Home loans by value fell in October and remained flat over the year, suggesting the housing sector remains stagnant.

The Australian Bureau of Statistics (ABS) said on Monday that total housing finance by value fell 2.5 per cent in October, seasonally adjusted, to $20.458 billion.

The ABS data also showed that the value of home loans was largely unchanged from October 2010, when it was reported at $20.593 billion.

The number of home loans approved in October 2011 rose 0.7 per cent.

National Australia Bank chief economist Robert Henderson said Monday’s data showed the housing market was still deteriorating.

Mr Henderson said it was a fairly dismal report on the housing market, with falling lending in value terms and construction and investment lending both weak.

Recent data, including the national accounts figures released last week, have highlighted the weakness of the housing sector.

"It is clear that over the foreseeable future Australia will fall well short of building the number of new homes required for both owner-occupiers and renters," Housing Industry Association chief economist Harley Dale said.

"Amidst the growing risks to our economy from the situation in Europe, now is the time to be providing stimulus to the new home building sector while at the same time reinvigorating the housing supply reform process, which currently lies dormant."

Commonwealth Bank of Australia senior economist Michael Workman said Monday’s ABS figures were a little softer than he expected.

"If you go back and look at the data over the last 15 years or so, housing credit growth still remains exceptionally weak.

"So, for the housing market, it’s strongly biased towards the buyers rather than sellers and it looks like it’s going to stay that way."

Mr Workman said the Australian dollar and local bond futures were largely unaffected by the data.

RBC Capital Markets fixed income and currency strategist Michael Turner said the October housing figures were a little dated.

"China has already reported trade data for November, and the finance data do not reflect the November and December (monetary) policy easing (in Australia)," he said.

"As such, there are limited implications for markets.

"We expect more timely domestic data to better reflect the softening in global growth in coming months, which should justify further easing (of interest rates) and a move to accommodative territory in 2012."

ICAP senior economist Adam Carr said the housing data showed the Australian lending market was recovering even before the Reserve Bank of Australia (RBA) cut interest rates.

The cash rate is now at 4.25 per cent after two consecutive 25-basis point cuts in November and December.

"The 50-basis points worth of cuts we’ve seen will likely see lending growth accelerate over coming months, which will start to add to the strong private demand numbers we’ve seen to date," Mr Carr said.

Story source: www.ninemsn.com.au

Economists are divided on whether borrowers will get a second interest rate cut in as many months on Tuesday.

Seven of the 14 economists surveyed by AAP say the RBA will cut the cash rate to 4.25 per cent from 4.5 per cent on December 6.

On Melbourne Cup day, the Reserve Bank of Australia (RBA) cut the cash rate from 4.75 per cent, saying that recent information suggested inflation had been contained.

With inflation no longer a problem, the bias for the RBA is now firmly leaning towards rate cuts, with 10 of the 14 economists forecasting rate cuts by the middle of 2012.

Citigroup head of economics Paul Brennan is expecting the RBA to cut rates on Tuesday, despite expectations of strong economic growth in the September quarter.

"We see this as a policy of least regret given that the outlook for global growth has continued to weaken in the past month to well below trend," Mr Brennan said.

"We see scope to lower the cash rate to the bottom of the neutral range over the next few months, which would imply a cash rate of four per cent over the next three months."

The biggest risk to economic growth comes from Europe, which may well go into recession, or start another financial crisis, as several members of the euro struggle to meet debt repayments.

There are also local risks to economic growth.

In the past month the RBA, Treasury and the Organisation for Economic Co-operation and Development (OECD) have cut economic growth forecasts for 2012.

In addition to that, official figures for October showed a 10.7 per cent fall in building approvals and retail spending only rising 0.2 per cent.

On the other hand Australia’s mining boom is still going strong, with the sector making its biggest ever contribution to economic growth.

Nomura Australia chief economist Stephen Roberts said he doesn’t expect the cash rate to move for the foreseeable future unless something bad happens overseas.

"My forecast is that they are going to leave it at 4.5 per cent," he said.

"I’m assuming they will hold it neutral all the way through to the end of 2012 but my proviso is if Europe generally does go to hell in a handbasket, then they can drop interest rates a long way."

NAB senior economist Spiros Papadopoulos said the RBA won’t cut on Tuesday but by early next year the pressure will build for another rate cut.

"Obviously there’s a risk that they might cut interest rates next week, given everything that’s been happening offshore in the last couple of weeks," he said.

"On balance, given the fact that the domestic economy has been holding up okay we don’t think they need to rush in to cutting rates."

Story source: www.ninemsn.com.au

House hunters who are pre-approved plan for a happier New Year

Future first homebuyers considering making their property move in the New Year have strong awareness of the importance of seeking loan pre-approval before house hunting, based on insights from national mortgage broker, Mortgage Choice.

A Mortgage Choice survey of first homebuyers looking to purchase before February 2013 found two-thirds of respondents intend to apply for loan pre-approval*.

According to Acting Head of Corporate Affairs, Belinda Williamson, first homebuyers are seeking assurance about their borrowing capacity before starting their property search.

“Our survey showed primed first homebuyers are making the wise choice to get their property finance pre-approved by a lender. This step helps buyers hone their property search and shop with confidence when negotiating a purchase or bidding at auction,” Ms Williamson said.

“Loan pre-approval provides a conditional approval of a loan amount and is usually based on an assessment of potential borrowers’ individual circumstances, needs and ability to repay the loan.

“Keep in mind it’s usually a limited time offer, for a period of three to six months and can be sourced through a mortgage broker. Once pre-approved, it’s important to keep your broker up to speed with any changes in your financial situation as this may void the agreement.

“It pays to shop around. Not all lenders offer loan pre-approval and some don’t conduct individual assessments, meaning you may get a different loan limit upon applying for unconditional approval and, like those without pre-approval, you could miss out on a property if it’s above your loan limit.

“If you are looking to purchase in the New Year now is a good time get pre-approved so you don’t miss out on potential property purchases over the holiday period.”

Mortgage Choice has compiled three top tips to help potential borrowers prepare for home loan pre-approval:

Organise your deposit and evidence of savings – You generally need a deposit of at least 5% of the purchase price, plus upfront costs. However, you will need to show evidence of a genuine savings plan, such as bank statements that illustrate a savings strategy for at least three and up to six consecutive months. Note some lenders now consider rent payments as savings evidence.

Check your credit history – Grey areas in your credit history, such as bill defaults and/or prior loan/credit applications can affect your loan pre-approval application. Resolve any issues with the relevant debt provider before you apply. For a copy of your credit file from mycreditfile.com.au you must provide personal details including your address, employment and driver’s licence number.

Prepare your paperwork – Gather evidence of your employment, income, assets, liabilities and expenses. You will also need to provide your driver’s licence or other ID, recent pay slips, tax returns and bank statements. Having everything at arm’s reach will streamline this process.

Story source: www.mortgagechoice.com.au

Top tips to saving more this Christmas

As households prepare their budgets for festive season shopping splurges, now is an ideal time to unwrap the financial strategies that help borrowers gain greater control over their home loan situation, according to Australia’s largest independently-owned mortgage broker, Mortgage Choice.

Company spokesperson Kristy Sheppard said, “Ensure Christmas costs don’t hamper your ability to meet home loan and/or other debt commitments, by proactively managing your money. It’s not hard.”

“Staying on top of financial obligations, in conjunction with careful pre and post silly season budgeting and planning, will without a doubt put you in a better position to achieve your property goals sooner. It should also give you more confidence to properly enjoy the festive season.”

Here are five tips to help improve your mortgage management in the countdown to Christmas:

‘Tis the season to bring budgeting back on track. Get your Christmas and new year budget underway if you haven’t already. Be sure to include seasonal spending estimates for gifts, treats, catch ups, celebrations and other holiday outings.

‘Tis the season for a home loan health check. Are you making the most of your loan? There may be features attached to it you are not utilising or are paying a premium for. A regular home loan health check is a great way to see if you are making the most of your existing loan or if you are better suited to a different lender and/or product. Before switching, carefully weigh up the pros and cons by comparing loan features, rate, repayment type and frequency, accessibility, fees and more.

‘Tis the season to keep repayments steady, despite recent rate cuts. If your loan’s interest rate has recently dropped, get ahead by continuing to repay at the original, higher rate. For example, take a loan of $300,000 at 7% over 30 years. If your rate reduces by 0.25% to 6.75% and you keep repaying your loan as if the interest rate was still 7%, you could shave over two and a half years off your loan term and save more than $54,000 in interest owed.

‘Tis the season to go one step further and round up repayments. If the monthly repayments on the above mentioned loan maintained at the higher rate are rounded up from $1,996 to $2,100 from day one, it is possible to cut a further three years and seven months off the loan term and save an additional $55,000 in interest owed (if all loan aspects remained the same). The total savings would equal $109,000 in interest and a reduction in the loan term to 24 years and 8 months.

‘Tis the season to turn up the frequency of repayments. Depending on your loan and lender, dividing your monthly minimum repayment in two and making fortnightly repayments instead may also save you interest owed and reduce the loan term. There are 12 months and 26 fortnights in one calendar year; by paying fortnightly, you make the equivalent of 13 monthly repayments. The savings on the above mentioned loan equal almost $100,000 in interest and almost six years off the loan term.

For home loan tips, trends, facts, data and other information, visit MortgageChoice.com.au,

With the Reserve Bank serving up a rate cut, it’s a smart move to keep your repayments at the same level. Many lenders don’t automatically reduce your repayments when rates fall.

That doesn’t mean, of course, that you’re not getting a cut in interest rates – just that your weekly or fortnightly (or monthly, but don’t pay monthly, it will cost you more in the long run, as explained below) repayments stay the same.

That’s smart because automatically you’re paying an extra $45-$60 (or whatever it equates to on your mortgage) a month, which will see you get out of the debt-jail sooner.

And with house prices stagnant or falling, the one smart way to make money out of your property is pay it off more quickly and reduce the overall cost of acquiring it.

It has, of course, always been the best way to do things. Ask any pre-baby boomer and they will tell you that.

But in the heady debt-fuelled days of recent past it seemed too easy that you could buy a place, sit it out, burn up the redraw facility on the loan on cars, clothes and overseas holidays, and still double your money in a decade. However, after such big run-ups in house prices, everything has softened and we’re not likely to see similar increases in home prices anytime soon.

Not that a slowing housing market is necessarily bad – despite the general pall it throws over things. Investors may want those days to return but most people can see that steady prices are a lot healthier.

Houses, after all, are primarily for living in. There are other money-making vehicles out there that don’t put the cost of basic shelter out of the average person’s reach.

And the slowing housing market also – in part – took the pressure off the Reserve Bank to keep hiking rates after last year’s Melbourne Cup.

When it comes to the cost of acquiring a home, you can do it the expensive way – borrowing the money (as most of us have to do), or the really, really expensive way (borrowing money and taking forever to pay it off).

The Figures

Let’s assume you’re paying 7 per cent on your mortgage now and you’ve borrowed $500,000 to buy your place. Pay it off monthly over 25 years and you’ll fork out a total of about $1,060,147.

Add another $60 a month to your repayments and you’ll be up for a total over the life of the loan of $1,031,230, saving $28,918.

Pay down an extra $200 a month, or about $50 a week, and suddenly you’re up for a six-figure total instead of a seven, of about $975,321. You’ll also save an impressive $84,842. And you’ll walk away from the shackles of that mortgage more than three years earlier.

Of course your mortgage might not be $500,000, so to find out how it works in your situation check out some of the online calculators such as this. It’s worth bookmarking the site and going back to it every time you need a bit of motivation to pay down the mortgage faster.

And another trick – now well known by many – is to pay fortnightly and not monthly. You’ll end up thousands of dollars ahead by taking advantage of the fact there’s 12 months in the year, but 26 fortnights, meaning you make one fortnight’s repayment more per year than you would if you were paying monthly.

Story by Carolyn Boyd www.domain.com.au

A FRESH round is likely to begin in the mortgage price war with Commonwealth Bank pledging to beat any advertised rate among its three big rivals.

The pledge has hallmarks of the ”unbeatable” campaign launched by National Australia Bank in New Zealand, a move that spurred on home lending but crunched margins among banks.

The move has been timed with the spring sale season, traditionally the most active period in the Australian housing market.

Intense competition has already emerged among banks across fixed rate loans, with some starting to price fixed rates lower than variable rates.

But CBA’s push extends to both fixed and variable rates and will remain in place until the end of September. The move is expected to draw a swift response from rivals National Australia Bank, ANZ and Westpac.

CBA’s executive general manager of retail products, Michael Cant, said the move was aimed at providing borrowers with competitive home loan deals.

”Our guarantee to beat our major competitors means we’re putting our money where our mouth is,” Mr Cant said.

Sluggish global economic growth, worsening debt market problems, as well as doubts about the Australian outlook have sparked predictions of cuts to official cash rates.

Source: www.domain.com.au

With an interest rate rise last week and the banks proving they are happy to move out of step with the Reserve Bank, many property owners will be wondering whether they should lock in the rate on their loans.

Fixing your interest rate provides certainty that the repayment amount for your loan won’t change, regardless of whether the Reserve Bank changes the official interest rate.

It is important to remember lenders are in the business of making profits by selling money. They are making a bet that the variable rate loan on average will be lower than the fixed rate they are offering and they rarely lose.

When you take out a fixed rate loan, you’re effectively paying a small insurance premium to protect yourself against repayment increases.

Most fixed rates run for one to five years, although some lenders offer 10- to 15-year terms. The longer the fixed-rate term, the higher the interest rate, because it becomes harder for the lender to accurately project the direction of official interest rate movements.

Generally speaking, fixed-rate loans differ from variable rate loans in a couple of ways. First, there is a limit to how much principal you can pay off. The ceiling for making additional repayments is usually around $5000-$10,000 a year above the minimum required amount.

In addition you may pay a penalty if you break a fixed-rate term and switch to a variable rate. If the official cash rate has dropped since you took out the loan, the variable rate will have dropped. The lender will incur a loss in comparison with the initial profit margin they set when you took out the loan, so they will charge a fee to compensate.

There is no hard and fast rule about whether, and when, it is appropriate to fix your interest rate. However here are a few general guidelines.

If you have debt on your family home and debt on an investment property, it may be wise to consider fixing your investment loan. This will enable you to focus on reducing the debt on your family home. Debt on your home should always be paid off first because it does not attract an income tax deduction.

Further if you’re self-employed and don’t have a regular income, fixing your loan may help you manage your cashflow.

If you do decide to fix your loan, it may be sensible to fix only a portion of it and put the rest of your borrowings in a separate variable loan facility. The usual split is 50 per cent fixed and 50 per cent variable, though this isn’t set in stone.

Splitting your borrowings enables you to make unlimited additional repayments on the variable component so you can reduce debt more quickly.

In the end, deciding to fix your loan comes down to your personal situation, how much debt you have and whether you think that obtaining certainty in your repayments is worth the risk of paying a premium if the official interest rate falls. Even if your friends or family are fixing their loans, it might not necessarily be the right move for you.

Mark Armstrong is a director of Property Planning Australia (NSW), www.propertyplanning.com.au  

View the original article here

CUP Day punters could have an extra reason to cheer today, with the odds strongly in favour of the Reserve Bank keeping interest rates on hold for a sixth consecutive month.

But any sigh of relief from borrowers could be short-lived, with some pundits predicting that the RBA will still send rates north by Christmas. And analysts are divided over whether Australia’s big banks will be forced to raise rates independently if the RBA chooses to keep its powder dry today.

Nomura’s Victor German said it was clear banks wanted to raise rates, but, from a political point of view, it would now be "very difficult".

He named Commonwealth as the bank most likely to go it alone, but said the chance of an independent rise was "diminishing" with the new Senate inquiry into banking competition.

Southern Cross Equities analyst TS Lim agreed that political pressure made it tougher for banks to raise rates but said increasing funding pressures meant banks were likely to act anyway.

"Once CBA does it the rest will follow," he said.

Futures market betting on the likelihood of an official rise has plummeted in the past week after benign inflation data dampened expectations that the RBA would lift the cash rate to 4.75 per cent.

Market odds last night reflected just 26 per cent chance of a rate hike today, despite new data revealing an uptick in price pressure in October.

Commonwealth Bank chief economist Michael Blythe said a rates pause today would be "probably only a temporary reprieve".

He said economic data in the next month – including critical growth, job and capital spending indicators – could convince the RBA to hike in December.

The TD Securities-Melbourne Institute monthly inflation gauge showed that on an underlying or "trimmed mean" basis – a measure used by the RBA – inflation rose by 0.2 per cent after flat results in August and September.

On a yearly basis, inflation grew at 3.1 per cent – outside the RBA’s target range of 2 to 3 per cent.

Pushing the gauge higher were price rises for car fuel, fruit and vegetables, and insurance services.

Story by Rachel Hewitt – with Peter Taylor www.heraldsun.com.au

IT is only a matter of time before interest rates rise again, with board minutes from the Reserve Bank of Australia (RBA) revealing that it "could not wait indefinitely" due to rising inflationary pressures.

Minutes from the latest RBA monetary policy board meeting, taken on October 5 and released on Tuesday, say that while the overall global outlook was broadly unchanged since the RBA board’s previous meeting, interest rates would need to rise "at some point".

A gradual tightening in resource utilisation meant that inflationary pressures would strengthen, the minutes say.

The minutes reveal that the decision to keep the cash rate on hold at 4.5 per cent, taken at the October 5 meeting, was finely balanced.

"While the board recognised that it could not wait indefinitely to see whether risks materialised, members judged that they had the flexibility to do so on this occasion," the minutes said.

Based on the medium-term inflation outlook, a case could be made to increase the cash rate at the October meeting as developments had been broadly consistent with central forecasts, the minutes said.

But members decided to leave the cash rate unchanged after accepting that the economy was expected to continue growing at trend in the near term, credit growth had softened and the rise in the exchange rate would effectively be "tightening financial conditions at the margin".

Board members also said it was "still possible" that downside risks to global growth could materialise.

"Members felt these arguments were finely balanced," the minutes said.

Overall, they concluded that it would be "appropriate to hold the cash rate steady for the time being," until evaluating further information at the next meeting, on Melbourne Cup Day, November 2.

The board noted that, despite the release of unemployment figures showing a 5.1 per cent unemployment rate in August, there had been a relatively limited amount of economic data released over the past month.

After rising to around record high levels in the June quarter, Australia’s terms of trade were estimated to have increased further in the September quarter but were then expected to decline gradually.

The minutes also noted that a slowdown in the pace of household borrowing had been accompanied by a cooling in the established housing market, and that the borrowing slowdown was a "welcome development".

There had been little new information on price and wage inflation, with consumer price index figures due out later in the month.

Good rainfall had led to conditions in the farm sector improving significantly.

In Europe, Ireland had been a focus of concern in financial markets and members noted that periods of "acute stress" in Europe were "likely to recur".

Meanwhile, business investment was expected to strengthen over the next few years and offset a scaling back in public investment.

Prospects for growth in Asia remained "solid" despite slowing from earlier in the year as the prices of many of Australia’s export commodities remained at high levels, board members said.

"Domestically, members noted that the economy appeared to be evolving broadly in line with the bank’s expectations," the minutes said.

The outlook remained for public spending to slow but for private demand to pick up, particularly in business spending.

Story by Kim Christian www.thesatellite.com.au

The Reserve Bank surprised many when it decided to leave the cash rate unchanged at 4.5 per cent this month, despite the market pricing in a greater than 70 per cent chance of a rise.

It has now been five consecutive months since the last rate rise in May, which is good news for the property market.

Sydney property activity for spring has been solid with September recording a healthy 66 per cent clearance rate with total sale values up on this time last year driven by a surge in listings.

Almost 2300 properties are listed for auction this month, compared with 1625 for the same period last year.

It seems vendors are taking advantage of the traditionally strong spring selling season combined with the impetus to act now before the next phase of interest rate rises begins and dampens buyer enthusiasm.

It’s no longer clear whether the next move upwards will be in November or if the Reserve Bank is likely to wait until the new year to start raising rates again.

According to the RBA, the average standard variable mortgage rate offered by the banks in September was 7.4 per cent.

Regardless of when interest rates start to move again, most economic forecasters are expecting at least another 1 per cent by the end of next year.

Take into  account comments from the banks about their struggle with increased funding costs, and it would be prudent to expect an additional increase on top of official cash rate movements.

So by the end of 2011, it’s possible that standard variable mortgage rates will be at 8.5 per cent or higher.

So what can mortgage holders do to gain some protection?

Many will already be thinking about potentially fixing part, if not all, of their mortgage.

Up until the last month, there was some uncertainty over the path of official interest rates due to some weak economic data at home and abroad.

This affected future views of interest rates in the market, and these in turn influenced how banks set their
fixed mortgage rates. According to RBA data, fixed-rate mortgages have been at similar levels as the standard variable rate since July, the first time since early 2009.

The latest housing finance figures (August) show the proportion of owner-occupiers taking out fixed rate home loans was less than 4 per cent, and actually fell slightly from July.

That is, more than 96 per cent of new loans in August were variable.

There is always a risk in fixing a mortgage and picking the right time to do so. The last time the proportion of new loans being fixed rose significantly occurred in March 2008, when the standard variable mortgage rate was
9.35 per cent, just shy of the peak four months later.

At this time, 24 per cent of all new loans were fixed, according to the ABS.

Now may be the right time to at least consider the option of fixing a portion of your mortgage.

With further rises on the cards, the opportunity exists to lock in a three-year rate now which may well be below the standard variable rate in a few months.

Anthony Ishac is the general manager for the Fairfax Media-owned Australian Property Monitors.

  The CEO of Australia’s largest independently-owned mortgage broker, Mortgage Choice, says the latest ABS housing finance data* highlights that warnings of interest rate rises are having a dampening effect on home loan demand.

The August ABS Housing Finance report 5609.0 shows a reduction in both the number and value of housing finance for investment housing, while the value remained steady for owner occupied housing finance. The total value of dwelling commitments dropped 1.3% from July to August 2010.

The number of owner occupied loans increased 1.0% and the number of loans for the purchase of established dwellings increased 1.4%. However, the number of loans for the purchase of new dwellings dropped 2.0% and the number of loans for the construction of dwellings dropped 1.0%.

Mortgage Choice CEO Michael Russell said, “It is no secret that winter delivered a slowed pace for housing finance demand, particularly from investors.”

“There is no doubt the Reserve Bank’s hold on the cash rate will shortly come to an end. What is just as worrying for potential and existing borrowers is how lenders will react to the news.

“To counteract any out of cycle rate movements, potential borrowers need to factor in higher loan repayments, create a savings buffer as early as possible and research their loan options thoroughly. It is important to know all the ins and outs before entering the mortgage maze.

“Some good news is that we have witnessed a dozen or so lenders announce product changes over the past couple of months. In a further sign that lender competition for home loans is rapidly returning, some lenders are offering special discounted interest rates and higher loan to value ratios.

“With a close eye on interest rates, potential and existing borrowers need to knuckle down now to prepare for rises by assessing their household budget, repayment strategy and the suitability of any home loan.

“A professional mortgage broker will introduce a borrower to a range of options, work to secure interest rate or fee discounts and put forward a solid case for loan approval. These are major reasons why 40% of all new home loans in Australia are sourced through brokers.

“Looking forward to the spring housing finance data, we will be keen to see if demand heats up.”

*All figures quoted are seasonally adjusted.

Source: www.australianhousehunters.com.au

Federal Treasurer Wayne Swan says banks could not justify raising rates above the official cash rate if the Reserve Bank of Australia increases its rates when it meets on Tuesday.

On September 21, the RBA kept its benchmark cash rate on hold at 4.5 per cent since the most recent increase in May.

The last rise capped off a series of six that began in October last year when cash was at a multi-decade low of 3.0 per cent.

But economists are predicting a rise when the bank meets at 1430 AEDT on Tuesday.

Mr Swan said there were issues on the long-term funding profile of banks but it still didn’t justify hitting customers with higher interest rates than those of the RBA.

"I don’t think there is any justification whatsoever for any bank to move above the official cash rate decision of the Reserve Bank," Mr Swan told ABC Radio.

"Banks are making healthy profits at the moment, their net interest margins are back above what they were before the global financial crisis."

HSBC’s chief economist Paul Bloxham expects the RBA 25 basis points this year, putting the brakes on an economy fuelled by China’s insatiable demand for resources.

Mr Bloxham says that if the central bank does not raise official interest rates at its meeting on Tuesday, it is likely to do so before the end of the year.

Story from ninemsn.com.au

Many Australian homeowners can’t be bothered switching lenders even to save more than a thousand dollars, according to mortgage broker Loan Market.

A national survey by Loan Market found 58 per cent of respondents said they would need to save at least $1500 a year to be motivated to refinance with another lender.

Loan Market chief operating officer Dean Rushton said the survey results showed that lenders and brokers needed to communicate more effectively about the potential savings from moving mortgages.

“The differences between lenders and the interest rates and conditions they offer has never been wider,” Rushton said.

“But our survey shows that people can’t be bothered switching banks even if they were able to save $1000 to $1500 a year.

Rushton said homeowners were often hesitant to refinance because they believed it would be too much trouble due to the fees and paperwork involved. “The fact is people can achieve significant annual savings by shopping around and getting a better deal on a mortgage with a much more competitive package,” he said.

“If you’re borrowing more than $250,000, then the savings can be even greater.”

The online poll of 380 people found 42 per cent of those surveyed would need to see potential savings of more than $2000 a year before considering switching loans.

Ten per cent said they would refinance to save $500 a year, 14 per cent to save $500 to $1000, 18 per cent to save $1001 to $1500 and 16 per cent to save $1501 to $2000.

Rushton said a mortgage broker was well placed to review an existing home loan and determine whether a borrower could obtain a better deal from a rival lender.

“Mortgage holders might have to accept some exit fees from their original lender but it can be worth it if they can negotiate a significant reduction on their interest rate,” he said.

Benefits of refinancing included the chance to reduce debt on credit cards, which often had interest rates triple that of an average variable home loan.

Source: Australian Property Investor

MOUNTING evidence of accelerating growth among major Asian trading partners is shortening the odds of a rate rise tomorrow.

JPMorgan economists led by Stephen Walters added their voices over the weekend to predictions that the Reserve Bank would jack up official rates by 25 basis points when it meets tomorrow.

Stoked by a resources industry booming on the back of demand from China, inflationary fears have overshadowed recent signs of weakening credit growth and falling building approvals.

"Our conviction that a 25bp rate hike will be delivered by the RBA has risen, particularly given accumulating evidence that China is past its growth downshift," Mr Walters told clients.

Financial markets predict there is a 70 per cent chance the central bank will increase interest rates by 25 basis points to 4.75 per cent, with further rises expected through to next year.

HSBC’s chief economist, Paul Bloxham, said that if official interest rates did not rise tomorrow, the RBA was likely to act before the end of the year.

"That’s obviously a close call as to whether they go up this week or they go in November, but my broad view is that they will go up by the end of the year by 25 basis points," he told ABC television.

Mr Bloxham, who spent 12 years as an economist at the Reserve Bank, is predicting interest rates to rise by 125 basis points by the end of next year.

"The outlook for the resources sector is very strong and of course everything can’t grow at once in an economy, otherwise it puts upward pressure on inflation," he said.

But property experts warned a rate rise threatened to damage the nation’s housing sector as weekend auction clearance rates fell to 12-month lows on the back of two football grand finals and interest rate concerns.

Real Estate Institute of Australia president David Airey said it was still too soon to be thinking about lifting rates, and if the RBA did so, it would be making a "serious mistake".

"The economy is still in recovery . . . we would advise the RBA to wait until the quarterly CPI figures in late October before they make any decisions," he said.

Opposition Treasury spokesman Joe Hockey said if the RBA put up interest rates tomorrow, Labor’s economic management would be to blame. "If interest rates go up the government has responsibility . . . because they are still spending like drunken sailors (and) putting upward pressure on inflation," he told Network Ten’s Meet The Press.

But Wayne Swan cited the International Monetary Fund’s comments that the pace of stimulus withdrawal was "appropriate", and the government’s fiscal consolidation was faster than in the past. In his weekly economic note, the Treasurer said the government was committed to getting the budget back into surplus in 2012-13.

Mr Airey said there was "no doubt" tomorrow’s RBA meeting contributed to increased buyer caution over the weekend.

Total auction revenue was $149 million, down $144m on last week’s $293m and down $140m on the $289m collected on the same weekend last year.

Story by Lanai Vasek The Australian

With Australia’s residential property sector finally coming off the boil, investors should be set to head back into the market to take advantage of easing demand and weakening buyer competition.

But while owner occupiers and first home buyers are fast disappearing from the market, the latest figures from the Australian Bureau of Statistics show that investors aren’t exactly jumping in to take their place.

It’s a sign of just how strong Australia’s property market became over the last 18 months that investors are now finding it a bit of a struggle to see a profitable way in.

One of the biggest problems is the across-the-board decline in gross rental yields seen in every capital city for both houses and units in the last year, according to analysts RP Data.

(Gross rental yield is calculated as a percentage of the annual rent versus the purchase price; it does not include expenses in maintaining the rental property.)

RP Data estimates that it takes a rental yield of 5.5 per cent or better to be attractive enough to draw investors into the market in any great numbers.

Many capital cities – particularly for houses – don’t even come close to that threshold:

HOUSES               Jul-10                    1 Year Change

Melbourne             3.5                              -0.6                        

Perth                     3.8                              -0.4

Adelaide                3.9                              -0.3

National                3.9                              -0.4

Sydney                  4.1                                0.3

Brisbane                4.2                              -0.3

Canberra               4.6                               -0.3

Hobart*                 4.9                               -0.1

Darwin                  5.2                               -1.2

UNITS                 Jul-10                    1 Year Change

Melbourne            4.1                               -0.5

Perth                    4.3                               -0.2

Adelaide               4.5                               -0.3 

National              4.8                               -0.3

Brisbane               4.9                               -0.3

Sydney                 5.1                               -0.3

Canberra              5.3                               -0.2

Hobart*                5.4                               -0.5

Darwin                 5.6                               -0.5

Sure, gross rental yields are a blunt instrument for measuring the profitability of an investment  — because they don’t account of other expenses and outgoings – and what ultimately matters is the rental yield calculated for an individual property.

But the data does point out pretty clearly how spiraling property prices in many of the capital cities have put real pressure on would-be investors.

Vacancy may be tight in many cities but rental growth has proved weak-to-moderate, which means investors are having to wait longer to see a decent rental return after paying those high purchase prices.

Then there’s the other risk that comes with buying into a near-peak market — pay too much above market value and you can end up sacrificing months or even years of potential capital growth.

Avoiding both these scenarios are sure to be on the forefront of investors’ minds heading into the spring property season.

*Due to the low volume of sales in Hobart, rental yield figures cited by RP Data cover the period from June 2009 to June 2010. 

Story by Chris Vedelago Fairfax Digital