Mortgage rates fall again in Australia as the US rates rise

The Reserve Bank of Australia reduced official interest rates in Australia to to its lowest rates ever, whilst mortgage rates n the US continue to climb.

The RBA reduced the cash rate to 2.5% in a bid to help the Australian economy transition from the peak of the mining boom and record high demand for coal and iron ore from China, to the wider economy, and especially housing construction and retail, two sectors that have suffered from a lack of confidence in recent times.

There seems to be a recovery in demand for Housing in the capital cities, especially Sydney and Melbourne,  which have seen record sales at weekend auction in recent weeks. Even Brisbane is well up on where it was this time last year.

But there is a growing shortage of homes in most of Australia’s Capital cities,  especially single unit housing, and there is hope that the Australian Government will have housing construction on its radar, as a main driver for employment and the big ticket items in the retail sector.

My concern is that we have heard nothing from either party regarding policy in this area, and a month out from the Federal election. Maybe they are keeping their policies in this for the Official Policy Launches due in a couple of weeks.

Australia has had a smooth ride since and through the Global Financial Crisis, and has a Triple A [‘AAA”] rating from all three rating agencies, a first for Australia. So things are good in the Lucky Country. But they could be a lot better for a lot of people, and for many sectors of the economy, especially manufacturing.

The mix of a high Australian dollar, high wages, employer paid superannuation, holiday pay and other benefits and working conditions, has meant that the Australian economy has defied gravity for years on the back of its economic management and stimulus packages during the GFC.

But as the economy goes into transition from the mining boom, it needs a lower $AU to help agriculture and manufacturing to take up the slack.

So apart from the RBA reducing rates even further, and causing the Australian dollar to fall further, where are the actual policies from the Opposition and the Government that will drive innovation, manufacturing and the single unit home construction industries? I am still waiting.

Source: Mr Mortgage

Interest Rates: Will the RBA start cutting rates? Westpac says yes

According to Westpac the Reserve Bank of Australia is getting ready to cut interest rates. That has to be good news for home buyers, homeowners and housing construction industry. But will it happen in October?

Westpac is Australia’s second largest home loan lender, and the biggest winner in mortgage growth in recent years since the GFC. It believes the RBA will start cutting interest rates at its next meeting. Many other experts says lower interest rates are on the way, but after October.

The prophet of profits bank

Westpac, has a good track record in predicting the timing of RBA rate cuts. After all it has a big stake in the outcomes. Westpac believes that reigning in the value of the high Australian dollar would help Australian businesses, especially those that are not  in the mining sector.

It would also be  shot in the arm for the ailing house building industry, and that is a big employer

ANZ predicts a brace of interest rate cuts, in October next month and in November!

The RBA was close to cutting interest rates in its September meeting,  but wanted more data on the economy due later in September . And things are suddenly unraveling for Australia with global economic conditions going south, the drop in commodity prices hurting Australia, and the low inflation all mean the bank could cut the base interest rate at its October 2 meeting.

All in all, a mortgage rate cut of 0.5% before Christmas is looming as a real possibility.

Source: Mr Mortgage

Home Mortgage and Refi harder to get

Home Buyers and Refinance: US Home buyers and refinance applicants will soon find mortgages harder to set

Fannie Mae gets tough with home loan borrowers through mortgage lenders

Fannie Mae is the largest source of money for the U.S mortgage industry and has warned mortgage lenders it will be raising some of its qualification standards for people buying homes, whether first homes or second home buyers, and also for those seeking mortgage refinance.
The changes to Fannie Mae Mortgage standards include lowering Loan to Value Ratios.

In the past mortgage borrowers could buy homes with no money down in some cases, but typically a 3% deposit [down payment] would get home buyers over the line.
Starting from October 2012, the changes to lowering loan to value ratios for some adjustable-rate mortgages to 90 percent, down from a maximum of 97 percent.
Mortgage applicants also require a better credit history than previously, with an increased credit scores requirements for certain loans.

Low doc home loans for the self-employed tightened

Fannie Mae also will start demanding more tax returns from self-employed borrowers. Many are expecting that many borrowers in self employment will suddenly find many mortgage avenues closed to them, and this may make some homes harder to sell.

Tougher Guidelines for Mortgage lenders

Fannie Mae (FNMA) and its smaller Government Sponsored Enterprise mortgage intermediary Freddie Mac, guarantees mortgage-backed securities financing of two-thirds of all new loans, so more misery for the housing market is likely to continue for some time

Fannie Mae told Mortgage Lenders that the adjustments were part of regular reviews of data and loan performance.

Both Fannie Mae and Freddie Mac will need to provide annual reports on actions they are taking “to reduce taxpayer exposure to mortgage credit risk.”

The requirement is part of changes to the companies’ bailouts agreements the Treasury Department announced Aug. 17.

Credit Scores Fannie Mae’s tightened standards include an increase of minimum credit scores for adjustable-rate mortgages needing to be at least 640, up from a previous minimum of 620, [on a scale ranging from 300 to 850, with 850 being clear credit], and removing flexibility to move on this with mitigating circumstances. The concept of benchmarking will also be eliminated. Instead, 36 percent will be the “stated maximum,” [This ratio can be as high as 45 percent if the borrowers meet credit score or cash reserve thresholds.]

This “provides more transparent requirements with regard to how compensating factors must be applied,” Fannie Mae said. Borrowers without credit histories will only be able to apply for single family homes they intend to live in [owner occupied] Appraisals to be more thorough Another thing that has changed with that Fannie Mae will require a full inspection to appraise the value of the property. [No more drive by, or kerb-side appraisals will be accepted.]

Sworn Appraisals will mean valuers will be liable for overstating values and this has also been a problem in Australia in the past.

Duplexes get relaxed LVR

An exception to loan tightening rules is duplex dwelling unit blocks upping the LVR to 85%.

Fannie Mae is also loosening some standards with the loan-to-value ratio allowed for some fixed-rate loans on two-unit properties will increase to 85 percent, from 80 percent. Down payment requirements [deposits] also will fall for certain co-op loans.

Australia is watching these mortgage tightening

These developments are being watched in Australia, with several similar recommendations being made by the RBA and other Peak finance groups concerning Low doc loans and Loan to value ratios and even interest only home loans.

Source: Mr Mortgage.com.au