Economic News
Foreclosures rise as more Australian borrowers fail to repay
January 4, 2012 by Editor · Leave a Comment
Banks and building societies have repossessed 22.5 per cent more homes than in 2010, with western Sydney and big regional centres in NSW hardest hit.
Lenders asked the NSW Supreme Court to issue 2466 writs of possession against borrowers in default in the 10 months to November last year.
The number of writs issued in the same period in 2010 was 2143, indicating heavier financial pressure on mortgage holders.
The dark side of the boom in Australia
January 4, 2012 by Editor · Leave a Comment
Graham Evans has lived in Dampier, on the Pilbara coast, for 43 of his 50 years. As a boy, he rode the school bus with the famous Red Dog, and swam off the beach in a now-vanished children’s enclosure, near where a busy hub for commercial seacraft now sits.
Evans’ livelihood is linked to the resources sector that dominates Dampier and nearby Karratha; his business, Australian Marine Services, runs a fleet of vessels that services the enormous and bustling Port of Dampier, from where 140 million tonnes of iron ore are shipped each year.
Yet Evans is ambivalent about the changes that have followed the boom. Karratha, the dusty town earmarked by the state government to become a 50,000-strong ”City of the North”, is bursting at the seams with its population of 14,000, and a fly-in-fly-out workforce that – at any given time - swells the shire’s population by thousands.
It has meant that, after 23 years in business, Evans has never struggled so hard to find, keep and house his staff. (more…)
APRA angry as Westpac reclassifies $28.8 million in Australian mortgages
January 4, 2012 by Editor · Leave a Comment
WESTPAC has infuriated the peak banking regulator and the opposition has called for an explanation after the bank revealed that it had incorrectly classified $28.8 billion in property loans for up to three years.
Australia’s second-largest bank had been recording the loans as belonging to owner-occupiers since November 2008, when in fact they had been used for investment purposes. (more…)
Risky home loans – avoid shared equity mortgages: Choice
January 2, 2012 by Editor · Leave a Comment
A shared equity or shared appreciation mortgage (SAM) works differently from a normal home loan:
- You borrow, say, 20% of the value of the property as a SAM and instead of paying interest on it, you’re charged a percentage of the capital gain when you sell.
- For the remaining percentage of the home’s value (minus your deposit) you take out a normal home loan.
- This means your monthly repayments are lower than they would have been if you’d borrowed the whole amount under this loan.
What paying back a portion of the capital gain means is that as the value of the property increases, so also does the repayment amount. And, of course, it’s very hard to predict just how much the capital gain is going to be.
For example, in the last 20 years in Sydney, annual changes in the value of house prices ranged from a decrease of 3.9% (2004/05) to an increase of 46.1% (1988/89).
The RISMARK/ADELAIDE BANK Equity Finance Mortgage (EFM) was (more…)
Risky home loans – avoid guarantees: Choice
January 2, 2012 by Editor · Leave a Comment
Your lender may ask you for a guarantee from someone, such as your parents, if it thinks you might not be able to cover the loan repayments yourself. If you don’t have a deposit, a guarantee may also mean you don’t have to pay mortgage insurance and have a wider choice of loans.
Guarantors usually use their home as security, and traditionally they were liable for the full amount of the home loan. Now new-style versions like the ANZ Family Guarantee allow the guarantor to limit their liability to a specific portion of the home loan, such as 20%.
However, even in this case, if something goes wrong and the borrower gets into default, the bank can sell their home and/or the guarantor’s home. (more…)
Risky home loans – avoid no-deposit home loans: Choice
January 2, 2012 by Editor · Leave a Comment
Several financial institutions offer a home loan for the full purchase price, or close to it. However, this comes at a cost:
- Mortgage insurance usually applies if you have less than a 20% deposit.
- No-deposit loans can also have a higher interest rate, especially compared to basic loans.
Mortgage insurance doesn’t insure you, but the lender. It protects the lender if you default on the loan and your home is sold for less than your loan amount. The insurance will compensate the lender, but you’re still not absolved from the debt — the insurer can chase you for it. It’s worth taking the cost of mortgage insurance into account when shopping for a home loan, as it varies between lenders. (more…)
Risky home loans – avoid 40-year mortgages: Choice
January 2, 2012 by Editor · Leave a Comment
CHOICE crunched the numbers and found that extending a mortgage to 40 years doesn’t make it much more affordable, and costs you many thousands of dollars more in the long term.
- On a $250,000 loan with an interest rate of 8%, your repayments would be about $100 per month cheaper: $1738 per month over 40 years instead of $1834 over 30 years.
- But it’ll cost you. Over the 40 years you’ll pay nearly $585,000 on the $250,000 loan in interest alone, which is more than double the amount borrowed — and about $174,000 in interest more than you’d pay over 30 years.
- If you borrowed $400,000 you’d pay $935,000 in interest over a 40-year term, about $278,000 more than over a 30-year term. Your repayment reduction is just $150 a month. (more…)
Risky home loans what to avoid: Choice
January 2, 2012 by Editor · Leave a Comment
With first homes averaging $430,000 and housing affordability at a record low, new types of loan may seem an answer to the prayers of desperate home buyers — but are they?
In this article, Choice takes a look at these new loans:
- 40-year mortgage Spreading your repayments over a longer period means lower minimum repayments, but you’ll pay much more in interest.
- No-deposit home loan With these loans, the typical 20% deposit (about $80,000 for a $400,000 loan) is no longer required. Some banks lend you the full amount, and specialist lenders even offer you the money for legal fees and extras as well — but this comes at a high cost.
- Guarantee (more…)
Protected: Leading Australian property spuikers for 2011 exposed
December 27, 2011 by Editor · Leave a Comment
Standard & Poor’s warns provision of Eurozone £407.5bn in cheap loans does not improve bank credit ratings
December 24, 2011 by Editor · Leave a Comment
The European Central Bank’s (ECB) unprecedented provision of a €489bn (£407.5bn) in cheap loans will “buy valuable time” for eurozone banks but has not improved their credit outlook, a director of Standard & Poor’s (S&P) has warned.
Amid a fresh raft of poor eurozone economic data, Scott Bugie, head of S&P’s financial institutions division doused the key cause for pre-Christmas optimism. Although he agreed Wednesday’s long-term refinancing operation was a “big deal”, Mr Bugie told Reuters: “It is not solving the fundamental issues though… It’s kicking the can a long way down the road rather than just a little bit, but in the end it is still kicking the big old can down the road.”
He said the action did not “change the fundamental picture but it does buy valuable time”. He added: “The move in itself will not lead to any improvement in (banks’) credit ratings.” (more…)
Fitch cuts Asia 2012 growth outlook: no denying global financial decline
December 23, 2011 by Editor · Leave a Comment
Global ratings agency Fitch on Friday cut its 2012 growth outlook for Asia to 6.8 per cent from 7.4 per cent previously, citing the weak global economy.
For 2011, the region is seen growing at 7.1 per cent, it said in a statement.
The downgrade was also to reflect the impact of policy tightening measures in some of the region’s economies, notably China and India where taming high inflation has been a major government priority, Fitch said.
It expects China’s economy, the world’s second biggest, to grow 8.2 per cent next year instead of the 8.5 percent forecast in June, while it tipped India to expand 7.5 per cent in the year to March 2013, instead of 8.2 per cent previously estimated.
“The reduction partly reflects weakening in the outlook for the advanced economies since June,” Fitch said. (more…)
New reality owing more than you own: 60,000 families in Australia in negative equity
December 22, 2011 by Editor · 1 Comment
Rising property values have been an article of faith in the housing market for a generation of Australians who borrowed big as real estate prices marched ever upward.
Now, though, some buyers are finding that their homes are worth less than the size of mortgages taken out to acquire the proverbial roof over their heads.
While the percentage of home owners with so-called negative equity remains tiny – about one in fifty of the 3 million households with mortgages – the number may well swell in 2012 if home prices extend their declines as some analysts expect. The emergence of a sector of the housing market ‘‘under water’’ on their mortgages may hurt an already fragile real estate market.
Any forced sales would obviously dent individual household wealth but further drops in home prices would deter investors from buying residential properties. Ben Phillips, principal research fellow at the National Centre for Social and Economic Modelling, helped prepare the analysis which pointed to 60,000 households nationwide with negative equity. “The prospect of negative returns will certainly detract from sentiment through 2012,” said NATSEM’s Mr Phillips. (more…)
Australia in the grip of unemployment crisis with 100,000 jobs set to be slashed after Christmas: not a recipe for property recovery
December 22, 2011 by Editor · Leave a Comment
AUSTRALIA is on the brink of an unemployment catastrophe, with up to 100,000 jobs set to be slashed in the months after Christmas.
But the news isn’t all bad, with economists suggesting the nation’s wobbly economy could drive the official cash rate as low as 3.5 per cent by the end of 2012, The Daily Telegraph reports.
Westpac chief economist Bill Evans, one of the few economists who correctly predicted a rate cut in November, said lead indicators pointed to a very weak employment growth next year.
“We would expect the unemployment rate to edge up to 5.75 over the next six months,” Mr Evans warned. (more…)
Australian property spruikers who’s who of 2011 named
December 20, 2011 by Editor · 3 Comments
The property spruikers are at it again talking up the Aussie residential real estate market contrary to objective and factual market information.
Recently the Adelaide property market was booming and now the Brisbane market is predicted to grow by 10% in 2012. We always appreciate well researched analysis and well informed commentary. We enjoy reading articles that demonstrate objectivity and provide factual information. Articles that give the reader a true sense of what is occuring in the market place, so you can make well informed decisions.
However when we read articles that are subjective, false, misleading and deceptive our blood pressure rises. How do you know what to believe? How can you discern what information is accurate and reliable? (more…)
British Foreign Office draws up plans to rescue expats if Spain and Portugal are hit by financial meltdown in 2012
December 19, 2011 by Editor · Leave a Comment
Evacuation plans for British expats stranded in Spain and Portugal if their banking systems collapse are being drawn up by the Foreign Office.
The contingency plans are being put in place to help thousands of Britons if they were unable to get to their money in the event of a catastrophic banking collapse in two of the most vulnerable eurozone economies.
Around one million British expats live in Spain, particularly around Marbella and Malaga, and some 50,000 in Portugal.
The Foreign Office is concerned that those who have invested savings in their adopted countries would face losing their homes if banks called in loans and they were unable to access money.
Last week ratings agency Standard & Poor’s downgraded 10 Spanish banks, including Banco Popular. (more…)
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