Confidence in property industry at low point

A survey has found that at the end of 2018 confidence in Australia’s property industry fell to its lowest level in five years.

According to the ANZ/Property Council of Australia survey, overall confidence in the Australian property industry fell by 11.3% over the past 12 months, reaching its lowest point since September 2013.

The state with the strongest confidence in the property industry was found to be South Australia, followed by the ACT and Western Australia. The largest falls in confidence were experienced in Victoria and New South Wales.

Property Council of Australia chief executive, Ken Morrison, said that with the final report of the banking royal commission due in February, a NSW state election due March, and a federal election due in May, it’s important that the nation’s policy-makers support the property industry:

“The global economy headwinds are picking up, foreign investors have been turned away, credit availability has tightened, and our largest residential markets have softened rapidly.”

“It’s not the time to be making changes to policies which undermine certainty, confidence or incentives to invest in Australian property.”

ANZ head of Australian economics, David Plank, added that according to the survey, the availability of finance is forecast to worsen further over the coming year, along with house prices and construction activity.

“The survey also suggests that firms expect the next interest rate movement to be higher, though the conviction in this expectation has dropped from the last survey.”

“With risks around global trade tensions and questions over the sustainability of domestic household spending, we think any RBA move is still some time off.”

The findings of the ANZ and Property Council of Australia survey follow recent research from CoreLogic, which found that some of the weakest housing market conditions in a decade at the end of 2018.

Two of Australia’s biggest banks have changed their mortgage rates

Considering a home loan with Macquarie Bank or ING? It may have just gotten cheaper.

Both banks have made changes to a wide variety of their mortgage rates, with Macquarie lowering rates by up to 60 basis points and ING by up to 40 basis points (see tables below).

ING has also increased a few of its home loan interest rates, by up to 11 points.

These interest rate changes apply to selected mortgage offers across:

  • Owner-occupied and investment loans
  • Principal-and-interest and interest-only loans

Looking at just two of the changes, here’s how they could affect the mortgage repayments on a 30-year, $400,000 loan:

Macquarie Bank ING
Product Basic Flyer Investment Loan Fixed (principal & interest, LVR 70-80%) 5 years Mortgage Simplifier Investment Loan (principal & interest, $150k+, LVR < 80%)
Old rate 4.74% 4.44%
New rate 4.14% 4.04%
Old repayments $750,304 $724,502
New repayments $699,151 $690,803
Difference $51,153 $33,699

Macquarie and ING v the market

So, how do Macquarie Bank and ING compare to other lenders in terms of interest rates?

Macquarie’s loan is priced at 4.14 per cent, while the average rate for all the five-year investment loans on RateCity is 4.82 per cent (as of 31 March 2019).

ING’s loan is priced at 4.04 per cent, while the average for all the variable principal-and-interest loans on RateCity is 4.72 per cent.

That said, it’s important to note that the cheapest mortgage isn’t always the best mortgage. Other factors to consider when weighing up a home loan include:

  • Loan fees (upfront fees, ongoing fees)
  • Loan features (such as offset account, redraw facility, additional repayments)
  • Lender customer service (branch access, call centre, online banking options)

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Macquarie Bank selected changes

Product Old advertised rate New advertised rate New comparison rate Change in advertised rate
Basic Flyer Home Loan Fixed 1 year (principal & interest, LVR 70-80%) 4.04% 3.94% 3.91% -10 points
Basic Flyer Home Loan Fixed 2 years (principal & interest, LVR 70-80%) 4.04% 3.84% 3.90% -20 points
Basic Flyer Home Loan Fixed 3 years (principal & interest, LVR 70-80%) 4.04% 3.84% 3.89% -20 points
Basic Flyer Home Loan Fixed 4 years (principal & interest, LVR 70-80%) 4.34% 3.94% 3.92% -40 points
Basic Flyer Home Loan Fixed 5 years (principal & interest, LVR 70-80%) 4.34% 3.94% 3.92% -40 points
Basic Flyer Investment Loan Fixed 2 years (principal & interest, LVR 70-80%) 4.34% 4.04% 4.33% -30 points
Basic Flyer Investment Loan Fixed 3 years (principal & interest, LVR 70-80%) 4.34% 4.04% 4.30% -30 points
Basic Flyer Investment Loan Fixed 4 years (principal & interest, LVR 70-80%) 4.64% 4.14% 4.31% -50 points
Basic Flyer Investment Loan Fixed 5 years (principal & interest, LVR 70-80%) 4.74% 4.14% 4.29% -60 points

ING selected changes

Product Old advertised rate New advertised rate New comparison rate Change in advertised rate
Orange Advantage Home Loan (principal & interest, $500k-$1m, LVR < 80%) 3.93% 3.85% 4.17% -8 points
Orange Advantage Home Loan (principal & interest, $1m+, LVR < 80%) 3.89% 3.81% 4.13% -8 points
Orange Advantage Home Loan (interest-only, ($150k-$500k, LVR < 80%) 4.33% 4.44% 4.75% +11 points
Orange Advantage Investment Loan (principal & interest, $150k+, LVR < 80%) 4.39% 4.09% 4.41% -30 points
Orange Advantage Investment Loan (interest-only, $150k+, LVR < 80%) 4.69% 4.49% 4.80% -20 points
Mortgage Simplifier Home Loan (principal & interest, $150k-$1m, LVR < 80%) 3.88% 3.80% 3.82% -8 points
Mortgage Simplifier Home Loan (interest-only, $150k-$500k, LVR < 80%) 4.28% 4.39% 4.41% +11 points
Mortgage Simplifier Investment Loan (principal & interest, $150k+, LVR < 80%) 4.44% 4.04% 4.06% -40 points
Mortgage Simplifier Investment Loan (interest-only, $150k+) 4.59% 4.44% 4.46% -15 points
Fixed Rate Investment Loan 3 years 4.19% 4.09% 5.48% -10 points
Fixed Rate Investment Loan 4 years 4.69% 4.59% 5.51% -10 points
Fixed Rate Investment Loan 5 years 4.69% 4.59% 5.41% -10 points

February finishes with mortgage rate rises

Several lenders increased variable interest rates on selected home loans in the last week of February, though there were also cuts to some fixed rate loans.

Auswide increased both its fixed and variable rates for owner occupiers and investors, with the smallest increase being by 3 basis points, and the largest increases being by 30 basis points.

Auswide Home Loan New Rate New CR Old Rate Old CR Rate changes
Freedom Package Home Loan Plus Discount Fixed (Principal and Interest) 3 Years 3.79 4.6 3.76 4.59 0.03
Freedom Package Home Loan Plus Discount Variable (Principal and Interest) (LVR < 90%) 3.69 4.08 3.64 4.03 0.05
Home Loan Plus (Interest Only) 5.61 5.76 5.48 5.63 0.13
Home Loan Plus (Principal and Interest) 5.61 5.76 5.48 5.63 0.13
Line of Credit Home Loan 6.06 5.93 0.13
Line of Credit Investment Loan 6.58 6.45 0.13
Freedom Package Home Loan Plus (Principal and Interest) (LVR 90%-95%) 4.53 4.9 4.38 4.76 0.15
Investment Loan Plus (Interest Only) 6.39 6.54 6.23 6.38 0.16
Investment Loan Plus (Principal and Interest) 6.39 6.54 6.23 6.38 0.16
Freedom Package Home Loan Plus Fixed (Principal and Interest) 4 Years (LVR 90%-95%) 4.9 4.94 4.7 4.87 0.2
Freedom Package Home Loan Plus Fixed (Principal and Interest) 5 Years (LVR 90%-95%) 5 5.01 4.8 4.93 0.2
Freedom Package Home Loan Plus Fixed (Principal and Interest) 1 Year (LVR 90%-95%) 4.39 4.76 4.09 4.73 0.3
Freedom Package Home Loan Plus Fixed (Principal and Interest) 2 Years (LVR 90%-95%) 4.49 4.78 4.19 4.72 0.3
Freedom Package Home Loan Plus Fixed (Principal and Interest) 3 Years (LVR 90%-95%) 4.49 4.78 4.19 4.71 0.3

Several of MyState Bank’s variable interest rates were also increased this week, with selected interest-only home loans seeing rate rise by 10 basis points, while some principal and interest loans increased their interest by 25 basis points.

MyState Bank Home Loan Rate New CR Old Rate Old CR Rate change
Basic Variable Home Loan (Interest Only) (LVR < 80%) 4.18 3.94 4.08 3.93 0.1
Basic Variable Investment Loan (Interest Only) (LVR < 80%) 4.38 4.16 4.28 4.15 0.1
Basic Variable Investment Loan (Interest Only) (LVR 80%-90%) 4.58 4.38 4.48 4.37 0.1
Special Residential Home Loan (Interest Only) (LVR < 80%) 4.38 4.16 4.28 4.15 0.1
Special Residential Investment Loan (Interest Only) (LVR < 80%) 4.58 4.36 4.48 4.35 0.1
Special Residential Investment Loan (Interest Only) (LVR 80%-90%) 4.78 4.58 4.68 4.57 0.1
Standard Variable Home Loan (Interest Only) 5.62 5.42 5.52 5.41 0.1
Standard Variable Investment Loan (Interest Only) 5.62 5.42 5.52 5.41 0.1
Basic Variable Home Loan (Principal and Interest) (LVR 90%-95%) 4.64 4.71 4.39 4.46 0.25
Special Residential Home Loan (Principal and Interest) (LVR 90%-95%) 4.84 4.91 4.59 4.66 0.25

However, People’s Choice Credit Union cut fixed rates on selected loans by 5 to 10 basis points this week.

People’s Choice Credit Union Home Loan Rate New CR Old Rate Rate change
2 Year Fixed Package (Owner Occupied, Principal & Interest) 3.69 4.66 3.79 -0.10
2 Year Fixed Package (Investment, Principal & Interest) 3.84 5.20 3.94 -0.10
First Home Buyer 3 Year Fixed Package (Owner Occupied, Principal & Interest) 3.84 4.64 3.89 -0.05
First Home Buyer 3 Year Fixed Package (Owner Occupied, Interest Only) 4.34 5.16 4.39 -0.05
Home, Construction & Low Doc 2 Year Fixed (Owner Occupied, Principal & Interest) 3.84 5.17 3.94 -0.10

These changes wrap up a February where several lenders adjusted their interest rates up or down, including Suncorp, Bendigo Bank and Credit Union SA, St.George and AMP, Macquarie Bank and ME Bank.

Lenders adjust fixed home loan interest rates

Several Australian banks have adjusted their home loan interest rates this week, with some lenders lowering their fixed rates, while others increased theirs.

St.George this week reduced some of its fixed interest rates, including the 2 Year Owner Occupier Principal & Interest home loan, which went down by 0.06% p.a., as well as the 2 Year Residential Investment Principal & Interest, whose rate was reduced by 0.10% p.a.

St.George fixed rates that increased  by 0.10% each included the 5 Year Residential Investment Interest Only, as well as the 5 Year Portfolio Loan.

Loan New interest rate New comparison rate Old interest rate Old comparison rate Change
St.George Owner Occupier Standard Fixed Rate 2 Year (Principal & Interest) 3.84% 5.24% 3.90% 5.25% -0.06%
St.George Residential Investment Standard Fixed Rate 2 Year (Principal & Interest) 4.04% 5.72% 4.14% 5.74% -0.10%
St.George Residential Investment Standard Fixed Rate 5 Year (Interest Only) 5.14% 6.05% 5.04% 6.01% +0.10%

AMP also adjusted the fixed interest rates on its professional package investment loans, with the largest decrease being by -0.75% over three years.

Loan New interest rate New comparison rate Old interest rate Old comparison rate Change
AMP Professional Package Investment Loan Fixed (Interest Only) 2 Years 4.17% 5.35% 4.77% 5.46% -0.6%
AMP Professional Package Investment Loan Fixed (Interest Only) 3 Years 4.19% 5.24% 4.49% 5.32% -0.3%
AMP Professional Package Investment Loan Fixed (Principal and Interest) 2 Years 3.99% 5.32% 4.57% 5.43% -0.58%
AMP Professional Package Investment Loan Fixed (Principal and Interest) 3 Years 4.12% 5.23% 4.87% 5.43% -0.75%

These adjustments to fixed interest rates follow several changes to variable interest rates earlier in the month, with Macquarie Bank, ME Bank and ING raising some of their variable rates, while Heritage Bank lowered some of its variable rates for investors.

The Royal Commission could trigger big changes in home loans

After holding seven rounds of public hearings and collecting more than 10,000 submissions, the Royal Commission into Misconduct in the Banking, Superannuation & Financial Services Industry is about to deliver its recommendations – which could turn the mortgage industry on its head.

The final report, which will be published on Monday afternoon, might recommend significant changes to how mortgage brokers get paid – which, in turn, would affect consumers.

These possible changes include:

  • Changing upfront commissions (from a percentage of the loan to a standard fee)
  • Abolishing trail commissions (which are ongoing commissions that the broker receives throughout the life of the loan)
  • Abolishing both upfront and trail commissions (forcing brokers to negotiate a fee, as financial planners do)

Why broker salaries are relevant to consumers

There are two reasons why consumers should care about broker remuneration.

First, Justice Hayne noted in his initial report that the current commission model is bad for consumers, because brokers have incentives to push Australians to borrow more than they need. If Justice Hayne is right, then changing the model might better align brokers’ interests with borrowers’ interests, leading to better outcomes for consumers.

Second, a new commission model might lead to a reduction in the average broker’s income, which would probably reduce the number of brokers in Australia. That, in turn, would probably mean that banks would win would back some market share from brokers – which would probably mean worse outcomes for consumers.

Why would that mean worse outcomes? The reason is that brokers offer more choice than banks. A typical broker will work with 20 to 40 lenders, which means they can help borrowers compare options from up to 40 institutions. Banks, though, will only show one set of loan products – their own.

What affects brokers will also affect consumers

All of this is just speculation, though. Time will tell what Justice Hayne recommends; and time will tell how many of those recommendations will be implemented by the government.

The only thing that can be said for certain is that any reform that affects mortgage brokers will ultimately affect consumers as well.

Housing finance falls to lowest level since Jan 2016

Today’s housing finance figures are further evidence of the continued slide in Australia’s housing market.

The ABS housing finance figures for August, released today, show an overall drop of 2.1 per cent from the previous month. It is the lowest recorded figure since January 2016 in seasonally adjusted terms.

Owner-occupier lending fell to its lowest level since April 2017, while investor lending fell for the sixth month in a row, to the lowest level since August 2013.

Year-on-year (August 2017 to August 2018), all categories have experienced falls:

  • All finance down 10.1 per cent.
  • Owner-occupier finance down 3.9 per cent.
  • Investor finance down 20.5 per cent.

RateCity research director Sally Tindall said the downturn was likely to continue for many months.

“The banks have put the brakes on loose lending practices and that’s having a marked effect on both the housing finance market and the property market,” she said.

“Today’s figures show year-on-year drops as high as 20 per cent for investors. That’s a significant slow-down, with no clear end in sight.

“The continued fall in housing finance will be hurting the banks’ loan books and their profitability.

“What’s important to remember is that banks are still in the business of writing loans and hungrier than ever for new business.

“Banks are falling over themselves to get ‘ideal’ borrowers on to their books at the moment. The continued drop in housing finance should only spur them on even more.

“If you’re an owner occupier and own over 20 per cent of your home then you’re in the driver’s seat when it comes to rates,” she said.

IMB raises rates for home loan customers

IMB Bank, one of Australia’s leading mutual banks, have increased its standard variable interest rate by 15 basis points for new and existing home loan customers.

The rate changes came into effect as of 5 October, with the Standard Variable Home Loan rate moving to 5.42 per cent.

In a statement released last Friday, the rate increases have been linked to recent moves made by big four banks.

“Despite home loan interest rates being at historically low levels, many financial institutions have raised their home loan interest rates in recent weeks.

Like other banks, we use customers’ deposits and other sources of funding to lend to our borrowers and we pay interest to attract and use these deposits.

Over recent months, the cost of this money has increased and as a result we are having to pass on some of this increased cost.

Although this decision was difficult, we need to move our lending rates in order to continue to balance the needs of our borrower and depositor members and maintain investment in new banking technologies, products and our communities.” – IMB Bank

Would you delay retirement to help your kids get their first home loan?

Many Australian parents are putting off hanging up their work hats for a few more years so they can help their children become first homebuyers.

New research from homeloans.com.au has found that almost two in three parents (65%) are making financial and personal sacrifices to help their children or grandchildren with home ownership plans, now or in the future. More than one in four (29%) of these parents are prepared to retire later than planned in order to provide financial assistance.

Homeloans.com.au head of marketing, Will Keall, said that the 2018 Generational Property Ladder Survey highlights just how far parents will go to help secure their children’s future:

“Due to tougher mortgage lending standards it’s increasingly difficult for younger generations to break into the property market. To help with this, parents are doing what they can to help their children become first homebuyers, from cutting back on their own spending to going guarantor on a loan.”

Breaking down the figures

Of the 1072 parents and grandparents surveyed in July 2018:

  • 39% are willing to live more simply by sacrificing small luxuries like going to restaurants or movies
  • 33% are willing to delay big expenses like holidays or a new car
  • 30% are willing to dip into their hard-earned savings to provide financial assistance
  • 26% of parents that are currently providing assistance have dipped into savings to do so
  • 10% are willing to refinance their own mortgage to free up cash
  • 49% have given cash gifts to help their children or grandchildren buy a home
  • 60% of respondents looking to provide a boost would consider a cash gift
  • 16% have provided an interest free loan
  • 35% of respondents looking to provide a boost would consider an interest free loan
  • 46% would let their children or grandchildren move into the family home while saving for a deposit
  • 36% are willing to be a guarantor on a loan from a financial institution
  • 32% are willing to purchase a home in partnership with their children or grandchildren
  • 13% have set up a trust fund for their children

Bendigo Bank joins the out-of-cycle rates party

Australia’s seventh largest lender Bendigo Bank has become the latest home loan provider to hike rates out of cycle by up to 16 basis points.

They join an ever-growing list of Australian lenders who have increased rates including AMP, Macquarie Bank, ING, Bank of Queensland, Suncorp and Citi blaming the cost of funding (see list of hikes below).

RateCity spokesperson Sally Tindall all eyes are now on the big four banks, who have kept a lid on rates so far.

“With the bank bill swap rate continuing to spike, our big banks have a decision to make.  Hike and protect their profit margins, or wear the cost and keep their customers onside.

“The big bank who goes first will cop the most negative publicity. It’s a matter of seeing who blinks first.

“The message for Australian mortgage holders is now clear. Be prepared to shell out extra for your home loan in coming weeks.

“The rate hikes have been moderate but even $20 or $30 extra a month will be a stretch for anyone who’s already feeling the pinch,” said Ms Tindall.

Main players left to hike

Commonwealth Bank

Westpac

NAB

ANZ

Bankwest

St George

Bank of Melbourne

BankSA

Bendigo Bank rate hikes  

  • Owner occupier principal and interest loans will increase by 0.10%;
  • Owner occupier interest only loans will increase by 0.16%;
  • Investment loans will increase by 0.10%;
  • Lines of credit will increase by 0.10%.

Out-of-cycle rate hikes

Lender Rate hikes Effective date
AMP Bank up to 0.57% from 13-Jul
Auswide Bank up to 0.13% 27-Jun
Bendigo Bank up to 0.16% 23-Jul
Beyond Bank 0.06% 13-Jul
BOQ up to 0.15% 2-Jul
Citi 0.10% 8-Jun
Heritage Bank 0.05% 2-Jul
Homeloans 0.15% May – Jul
IMB Bank 0.08% 22-Jun
ING 0.10% 3-Jul
Loans.com.au up to 0.10% 6-Jun
Macquarie Bank up to 0.10% from 13-Jul
ME Bank up to 0.16% 19-Apr
MyState up to 0.09% 28-May
Pepper up to 0.55% 6-Jul
Qbank up to 0.16% May-23
State Custodians up to 0.10% 18-Apr
Suncorp up to 0.12% 28-Mar

Millennials putting first home loans ahead of travel

Forget the stereotypes – new data from Westpac shows that Australia’s millennials are forsaking travel in favour of saving for their first home.

According to Westpac, the number of its first home buyer loans that settled in March and April 2018 was higher than at the same time in 2017 and 2016.

Making a savings commitment

Based on analysis of 3480 Westpac Life savings accounts, which are structured around goal-based saving, the most popular savings goal of 25 to 34 year olds customers is “Home and Property”.

On average, 70% of millennial customers’ total savings is earmarked for a future home – ten times more than for holidays and travel, which was the most popular savings goal across all other age groups.

The age group found to be saving the most toward holidays and travel turned out to be the over-55s.

While 18 to 24 years olds also had holidays and travel in their number one spot, they were also found to be starting to save for their first homes, with their average savings balance for home and property at 50% of the average for older millennials.

Westpac head of savings, Kathryn Carpenter, said that reaching the age of 25 appears to be a key tipping point when people to go from thinking about saving for a home, to seriously saving for one:

“Millennials are often depicted as a generation more focused on life experiences and living in the ‘now’. However, our research shows that many are in fact taking saving for a home deposit seriously and prioritising it above other goals including travel or lifestyle.”

How long do millennials need to save for their first homes?

Depending on their location, these Westpac customers may need to save for several years before they can afford their first home deposits, according to the recently-released Domain 2018 First Home Buyers Report.

According to the report, first home buyers in Sydney would need to save for an average of 6.7 years to afford a 20% deposit on a house, or 5.8% for a deposit on a unit. In Melbourne, it would take 6 years to save a house deposit, and 4.2 years for a unit deposit.

Nationally, the areas with some of the lowest entry prices and quickest paths to purchase houses could be found in Adelaide and Perth, while the areas with some of the lowest entry prices and quickest paths to purchase units could be found in Adelaide, Perth and Hobart.