Cheap Home Loans

According to the Quarterly Credit Demand Index by credit data researcher Veda, for the  first time in over 2 years there has been an increase in demand for home loans.

Angus Luffman, from Veda Advantage translates this result to mean that the value decline of the Australian property market is about to experience a turnaround.

A change in the trend of demand for home loans usually occurs one to three quarters before a change in trend in house prices, an early warning sign which could indicate that after a continued decline, home loan demand has bottomed out and is now heading towards a recovery.

It seems that Veda mortgage enquiries are closely related to the number of home loan approvals and home purchases.

This is an exciting proposition for anyone in the finance or property industry, waiting for a turnaround in the currently depressed market.

There is much speculation in the media that RBA will be dropping the cash rate when they meet next week. The question is by how much. While they do generally choose to play it safe and mostly move rates up and down by only 25 basis points – will this be enough?

Producer Price Index figures released to day, confirmed that prices went down against economist expectations. This does not mean that CPI will come in lower than expected , however it does suggest that rates will need to come down.

John  Symond, the Chairman of Aussie Home Loans has appealed to the RBA to take serious action to address flagging demand in the Australian economy. He expressed his concerns that a small cash rate cut of 25 basis points may not be passed on the mortgage holders and do little to alleviate the current distress that they are feeling. It seems that lenders have made it a habit not to pass on rate cuts in full to borrowers. Consequently if RBA wants to make a difference an more significant rate cut may be needed.

The value of business loans in Australia has declined in February again, for a forth month in a row. Borrowers are extremely concerned by falling consumer confidence and escalating costs of loans and in most cases opt to pay down debts instead of leveraging further.

The value of business loans fell by 8.4 per cent in February, following a 1.1 per cent decline in January and declines in December and November last year, according to the Australian Bureau of Statistics.

Business sector has been doing it tough for some months now with many businesses shedding jobs and downsizing.

Credit growth in Australia has come down to a 30-year low over the past year in the aftermath of the credit boom that helped drive up house prices to world-leading highs, which placed Australia’s banks in a highly profitable environment. This has been the trend with home loans as well as business loans.

The current negative business sentiment and declining consumer confidence had negated the benefit of interest rate increases by RBA in late 2011.

ANZ Bank surprised the market by lifting the rate on mortgages and small business loans by 6 basis points late on Friday. ANZ Bank, which began announcing its rates independently of the Reserve Bank this year, blamed the rising cost for deposits and wholesale funding.

Demand for personal loans also fell by 3.8 per cent in February from a 4.3 per cent rise in January, while home loans fell 4 per cent in the February, after a 0.1 per cent rise in January, according to ABS data.

Borrowers who decide to apply for a home loan to several lenders at the same time or those who continue to apply to the same lender, are doing themselves untold damage.

When putting in a home loan application you only have one chance to make the right impression. The more you try the more you are likely to be declined.

Borrowers who file multiple home loan applications could damage their credit history and could miss out on qualifying for a home loan.

Several credit inquiries in a short period of time is translated by potential lenders as “undesirable borrower”. If others had declined his application, why should we accept it.

Every home loan application leaves a credit inquiry mark on your credit file. In instances where mortgage insurance is payable, the bank and mortgage insurer can create two inquiries for the same application.

This is why it is so important to prepare for a home loan and do your homework. Never apply to a multiple of lenders thinking that this will increase your chances of success as it will do the opposite.

Put all you documentation together and then go an see your local mortgage broker. They will assess your situation and your needs. They will prevent you from making multiple loan applications which only deteriorate your chances of success.

Australian borrowers had made every effort during 2011 to pay down their home loans and consolidate unsecured debts into their home loans in order to reduce monthly repayments. Borrowers with large debts outside of their home loans were a little uncomfortable with the economic uncertainty of last year and opted to minimize risk and pay down debts as much as possible. Many were in the position to pay double the required amount off their loans in order to reduce mortgage balances and make it easier on the family going forward.

As a result, borrowers holding home loans, on average succeeded to inject the equivalent of three per cent of their annual income into their homes as equity.

This is the result of findings, published in the RBA’s half-yearly Financial Stability Review.

If you have purchased your property within the past couple of years you may be surprised to know that refinancing your current home loan is an almost impossible task. The problem is simply that property prices have been in decline for several years now and although there may be great home loan offers advertised to the general market, to qualify for these you need to have sufficient equity in your home.

While first home buyers are able to borrow up to 97% when purchasing their home, when it comes to home loan refinance, most lenders do not wish to look at refinances over 80%. If you had initially borrowed more than 90% of your purchase price, you may just find that your home is worth less today than the amount that you owe the bank – consequently home loan refinance is not a possibility.

Provider of home loans, Loan Market does not expect to see to hear further interest rate increase announcements from the banks, after they took widespread action last month.

The RBA decided to leave the cash rate unchanged at 4.25 per cent for a second month at Tuesday’s monthly board meeting.

A survey of Loan Market’s 138 mortgage brokers identified that majority, ie. 65 per cent, expected no change to interest rates on variable home loans during March.

However, 31 per cent thought the banks could decide to further increase interest rates by another 10 basis point and 4% consider that the bank increase to cost of home loans could be higher still.

No mortgage brokers are expecting an out of cycle rate reduction from home loan providers.

Loan Market Corporate Spokesman Paul Smith said that although the Bank of Queensland lifted its standard variable interest rates on Tuesday by 10 basis points, it was one of the few lenders not to increase mortgage rates in February.

The home loan industry will be keenly watching the outcome of ANZ Bank’s monthly rate meeting this Friday, the first bank to move its rates during February 2012.

Adelaide Bank has come out fighting against Australia’s big four banks as well as the non-majors, by eliminating their $795 application fee going forward on new home loans.

According to the bank’s general manager of third party lending Damian Percy, the application fee for Adelaide Bank’s  home loans is being waived going forward. This will provide great savings for borrowers looking for cheaper home loan deals.

“Effective from 1st March 2012, Adelaide bank will be offering a $0 new loan application fee across all residential home loans sold via mortgage brokers.

This offer is applicable to new home loans as well as increases, changes and splits on existing home loans.

Making such an offer exlusively via mortgage brokers is showing to the finance industry that Adelaide Bank is looking after both consumers and brokers and sets the lender aside from the big four banks.

Mr Percy said residential lending is intensely competitive at the moment and lenders were doing whatever they can to beat their competition.

After the RBA had decided to leave interest rates on hold this month, most lenders turned around and announced interest rate increases to their variable home loans outside of RBA. ANZ and Westpac were the first to take such actions. However it did not take long for the others to follow suit.

Westpac-owned St George will lift its standard variable rate (SVR) home loans by 12 basis points to 7.42 per cent from February 20, it said on Wednesday.

That’s two basis points beyond the most significant increase announced by the big four, which was passed on by Commonwealth and Westpac banks.

“This was a difficult decision,” chief executive Scott Tanner said in a statement.

“It is important to balance our customers’ needs with the importance of ensuring that we remain a strong and viable business into the future