SMH Article on Fixed Rates 16/11/2011

FIXED RATES - Don't wind up in a bind

Article writtne by Lesley Parker - Sydney Morning Herald November 16, 2011

Borrowers should be cautious about taking a fixed-rate home loan now.

The rush of borrowers towards fixed-rate loans at a time when official interest rates have started to fall has Australia's credit ombudsman worried.
With one interest rate cut in the bag, Ombudsman Raj Venga has urged borrowers to carefully consider the implications of locking in a home loan rate - in particular, the possible ''break cost'' if they discharge the loan early to refinance or sell.
Housing finance data released last week showed that fixed-rate loans jumped from 5.6 per cent of all loans in August to 7.9 per cent in September as unusually cheap fixed rates enticed borrowers.

But Venga, who handles complaints about non-bank lenders, says although fixed rates are often seen as a way of reducing the risk of rising interest rates, ''borrowers should be aware that they may incur substantial break costs in a falling interest rate environment.''
In the past, fixed-rate loans have resulted in a spike in complaints when variable rates later drop significantly and people try to refinance.
While exit fees have been banned on variable-rate loans, lenders can still charge break costs on a fixed-rate loan to recover the amount they'll lose if the borrower leaves early.
If rates are falling and the financier has to re-lend the money at a lower rate, they're entitled to recompense. The more rates fall, the higher the break cost.
''Break costs can and do sometimes run into tens of thousands of dollars,'' Venga says.
They might be payable if the loan is refinanced or discharged within the fixed-rate period, possibly because the property is being sold; if additional funds are sought, which would require the existing loan to be discharged; and if a lump-sum repayment is made during the fixed-rate period (though some lenders allow you to prepay up to $10,000).
Before signing a contract, borrowers should seek advice on how any break costs would be calculated, Venga says.
If you're already on a fixed-rate loan and are thinking about refinancing, ask first for an indicative payout figure, making sure this includes any break cost. Remember that this payout figure might change if you don't act straight away.
Those who fixed in August and September won't have cause for regret yet. The typical fixed rate was 6.6 per cent to 7 per cent then and even after the recent rate cut the average big-four variable rate is 7.55 per cent - though some people qualify for discounts of 0.5 to one percentage points.
However, those who locked in about 8 per cent in November 2007 - when fixed-rate loans hit a record 24 per cent of all borrowing - know how costly it can be if you need to break a loan early when rates are falling.
A year after they fixed, the global financial crisis hit and rates plummeted, sending break costs soaring.
Key points
❏ Fixed-rate loans should be used for certainty not as a ''bet'' on interest rates.
❏ Break costs can be hefty if you exit early when rates are falling.
❏ Selling or refinancing may incur a break cost.
❏ Extra repayments or loan top-ups can also trigger break costs.

Read more: http://www.smh.com.au/money/borrowing/dont-wind-up-in-a-bind-20111115-1nfxi.html#ixzz1e1uVhGl6

Broking Body warns against 'laughable' One Big Switch

Here is a good article from Broker News.
Choice and One Big Switch have offered great deals based on Collective Bargaining.
Equitimax does not think this will be any better than what we can currently do and Australian Finance Group (AFG) general manager of sales and operations Mark Hewitt agrees.


AFG warns against 'laughable' One Big Switch
_{By Ben Abbott | 30/09/2011 8:00:00 AM}           

Mortgage industry aggregator Australian Finance Group (AFG) has come out in support of the broker proposition, by issuing a warning to consumers over the loan offer being provided by One Big Switch.

Following widespread criticism from the broking industry over the group buying exercise masterminded by consumer group Choice, AFG's general manager of sales and operations Mark Hewitt said the problem is One Big Switch had failed to attract major lenders to its panel.
"The proposition would be laughable if they weren’t putting people’s property on the line," Hewitt said.

Hewitt also questioned 'sweeping pronouncements' being made by representatives of the organisation - as reported in the Australian Financial Review - about financial advice in Australia being 'crap', when they are not prepared to provide financial advice themselves.
"The disclaimers on the emails that they’re sending out makes it clear that their so-called ‘members’ are on their own when it comes to deciding whether or not a mortgage deal is right for them," Hewitt said.

"Providing the best deals in the market is what aggregators and brokers do every day"

Hewitt said in the media announcement. "In the past twelve months AFG has refinanced $9.3bn of mortgages – and we are only one of several major broker groups," he said.

Earlier this week, non-banks Resimac, Firstmac, Mortgage Ezy and Mortgage Port were revealed to be the first lenders cooperating with One Big Switch on its consumer buying campaign.

Westpac - Next move from the RBA will be down

Except from Westpac Consumer Sentiment Survey

The September Westpac–Melbourne Institute Consumer Sentiment Survey was a mixed bag. Headline sentiment posted a solid rise, mainly driven, we suspect, by a more relaxed outlook for interest rates. Responses to the various ‘time to buy’ questions were also perkier, particularly for housing.

However sentiment remains in firmly pessimistic territory overall and aversion to risk is still intense.

Meanwhile a sharp deterioration in unemployment expectations lends more weight to the view that consumer demand is entering a cyclical weakening. Indeed, the worsening picture on job security effectively negates the good news from improved sentiment.

Not only does it suggest actual labour market conditions are deteriorating, it also points to a material downturn in discretionary spending and is an additional negative for already soft housing markets where job loss concerns inhibit demand.

For now we have made only minor changes to our consumer forecasts, mainly to incorporate stronger than expected Jun quarter spending estimates from the national accounts and partial data for Jul. These give a firmer near term picture for consumer demand but the broad forecast of a material weakening in remains intact.

Looking ahead, steady rates and a reduced threat of rate rises should continue to allay consumer fears of rate hikes. But with rising uncertainty around the global economy and growing signs of weakness in local labour markets, we suspect that steady rates on their own will not be enough to restore consumer confidence.  

We continue to expect that the next move from the RBA will be rate cuts starting with 25bps in Dec and culminating in a total reduction of 100bps by Sep 2012.

Australian consumers are likely to remain badly out of sorts at least until an easing bias is apparent and most probably until actual rate moves are enacted.

Westpac Institutional Bank is a division of Westpac Banking Corporation ABN 33 007 457 141. Information current as at date above. This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Westpac’s financial services guide can be obtained by calling 132 032, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is regulated for the conduct of investment business in the United Kingdom by the Financial Services Authority. If you wish to be removed from our e-mail, fax or mailing list please send an e-mail to economics@westpac.com.au or fax us on +61 2 8254 6934  or write to Westpac Economics at Level 2, 275 Kent Street, Sydney NSW 2000. Please state your full name, telephone/fax number and company details on all correspondence. © 2011 Westpac Banking Corporation

Interest Rates Continue to Fall - Time to Review your loan and save

Two Minutes could save you $’000s*

Let Equitimax review your Loan

The Current Banking Environment

·         International Economies are under the Spotlight
·         Ratings Agency - Downgrades
·         Australian Banks recording record profits
·         Slowing Australian Retail Market
·         Tightening of Lending Credit Policies
·         Talk of an Interest Cut by the RBA (previously it was tipped to be an Increase)
·         Cost of Funding reduced
·         Decline First Home Owners and New Loans Applications
·         Lenders offering cheaper pricing for loans with higher equity ratios
·         Increased Competition for Quality Loans

MORE COMPETITION = BETTER INTEREST RATES 
·         Fixed Rates are dropping
·         Standard Variable Rate has remained unchanged
·         Bigger discounts are available for new money applications

IF YOU DO NOTHING  .  .  .  .  .  .

YOUR RATE WILL NOT CHANGE !

·         Why are you not getting the best rate? 
·         Ask us how you can.

REVIEW YOUR LOAN and SAVE THOUSANDS*

The review should take you less than 10 mins – All we need is some information about your current loan such as

1.       Your Current Loan Balance

2.       Your Current Interest Rate

*savings depend on your specific loan. For example if Equitimax could save someone with a $500,000 loan just 0.10% that would save them $2,000 in just 4 years. 

Equitimax FAQ’s

Q. I want a cheaper rate, what are my options?

A.     (a) Refinance your loan to a cheaper lender – Equitimax can help.

(b) Apply for a loan increase – your lender may give you better pricing – Equitimax can help.

(c)  Apply for pricing from your existing lender – Equitimax can help.

(d) Consolidate loans – your lender may give you better pricing – Equitimax can help

Q. What Interest Rate should I be getting?

A. This depends on your specific loan. There is no correct answer.  Your loan rate depends on your current lender, the amount of your loan, the equity you have in your loan, you loan history & what sort of home loan you have. 

Most Variable Rates are around 7.0% at the moment.  So if you are paying a rate higher than 7.0% you should definitely give us a call.

Q. Is it a good time to fix?

A. Fixed rates are changing almost daily – sometimes it is best to wait until the dust settles. 
The good news is that they are going down and we believe there will be more lenders dropping their fixed rates soon.

Q. But Fixed Rates are currently cheaper than Variable Rates?

A. Fixed rates vary from lender to lender, however it is possible to fix in between 6.39%% and 6.79% for 2-3 years.  In most cases this will be a reduction from what clients are currently paying and therefore this is a real saving.

Q. What Fixed Rates are available at the moment?

A. Below is the table of rates as at 23/08/2011

Lender	1yr Fixed	2yr Fixed	3yr Fixed	4yr Fixed	5yr Fixed	Standard	Basic
AMP Banking	6.69%	6.69%	6.69%		6.99%	7.79%	7.02%
ANZ Bank	6.59%	6.44%	6.44%	6.89%	6.99%	7.80%	7.10%
Bankwest	6.99%	6.89%	6.99%	7.54%	7.59%	7.70%	7.10%
Citibank	6.79%	6.34%	6.34%	6.45%	6.74%	8.02%	6.95%
CBA	6.59%	6.59%	6.59%	6.99%	6.99%	7.81%	6.99%
Heritage	6.85%	6.95%	7.05%		7.49%	7.44%	7.03%
Homeside Lending	6.59%	6.59%	6.59%	7.39%	6.94%	7.70%
ING Direct	6.39%	6.39%	6.39%	6.89%	6.99%	7.34%	6.96%
Macquarie	6.50%	6.55%	6.69%	6.99%	6.99%	7.80%	6.99%
NAB	6.94%	7.09%	7.09%	7.49%	7.54%	7.67%
St George Bank	6.79%	6.59%	6.59%	6.99%	7.04%	7.80%	7.08%
Suncorp	6.59%	6.40%	6.45%		7.15%	7.83%	7.25%
Westpac Bank	6.99%	6.99%	6.79%	7.54%	7.64%	7.86%	7.16%

*these rates are a guide only to demonstrate the difference between lenders and were correct as at 23/08/2011
Professional Package Discount are based on the Standard Rate. For Lender Specific Comparison Rates please contact Equitimax.

Q. What do I need to do?

A. SIMPLE – Get Equitimax to help.

1.       Just ask us to review your loan.
With some Banks we can find out your interest rate & loan balance, however not all banks pass on this information to us.

2.       Send Equitimax an email              CLICK HERE TO EMAIL US
(a)    The Loan Balance $
(b)   Your Current Interest Rate                %
(c)    Your Lender  
(d)   Any other details you think are relevant

Vow brokers embrace insurance products

Over 220 of Vow Financial's brokers have expressed interest in selling general insurance via its new alliance partner, Allianz Australia, since a deal was signed between the two groups four weeks ago.
Under the terms of the agreement signed in May, Allianz Australia, a subsidiary of the global general insurance provider, will offer all housing-related insurance products to the clients of Vow's brokers.
Vow CEO Tim Brown said that in a difficult economic climate for brokers at present, Vow Financial management thought it important to establish alternative sources of income for their broking network.
“Already a healthy percentage of our brokers are using Allianz, and we expect more to join up as they come to appreciate Allianz’s competitive offering in this market,” Brown said.
Michael Osborne, head of sales and distribution at Vow Financial, said in the aggregator's latest broker update that its broking network "appear to have shifted on mass from thinking about diversification to actual implementation of new products & services".
He said this has been evidenced from "dozens" of brokers utilising the Vow Leasing service, expressions of interest in partnering with Vow Wealth Management - Vow's financial planning arm - and over $10m of investment properties exchanging thorugh Blue Wealth Property.
Commenting on the deal, Allianz managing director Terry Towell said that insurance is an important consideration for clients who are taking out a home loan.
"It is in both the broker’s and borrower’s best interest to put in place an appropriate insurance solution and ensure protection is in place," he said.

If you need an Insurance quote let John or Robert know

Interest rate rises loom but home prices 'won't crash'

A timely article from Thomas Hunter - The Age     
http://news.domain.com.au/domain/real-estate-news/interest-rate-rises-loom-but-home-prices-wont-crash-20110627-1gmw0.html

 Interest rate rises loom but home prices 'won't crash'June 27, 2011

Property prices won't experience huge losses over the next three years but interest rates will rise to almost 9.5 per cent by 2014 to force buyers back onto the sidelines, a new study says.

The report by BIS Shrapnel, released today, dismisses forecasts of sharp falls in prices over the short to medium term and predicts prices to remain steady through the rest of 2011 "with some cities even showing moderate price growth over the two following years".
Report author Angie Zigomanis said the drop in home prices to June this year had been caused by the government's withdrawal of stimulus spending, rising interest rates and a 50 per cent pull-back in the number of first-home buyers entering the market.
But he said buyers would return as investment from the mining boom started revving up the economy through 2012.
"The only question mark for us is interest rates. Our forecast is for a half a per cent rise later this year, and another half a per cent rise in the first-half of next year," said Mr Zigomanis.
"In an environment that is strengthening, we can probably handle that at current price levels. People have factored those rate rises in, so as the economy picks up people will wade back into the market knowing that there is a couple of interest rate rises on the horizon."
He said the forecasts were based on unemployment falling below 4 per cent in "a strong economic environment" where rising wages and inflation would see the RBA hike rates.
"Housing rates are consequently forecast to peak at 9.4 per cent by the end of 2013. While the momentum in purchaser activity is expected to continue into 2012-13, rates at this level will eventually bring about a downturn in both the residential market and the economy over 2014."
City by city
Mr Zigomanis forecast Sydney's median house price to be $640,000 in June 2011, or a 1 per cent rise on a year earlier. The report noted that house prices would "remain 9 per cent below the peak of March 2004" but home loan affordability was "at its best level since 2002".
Melbourne's forecast median house price would hit $575,000, a 3 per cent rise on a year earlier, but Mr Zigomanis noted there was "little upward pressure on prices" as the construction of new dwellings was beginning to exceed demand.
In Brisbane, the median house price would slide 4 per cent over the year to $440,000. The report noted that "underlying demand in the Queensland market has been weakened by lower overseas and interstate migration inflows that have fallen to long term lows". The Gold Coast and Sunshine Coast regions were expected to have moved in tandem with Brisbane.
Adelaide's median house price to June 2011 was predicted to remain static at $410,000, while Perth home prices would settle at $480,000, down 4 per cent for the year and 10 per cent since the March quarter peak of 2007.
The median price of a home in Hobart was steady at $365,000 over the year to June and Canberra's median house price was estimated to have fallen 2 per cent to $512,000.
thomas.hunter@theage.com.au

Senate Rules on Exit Ban Fee

From the Mortgage Finance Association of Australia (MFAA)

Date 23/06/2011

Yesterday afternoon the Senate voted on a motion by the Coalition and Independent Nick Xenophon to disallow the Government regulation to ban exit fees. The strategy (backing the MFAA’s campaign over the past few weeks) was to bring the Government to the table to prepare an amended regulation which would have exempted smaller lenders from the exit fee ban.

Regrettably when the vote was taken, there was a 35-35 tie (Senator Fielding voted with the Government and the Greens). This meant that the motion failed and the ban on exit fees goes ahead from 1 July 2011.

In our lobbying with the Treasurer, the Greens and Senator Fielding, we were advised that they were all aware of our concerns about the lack of breadth of competition in the mortgage market, but felt that allowing exit fees to continue was not the appropriate way to deal with our concerns.

The Greens told us: “After much consideration, (we have) decided that the Greens can’t support Xenophon’s disallowance this week (thus upholding the Swan regulation re exit fees), but the Greens will be seeking further reforms from the Government to improve non-bank lenders’ access to finance.”

Although just unsuccessful by a whisker on this occasion, our campaign has certainly made a mark in Canberra and we will continue our campaign to improve the breadth of competition in the mortgage market.

Thanks to all our members who supported the advertising campaign, or supported our lobbying by writing to politicians. Your efforts have not been in vain.

The MFAA also thanks the Coalition and Senator Xenophon for taking up the cudgels on our behalf. In particular we give special thanks and appreciation to Nationals Senator John Williams for the hours of work he put in to convince the Coalition to take up the case and his continuing support in the Senate.

We’ve now made our point – the campaign for enhanced competition will continue!

Equitimax's View on this Decision
==========================
Any regulation that reduced Bank Fees is a good one.
However the problem with this bill was that it undermines Non-Bank Lenders profitabilities more than the major banks and therefore reduced competition in the market.  Rob & John