Andrew – Page 7 – Peach Home Loans

“Tick and flick” reforms would ease and encourage lenderswitching

May 15,2012 Comments Off

Independent research reveal that about 50% of people are ready to ditch and switch lenders should red tape be eliminated and the implementation of the tick and flick approach by the Federal Government on July 1 makes it that much easier for borrowers to switch accounts.

The government’s announcement of the reforms to be done on lender switching processes was greatly appreciated by Abacus – Australian Mutuals who recently employed Roy Morgan research to find out what it is that would help make borrowers switch lenders.

Research revealed that “one in five Australians are likely to change financial institutions in the next year, rising to almost 50% of people if the paperwork and administrative effort was substantially reduced.”

Abacuschief executive Louise Petschler stated, “Abacus welcomes this important consumer research from Roy Morgan which illustrates the opportunities and challenges facing our industry in the coming months. The report shows Australians are itching to ditch and switch to banking providers that offer competitive interest rates, fairer fees and charges and the convenience of branches and ATM networks.We offer this in spades and our members look forward to Australians switching to us in 2012, particularly when significant account switching reform begins on July 1.”

The survey conducted on 18-64 year old respondents found that, “21% of people are likely to change their main financial institution in the next 12 months, with interest rates not being competitive (35%), and high or unfair fees (30%) listed as the main reasons for the change and 49% of people would be likely to change their main financial institution in the next 12 months if the administration process of moving finances, direct debits and scheduled payments could be handled automatically by their new financial institution.”

Further, the press release stated that, “from July 1, instead of requesting a list of regular debits and credits from their ‘old’ bank, Australians can let their ‘new’ bank do the work for them by signing authorisation forms to allow the establishment of regular debits and credits to the new transaction account.”

Abacus is encouraging Australians to look around and find a better dealand consider the choice, value and competition offered by other sources like building societies, credit unions, and mutual banks.

“Switching is easier than you think, and we recognise the next 12 months will be an exciting time for Australian consumers and our industry,” added Petschler.

Contrary to common opinion, none of this is good news for mortgage brokers as lenders already claw back substantial commission where a loan is refinanced within 18 months. If borrowers are encouraged to refinance on a whim with no exit fees and easy account switching , the result is that mortgage brokers are faced with performing work for which they may not be paid. Alternatively mortgage brokers may have to impose fees on clients whose refinance results in commission claw backs. After all no fair minded person should expect a mortgage broker to work for nothing however it undermines some of the government’s strategy. A good solution would be for the government to ban broker commission claw backs ….. but that isn’t going to happen 😉

Renting out extra rooms can help pay for mortgage

May 14,2012 Leave a comment

An article from The Adviser tells of a survey conducted by PRDnationwide where homeowners answered considering to have a spare room rented so as to help pay home loans.

The research was done on 450 respondents where 14 per cent answering they already had their spare room rented; with 11 per cent more saying they’d do the same if only they had the extra space.

The research director for PRDnationwide, Aaron Maskrey, was not surprised with the results especially due to the tough economic times.

Maskrey shared, “Renting out a spare room to generate extra cash could reduce the likelihood of suffering mortgage stress. Getting onto the property ladder is increasingly difficult for thousands of first-time buyers in Australia, and increasingly, homeowners are making unused space earn its keep.”

The result of the poll now was greater than a similar poll done on August 2009. “That was when the global recession had just begun to bite and people were perhaps under less pressure,” added Maskrey.

Renting a spare room could just be one of the ways a person can do to help get out of mortgage faster. Rather than have a room used for storage, it would be more practical to use the extra room and have the rent help pay for the mortgage. Although many persons have never really done renting a spare room, the research found that most of the properties bought were with a spare bedroom or a granny flat as buyers thought of the renting out option.

Maskrey is telling people how it is now easy to do the rent out option, saying, “Finding a lodger has become easier, with a range of websites advertising for rooms to rent and flatmates.”

Keep the bastards honest – V2

May 8,2012 Leave a comment

As a result of the growing disappointment of Australians with banks a new party may soon have a representative in the government. Members of Unhappy Banking have formed the Bank Reform Party, a political party which was formed to contest in the next federal election.

Once the group has 500 formal members, it will register in the Australian Electoral Commission. The proposed political group aims to, “reform the banks and the legal system to protect Australians from greedy and unfair banks.”

The political party is made up of dissatisfied bank clients and former staff and is headed by Former BankWest head of media, Mr. Adrian Bradley. Bradley shared that consistent survey results revealed that most Australians want banks to be more accountable.

In a statement Bradley said, “We saw the banks’ arrogance again last week when they thumbed their nose at the RBA’s 50 basis point cut. The ALP and Coalition are out of step with the Australian community’s expectations on the need to reform our banks.”

In their website the group stated, ”We want a fair and just society where we are all accountable, and this must extend to our banks and other institutions.”

The group declare that they are NOT bank bashers! The statement in their website states, “We know Australian banks are the lifeblood of the Australian economy. Australia and all Australians urgently need STRONG banks. But we also urgently need banks to be FAIR! Yet the banks seem to think it’s impossible for them to be strong while also being fair and accountable. We believe our banks urgently need better and possibly more regulation to be fairer, and more accountable to ALL Australians. We do not want to over-regulate anyone, as a principal we support less regulation, but not at the cost of fairness to the wider Australian community. At the very least, we believe most Australians agree banks need to be regulated to stop gouging on interest rates!”

The group also shared how they are sick of the banks saying, “what’s good for the banks is good for Australia,” and with “how banks keep telling us all to keep out of banking, yet as soon as they get into trouble they are the first ones demanding assistance.”

A fundamental of their plans is regulating banks and have them follow RBA’s cash rate moves, enforce new and tougher anti-predatory lending practices, enforce greater transparency on fees and charges, examine greater competition, give more support for non-bank lenders and legislating a cap on excessive bank bonuses and executive salaries.

I have a feeling that mortgage brokers may become major supporters of the new party 😉

Why the Australian Dream is unattainable to so many people

Apr 16,2012 Leave a comment

The McKell Institute’s release of their report “Homes for All – The 40 things we can do to improve supply and affordability,” written by Dr. Tim Williams and Sean Macken, has shed some light as to why the Australian dream remained a dream, even a nightmare to some people.

Houses have become very expensive, nine times the median salary,costing more than those in New York and London. While the ages of people owning properties in Sydney are getting older.

Australia’s typical family structure has also changed because of the high prices with people being forced to live with their parents to save on rent, or while they come up with a loan deposit, or worse, not being able to afford rent.

Renting has been the most practical solution for some but even the cost or renting has driven a lot of people out of the city and into places where jobs are meager. The list of those availing public housing has grown longer as those who have no choice have nowhere to turn to.

The unaffordability of housing is primarily due to the lack of supply. The report also stated that because of the scarcity of supply houses have become, “even more of a commodity, an asset class, an investment, to be leveraged to fund retirement, transfer wealth to children, support consumption and buy second homes.”

It is not that housing has become universally unaffordable, some people with existing properties are said to have no problems staying in the property market and acquiring more properties as they have a secret weapon, negative gearing.

An article in brisbanetimes.com.au reports Tim Williams saying, “Home ownership is becoming something that older people do. I remember my head reeling when I discovered how generous negative gearing was. There’s nothing like it in the known world in terms of its generosity and in terms of its middle-class welfare. I just think it’s an astonishing gift to the wealthy and it has perverse effects on the housing market. You are squeezing young people out of home ownership while some people have two, three or four units – the incentives are just wrong.”

Williams is suggesting that negative gearing be phased out or just be used as a targeted incentive.

The report has also been used as a contribution to the debates happening currently in the government. Other aspects like stamp duty and land taxes are also being looked into. The development of new properties is also being hampered by other forces like the NIMBY (Not In My Back Yard).

Selling by tender – pitfalls

Feb 21,2012 Comments Off

As Australia’s auction clearance rates made a dramatic fall in the past 12 months, several real estate agents are going after the tender process. As auctions lose their appeal through low competition and are property reputation is stained with the thoughts of being not marketable, agents opt for the tender process as it only needs one buyer not to mention that the agent still gets paid for selling and advertising.

Rob Miller of Domain Property Advocates shares his view in his blog about the tender process. According to Miller, the tender process from a buyer’s perspective is “like a secret maze, it’s a nightmare.” The reason behind why he thinks of tenders this way is the fact with how most people connect tenders with “government bodies or business organisations who require specific goods and services.” People believe that all tenders have conditions and special terms and that with tenders, the lowest quote is always successful. In the world of real estate however, the highest or the best tender doesn’t matter as there is always an estimated reserve price. Sometimes, when the reserve price has not been disclosed, the agent needs to give out what the estimated selling price is so as to comply with legal guidelines. The problem then lies when the agent’s assessment doesn’t meet with the vendor’s expectations.

The problem with the tender process is the lack of transparency. Tenders are confidential having sealed bids, security measures, locked boxes, closing dates, etc. and the agent is the only one telling the buyer the estimated price. The buyer will never know if what was given is accurate or if it is within the reserve price or if the agent has other interests to the property. It is the confidentiality behind the tender that affects the credibility of the tender process.

Auctions are more reliable as buyers can see who they’re bidding against. These are the reasons why successful tenders tend to be the bid significantly higher than the others. Buyers could lose as much as $100,000 on the fear of not getting the property only to find out in the end that they were played or was the only one who submitted an offer.

It is what happens after the tender process has closed that is most disturbing. What happens to those who bid within the reserve price? What if there’s a highest bidder, does the agent pick him directly and talk to him or does the agent ask everyone else to do another submission of bids making the highest priced bid as basis? These scenarios are likely to happen in a tender process which is a nightmare to buyers.

The difference from a tender process for commercial intents and real estate sale is that the commercial depends on a fairly simplistic commercial outcome while the other is controlled by strict statutory guidelines where the duty of the agent to take care of his buyer is severely compromised by the tender process’ confidential nature. The best thing to do is to conduct business with reliable agents, the ones who will put your needs before their own.

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