Online mortgage provider RateCity has registered a 68 per cent jump in loan applications in August 2009.
According to RateCity chief executive officer Damian Smith the result highlighted a growing shift to how borrowers shopped for financial products.
“Never before have we seen such a significant rise in applications for home loans at RateCity, which shows how quickly the market is changing for how we shop for financial products.”he said.
September applications were also strong, Mr Smith said.
Compared to September 2008, the number of home loan applications in New South Wales grew 32 percent in September 2009.
There were 28 per cent more home loan applications in Victoria, 15 per cent more in Queensland, 26 per cent more in Western Australia and South Australia saw a 22 per cent rise.
The Northern Territory saw the biggest growth of 66 per cent, while the Australian Capital Territory experienced a 30 per cent rise.
“As the housing market races into recovery and interest rates are likely to rise further in 2010, we expect to see continued growth of home loan applications at RateCity as Australians seek better value deals,” Mr Smith said.
Friday, October 16, 2009
Reverse mortgages market grows
Reverse mortgages have increased in popularity with older Australians, a new study has found.
According to the report by Deloitte Actuaries and Consultants, the local reverse mortgage market grew by 13 per cent over the last financial year, measured by outstanding balances after 4,950 new borrowers entered the market.
The average age of the reverse mortgage borrower is 74, the report said.
The report also found that the main reason for taking out a reverse mortgage was to receive a regular income stream in retirement, followed by debt repayment and home improvement.
Senior Australians Equity Release Association chief executive, Kevin Conlon, said the report showed borrowers were using their reverse mortgages appropriately – with many choosing to repay their debt in full each year rather than let the debt build up until death.
"Senior Australians are continuing to show restraint when releasing equity through reverse mortgages, shown by borrowers, on average, only choosing to access about 70 per cent of the actual funding available to them," Mr Conlon said.
According to the report by Deloitte Actuaries and Consultants, the local reverse mortgage market grew by 13 per cent over the last financial year, measured by outstanding balances after 4,950 new borrowers entered the market.
The average age of the reverse mortgage borrower is 74, the report said.
The report also found that the main reason for taking out a reverse mortgage was to receive a regular income stream in retirement, followed by debt repayment and home improvement.
Senior Australians Equity Release Association chief executive, Kevin Conlon, said the report showed borrowers were using their reverse mortgages appropriately – with many choosing to repay their debt in full each year rather than let the debt build up until death.
"Senior Australians are continuing to show restraint when releasing equity through reverse mortgages, shown by borrowers, on average, only choosing to access about 70 per cent of the actual funding available to them," Mr Conlon said.
Mortgage broker faces $6.1m fraud charges
A broker, who already stands accused of defrauding up to $5 million from his clients, has been charged with new offences involving a further $1.1 million.
Samer Hraiki yesterday faced a further five charges of obtaining money by deception.
In July, his lawyer told the court Mr Hraiki had encountered financial difficulties while developing a property in Kings Cross that would have realised tens of millions of dollars in profit.
At the time, Magistrate Allan Moore commented that at one point there had been $5 million worth of dishonest activities.
The new charges cover dates between September 2006 and April this year.
In July, it was reported that Mr Hraiki had allegedly taken more than $490,000 from one victim.
He was once again refused bail and will re-appear in Court on 8 December.
Samer Hraiki yesterday faced a further five charges of obtaining money by deception.
In July, his lawyer told the court Mr Hraiki had encountered financial difficulties while developing a property in Kings Cross that would have realised tens of millions of dollars in profit.
At the time, Magistrate Allan Moore commented that at one point there had been $5 million worth of dishonest activities.
The new charges cover dates between September 2006 and April this year.
In July, it was reported that Mr Hraiki had allegedly taken more than $490,000 from one victim.
He was once again refused bail and will re-appear in Court on 8 December.
House prices tipped to climb 20pc
Research from BIS Shrapnel suggests house prices will rise by nearly 20 per cent in the next three years.
The rise would add more than $100,000 to the average house price.
According to an article in The Herald Sun, BIS Shrapnel found that house prices will rise by 3 per cent this financial year and 8 per cent in each of the following years.
The research, conducted on behalf of QBE Lenders' Mortgage Insurance, said the shortage of dwellings and soaring population were combining to create the perfect environment for property investors.
"Upgrader and investor demand is expected to gather momentum and take over as the main drivers of the housing cycle," QBE chief executive Ian Graham said.
According to Mr Graham, recent job security fears had held many potential buyers back from entering the property market.
Economic and employment growth is forecast to continue to slow until the middle of next year, when stronger growth is tipped to unleash a new batch of confident buyers.
The rise would add more than $100,000 to the average house price.
According to an article in The Herald Sun, BIS Shrapnel found that house prices will rise by 3 per cent this financial year and 8 per cent in each of the following years.
The research, conducted on behalf of QBE Lenders' Mortgage Insurance, said the shortage of dwellings and soaring population were combining to create the perfect environment for property investors.
"Upgrader and investor demand is expected to gather momentum and take over as the main drivers of the housing cycle," QBE chief executive Ian Graham said.
According to Mr Graham, recent job security fears had held many potential buyers back from entering the property market.
Economic and employment growth is forecast to continue to slow until the middle of next year, when stronger growth is tipped to unleash a new batch of confident buyers.
Low Sydney vacancy rates good for investors
Sydney’s rental property market is in a stalemate, figures from the Real Estate Institute of NSW (REINSW) have found.
According to the REINSW, the number of vacant rental properties across the city and in Newcastle remained stable at 1.3 per cent in September despite incentives designed to encourage people to buy homes.
The number of vacant rental properties in Sydney's outer suburbs rose by 0. 1 per cent to 1 per cent, while vacancies in the inner suburbs fell slightly to 1.4 per cent.
In the Hunter Valley rental vacancies fell 0.1 per cent to 1.5 per cent.
In the Illawarra, overall vacancies rose 0.4 per cent to 1.7 per cent while in Wollongong, the percentage of available properties increased 0.3 per cent to 1.6 per cent.
"These results are a double-edged sword; great news for landlords but grim news for tenants," REINSW president Steve Martin said.
"The results for Sydney and Newcastle are concerning and show that despite a low interest rate environment and additional first home buyer and other buyer incentives, the rental market remains extremely fragile."
According to Mr Martin, the current vacancy rates are unlikely to change in the immediate future.
According to the REINSW, the number of vacant rental properties across the city and in Newcastle remained stable at 1.3 per cent in September despite incentives designed to encourage people to buy homes.
The number of vacant rental properties in Sydney's outer suburbs rose by 0. 1 per cent to 1 per cent, while vacancies in the inner suburbs fell slightly to 1.4 per cent.
In the Hunter Valley rental vacancies fell 0.1 per cent to 1.5 per cent.
In the Illawarra, overall vacancies rose 0.4 per cent to 1.7 per cent while in Wollongong, the percentage of available properties increased 0.3 per cent to 1.6 per cent.
"These results are a double-edged sword; great news for landlords but grim news for tenants," REINSW president Steve Martin said.
"The results for Sydney and Newcastle are concerning and show that despite a low interest rate environment and additional first home buyer and other buyer incentives, the rental market remains extremely fragile."
According to Mr Martin, the current vacancy rates are unlikely to change in the immediate future.
CBA, NAB deliver lowest comparison rate of the majors
While all of the big banks passed on this month’s 25 basis point rate increase by the Reserve Bank of Australia (RBA) in full, a narrow spread of 0.07 per cent remains between the comparison rates on the major’s standard variable rates.
At 6.12 per cent, the Commonwealth Bank of Australia (CBA) and the National Australia Bank (NAB) have the lowest comparison rate, fractionally ahead of the Australian and New Zealand Banking Group’s (ANZ) 6.16 per cent and Westpac’s 6.19 per cent.
The RBA is widely expected to push the official cash rate higher in the coming months, which would see comparison rates climb further. There is also the very real chance of banks moving on rates independent of the RBA as funding costs continue to pressure bank margins.
Despite the recent hike to the cash rate, Vincent Turner, business manager of Pisces Communication, told Mortgage Business it was pleasing to see comparison rates were still relatively low.
“It is a great market to buy a property at the moment – especially for investors. Investors are currently getting a 4 to 5 per cent rental yield on their property, which is fantastic seeing as their interest rate would be in the low 6 percentile range,” he said.
However brokers were not just relying on the comparison rate when assessing products for their clients.
Mr Turner also said while the comparison rate allowed brokers to give their customers a better understanding of their home loan, he said more brokers were using annualised percentage rates to show their customers the ‘true cost’ of their loan.
Mortgage Business last contrasted each of the major’s comparison rates in February this year, two months before the RBA reduced the official cash rate to the 49 year low of 3 per cent.
At that time CBA delivered the lowest home loan comparison rate at 5.86 per cent, which reflected a spread between the majors’ comparison rate’s on variable rate products of 0.19 per cent.
St George recorded the highest comparison rate of 6.05 per cent, while ANZ and Westpac offered comparison rates of 6.01 and 6.04 per cent respectively.
At 6.12 per cent, the Commonwealth Bank of Australia (CBA) and the National Australia Bank (NAB) have the lowest comparison rate, fractionally ahead of the Australian and New Zealand Banking Group’s (ANZ) 6.16 per cent and Westpac’s 6.19 per cent.
The RBA is widely expected to push the official cash rate higher in the coming months, which would see comparison rates climb further. There is also the very real chance of banks moving on rates independent of the RBA as funding costs continue to pressure bank margins.
Despite the recent hike to the cash rate, Vincent Turner, business manager of Pisces Communication, told Mortgage Business it was pleasing to see comparison rates were still relatively low.
“It is a great market to buy a property at the moment – especially for investors. Investors are currently getting a 4 to 5 per cent rental yield on their property, which is fantastic seeing as their interest rate would be in the low 6 percentile range,” he said.
However brokers were not just relying on the comparison rate when assessing products for their clients.
Mr Turner also said while the comparison rate allowed brokers to give their customers a better understanding of their home loan, he said more brokers were using annualised percentage rates to show their customers the ‘true cost’ of their loan.
Mortgage Business last contrasted each of the major’s comparison rates in February this year, two months before the RBA reduced the official cash rate to the 49 year low of 3 per cent.
At that time CBA delivered the lowest home loan comparison rate at 5.86 per cent, which reflected a spread between the majors’ comparison rate’s on variable rate products of 0.19 per cent.
St George recorded the highest comparison rate of 6.05 per cent, while ANZ and Westpac offered comparison rates of 6.01 and 6.04 per cent respectively.
Demand for fixed rates plummets
The number of borrowers taking out fixed rate mortgages continues to drop despite the increasing threat of further rate hikes.
Statistics from Mortgage Choice showed fixed rate products accounted for 4.56 per cent of new loans approved in September, down from 6.98 per cent in August.
At the same time, demand for variable rate mortgages increased to 95.44 per cent in September, from 93.02 per cent the month before.
Mortgage Choice said brokers are letting their customers know the pros and cons of both fixed and variable rates and it seems more borrowers are comfortable with leaving their rates variable.
"Demand for fixed rates hasn't reached such a low level since April this year," Mortgage Choice corporate affairs manager Kristy Sheppard said.
"Given the vast majority of fixed loans are priced between 100 and 250 basis points above variable loans, the result is not surprising, despite most borrowers being aware of imminent rate rises."
Smartline’s personal mortgage adviser Kevin Lee said borrowers had missed the boat in terms of fixing rates.
“Since March the banks and other lending institutions have ramped up their fixed rates regularly with the average 3 year rate now between 6.99 per cent and 7.29 per cent and 5 year rates between 7.29 per cent and 7.89 per cent,” Mr Lee said.
“Really, if you wanted a fixed rate, the time to lock in was back in March.”
Statistics from Mortgage Choice showed fixed rate products accounted for 4.56 per cent of new loans approved in September, down from 6.98 per cent in August.
At the same time, demand for variable rate mortgages increased to 95.44 per cent in September, from 93.02 per cent the month before.
Mortgage Choice said brokers are letting their customers know the pros and cons of both fixed and variable rates and it seems more borrowers are comfortable with leaving their rates variable.
"Demand for fixed rates hasn't reached such a low level since April this year," Mortgage Choice corporate affairs manager Kristy Sheppard said.
"Given the vast majority of fixed loans are priced between 100 and 250 basis points above variable loans, the result is not surprising, despite most borrowers being aware of imminent rate rises."
Smartline’s personal mortgage adviser Kevin Lee said borrowers had missed the boat in terms of fixing rates.
“Since March the banks and other lending institutions have ramped up their fixed rates regularly with the average 3 year rate now between 6.99 per cent and 7.29 per cent and 5 year rates between 7.29 per cent and 7.89 per cent,” Mr Lee said.
“Really, if you wanted a fixed rate, the time to lock in was back in March.”
Melbourne commercial vacancy rates at record lows
Melbourne’s commercial property market is enjoying record low vacancy rates, according to CB Richard Ellis.
CBD retail vacancy in Melbourne fell from 2.8 per cent to 2.5 per cent in the September quarter.
Similarly, the vacancy rates in Melbourne’s lanes and arcades dropped from 4.8 per cent to just 1.5 per cent.
Rates also dropped in Hardware Lane, Midtown Plaza and Equitable Place.
CBRE retail agent Max Cookes said the vacancy rates in the laneways were performing particularly well because the culture in Melbourne is such that people are more attracted to the laneways because they offer elements such as personalised baristas.
CBD retail vacancy in Melbourne fell from 2.8 per cent to 2.5 per cent in the September quarter.
Similarly, the vacancy rates in Melbourne’s lanes and arcades dropped from 4.8 per cent to just 1.5 per cent.
Rates also dropped in Hardware Lane, Midtown Plaza and Equitable Place.
CBRE retail agent Max Cookes said the vacancy rates in the laneways were performing particularly well because the culture in Melbourne is such that people are more attracted to the laneways because they offer elements such as personalised baristas.
Lack of supply puts pressure on affordability
The amount of new residential building work fell in the June 2009 quarter, indicating that a possible recovery in the housing shortage problem is still well off.
According to figures from the Australian Bureau of Statistics (ABS), seasonally adjusted work done on new residential dwellings fell by 1.2 per cent in the June 2009 quarter to an annualised worth of $33.2 billion, down 6.5 per cent on last year.
On a state basis, new residential work done fell by 1.8 per cent in South Australia, 0.4 per cent in New South Wales, and 0.2 per cent in Western Australia, but increased by 5.5 per cent in Victoria and 5.6 per cent in Tasmania.
“We are on the cusp of a moderate recovery in new home starts and that should feed through to a positive year for new dwelling investment in 2009/10,” the Housing Industry Association’s (HIA) chief economist Harley Dale said.
However, the sixth consecutive decline in the worth of dwelling commencements in the June 2009 quarter highlights the fact that dwelling investment has not turned the corner yet.
"Even before adding rising interest rates to the mix, there are a number of factors likely to constrain the increase in new housing supply over the next 18 months, including projects bogged down in the approvals process, lack of available finance, and the very real threat that we will see residential land shortages reemerge and skilled labour shortages across the construction sector intensify,” Mr Dale said.
“These factors suggest that the recent gains in affordability will reverse and that the considerable pressure lower income rental households face from tight rental market conditions will remain with us for some time to come.”
According to figures from the Australian Bureau of Statistics (ABS), seasonally adjusted work done on new residential dwellings fell by 1.2 per cent in the June 2009 quarter to an annualised worth of $33.2 billion, down 6.5 per cent on last year.
On a state basis, new residential work done fell by 1.8 per cent in South Australia, 0.4 per cent in New South Wales, and 0.2 per cent in Western Australia, but increased by 5.5 per cent in Victoria and 5.6 per cent in Tasmania.
“We are on the cusp of a moderate recovery in new home starts and that should feed through to a positive year for new dwelling investment in 2009/10,” the Housing Industry Association’s (HIA) chief economist Harley Dale said.
However, the sixth consecutive decline in the worth of dwelling commencements in the June 2009 quarter highlights the fact that dwelling investment has not turned the corner yet.
"Even before adding rising interest rates to the mix, there are a number of factors likely to constrain the increase in new housing supply over the next 18 months, including projects bogged down in the approvals process, lack of available finance, and the very real threat that we will see residential land shortages reemerge and skilled labour shortages across the construction sector intensify,” Mr Dale said.
“These factors suggest that the recent gains in affordability will reverse and that the considerable pressure lower income rental households face from tight rental market conditions will remain with us for some time to come.”
Lenders given more investigation powers
Lenders have been given the ability to conduct a more thorough review of a borrower’s repayment history.
According to today’s The Australian Financial Review, the government has announced changes to the Privacy Act which will allow lenders to find out the opening and closing date of an account, a borrower’s credit repayment history and credit limits.
The ability to look at a borrower’s credit repayment history will be made available following the introduction of the National Consumer Credit Protection Bill.
Current privacy restrictions stop lenders from seeking payment history details, as credit reports can only record the basic identification details of borrowers, their credit applications and any negative events such as defaults or bankruptcies.
The changes to the Act follow recommendations made by the Australian Law Reform Commission last year, in a report that called for the complexities of the Privacy Law to be simplified.
According to today’s The Australian Financial Review, the government has announced changes to the Privacy Act which will allow lenders to find out the opening and closing date of an account, a borrower’s credit repayment history and credit limits.
The ability to look at a borrower’s credit repayment history will be made available following the introduction of the National Consumer Credit Protection Bill.
Current privacy restrictions stop lenders from seeking payment history details, as credit reports can only record the basic identification details of borrowers, their credit applications and any negative events such as defaults or bankruptcies.
The changes to the Act follow recommendations made by the Australian Law Reform Commission last year, in a report that called for the complexities of the Privacy Law to be simplified.
UK house prices up
UK house prices have delivered their strongest rise in two years, according to a new survey.
The Royal Institution of Chartered Surveyors – the professional association for valuation groups – yesterday revealed that its headline house price balance had reached the highest level since the onset of the GFC.
A spokesperson from the Chartered Surveyors said a lack of supply was underpinning the rise in house prices with new instructions to estate agents only edging up very gradually.
“Despite the problems first time home buyers are experiencing in securing finance, the level of inquiries from potential purchasers is increasing. This imbalance between demand and supply suggests that house prices will move higher in the near term,” the spokesperson said.
The Royal Institution of Chartered Surveyors – the professional association for valuation groups – yesterday revealed that its headline house price balance had reached the highest level since the onset of the GFC.
A spokesperson from the Chartered Surveyors said a lack of supply was underpinning the rise in house prices with new instructions to estate agents only edging up very gradually.
“Despite the problems first time home buyers are experiencing in securing finance, the level of inquiries from potential purchasers is increasing. This imbalance between demand and supply suggests that house prices will move higher in the near term,” the spokesperson said.
St George identifies nation’s property hotspots
St George’s National Property Report released today has revealed 24 locations across the nation that are likely to provide the strongest value for home buyers.
Suburbs have been chosen based on their location attributes, the value of housing in the area, the level of amenities in the suburb and the demographic mix.
According to St George chief economist Besa Deda, the locations should continue to grow and therefore suit buyers looking to live in a blossoming area and investors seeking capital growth.
In Sydney the best ‘value for money’ suburbs were Granville, Rockdale, Lidcome, Riverwood and Waterloo.
Granville’s 18.5 km distance to the inner city and median house price of $347,500 made it the standout performer in Sydney.
In Melbourne the city’s hotspots were Chadstone, Ashburton, Brunswick, Flemington and Fawkner.
According to Ms Deda, the 24 hotspots included an interesting mix of older demographic areas where the dwellings have great potential for renovation, and younger demographic areas where the dwellings offer good value for money.
“Savvy home buyers and investors should look outside the square and consider the areas which have not attracted the same level of attention as traditional blue-ribbon locations,” Ms Deda said.
“For example, some of the suburbs identified in the National Hotspot research include light industrial areas which are expected to eventually transform into residential areas with amenities.”
Hotspots:
Sydney
Granville
Rockdale
Lidcombe
Riverwood
Waterloo
Brisbane
Keperra
Margate
Cannon Hill
Fairfield
Kedron
Melbourne
Chadstone
Ashburton
Brunswick
Flemington
Fawkner
Hobart
North Hobart
Canberra
Dickson
Perth
Bassendean
Thornlie
Adelaide
Thebarton
Glanville
Darwin
Rapid Creek
Regional Australia
Gulliver
Redan
Suburbs have been chosen based on their location attributes, the value of housing in the area, the level of amenities in the suburb and the demographic mix.
According to St George chief economist Besa Deda, the locations should continue to grow and therefore suit buyers looking to live in a blossoming area and investors seeking capital growth.
In Sydney the best ‘value for money’ suburbs were Granville, Rockdale, Lidcome, Riverwood and Waterloo.
Granville’s 18.5 km distance to the inner city and median house price of $347,500 made it the standout performer in Sydney.
In Melbourne the city’s hotspots were Chadstone, Ashburton, Brunswick, Flemington and Fawkner.
According to Ms Deda, the 24 hotspots included an interesting mix of older demographic areas where the dwellings have great potential for renovation, and younger demographic areas where the dwellings offer good value for money.
“Savvy home buyers and investors should look outside the square and consider the areas which have not attracted the same level of attention as traditional blue-ribbon locations,” Ms Deda said.
“For example, some of the suburbs identified in the National Hotspot research include light industrial areas which are expected to eventually transform into residential areas with amenities.”
Hotspots:
Sydney
Granville
Rockdale
Lidcombe
Riverwood
Waterloo
Brisbane
Keperra
Margate
Cannon Hill
Fairfield
Kedron
Melbourne
Chadstone
Ashburton
Brunswick
Flemington
Fawkner
Hobart
North Hobart
Canberra
Dickson
Perth
Bassendean
Thornlie
Adelaide
Thebarton
Glanville
Darwin
Rapid Creek
Regional Australia
Gulliver
Redan
WA property vacancies surge
While vacancy rates are sitting at historic lows in NSW, it seems Western Australia is suffering from the reverse.
The number of vacant properties to rent in Perth has hit its highest level in 14 years, with the recent surge in first home owners largely responsible.
According to figures from the Real Estate Institute of WA (REIWA), the western state has a vacancy rate of 4.8 per cent, one third higher than the June quarter and the highest level since December 1995.
REIWA president Alan Bourke said the surge in vacancies was thanks to strong demand from first home buyers and an increasing number of new homes being built.
But despite the surge in vacancies, the average weekly rent did not drop for the quarter, staying at $360.
APM economist Matthew Bell said rents would probably start increasing early next year as the economy improved and the first home owners grant was phased right back, resulting in fewer first home buyers.
The number of vacant properties to rent in Perth has hit its highest level in 14 years, with the recent surge in first home owners largely responsible.
According to figures from the Real Estate Institute of WA (REIWA), the western state has a vacancy rate of 4.8 per cent, one third higher than the June quarter and the highest level since December 1995.
REIWA president Alan Bourke said the surge in vacancies was thanks to strong demand from first home buyers and an increasing number of new homes being built.
But despite the surge in vacancies, the average weekly rent did not drop for the quarter, staying at $360.
APM economist Matthew Bell said rents would probably start increasing early next year as the economy improved and the first home owners grant was phased right back, resulting in fewer first home buyers.
Ray White buys Loan Market Group
Friday, 16 October 2009
Ray White real estate owners, the White Family, have taken full ownership of the mortgage brokering operation Loan Market Group after buying the remaining equity held by founding X Inc finance directors John Kolenda, Jennifer Nielsen and Dean Rushton.
Loan Market Group was formed two years ago when X Inc merged with Ray White Group’s Mortgage Organisation Channels of Australasia, comprising Ray White Financial Services, Loan Market and Realestate.com.au Home Loans.
Head of online and marketing at Ray White Jennifer Nielsen told Mortgage Business that the new ownership structure of Loan Market Group would not have an adverse effect on their brokers.
“It will be business as usual for our brokers,” Ms Nielsen said.
“There are obvious synergies between mortgage broking and real estate practices. This new structure will provide greater opportunities for our brokers in terms of referral partnerships and retail branding.”
Ms Neilsen said the Group’s current executive director, John Kolenda, would be gradually phased out of the company in the coming weeks to focus on other outside business interests.
Ray White real estate owners, the White Family, have taken full ownership of the mortgage brokering operation Loan Market Group after buying the remaining equity held by founding X Inc finance directors John Kolenda, Jennifer Nielsen and Dean Rushton.
Loan Market Group was formed two years ago when X Inc merged with Ray White Group’s Mortgage Organisation Channels of Australasia, comprising Ray White Financial Services, Loan Market and Realestate.com.au Home Loans.
Head of online and marketing at Ray White Jennifer Nielsen told Mortgage Business that the new ownership structure of Loan Market Group would not have an adverse effect on their brokers.
“It will be business as usual for our brokers,” Ms Nielsen said.
“There are obvious synergies between mortgage broking and real estate practices. This new structure will provide greater opportunities for our brokers in terms of referral partnerships and retail branding.”
Ms Neilsen said the Group’s current executive director, John Kolenda, would be gradually phased out of the company in the coming weeks to focus on other outside business interests.
Consumer sentiment continues solid upwards run
Consumer sentiment has risen again in October despite the Reserve Bank of Australia’s (RBA) decision to raise rates and the governor’s recent suggestion that further rate hikes are imminent.
According to the Westpac - Melbourne Institute Index, consumer sentiment rose by 1.7 per cent in October from 119.3 in September to 121.4 in October.
Westpac's chief economist Bill Evans said in the last tightening cycle sentiment only started to respond adversely when the standard variable mortgage rate exceeded 6.55 per cent.
“The consecutive 0.25 per cent increases in November and December 2003, which pushed the standard variable rate from 6.55 per cent to 7.05 per cent, saw a cumulative fall in sentiment of 5.2 per cent while the next move in March 2005, which pushed the standard variable rate to 7.3 per cent, saw a 15.5 per cent collapse in sentiment,” Mr Evans said.
Of course, interest rates are not the only factor affecting sentiment.
Mr Evans said petrol prices, which have fallen by 7.5 per cent since the last survey, and the ongoing resilience of the labor market both helped keep consumer sentiment strong.
“The Reserve Bank board next meets on November 3. We expect the board to raise the overnight cash rate by 0.25 per cent and indicate in the associated statement that more rate hikes are likely. That said, we would not expect the next rate hike to damage sentiment although subsequent moves are likely to see sentiment turning down”, Mr Evans said.
According to the Westpac - Melbourne Institute Index, consumer sentiment rose by 1.7 per cent in October from 119.3 in September to 121.4 in October.
Westpac's chief economist Bill Evans said in the last tightening cycle sentiment only started to respond adversely when the standard variable mortgage rate exceeded 6.55 per cent.
“The consecutive 0.25 per cent increases in November and December 2003, which pushed the standard variable rate from 6.55 per cent to 7.05 per cent, saw a cumulative fall in sentiment of 5.2 per cent while the next move in March 2005, which pushed the standard variable rate to 7.3 per cent, saw a 15.5 per cent collapse in sentiment,” Mr Evans said.
Of course, interest rates are not the only factor affecting sentiment.
Mr Evans said petrol prices, which have fallen by 7.5 per cent since the last survey, and the ongoing resilience of the labor market both helped keep consumer sentiment strong.
“The Reserve Bank board next meets on November 3. We expect the board to raise the overnight cash rate by 0.25 per cent and indicate in the associated statement that more rate hikes are likely. That said, we would not expect the next rate hike to damage sentiment although subsequent moves are likely to see sentiment turning down”, Mr Evans said.
St George narrows in on Gen Y borrowers
St.George Bank has stepped up its focus on first home buyers, launching a new product that will help them save for their home deposit faster and capitalise on the increased first home owners grant.
The bank’s general manager of intermediary distribution, Steven Heavey, said the SENSE product will help brokers with young clients save the necessary funds to buy a house before the grant is wound back again on 31 December.
“Many brokers have potential customers on their database who are 18 to 30 year-olds, starting out in their careers, or potential customers who find it difficult to budget and save effectively,” he said.
“Being able to set a savings target is a great tool to help motivate these customers who aren’t used to saving or budgeting, as they will be able to see clearly on their statements exactly how they are tracking in line with their targets.”
The product combine two accounts – SENSE everyday transaction account and SENSE savings account.
A statement is used to chart up spendings and savings. That information is then rounded up to the nearest dollar and the change that is left in the SENSE transactional account is electronically transferred to SENSE savings account.
The bank’s general manager of intermediary distribution, Steven Heavey, said the SENSE product will help brokers with young clients save the necessary funds to buy a house before the grant is wound back again on 31 December.
“Many brokers have potential customers on their database who are 18 to 30 year-olds, starting out in their careers, or potential customers who find it difficult to budget and save effectively,” he said.
“Being able to set a savings target is a great tool to help motivate these customers who aren’t used to saving or budgeting, as they will be able to see clearly on their statements exactly how they are tracking in line with their targets.”
The product combine two accounts – SENSE everyday transaction account and SENSE savings account.
A statement is used to chart up spendings and savings. That information is then rounded up to the nearest dollar and the change that is left in the SENSE transactional account is electronically transferred to SENSE savings account.
BoQ eyes aquisition targets
The Bank of Queensland (BoQ) is gearing up for a potential acquisition, with view of increasing its loan book.
Yesterday, BoQ chief executive David Liddy announced the company’s results for the 12 months to September and said the bank hoped to ‘build scale’ in the year ahead in order to compete with the big four.
Suncorp is currently on the bank’s radar as a potential acquisition target.
Mr Liddy told The Australian Financial Review that a deal with Suncorp’s $2 billion lease finance portfolio was possible. “[Suncorp] have stated it’s non-core to their business. It’s certainly core to us. So if an opportunity presented itself, we’d certainly have a look at that stuff,” he said.
According to the 2009 results, BoQ delivered a cash net profit of $187.4 million, up 21 per cent on last year.
The result was boosted by the bank’s acquisition of Home Building Society. Moreover, the bank also managed to deliver a lift in net interest margin (NIM). The bank’s NIM was 1.67 per cent in 2008, but fell to 1.52 per cent in the first half of 2009. Yesterday however, it was revealed that the bank had grown its NIM in the second half to 1.59 per cent. NIMs are a core measure of a bank’s profitability and have fallen sharply in regional banks as access to wholesale funds became more difficult.
Rates to hit 5.5pc by end 2011
The official cash rate is forecast to hit 5.5 per cent by the end of 2011, according to the National Australia Bank’s (NAB) monthly business survey and economic outlook.
Following the Reserve Bank of Australia’s decision to raise rates by 25 basis points in October, NAB has altered its rate forecast to include another 50 basis point increase before the end of this year.
While the bank has decided to change its immediate forecasts for 2009, it has left its longer term rate path prediction unchanged however at 4.25 per cent by the end of 2010 and 5.5 per cent by the end of 2011.
Yesterday the RBA governor Glenn Stevens all but confirmed that Australia is set for a string of rate rises over the coming months.
Speaking at a financial breakfast in Perth, Mr Stevens said the period of greatest weakness in the Australian economy is probably past.
“Barring another serious international setback, the economy is likely to continue on a path of gradual expansion during 2010," he said.
"If we were prepared to cut rates rapidly, to a very low level, in response to a threat but then were too timid to lessen that stimulus in a timely way when the threat had passed, we would have a bias in our monetary policy framework. Experience here and elsewhere counsels against that approach.”
Despite the now imminent rate hikes, Mr Stevens said, interest rates are still sitting at a 45 year low and the move away from the emergency setting of 3 per cent signals the increasing health of the economy
Following the Reserve Bank of Australia’s decision to raise rates by 25 basis points in October, NAB has altered its rate forecast to include another 50 basis point increase before the end of this year.
While the bank has decided to change its immediate forecasts for 2009, it has left its longer term rate path prediction unchanged however at 4.25 per cent by the end of 2010 and 5.5 per cent by the end of 2011.
Yesterday the RBA governor Glenn Stevens all but confirmed that Australia is set for a string of rate rises over the coming months.
Speaking at a financial breakfast in Perth, Mr Stevens said the period of greatest weakness in the Australian economy is probably past.
“Barring another serious international setback, the economy is likely to continue on a path of gradual expansion during 2010," he said.
"If we were prepared to cut rates rapidly, to a very low level, in response to a threat but then were too timid to lessen that stimulus in a timely way when the threat had passed, we would have a bias in our monetary policy framework. Experience here and elsewhere counsels against that approach.”
Despite the now imminent rate hikes, Mr Stevens said, interest rates are still sitting at a 45 year low and the move away from the emergency setting of 3 per cent signals the increasing health of the economy
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