The Reserve Bank this month dropped the Cash Rate 50 basis points to 3.75% but as expected the banks have not been able to pass on the rate cut in full. ANZ are still to advise their intentions but we should know that tomorrow (Friday May 11).

Rates to date have dropped anywhere between 0.32% p.a.  to 0.40% p.a.

Although NAB reduced rates the least to date, they still have the lowest Standard Variable Rate of the major banks.

The fixed rate war is heating up again with the 3 year fixed rate the main focus. I am seeing rates from 5.94% p.a., with a number of lenders offering 5.99% p.a.

If you are looking at a fixed rate, you need to be aware that the fixed rate you are offered at application may not necessarily be the rate when the loan is funded. Most lenders will give you the going fixed rate at the time of funding. You do have the option to lock in the fixed rate at the time of application by paying a fee which can range from about $600 upwards.

Should you be paying a fee to lock in a fixed rate now? Maybe, maybe not. Word is that we may see official interest rates drop another 75 basis points by the end of the year. With that in mind, one would expect fixed rates to drop further. Then again with the volitility of the fixed rate market who knows what the banks may do down the track. Raise fixed rates? Could do.

Before handing over money to lock in a rate, you need to consider whether there is a real chance that the fixed rate will stay as is, go up or go down. Generally you will find that your mortgage broker or bank lending officer can’t advise you what to do. It is a decision you need to make as the borrower.

I thought I would share a couple of recent scenarios…….

Non Resident Borrowers

A couple recently purchased a property at auction without having their finance in place beforehand. They approached their Australian bank after the event and were knocked back due to their place of residence and currency in which their income is derived. (Dubai / Dirhams).

All lenders have differing policy when lending to non residents. The main factor is the currency in which they are paid.

In this case I had a lender who approved the clients (no questions asked) with a 20% deposit which was a great result. Time is very much of the essence when dealing with non residents, and they had their documents in Dubai within 5 days of approval and all is on track for a June 1 settlement.

Self Employed Contractor

I saw a couple earlier in the year who are purchasing a property off the plan as an investment. They decided to go with their existing bank who held a mortgage over their owner occupied property and they held a pre approval from that lender.

Last week I received an email from the client saying their finance had fallen over just as settlement is approaching. The issue being the male applicant has taken 6 months leave without pay from his government job to undertake a private consultancy position under an ABN (self employed) structure. Because he is now considered self employed, their lender wanted 2 years financials and tax returns which is the case for most lenders.

In this instance I had a major bank who will consider self employed workers contracted to one entity the same as PAYG workers.

Once again the loan was approved, subject to valuations, no questions asked.

Conclusion

Not all lenders are the same. If you have been knocked back by a lender, don’t dispair. There may be  a solution.

Talk to me.

Actually, if your circumstances are outside the square, talk to me before you are knocked back elsewhere.

The new Queensland LNP Government yesterday approved the re-introduction of stamp duty concessions for people buying a principal place of residence as of July 1, 2012.  That will be a saving of up to $7,000 for some buyers. This is great news for our already struggling real estate market. The former Queensland ALP Government abolished stamp duty concessions at the height of our property slump.

in other news

There is a strong possibility we will see the Reserve Bank drop interest rates next month (May) by 25 basis points which will be another welcome boost. It is also considered the banks will be in a position to pass on any rate reduction in full.

Competition between the banks is still active but not to the extent it was about 4-6 weeks ago.

A number of lenders have raised their fixed rates a little plus have reduced some of their discount margins under their ‘Professioanl Packaged’ loans.

Having said that, there are still some very attractive variable rates on offer from 6.35% p.a. plus fixed rates from 5.99% p.a. (terms and conditions apply)

The main activity I am seeing at present is

1. First Home Buyers
2. Investors
3. Reverse Mortgages

First Home Buyers have a number of options open to them to get into the property market

• No requirement for Genuine Savings (Gifted Deposits)
• Security Support from a family member and no deposit is required (no need for Lenders Mortgage Insurance)
• Shared ownership purchases (borrowers only responsible for their portion of the loan)

Investors who are existing home owners and have built up equity over a  number of years are utilising that equity to purchase an Investment property. In most cases they are borrowing the full 100% of the purchase price plus costs. In a number of cases the rental return is covering the cost of the mortgage.

Reverse Mortgages are for eligible retired borrowers over the age of 65 who own their own home. Depending on their age, they can a borrow a percentage of the value of the property (say 20%) to assist with things such as property maintenance, buy a new car or just access funds to suppliment their pension. No repayments are required on the loan and interest is capitalised to the loan each month. The loan is cleared upon sale of the property down the track.

Terms and conditions apply to each of the above facilities.

If you wish to know more, please do not hesitate to contact me.

Just in the last couple of months I have financed a couple of first home buyers into properties at prices I haven’t seen for many years.

Both properties were sold by Receivers.

Property 1

A two bedroom unit beachside in Mermaid Beach within a 7 unit complex which was bought for $220,000. Previous sales in the same complex were in the mid $300′s back in 2008.

Property 2

A one bedroom unit on Chevron island, again within a 6 unit complex which was bought for $155,000. The unit had been renovated and within a couple hundred meters walking distance to the popular shopping and restaurant precint of Thomas Drive. Body Corporate of $29 per week is payable which is very reasonable. The unit can been rented at approx $250 per week which would make it positively geared as an investment.

That unit was purchased with a gifted 5% deposit of $7,750.

Lenders Mortgage Insurance was capitalised to the loan.

The First Home Owners Grant was used to cover purchase costs totaling less than $3,000 which provided the buyer with the balance of $4,000 to be used as he wished.

A similar 1 bedroom unit in the same complex sold in 2007 for $260,000.

A two bedroom unit in the same complex sold last week for $195,000.

Crazy stuff!!!!!

Anyone with access to funds and looking for a good buy need to move sooner rather than later.

I think after the January auction ‘Event’ held by Ray White Surfers Paradise, it shows there are buyers out there who are just waiting for the right property at the right price. They cleared in excess of 80 properties of the 130+ up for grabs. A clearance rate of 60%.

Ok the banks did raise interest rates slightly this month outside of the Reserve Banks decision to leave rates on hold. When taking into consideration the discounts the banks are offering off their standard variable rates at present which range up to 0.90% p.a., variable rates are still in the low 6′s and fixed rates start in the high 5′s.

Interest rates are still low and are expected to remain so for the remainder of the year.

Those who remember paying up to 18% p.a. in 1990 for a home loan, I think you will agree, we have it pretty good at present.

First home buyers looking to get into the property market, there are a number of options available to them without the need for ‘genuine savings’ so long as they have the borrowing capacity.

Anyone slightly interested in getting into the property market need to speak to a mortgage broker as the credit policy applied to each lender can differ greatly. If one lender says no, there may well be another one or two lenders who says yes.

Please do not hesitate to contact me should you wish to discuss any of the above.

Well the Commonwealth Bank started the year by announcing reductions in their interest rate discounts they have been offering on some of their products.

CBA were offering up to 1% p.a. discount off their standard variable rate home loan under their wealth package but have now reduced their maximum discount to 0.80% p.a.

Last week, CBA also announced they reduced the discount margin on their 3 year Special Rate Saver home loan from 0.31% p.a. to 0.21% p.a. which left a rate of 6.59% p.a.

The banks have been saying lately that their cost of funds have increased with the unstable economic conditions overseas, and because of the increased cost they could not guarantee they would be in a position to pass on further rate reductions announced by the Reserve Bank.

It was suggested in the media the banks may need to look at the heavy discounting war they have been engaged in for many months leading up to the end of 2011 so that if the Reserve Bank were to announce further interest rate cuts in 2012, the banks may be in a position to pass on those cuts (in full).

Has the CBA listened? It will be interesting to see what action the Commonwealth Bank take when the next interest rate reduction is announced (which could be as early as next month). In addition, what action the other banks take.

I am hearing from a number of real estate agents that there has been an increase in activity by prospective buyers at weekend properties open for inspection.

With a continued volatile share market, I think we will see people opting out of shares and investing more in the property market.

With property prices at levels not seen since the early to mid 2000′s, value for money is the key. Prospective buyers can see good gains are likely as and when the property market improves. With two recent rate reductions last year, first home buyers and investors see conditions right to make a move.

With further rate reductions being suggested, this will lead to an increase in affordability and more sales.

A lot of wealth has been stripped from our Superanuation Funds due to the volitile share market and I am hearing of retirees having to return to the workforce  just to make ends meet. I think we will see more workers opting into a Self Managed Super Fund (SMSF) and purchase property through their SMSF to take advantage of the current property prices and tax advantages that are available. Due to the strict governance of SMSF’s, anyone thinking of managing their own fund need to obtain legal and financial advice from qualified practitioners that a SMSF will be a good stratergy for their future retirement.

Please do not hesitate to contact me should you wish to discuss any of the above.

For me I have experienced an improvement on 2010.

The most noticeable sector was the return of the First Home Buyers and I am now seeing Investors tipping their toes in the water for a look see.

Interest rates had been stable for 12 months then in November and December of this year we received early Xmas presents with the Reserve Bank dropping official interest rates.

November delived the news that the Gold Coast is to host the 2018 Commonwealth Games which will bring a much needed stimulus to our sluggish economy.

We are now hearing with the ongoing European financial woes that there is a good liklihood that interest rates will drop even further in 2012.

That in itself will further improve confidence in our economy.

We do hear that the banks may not be in a position to pass on further interest rate cuts in full when handed down by the Reserve Bank but I don’t think that will have an negative effect.

So long as consumers see interest rates won’t be increasing too soon I believe we will continue to experience an improvement in our property market.

Driving along Hedges Avenue since the weekend I have noticed a number of ‘SOLD’ signs have appeared.

Personally, I have received 4 new purchase contracts since the weekend to arrange finance for the buyers plus another 3 ‘pre-approval’ loan applications in the last week for clients looking to buy in the new year.

All in all, things are looking positive heading into 2012.

With that said, I will be out of the office from COB tomorrow December 22 and returning January 3. I will still be monitoring all files still in progress while away.

I would like to take the opportunity to wish everyone a very Merry Christmas plus a Happy and Prosperous 2012.

Till next year, stay safe.

DR

The market under $1 million is strong due to first home buyer and investor activity but the prestige sector still lags. We need to see unemployment down, retail spending up, a resolution in Europe, improved bonuses and a good consistent quarter on the stock market for the prestige sector to move.

Australian buyers don’t need to see a lot of price growth to regain confidence, they just want to know that home values have stabilised and now’s the time to buy and I think there’s a good chance that will happen in the first half of 2012.

To view John’s Market Review in full click here

Interest rates are on the way down……………..

The Light Rail Project will be completed on time………………

Ron Clarke will be Mayor till he is 90…………….no hang on, getting a little carried away there!!!!!

But what great news for the Gold Coast. This is just what the doctor ordered to help kick start our ailing economy.

Having close ties to the Gold Coast real estate industry, I get out and about most weekends visiting properties ‘Open for Inspection’ with a number of real estate agents.

For the majority of the properties I visit there are few inspections and I see first hand the state of our property market.

Then I talk to our Head Auctioneer who regularly travels to Sydney and Canberra. He says the agents are complaining down south about the state of their property market yet they generally have big numbers to their ‘Open for Inspections’…….to the extent they require a couple of agents on hand to manage the visitor numbers.

Having said that, I know interest rates and the Commonwealth Games announcement had nothing to do with it, but last week I had the busiest week (and it continues to be busy).

Nine new deals lobbed on my desk with further new enquires coming in this week.

Good to see an increase in activity from first home buyers plus buyers returning to the market after exiting at the height of the GFC.

Also seeing activity in the investment market.

As I said, I tend to think it all just a coincidence at this stage after all the encouraging news over the past couple of weeks, but maybe…just maybe……we may start to see a little improvement over the next 6 to 12 months as we hear new projects being announced to cater for the 2018 games.

Competition between the banks for a bigger share of the business is still happening with a couple of lenders announcing cuts to their fixed rates.

3 year fixed rates at 5.99% p.a.

It would appear that for the medium term, banks consider interest rates to remain down.

Receiving some good service from a couple of the banks of late.

Lodged a deal with ANZ a couple of weeks back and had an unconditional back within 24 hours.

Another deal lodged with CBA last week which was just a little complicated having a guarantor plus multiple securities yet the bank was able to provide an unconditional approval within a week.

Yet I hear of Contracts of Sale ‘subject to finance’ needing extention after extention.

There are lenders and ‘there are lenders’.

Before buyers use the services of a broker, they need to ensure the person they engage has the experience to process the deal quickly and efficiently.

There are broking groups out there who sell franchises to interested parties ‘no experience necessary’.

I’ve been in the industry over 35 years and I still learn something new each day.

Till next time…………..HAPPY DAYS!!!!

Lately I have had a couple of instances where I have been left a little bewildered by the service provided by a couple of bank BDM’s who are always looking for broker business yet the actions of that BDM can destroy any prospect of being considered as a potential lender for my clients.

It all comes down to delivering a service.

BDM number 1 made an appointment to meet then rescheduled then didn’t turn up nor phone to advise she couldn’t make it. That happened another two times. That particular BDM is now looking for new employment.

BDM number 2 after a couple of follow up phone calls hasn’t delivered the service promised.

As I say, it has left me a little bewildered.

On a brighter note…………it does pay to maintain contact with former clients no matter how long it has been since assisting them.

I just received a phone call from a former client I arranged finance for 12 years ago. As part of my ongoing client management, I send birthday cards plus 6 monthly letters to update clients with any relevant lender news. I sometimes question myself at what stage after assisting a client do I stop the communication if I don’t receive a new request for assistance.

Well that question has now been answered………..NEVER STOP CONTACT………..

What will be the outcome of the Reserve Bank meeting on Tuesday (Melbourne Cup Day)?

My punt is that we will be given a rate reduction………….will it assist with a turnaround in buyer confidence for the Gold Coast property market? I don’t think so. There are too many other factors which are affecting our market at present.

Just look around. It scares me to see so many shopfront businesses closing their doors in prime highway positions just in and around the Mermaid Beach area. I went to Pacific Fair on the weekend for the first time in a long time. It was quiet. A couple of years ago it would have been bustling with shoppers. Not these days.

Is it going to get better? Yes it will.

How long will it take? Not in the short term. I don’t expect to see a turnaround for a few years. I’m thinking at least 2016.

Have we reached the bottom of the market? I don’t think so but I do believe we are close.

Am I being negative? No, just realistic. We have been through and are still experiencing one of the worst global economic downturns in history.

Do I believe this to be a good property market to buy in? Definitely. Great value for money at the moment.

Is this a good market to be selling? No but everyone has their own circumstances. If you are looking to downsize and sell then buy in the same market, what you loose on the way out hopefully will be compensated in the future.

I would be interested in your thoughts. Please do not hesitate to leave a comment.

If one lender says you can only borrow ‘x’ amount but you need to borrow more, do not dispair, there may be a lender who can assist.

Here are some examples:-

• A single person on $40,000 p.a. with no other debts, the difference in borrowing power just between the 4 major banks is $30,000. That figure is higher when comparing the 30 lenders we have on our panel.
• A couple with a joint income of $125,000 p.a. will find a variance of $70,000 in borrowing power just between the 4 major banks (that figure is $224,000 when comparing all lenders on our panel)
• And again a couple on the same joint income of $125,000 with 3 children and liabilities consisting of 2 credit cards with total limits of $15,000 plus a car loan with a monthly repayment of $500, the borrowing power between the 4 majors has a variance of $103,000 (a $166,000 variance between all the lenders on our panel).

In addition to the variances in borowing power, lenders policies also vary when considering

• Employment
• Savings history
• Lenders Mortgage Insurance
• Definition of Self Employed
• Rental Income
• Income verification

and much more.

In my 30+ years in the finance game I have never seen competition between lenders so fierce. 

• Interest rate discounts
• Application fees
• Rebates to refinance from one lender to another

If you have any queries regarding finance, please do not hesitate to contact me.