Australian Bankers’ Association to appear at public hearing

Posted by Henry | BANKS,EVENTS FAIRS FESTIVALS,GOVERNMENT | Thursday 16 February 2017 10:56 am

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The Australian Bankers’ Association (ABA) will join the four major banks at the House of Representatives Standing Committee on Economics’ public hearings in March for the review of the performance of Australia’s banking and financial system.

One of the committee’s focus areas is on how individual banks and the banking industry as a whole are responding to issues previously raised in Parliamentary and other inquiries, including through the Australian Bankers’ Association’s April 2016 six point plan to enhance consumer protections and in response to Government reforms and actions by regulators.

The Chair of the committee, Mr David Coleman, MP, stated that ‘these hearings provide an important mechanism to hold the banking sector to account before the Parliament’.

‘As the ABA is charged with addressing numerous issues of concern to consumers, it is important that they are scrutinised by the committee.’
Public Hearing Details:
Public hearing day 1

Friday, 3 March 2017
Committee Room 2R1,
Parliament House, Canberra
NAB – 9.15am to 12.15pm
Public hearing day 2

Tuesday, 7 March 2017
Main Committee Room,
Parliament House, Canberra
CBA – 9.15am to 12.15pm
ANZ – 1.15pm to 4.15pm
Public hearing day 3

Wednesday, 8 March 2017
Main Committee Room,
Parliament House, Canberra
Westpac – 9.15am to 12.15pm
ABA – 1.15pm to 3.15pm

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Henry Sapiecha

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First home buyer grant used as deposit with no cash outlay.


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DAVID Dyball had dreamed of being a homeowner for as long as he could remember but there was one word stopping him: Deposit.

The Maryborough man, 28, has purchased a home without a deposit in Aldershot The Fraser Coast Chronicle reports.

And he is sharing how he did it.

His trick was turning his $20,000 First Home Owners Grant into the deposit for the land.

“It all started when I picked up a paper and saw prices for house plans listed,” he said.

Once Mr Dyball realised the weekly payment on the plans was less than he was paying as rent, he started thinking outside the box as to how he could get himself onto a plan.

“So I contacted a few builders, explained my situation, and had two come back saying they work closely with finance companies that do no-deposit deals.”

He said negotiating a deal came down to communication and finding people that would listen to his idea.

Over the next few months, Mr Dyball looked at blocks of lands and found the piece he wanted in Aldershot.

“My plan was simple,” he said.

“The process was to find a house plan that suited my budget and then to find land to build it on.

“I spent a lot of time watching land prices to find one at a cheap price.

“The only luck in the process was the fact that the Government was offering grants.”

His new home is planned for completion in May.

“It has three bedrooms and two bathrooms,” he said.

“It was all done for less than $200k; it cost $196k to be exact.

“If you want to save money you have to get out there and put the work in.”


Henry Sapiecha

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Customers use credit rate cut to get ahead on mortgages


After the Reserve Bank cut official interest rates to a new record low this month, figures from two big lenders demonstrate customers have a growing safety buffer against a financial shock, because they are paying more than the minimum repayment.


RBA cuts interest rates

The Reserve Bank drops interest rates to a record low of 1.5 per cent.

Separate analysis shows a typical mortgage borrower would have paid off an extra $18,250 on their home loan if they had left their mortgage payments unchanged since the RBA began cutting interest rates in late 2011.

As interest rates have plumbed record lows in recent years, home loan customers have on average taken the opportunity to repay their bank faster, which slows growth for banks.

Interest rate cuts have given many households a growing buffer against financial shocks. 

The trend is likely to pick up after the latest rate cut, as National Australia Bank, Commonwealth Bank and ANZ Bank have a policy of leaving customers’ mortgage payments the same when their monthly interest bill falls. Westpac is the exception – it drops the monthly repayments of its customers when rates fall where it has set up a direct debit.

NAB said that on average, its customers were nearly 15 months ahead of their minimum repayments, up from 14 months a year ago and 12 months in 2012.

CBA’s result this month also showed more borrowers paying off their mortgages ahead of schedule, with 77 per cent of customers ahead of their minimum payments at CBA. Including mortgage offset accounts, CBA customers were ahead by an average of 31 months on their loan repayments, up from 27 months a year earlier.

NAB’s general manager of home lending Meg Bonighton,said customers had the option of reducing their repayments, but the default for the bank was to leave repayments unchanged.

“Four years ago, the average home loan account was 12 months ahead on its repayments; today, it’s almost 15 months ahead. This is great to see, because it means our customers are closer to paying off their mortgages, and are paying less interest,” she said.

“When interest rates are reduced, the monthly repayment amount remains the same unless the customer requests to change it. Some customers do choose to reduce their repayment amount, while some choose to keep it the same.”

Over several years, customers can knock thousands of dollars off their loans keeping payments unchanged as rates fall.

If a customer with a $300,000 loan had kept their minimum monthly payments unchanged since the RBA began cutting interest rates in late 2011, they would be $18,250 further ahead on their mortgage principal, according to interest rate comparison website Mozo.

That assumes a 30-year loan with minimum monthly payments of $2108 a month and an interest rate equal to the average major bank standard variable rate.

While the trend points to an improvement in some households’ financial position, it also highlights the limitations of cutting interest rates as a way of boosting the economy.


Henry Sapiecha

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What makes property managers say no to a potential tenant

Posted by Henry | R/E AGENTS,RENTING,TENANTS | Tuesday 12 April 2016 9:10 am

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  • Not all tenants are equal in the eyes of the landlord & agent.

In competitive rental markets, property managers need to quickly whittle down a pile of applications into the best possible tenants for their landlords.

It’s not an exact science, but there are several hallmarks of “bad tenants” they’ll use to weed out the weakest applications and to make their final decisions.

Terri Scheer Insurance executive manager Carolyn Parella warned of tenants who try to keep a distance from their landlord and who avoid leaving a paper trail.

“New, potential drug manufacturing tenants may be willing to pay rent months in advance and be happy to pay cash,” Ms Parella said.

She also warned of tenants who “try to avoid background checks”. This could include providing false references or not wanting to provide contact details.

When contacting a referee there are specific questions landlords and property managers should ask to determine whether an applicant is worth considering.

“Speak with previous landlords or property managers and ask whether they have had any issues with the tenants being reviewed, including late or missed rental payments and incidences of malicious or accidental damage,” Ms Parella said.

She said property managers should research the national tenancy databases to double check their rental history, undertake a public record check for bankruptcies and other details, and verify their identity.

But a negative mark on a tenancy database doesn’t necessarily mean a renter is going to be bad, Tenants Union of NSW policy officer Ned Cutcher said.

“The question of whether or not they’re a bad tenant warrants further exploration,” Mr Cutcher said.

“It puts them in a vulnerable position and to put a line through them without an opportunity to talk through what went on is symptomatic of our housing system.”

How a tenant acts at an open home can also be a deal breaker for some landlords. But while considering how polite an individual is, and how well-dressed they are, is “reasonable to a point” it isn’t always indicative of a good tenant, he said.

“In many cases you’re lining up with other hopefuls, it’s not quite what you are after and you’re expected to put on a cheshire cat grin. It’s a bit shallow but that’s the way decisions are being made about how you’re going to be housed,” he said.

“The best applicant might be the one that doesn’t immediately leap out at you,” he said.

It’s often not just one single warning sign but a combination of red flags that should be cause for concern. But in a competitive market it could be a single black mark that results in a potential tenant being unsuccessful in their application.

Unfortunately for most tenants, if you don’t get the rental “there’s no obligation for the landlord to provide a reason … most tenants wouldn’t hear back,” Mr Cutcher said.

Buyer’s agents and property management company Right Property Group director Victor Kumar said without a rental history they’d be willing to “give [a tenant] a break if everything else checks out”.

“I find that most times these tenants are grateful and will stay long term,” Mr Kumar said.

They also research the tenant’s workplace online, check on the ASIC register and ABN search where necessary to ensure the applicant is being truthful.

Asking for a month or two worth of bank statements can “tell a story too” about a tenant’s financial habits, Mr Kumar said, as can looking them up on social media.


Henry Sapiecha

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Bob Carr says Australian immigration should be cut by 50%

Posted by Henry | HOME OWNERSHIP,IMMIGRATION,POPULATION | Tuesday 16 February 2016 11:34 pm


Australia reaches population milestone

We all know that Australia’s population is growing, but you might be surprised to learn which city will be our biggest by 2050.

Former NSW Premier and Australian Foreign Minister Bob Carr has called for Australia to consider reducing its immigration intake by up to one-half before growing population density on the eastern coast changes the Australian style of living.

“I think the Australian people, if asked, would want immigration slowed,” Mr Carr said at a press conference in Sydney on Tuesday. “We’ve got a third-world style population growth rate.

“If you bring 100,000 people into the Sydney basin every year, the price of housing goes up […] people wonder why their youngsters can’t get houses in the big cities… the answer is we are going for breakneck population growth.”

bob carr file pic image

“We are going for breakneck population growth”: Bob Carr.

Australia’s population was officially declared to have hit 24 million people shortly after midnight on Tuesday, according to the Australian Bureau of Statistics.

About 190,000 people will be admitted to the country under Australia’s managed migration program this financial year, according to federal government statistics. About 70,000 were admitted in 1999-2000.

Mr Carr said Australia had the highest rate of population growth of any developed country and that the growth was undermining policies by governments to make housing more affordable and to improve infrastructure. “It’s always never enough”.

“By the middle years of this century we’re going to have a huge concentration of the available land,” he said. “We can go the way of other cities so that the basic unit of housing is a unit in a high-rise tower, but I would rather think a lot of Australians would believe we’ve lost something of ourselves.

“There comes a point … at 50, million, 60 million, 70 million before the end of the century where we have to start thinking again.”

Mr Carr said new immigration would invariably be “crammed” on a “narrow coastal strip” in Australia’s east, despite the fact the country is among the least densely populated on Earth.

“There’s a case for pegging immigration back by easily one-third, perhaps even 50 per cent,” Mr Carr said.

He said reducing overall immigration was compatible with federal Labor’s plans to increase Australia’s refugee intake.

Mr Carr said Australia’s economy should focus on export-led growth and stop relying on an expansion in its domestic market.

Australia’s “net migration”, which subtracts the number of people leaving the country each year, has dropped from a 2008 peak of about 300,000 to about 200,000 in 2014. It remains at its highest level as a proportion of the country’s total population since about 1965, according to statistics from the federal Treasury.


Henry Sapiecha

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Basic Training: How to have a second bite at your mortgage cherry

Posted by Henry | HOME LOANS,INTEREST RATES,MORTGAGES | Monday 28 September 2015 11:00 am

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Cherries, like a better mortgage rate, are always good for the picking.

The task of finding a better home loan deal is not right up there in the excitement stakes.

  • This is the latest in a series of stories for anyone just starting to manage their own financial future.

Sometimes the easiest thing to do is to forget about it, and keep paying too much. Or – as most of us do when buying petrol, milk, or any number of smaller things – you could shop around, and save a bundle.

Refresh your memory Check what your current interest rate is, and what the loan includes. Are you on a fixed or variable loan? If it’s fixed, are there discharge fees?

The fine print “The key to finding the cheapest home loan is that it’s not just about finding the cheapest interest rate – you also need to take into account the fees and charges associated with the loan,” says Shelley Marsh, a former stock market analyst who writes personal finance blog Money Mummy.

“This is why you should look at the comparison rate as well as the interest rate.”

She says the comparison rate reflects the actual cost of the loan as it takes into account fees and charges, plus the interest payment you’ll have to make over the entire life of the loan.

Featuring… If you want to pay your home loan off quickly (who doesn’t?), Marsh suggests looking for three top features: unlimited extra repayments without fees, a redraw facility and a 100 per cent offset account.

Play the field Do your research before tackling your bank. Comparison websites such as Finder, Mozo, Canstar or RateCity can link you directly to lenders.

New website HashChing, “Australia’s first online marketplace for home loans” – advertises special deals, and puts you in touch with a local mortgage broker who can help you get that deal.

Chief executive Mandeep Sodhi says mortgage brokers have access to better rates, and can do the heavy lifting for you.

Negotiate hard. Sodhi says if you’re dealing directly with a bank, dig your heels in, and don’t take the first offer.

Threatening to jump ship remains a smart tactic. “Do you want to stick with the bank that’s not looking after you?” says Sodhi.


Henry Sapiecha

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Home loans getting cheaper as lenders wage war

Posted by Henry | BANKS,INTEREST RATES | Tuesday 22 September 2015 7:56 am

There is a widening gap between the most competitive deals in the market and the average rates offered by the major banks image

There is a widening gap between the most competitive deals in the market and the average rates offered by the major banks. Photo: Louie Douvis

Some smaller lenders have slashed advertised interest rates on new owner-occupier mortgages by twice as much as the Reserve Bank of Australia.

The central bank cut official interest rates by 0.5 percentage points to 2 per cent over the past year to stimulate the economy. Several lenders have cut their most competitive advertised home loan interest rates for new borrowers by significantly more than this, figures from interest rate comparison website Mozo show.

The cuts have been prompted by fierce competition in mortgages, the biggest source of credit growth for banks.

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RBA governor Glenn Stevens expects some borrowers who have called themselves investors will become owner-occupiers. Photo: Louie Douvis

The most competitive rate offered by small lenders Credit Union SA and Community First Credit Union-owned Easy Street had fallen by more than 1 percentage point in the last year, with both offering loans at 3.99 per cent, while online bank ING Direct was also offering rates of 3.99 per cent, Mozo said.

The best home loan rate offered by National Australia Bank had also fallen 0.93 percentage points to 4.15 per cent in the past year, while Westpac’s rate had fallen 0.89 percentage points to 5.08 per cent, Mozo said.

“Margins are healthy right now, funding costs are fairly moderate, and the smaller lenders are taking advantage of the traditional spring property market to try to ramp up their loan books,” Mozo director Kirsty Lamont said.

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Competition is pushing down interest rates offered to new owner-occupiers. Photo: James Davies

Mozo’s figures are based on the best rates available to an owner-occupier taking out a new loan who has a 20 per cent deposit and is borrowing $300,000 over 25 years.

Rate cuts of this size have not necessarily been passed on to existing borrowers as banks’ specials are typically available to customers taking out a new loan or refinancing.

Ms Lamont also said there was a widening gap between the most competitive deals in the market and the average rates offered by the major banks.

Mozo data shows the average home loan interest rate offered by the big four bank is 4.86 per cent, which is 1.02 percentage points higher than the cheapest rate in the market, from iMortgage, owned by non-bank lender Homeloans.

Banks are targeting owner-occupiers because the Australian Prudential Regulation Authority wants lenders to slow their growth in the housing investor loan market to less than 10 per cent from the present 10.8 per cent.

In another sign of the competition for owner-occupiers, NAB last week said it would offer new borrowers in this segment enough frequent flyer points for two return flights to London.

The focus on owner-occupiers comes after most major lenders have raised interest rates for housing investors by 0.27 percentage points, opening up a two-tier interest rate market where investors pay more for debt.

Since these hikes were announced in July, thousands of customers had contacted their banks to update records so their loan was classified as an owner-occupied loan.

Reserve Bank governor Glenn Stevens on Friday said this trend would continue.

“I predict we will now see a number of people who used to call themselves investors are going to call themselves owner-occupiers because the relative pricing has changed. That will lead to some interesting dynamics, I suspect, over the next year,” Mr Stevens said.


Henry Sapiecha

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Posted by Henry | BANKRUPTCY,BANKS,GETTING OUT OF DEBT,HOME LOANS,MINING TOWNS | Thursday 27 August 2015 2:19 am

Mining regions are experiencing higher rates of mortgage arrears, Fitch Ratings says image

Mining regions are experiencing higher rates of mortgage arrears, Fitch Ratings says. Photo: Manfred Gottschalk

Job cuts in the resources sector are causing more households in mining regions to fall behind on their home loans, highlighting the risk to banks from the commodities slump.

Mortgage arrears rates are rising in mining regions across Queensland, Western Australia and the Northern Territory, Fitch Ratings said, due to deep costing cutting by miners.

At the same time, the house price boom in Sydney has dragged down the share of borrowers falling behind in suburbs in the city’s west and southwest – areas that have historically had among the highest loan delinquency rates in the country.

Mackay in central Queensland, a hub for the struggling coal industry, became the region with the highest share of loans by value that were more than 30 days in arrears, at 2.01 per cent.

This occurred after the region, which includes the Hay Point coal terminals, posted the sharpest deterioration in arrears in the six months to March, with a lift of 0.59 percentage points.

Regional Western Australia, which includes mining hubs such as Broome and Kalgoorlie, was the second-worst performing region, with an arrears rate of 1.88 per cent.

Fitch said mining-heavy areas of the Northern Territory were also affected by the trend.

“The slowdown and job cuts in the mining industry have hit non-metropolitan regions in the outback of Western Australia, in Northern Territory, and in the north and outback of Queensland,” the report said.

Despite more loans in mining areas falling into arrears, Fitch analyst James Zanesi said there had previously been higher arrears rates of 2.5 per cent to 2.6 per cent in other areas, such as Fairfield and Liverpool in Sydney or the Gold Coast after the global financial crisis.

“It’s the worst performing region, but in the past we’ve had worst performing regions with a higher delinquency rate,” Mr Zanesi said.

The best performing areas, in contrast, were the inner suburbs of Perth, Sydney, Brisbane and Melbourne.

The report also said there had been a “remarkable” improvement in performance in outer west Sydney, Fairfield and Liverpool, and the central coast of NSW, which had been among the worst performing regions in the past decade.

The 30-day arrears rate had fallen from 1.92 per cent to 1.19 per cent in Fairfield-Liverpool in the year to March. While this is still higher than average, the improvement is significant.

Mr Zanesi said one reason for this change was Sydney’s booming housing market, which allows banks to sell houses with mortgages in default more quickly, moving them off their books. Borrowers in difficulty are also more likely to sell their house before defaulting when prices are rising.

“If you have a booming housing market you actually have an opportunity to sell the property before financial difficulties materialise,” he said.

Henry Sapiecha
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ASIC catches out banks on interest-only home loans

Posted by Henry | ASIC,BANKS,INTEREST RATES | Thursday 20 August 2015 9:52 am

ASIC has uncovered flaws in banks' interest-only home lending image

ASIC has uncovered flaws in banks’ interest-only home lending. Photo: Sasha Wooley

Banks and other lenders have been put on notice by the corporate watchdog after it found significant flaws in credit standards in the booming interest-only mortgage market.

The Australian Securities and Investments Commission sent banks a blunt message to lift their game on Thursday, as it released a critical review into how 11 lenders, including the big four, were assessing customers for interest-only mortgages.

Interest-only loans account for $479 billion in mortgages, 37 per cent of home loans held by banks, building societies and credit unions, and have been growing rapidly.

In findings it described as “troubling,” ASIC identified instances where lenders’ practices may be putting customers at risk, in turn falling short of responsible lending obligations.

A review of 140 customer files found that in 40 per cent of cases, lenders wrongly calculated how much time borrowers had to repay the principal when the interest-only period of the loan ended, assuming they had more time than was actually the case.

In more than 30 per cent of files, there was no evidence the banks had properly considered whether an interest-only loan was appropriate for the borrower.

And in more than a fifth of cases, the lender had not properly assessed the borrower’s living expenses.ASIC deputy chairman Peter Kell signalled the regulator’s concerns were broad-based.

“It’s not a case where we found there were just two or three bad apples so to speak, this is a message to the entire industry. Lift your game when it comes to responsible lending around interest-only loans,” Mr Kell said.

Major banks backed the regulator’s calls, with Westpac saying it was working to address ASIC’s recommendations.

An ANZ spokeswoman said the report provided “appropriate recommendations to all key participants in the industry which will ensure interest-only home lending practices remain consistent with responsible lending obligations of all Australian credit licence holders.”

A National Australia Bank spokeswoman said the bank was “supportive of ASIC’s recommendations and any moves to further strengthen lending practices in the industry.” CBA said it “constantly” reviewed lending standards to ensure they were prudent.

Demand for interest-only home loans has jumped by 80 per cent since 2012, and interest-only loans accounted for a near-record 42 per cent of all home loan approvals in the March quarter.

While they are most popular with investors, who can claim a tax break on interest payments, owner-occupiers accounted for 41 per cent of interest-only loan approvals in December last year.

Mr Kell said delinquency rates on interest-only loans were low, but ASIC had acted to review the sector “before significant problems emerge.”

Penalties for breaking responsible lending laws can be up to $1.7 million per breach, and ASIC chairman Greg Medcraft said ASIC would consider individual action against lenders over the issue.

“We can do this the hard way, or we can do this the easy way,” he said.

“We’ve gone out and we are disclosing these results today, we will look at taking some action, investigation and enforcement, and most importantly we will be back,” Mr Medcraft said.

ASIC plans to revisit the issue in the second half of 2016.

The report said a “high” proportion of interest-only home loans were written by mortgage brokers, some of whom may have an incentive to write interest-only loans because it could lead to a larger trailing commission payment.

CLSA banking analyst Brian Johnson said the report was a further sign credit standards were not as high as banks had previously said.

While stressing ASIC’s report should not be overplayed, he said it also raised the risk that contracts were not enforceable if a lender had not followed responsible lending obligations

Henry Sapiecha
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