Tuesday, May 26, 2009

Bigger slice of less competitive pie

According to a report just released, two mergers in Australia's banking sector may be reshaping the home loans market. The report shows the merged entities Westpac and St George and that of the Commonwealth Bank and BankWest claimed a whopping 85 per cent share of new mortgages written in the first quarter of 2009.

The banking industry review by Brandmanagement – a market research firm specialising in the finance sector – shows $22.7 billion of the $26.6 billion growth in mortgage books by the big four banks (ANZ, CBA, NAB and Westpac) in the March quarter was achieved by CommBank/BankWest ($15 billion growth) and Westpac/St George ($7.7 billion), as reported by The Australian Newspaper.

The Australian Competition & Consumer Commission chair, Graeme Samuel said advice from other regulators in late 2008, at the height of the global financial crisis, to allow the merger of Commonwealth Bank and BankWest was followed only reluctantly. Mr Samuel said yesterday that the approval the commission had given to the merger between CommBank and BankWest was "not one we had been very happy about." But given the crisis in the international banking sector and on advice from the RBA and APRA "we felt we had no choice", he said.

(this article can be found at Business Spectator)

Thursday, May 14, 2009

FHOG extension a chance to boost savings

The Federal Government’s extension of the boost to the FIRST-HOME Buyers Grant will give would-be first home-owners a chance to get their finances in order before applying for a loan.

Under the scheme as it was, the boost to the grant was due to cease on June 30, 2009. The Federal Government will extend the boost to the first home-owners grant by six months to December 31. This additional six months extension, announced in last night’s federal budget, will allow borrowers to build their savings to meet the current, more stringent requirements of lenders.

The boosted grants were due to end on June 30 but will now apply for homes purchased on or before September 30 this year.

Since October 2008, first home-buyers have received an extra $7,000 when purchasing an established home and an extra $14,000 for new homes, on top of the $7,000 provided under the first home owners scheme. The boosted grants were due to end on June 30 but will now apply for homes purchased on or before September 30 this year. The extra grants will then be phased down to an additional $3,500 for established homes and $7,000 for new homes up to December 31, 2009. After that date the scheme will continues in its original form providing $7000 to eligible persons to purchase either a new or existing home.

Monday, May 11, 2009

Are you on a Financial Treadmill?

Have you ever looked back at the last 5 years and wondered if you are in the same spot now as you were then? Are you doing the same thing with your money today that you were doing 5 years ago?

Your personality plays a huge role in the decisions you make and how you behave with money. Understanding this can play a big part in moving forward with your financial future. For couples this is especially so. The ability to know and understand each other's financial personality can offer a real leap forward in achieving your goals. Ask yourself these questions:

  • What differences have you noticed in how you and your partner treat money?
  • What are the strengths and struggles you see between you and your partner?
  • Have you and your partner discussed your wealth creation needs?
  • Have you and your partner discussed your attitudes toward money?
  • Do you both understand each others prior experiences towards money?
  • Have you worked out a plan that brings together your wealth creation?
    Does your strategy suit both your needs and is it something you can both comfortably commit to?
  • What financial education do you and your partner have?

Wednesday, May 6, 2009

First Home Owners Grant - about to reduce

We all know the recent drop in interest rates has made home loans that little bit more affordable. With the spiralling price of housing finally easing somewhat, First Home Buyers are presented with an unprecedented opportunity to enter the property market. However, for most part, the days of access to the property market with little or no cash may be gone.

Two reasons for this. The first is that the Federal Government has indicated that the extended First Home Owners Grant (FHOG) will reduce back to $14,000 and $7,000 respectively for new and established homes by June 30 of this year (down from $21,000 and $14,000 respectively). In the current economic environment of government fiscal stimulus, we cannot rule out an extention to the current FHOG but just in case, if you are a first home buyer, consider looking now as you may regret it come June 30.

The other reason is the withdrawl from the market of the 100 per cent home loan. Of the three remaining lenders offering this type of loan, all have now withdrawn it. Prudently, this means buyers will now have to save a 5 per cent deposit and have the FHOG cover the fees and charges including mortgage insurance.

Tuesday, May 5, 2009

Bank service is reaching horror levels

The past 12 months have seen a tremendous shift in Australian banking. Despite the fact our banks are much better off than in other contries, many banks are no longer in the mortgage market. I personally believe this has taken the banking industry back fifteen to twenty years. As a result of the turmoil in credit markets, consumers won't be able to count on serious competition from non-bank lenders for some time.

Recent aquisitions (RAMS and St George to Westpac and Bank West and part of Aussie to CBA) has given the four major banks a huge opportunity to capitalise on a situation where they are handling almost ninety-five percent of all loan applications. The downside of this is that service levels are at an all time low. If you need to use a major bank, please understand that they can take up to 2 - 3 weeks just to look at your application. Refinances are taking an inordinate amount of time as there is not the same urgency as there is in a purchase. Genuine pre-approvals (I'm not talking about the rubbish-waste of paper-internet ones) are not even available. If you're about to purchase a home, please don't be cajoled by your real estate agent into offering a contract that only has a 14 day finance clause on it. It's almost certain you will need to arrange an extension through your solicitor. 21 days should be the minimum in the current environment.

Despite all this there is opportunity for some borrowers to use lenders other than the majors. After being knocked about early on, these second tier lenders are determined to make a come-back, offering good and timely service and pricing their loans similar to those of their cartel-like competitors. But, as always, don't just look at the rate. In some cases we have clients taking a rate which is only 0.10 per cent lower than someone else but unfortunately, we are not seeing the service they require.