia

IMPROVING funding markets are starting to help stir competition across the nation’s mortgage market, the Reserve Bank says.

Assistant governor Guy Debelle said yesterday that alternative funding sources such as securitisations were starting to emerge for smaller banks and non-bank lenders. After almost 18 months, this was encouraging small lenders back into the market.

The comments from the Reserve come amid intense political focus on pricing of mortgages. Executives at some of the nation’s biggest banks say they have had to lift interest rates by more than moves in official cash rates to cover skyrocketing funding costs.

Mr Debelle, who heads the central bank’s financial markets division, said the competitive state of Australia’s mortgage market ”is reflected in the fact that home lending rates have not risen as much as funding costs”.

Relative to the cash rate, the average rate on variable-rate housing loans had increased by about 110 basis points since the middle of 2007, Mr Debelle told a Mortgage Innovation Conference. That is below the estimated 130 to 140 basis-point rise in banks’ overall funding costs over the same period.

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Economists are divided over the probability of an April rate rise by the Reserve Bank.  NAB is expecting  the RBA to act quickly to increase the cost of funds.

CBA believes that The Reserve Bank has set the scene for a gradual policy tightening of the money supply.

There are nine monetary policy meetings to come this year, RBA is likely to increase rates in at least 4 of these.

The current cash rate set by the RBA in March is 4.0 per cent. Retail variable mortgage are two to three per cent above that. Another 1.0 per cent on average mortgage repayments on a loan of about $300,000 could take monthly repayments up by more than $200 to $2173 per month.

Another drop in home lending next month could sound alarm bells for the residential property market, analysts say.

Finance commitments for owner-occupied housing fell almost eight per cent in January and others say some of the heat has already been taken out of the booming residential property market.

Economists had expected the number of owner-occupier housing finance commitments to have risen by two per cent in January.

ICAP economist Adam Carr said he was not “too freaked out” about the result January result, just yet.

“But if February shows a fall of a decent magnitude then I think there’s a problem,” Mr Carr told AAP.

“I think we’ll need to just stop and take a really good look at what’s going on there because clearly the strength we’re seeing in the housing market is not going to be maintained if lending figures continually drop.”

While owner-occupier home loans suffered the biggest decline, total housing finance by value fell by 3.3 per cent in January, seasonally adjusted, to $21.159 billion, the Australian Bureau of Statistics (ABS) said earlier this month.

Many economists attributed the fall in demand to first home buyers dropping out of the market following the winding back of the expanded first home owners grant from January.

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The share of new loans to owner-occupiers and with a loan to valuation ratio of more than 90 per cent fell by more than a third over the last year, the Reserve Bank of Australia reported in its half-yearly Financial Stability Review.

Housing loans with an LVR above 90 per cent fell from a peak of 27 per cent in the March 2009 quarter to 17 per cent by the end of last year. The RBA’s source is not clear, but is most likely from bank records.

One context for the RBA citing this data is the extent to which the first home owners boost, a lift to the usual Australian government grant to new buyers, encouraged lenders to loosen lending standards to meet demand last year.

The RBA argued, citing “partial credit bureau data” that “the creditworthiness of recent first-home buyers has been broadly similar to earlier cohorts of first-time borrowers.”

The central bank also produced some conclusions based on the survey of Household, Income and Labour Dynamics in Australia, produced by the Melbourne Institute.

The RBA said that, based on the most recent HILDA Survey data, from late 2008 (but produced more recently) around two per cent of households with owner-occupier mortgages spent more than 50 per cent of their disposable incomes on mortgage repayments and also had an LVR of 90 per cent or more.

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Australia’s economic outlook appears to be “considerably brighter” than most other advanced economies, the Reserve Bank says.

Reserve Bank Assistant Governor Philip Lowe said underlying inflation had “moderated significantly” and was expected to decline from 3.25 per cent to about 2.5 per cent during 2010.

Dr Lowe reiterated the central bank’s view that the Australian economy had “relatively limited spare capacity” and that it was likely interest rates would move towards “more normal” levels.

“Our central scenario is for the world economy to grow at around an average pace over the next couple of years, with strong growth in a number of our major trading partners in Asia,” Dr Lowe said in a speech in Sydney today.

There were significant risks as the flow-on effects of the global events of the past 18 months continued to reverberate around the world economy, however, he said.

“While we need to watch these flow-on effects carefully, the outlook for Australia appears to be considerably brighter than that for most other advanced economies.”

Dr Lowe told the Australian Industry Group’s tenth annual economic forum that Australia must contain inflation pressures and inflationary expectations.

“Expansion of the supply side of the economy is obviously important here,” Dr Lowe said in his speech, entitled Recent developments in the global and Australian economies.

Addressing potential bottlenecks and ensuring labour and capital markets were sufficiently flexible was important, so that resources were able to move to where they are most productive, he said.

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It’s official: 60 per cent of investors believe Australia has a property bubble. A confluence of housing shortages, low interest rates, speculative fervour and last year’s move by the Rudd Government to relax foreign ownership rules on real estate have turbo-charged house prices.

But as John Maynard Keynes famously said: “A market can stay irrational longer than you can stay solvent,” and those looking for an imminent correction will find little evidence for it in investor attitudes.

In the latest Investor Pulse survey, conducted jointly by BusinessDay and marketing research group Colmar Brunton, there is no indication that investor appetite for property will slow down soon.

When asked if it was a good time to buy an investment property, 67 per cent agreed that it was because the supply shortage would support rental and price yields. Another 21 per cent thought prices would stagnate and only 12 per cent believed that prices would fall.

On the future of the boom, 32 per cent could see it running another year, 44 per cent for two or more years, and 7 per cent forever. Contrary to recent years, respondents ranked Sydney as the strongest property market in the current cycle, followed by Melbourne, Brisbane, Perth, Adelaide, Canberra, Darwin and Hobart.

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Interest rates may be rising, but that’s not stopping people from dishing out more than $1 million for prestige property, a leading mortgage broker says.

Loan Market says its brokers have seen a 30 per cent increase from people seeking loans in excess of $800,000 in the past year.

“There is strong evidence that the prestige property market is on the move and people are on the hunt for homes worth more than $1 million,” Loan Market chief operating officer Dean Rushton said on Wednesday.

The one percentage point increase in official interest rates to four per cent during the past six months had not deterred people from seeking to upgrade their properties, he said.

“Obviously interest rates are coming back up from a near 50-year low, so they are well below where they were only two years ago.

“There is confidence out there about both the direction of the Australian economy and the housing market, which is encouraging those with financial stability to upgrade their homes.”

While first home buyers are finding it harder to get into the market, partly because of tougher bank lending criteria, those already on the property ladder are not as affected.

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“There is a big seduction that’s very powerful in this country of having your own home.”

Australians are spending an ever-increasing amount on homes, seduced, to borrow psychologist Elisabeth Wilson-Evered’s term, by the dream of ownership.

Indeed, there is sometimes a “sense of failure” if a couple is still renting when they marry or have children, said Professor Wilson-Evered, director of research at Relationship Australia Queensland. The home represents security and comes to embody a family’s very identity, even achievement.

Ironically, Australians are engaging in increasingly risky behaviour to gain that security as they face the uncertainty that comes from a combination of the global economic crisis, labour market reforms and a widening gap between rich and poor.

“Many Australians will do almost anything to purchase a home,” said Sydney University anthropologist Stephen Juan. “They will often take out loans far beyond their ability to repay them.”

Regardless of their – or the world’s – financial position, Australians “reason that they might as well ‘go for it’ now because it may be their only chance,” Dr Juan said. “Or if another chance comes along tomorrow it will not be as good as today’s.”

That notion is borne out in official data from the Australian Bureau of Statistics that show the average loan size for first-home buyers was $285,000 in January. That is more than a third higher than it was five years ago. But over the same timeframe, full-time weekly earnings rose only 21 per cent to $1226, according to ABS figures.

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Corporate treasurers are finding that funding remains expensive and hard to obtain, despite recent stirrings of activity in the capital markets. A panel of treasurers at a Finance & Treasury Association conference in Sydney agreed that their best option in the medium term was to manage their cash flow better.

Treasurers talked about how they reduced the cost of working capital; reduced their debt load by harvesting idle cash; building better cash flow forecasting systems and rationalising banking relationships

Caltex Australia assistant treasurer Jonathon Hirst said there were encouraging signs in the corporate debt and securitisation markets, but for companies needing to refinance or find new debt capital the situation was still volatile and uncertain.

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Australia’s consumer watchdog has condemned Westpac’s decision to make customers pay interest on their interest.

The bank has announced that customers will be charged interest on credit card fees and interest charges starting from June.

It has defended the move, saying it will not apply to customers who pay off their credit cards.

But Christopher Zinn from Choice says the bank is aware many people will not be able to do that.

“They know that approximately a third of cardholders don’t pay off the outstanding balance at the end of the month,” he said.

“So, in fact, they are hit by this amount. And in fact, if all customers really did pay off that outstanding balance, then Westpac and many other card providers would pull out of credit cards because they wouldn’t be a buck in it.”

But the Australian Bankers Association’s chief executive, Steven Munchenberg, says Westpac is not acting unfairly.

“When you save money in a bank, you actually earn interest on interest, so this is in many ways the other side of the equation,” he said.

“All Westpac is doing is just saying that they will charge you interest on the amount of money you owe the bank.”

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