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Avalon bid for Australian Formula 1 Grand Prix (Melbourne’s West)

Wednesday, March 3rd, 2010

By: David Hastie

Source: Sunday Herald Sun February 28, 2010 12:00AM  A PLAN to move the Australian Formula 1 Grand Prix to a purpose-built, $200 million race circuit at Avalon is being considered in an attempt to keep the event in Victoria.  

The Sunday Herald Sun has seen documents that pave the way for a new permanent venue after the contract to host the race at Albert Park expires in 2015.  The Confederation of Australian Motor Sport has been granted funding to conduct a feasibility study to build the state-of-the-art complex near Avalon Airport.  

The move would improve Victoria’s chance of retaining the Grand Prix beyond the current contract as well as providing a facility that would enable the state to run the race under lights.  The proposed motorsport complex would be built on some of the 1821ha of land owned by trucking heavyweight Linfox. Linfox director Andrew Fox told the Sunday Herald Sun his family was prepared to foot the $200 million to build the circuit, meaning taxpayers would not be left to shoulder the cost.  A move to a permanent track would save taxpayers the estimated $32 million each year it costs to assemble and dismantle Albert Park’s temporary circuit.  

CAMS chief executive Graham Fountain said his organisation was given about $130,000 last year by the FIA to complete a facility master plan.  He confirmed CAMS was working in partnership with Linfox.  ”We, as part of the feasibility study, will be looking at a whole range of options and opportunities for a potential venue at Avalon,” Mr Fountain said.  “Whether or not Avalon will or will not be an international grade circuit remains to be seen. But certainly it is one of many considerations as part of the master plan process.” The study will be carried out by industry experts from the UK and could begin within months.  While the Government is aware of and supports the study, Sports Minister James Merlino, who met with Mr Fountain earlier this month, said: “A decision to relocate the race is ultimately up to Government, regardless of CAMS’s findings.” GLinfox last year completed its own feasibility study to build a motorsport complex on the land.  Mr Fox said his wish was for Government to utilise the motorsport facility as a driver education centre for young drivers when not in use for competitive racing. 

“You can build a permanent facility that beyond doing a three-day event can also house driver training where the Government should be putting funds for trying to eliminate accidents of P-platers and L-platers on Victorian roads because that is money well spent,” Mr Fox said.  “I’m happy to put the capital up on behalf of the family at Avalon and build a world-class standard.  “We’re building a start-of-the-art facility for the soccer and that’s unchartered waters yet we’ve had the Grand Prix here for so many years.  “Yes, you’ll never be able to replace the views of Albert Park, but you can still build one of the best race tracks in the world.”  

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Housing debt in overdrive

Friday, February 26th, 2010

By Anthony Keane 

HOMEBUYERS and investors have nearly doubled their borrowings over the past five years, figures show.       

 

Latest Reserve Bank of Australia figures show total housing debt hit $910.1 billion in December, up 17 per cent over 12 months and up 92 per cent since December 2004.   

Total housing debt is set to reach $1 trillion within a year. The figure itself is not a worry, but there is concern the pace of borrowing is exceeding household income growth. 

AMP Capital Investors chief economist Shane Oliver says the rapid growth of housing debt could be Australia’s “achilles heel” amid any sharp rise in interest rates or unemployment, although neither is expected in the short term. 

Oliver says factors driving the borrowing boom include government first-home buyer incentives in recent years, generational lows in interest rates and rising house prices as demand outstrips land releases.  “Last year we started building 135,000 houses but the underlying demand was (for) 180,000-190, 000,” he says. “This year we should start building about 155,000 houses but the underlying demand is close to 200,000.”  “It’s a worry that we have such a high level of household debt.

Over the past 20 years we have gone from the low end of comparable countries to the high end,” Oliver says.  Reserve Bank figures show our housing debt is currently 135 per cent of disposable household income.

Ten years ago, it was 75 per cent and 20 years ago it was 45 per cent.  “The RBA has to be careful raising interest rates because, if they go too far, they can end up tipping the economy over the edge,” Oliver says. Investors represent about 31 per cent of total property debt, down from 34 per cent five years ago.

In 2003, it was 50-50, amid concerns about a property investment bubble that did not eventuate.  Real Estate Institute of Australia president David Airey says the sector “cruised past” the global financial crisis, with younger buyers not afraid of high debt levels. 

“In the first part of 2009 real estate agents were quite depressed. In the second half, auctions took off and that shows people are competitively bidding against each other, in many cases, pushing prices up,” he says. 

“This year’s looking to be a very strong year for property and that will have an upward effect on prices.”      

 

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100,000 borrowers get 3 years hard labour from Westpac

Monday, February 22nd, 2010

By Jason Bryce

Friday, December 18th, 2009 at 11:14am

About Jason Bryce - is a senior and experienced business journalist who specialises in covering personal finance and banking topics, he is based in Melbourne.

In 2009, about 100,000 owner/occupier borrowers have been trapped into paying high mortgage interest rates on their new Westpac variable loan by high early exit fees that prevent them leaving and getting better rates elsewhere.

Those people face at least three years of higher mortgage repayments until they can escape Gail Kelly’s high rate regime at Westpac.

As many as a quarter of a million new Westpac mortgagees, signed up by the bank in the last two years, will have to pay higher rates or exorbitant exit fees on Westpac standard variable mortgages.

Last week the prime minister said Westpac borrowers should look elsewhere to do their banking after the bank lifted interest rates on standard variable mortgages by 0.45 per cent immediately after the Reserve Bank of Australia raised the official cash rate by 0.25 per cent.

”Customers out there should be looking at where else they can do their banking,” said Mr Rudd from Townsville last week. The government has been quick to lead the criticism from customers and media about Westpac’s decision.

But Westpac charge prohibitive early exit fees of $1150 for loans less than four years old. For people with a mortgage taken out in 2009, that is at least three more years of higher rates, unless Westpac changes policy settings.

Last week, Westpac’s outgoing retail banking chief Peter Hanlon said Westpac was not the “Jetstar of banking” meaning the bank was not interested in competing on price.

Westpac’s standard variable mortgage interest rate is now set at 6.76 per cent. ANZ is at 6.66 per cent and Commonwealth 6.61 per cent. NAB has the best standard variable rate of the major four banks at 6.49 per cent.

Many customers are getting up to 0.60 per cent off these headline rates by packaging their loan with other bank products.

Analysis of monthly Australian Prudential Regulatory Authority data shows that in the first ten months of 2009 Westpac increased the value of its loans outstanding to owner occupiers by about $19 billion from $95 billion to $116 billion.

Assuming average mortgage size of $230,000 and churn rates of about 20 per cent, Westpac sold about one hundred thousand new mortgages to owner occupiers between January 1 and October 30 2009.

“Westpac has lifted its home loan rate by more than others in order to lend less, or least to let some market share drift off to other lender,” said the editor of banking industry newsletter The Sheet, Ian Rogers.

“The bank does face higher funding costs, but the main aim seems to be to curtail growth.”

“Along with CBA Westpac has enjoyed the lion’s share of growth in home loans since the property market received a hand-up from the government through the first home owner’s boost.”

“Like a lot of lenders Westpac’s back office has had trouble keeping up with the volume and dealing with loan applications in acceptable time frames,” says Mr Rogers.

“While the problems are not as acute as they were Westpac’s processing problems are still pretty severe.

“They are also about to sack the company running their home loan processing factory in Adelaide.”
 

 

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Melbourne house prices up $30,000 in three months

Sunday, October 25th, 2009

By: Craig Binnie
Source from: Herald Sun
October 24, 2009 12:00AM

THE average Melbourne house price surged to a record $480,000 in the September quarter - a $30,000 rise over the previous three months.

And the number of suburbs with a median of more than $1 million reached a record 18, with Brighton East making the list for the first time.

The 6.7 per cent jump in Melbourne’s median price has been pinned on our rising population, near record low interest rates and massive cash handouts to first home buyers.

Upmarket Surrey Hills, in the eastern suburbs, enjoyed the largest increase - up 24.6 per cent, from $905,000 to $1,127,500.

Surrey Hills fell below the $1 million mark during last year’s financial crisis, but has now climbed to a new high.

Balwyn North and Albert Park also rejoined the $1 million club, while Brighton East broke through the magic figure for the first time.

• Interactive: Click here for our suburb-by-suburb price map

Pascoe Vale was second best for the quarter with a 23.7 per cent jump from $485,000 to $600,000.

Real Estate Institute of Victoria chief executive Enzo Raimondo said prices were rising across the market.

“The recovery in the property market is widespread with record demand in the city’s most prestigious suburbs as well as its most affordable ones,” he said.

Strong demand for homes in middle-belt suburbs such as Thornbury, Highett, Doncaster East and Nunawading helped push prices higher.

Regional centres including Geelong, Ballarat and Bendigo also performed well.

The median price for units in Melbourne increased by more than 5 per cent from $390,000 to $410,000 - the first time it has been above $400,000.

The bumper house prices reflect a strong auction season, which has seen clearance rates of more than 80 per cent for the past 23 weeks.

The REIV’s monthly price figures, which are not as revealing as the quarterly figures because they do not cover as many sales, show prices rose in each of the three months in the quarter.

“Individual monthly results show sustained increases over the quarter, which indicates demand will continue to push prices up through October, November and December,” Mr Raimondo said.

Pressure is mounting on the Government to increase the supply of homes and take the heat out of the market.

“This has been a very good period for vendors but is not sustainable,” he said.

“Unless there is a sustained increase in supply there will be further pressure on prices.”

The Housing Industry Association’s executive director in Victoria, Gil King, said without adequate and affordable land supply house prices would continue to rise.

Phone: 1300 735 161
www. mrsmortgage.com.au

 

 

 

 

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Paying more … banks are doing better even though borrowers are about $530/month worse off

Monday, April 13th, 2009

Gouging by banks revealed
Scott Murdoch and Tim Boreham | April 13, 2009
Article from: The Australian

THE major banks are making $450 a year more from each average home mortgage today than before the global financial crisis as they exploit weaker competition from non-bank lenders.

The cash grab by big banks, revealed in an analysis conducted for The Australian, threatens to further increase tensions between the banks and the Rudd Government.

Paying more … banks are doing better even though borrowers are about $530/month worse off

The banks have cried poor, declaring they cannot afford to pass on the full benefit of the Reserve Bank’s latest 0.25 percentage point interest rate cut because they are suffering from increased costs.

The ANZ, Commonwealth and Westpac have cut mortgage rates by only 0.1 of a percentage point while the NAB has given mortgage holders nothing.

However, an analysis of bank funding costs by Fujitsu Consulting shows the banks have increased the profit margin on home loans over the past two years.

The major banks are making at least $450 a year more on the average mortgage now compared with two years ago, at the peak of the economic boom and when interest rates were higher.

The raised margin reflects reduced competition as the majors buy smaller competitors and non-bank lenders exit the market.

The banks are disputing the Fujitsu assessment. However, it increases the political pressure on the Government, which has been accused by the Opposition of being too close to the banks.

Calculations by Fujitsu Consulting show the profit margin on a $300,000 loan has increased from 0.8 per cent two years ago to 0.95 per cent. The increased profit margin has coincided with the banks’ share of the home loan market surging past 90 per cent.

In the past year there were 125,000 new mortgages originated, which, based on an average loan and the increased profit margin compared with two years ago, means the banks have earned an extra $56.25 million from those mortgages alone.

Fujitsu’s calculations were based on the net margin between a blended mix of funding sources for the major banks.

A recent report by Fujitsu and investment bank JPMorgan found that the cost to banks of raising money in Europe, one of the major markets for the institutions, has become significantly cheaper, by at least 0.5 per cent, in the past month.

“The banks have been more aggressive in reclaiming these higher funding costs to maintain profitability,” analysts at JPMorgan said.

“Banks have already passed on considerable rate rises to both households and businesses.”

The decision by Westpac, ANZ and the CBA to cut their standard variable rate by only 0.1 of a percentage point was expected to save the three banks $850million a year, they said.

“At the moment, on our calculations, the margins on the loans have increased and the reason for that was we had a lot of non-bank lenders in the sector,” Fujitsu’s Martin North said.

“When the non-banks disappeared, all the competition disappeared.”

However, Fujitsu’s findings were challenged by CBA and Westpac, the country’s two biggest home lenders.

CBA spokesperson Steve Batten said the $450 figure was “not consistent” with the bank’s experience. “The margins on CBA’s home loans … have contracted, as reported at our interim results in February,” Mr. Batten said.

Westpac spokesperson David Lording said its margins had been “contracting for many years”.

Goldman Sachs JBWere chief economist Tim Toohey said the Reserve Bank would have been aware of the prospect of the retail banks not cutting rates when it decided to move interest rates down to 3 per cent.

The Bank of Queensland chief executive David Liddy said the political reaction was not justified as the Australian banks still faced higher costs for funding sourced from domestic and offshore financial markets.

“To hear the Government and the Opposition say that banks need a kick up the bum is irresponsible,” Mr. Liddy told The Australian. “I think that the federal Government is only interested in one thing and that’s the stability of the big four, they are not interested in competition at all.” Mr. Liddy has campaigned for the Government to reduce the 150-basis-point charge the bank incurs for using the government guarantee to insure retail deposits and access overseas funding markets, whereas the top four banks pay 70 basis points.

“That needs to be fixed, there has never been that much difference between the pricing in the market,” Mr. Liddy said. “That is why we are not seeing all of the changes in the cash rate being passed on.”

Phone: 1300 735 161

www.mrsmortgage.com.au

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Don’t be quick to fix loans as rates to keep dropping

Sunday, September 7th, 2008

By Nick Gardner

Article from: Sunday Herald Sun

September 07, 2008 12:00am

VICTORIAN house hunters have been given a new headache with last week’s interest rate cut leaving them tossing up between fixed and variable loan deals.

First-home buyers and those wishing to re-finance have been forced to look hard at the fine print of their loan offers as economists predict interest rates to fall a further 1.5 per cent over the next 18 months.

Even though those with a $300,000 loan would have saved $55 a month from the Reserve Bank’s cut, they may be out of pocket if they lock their rate long term.

Bank variable rates fell to about 8.36 per cent during the week, compared with the best fixed deals that start from 7.99 per cent.

On today’s rates, that is an instant saving for those who fix.

But if predictions of further falls are accurate, variable mortgage rates could fall to about 7.11 per cent within two years.

And buyer beware — that relies on banks passing on their savings to borrowers, which investment gurus believe unlikely given their “higher cost” of sourcing funds on the international market.

Pressure exerted by Treasurer Wayne Swan before the rate cut prompted the banks to respond within five minutes of the announcement last Tuesday.

But Commonwealth Bank boss Ralph Norris said banks might not be able to pass on many more cash-rate reductions.

“I can’t guarantee anything,” he said.

“At the moment we have a situation where offshore funding costs have increased dramatically — about eight fold in margin over the past nine or 10 months due to the overseas crisis,” he said.

Mortgage brokers have been crunching the numbers for borrowers since the rate cut, trying to work out the best way to save them thousands during the life of their loan.

Jennifer Neilsen, chief of mortgage broker The Loan Market Group, urged caution on fixing rates.

“The cheapest fixes at the moment are about 8 per cent and you wouldn’t want to fix yet,” she said.

“Variable rates are the way to go. The trick is to fix when you can see we are nearing the bottom of the cutting cycle, and we are a long way from that at the moment.”

Financial markets have priced in an 80 per cent chance of another cut next month, and were expecting a further two by April, bringing the cash rate down to 6.25 per cent.

Frank Lopez, of financial data firm Cannex, said borrowers could get the cheapest variable rate if they went for a deal with no bells or whistles.

“Many people who take mortgages with lots of additional features such as redraw or payment holidays never actually use them — or don’t use them enough to justify the higher rate they pay for the privilege,” Mr Lopez said.

“Think hard before paying for any extra features at all.”

SAVERS

While borrowers may be celebrating the rate cuts, the future looks less rosy for those banking their pennies.

Savings accounts rates have already been falling and may fall rapidly as further cuts kick in. But there were some good deals available this week.

Many planners advised those who depended on savings accounts to boost their income to lock into a term deposit account before rates fell any lower.

Paul Bilson, of Woodward Nhill Financial Planning, said he favoured a mixture of term deposits and income funds.

“Sure, put part of your money into term deposits, but remember there will be penalties if you need to access your cash,” he said.

Mr Bilson said most income funds, which primarily invest in mortgage debt, were returning seven to 8 per cent “There is a little more risk,” Bilson said.
“They are not guaranteed — you have to make certain that the one you choose is very well rated.”

He said companies including Mariner, Axa and Colonial First State all ran good funds invested in quality loans, fixed interest securities and cash.

INVESTORS

Usually a rate cut is welcomed by the stock market because it makes the returns on cash less attractive and so forces more money into the stock market.

But after the cut on Tuesday, the market finished marginally down and fell further later in the week, stripping 5 per cent off Australian stocks.

It was the worst result since the major index fell 5.53 per cent in March.

Shane Oliver, chief economist at AMP Capital, said: “It is difficult to escape the bad news in the economy, which is going to make it harder for companies to grow their profits, and that will act as a drag on the stock market for some time.”

He said retail and discretionary spending would be hit hard by an economic slowdown.

“Unemployment will rise, but these things do not last forever,” Mr Oliver said.

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Tax cheats now more likely to be caught

Monday, August 11th, 2008

Article from: news.com.au

By Anthony Keane | July 20, 2008 02:05pm

WATCH out tax cheats. Advances in technology are giving the taxman a sharper eye.

People who deliberately avoid declaring income from bank deposits, shares or even capital gains on property and share sales now are more likely to get caught out by the Australian Taxation Office’s data-matching program.

Even those who inadvertently forget to declare income could get a tap on the shoulder from the ATO, which uses computer technology for data matching tens of millions of transactions each year.

It checks information on people’s tax returns is the same as the records of banks, Centrelink and other government organisations, state property registers, company share registers and private health insurance funds.

The tax manager at Adelaide accounting firm PKF, Vincy Choi, said the use of computers to crunch vast amounts of data had made matching easier. “It’s a lot harder now to say `nothing’ (when asked to declare income),'’ she said.

Miss Choi said apart from the obvious bank interest checks, the ATO was data-matching using South Australia’s lands titles office to check property sales, plus motor vehicle registrations.

The ATO could discover if people who claimed to be earning just $50,000 a year bought a luxury car costing hundreds of thousands of dollars and then ask where the money came from, she said.

“If you can explain yourself they won’t do anything but if you can’t they will start digging. It’s not difficult nowadays with technology to pick things up and, if they do, there will be severe penalties and interest,'’ she said.

Penalties typically totaled between 25 and 50 per cent of the tax shortfall but could be up to 100 per cent, depending on the severity of the case. Interest could be about 15 per cent compounded daily.

Second commissioner Jennie Granger said the ATO heavily publicised its data-matching capabilities to remind people to declare all their interest and dividend income, including money earned overseas and also was closely monitoring sales of investments.

“Improvements in data-matching techniques and access to more data are making it much easier for the tax office to identify unreported gains on sales of investments,'’ Ms Granger said.

“Unfortunately, our review and audit work is still rich pickings”.

“By the end of April we had completed 6393 audits and reviews for capital gains tax which have resulted in revenue adjustments of $50.2 million.'’

Superannuation has been a popular place to inject money since new laws came into force last July.

“Clients who sold assets to invest in superannuation may have a capital gains tax liability which will need to be disclosed regularly,'’ Ms Granger said.

E-tax

The Australian Taxation Office’s free online tax return tool, e-tax, becomes more popular and more effective each year. Recent improvements include “pre-filling” your bank deposit, shares and managed funds data, which saves time and promotes accuracy.

Record keeping

Make sure you can justify any tax deductions with receipts and other financial records.

If work-related deductions total more than $300, evidence is needed to show the total amount claimed.

Family tax benefit

This year is the last year people can claim the family tax benefit with their tax return. In future, the benefit can be claimed as a fortnightly payment or a lump sum through the Family Assistance Office.

Child care rebate

People can no longer claim the 30 per cent tax rebate in their tax return. It is now paid by the Family Assistance Office after they lodge their return and the benefit has been reconciled with Centrelink.

The ATO will automatically process claims for expenses incurred in the 2005-06 and 2006-07 years.

Shareholders

Takeovers in 2007-08 involving major companies such as Coles, Wesfarmers and OneSteel created capital gains tax events for shareholders. You can see how these need to be treated on your tax return on the ATO website.

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The dream is alive

Tuesday, July 29th, 2008

Article from: Sunday Herald Sun

*by Tony Rindfleisch
July 27, 2008 12:00am

THE headlines shout bad news about interest rates being up and housing affordability going down.

Rental prices are at their highest point yet and the rising cost of living is forcing many first-home buyers to worry about whether they will be able to buy a house.

While the great Australian dream might appear to be sliding off the radar for many, real estate industry experts insist there are options for first-home buyers prepared to compromise.

Today’s “have it now” generation might find it a bitter pill to swallow, but those prepared to live in a smaller or less conveniently located property than they would prefer can take their first steps on the property ladder.

So where are the best places and why? And what factors should buyers consider before spending up big on a home?

The Victorian market is in a lull after the high-speed price gains of last year, providing buyers with time to make a considered purchase.

Leading agents believe major infrastructure projects, transport links, jobs creation and median house prices are issues to watch when deciding where to buy.

NORTH

Epping, Mill Park, South Morang and Reservoir lead the pack of suburbs suggested by major agencies as ideal places for first-home buyers.

First National Real Estate chief executive Ray Ellis said most of these suburbs had house-land deals at the bottom of the price scale. New houses had the advantage of not needing renovations, he said.

Barry Plant Group director Barry Plant highlighted Roxburgh Park as a suburb where buyers could get a modern house for less than $300,000.

Rescom director Robert Findlay added Oak Park, Pascoe Vale and Brunswick West as suburbs offering attractive lifestyle options.
He said Regent, near Reservoir, was another hot spot.

LJ Hooker’s Victorian franchise representative, David Harris, said the cheaper suburbs gave buyers more “bang for their buck” but were not necessarily the best for first-home buyers with an eye on capital growth. Buyers prepared to secure a one or two-bedroom unit before moving to a bigger property would be best to look at Coburg, Preston and Thornbury, he said.

SOUTH

For the same reason, Murrumbeena and Oakleigh were attractive because they had strong transport links and continued demand, he said.

Frankston is a standout, despite being slow to live up to its widely publicised tag over recent years as the “next big thing”.

Terry Ryder, of property analysis website Hotspotting, said Frankston had all the hallmarks of a suburb set to go places, with cheap houses close to the beach and city access via Eastlink freeway.

Dandenong had a strong employment base with $300 million in new infrastructure pouring into the suburb, which would increase its demand from home buyers, Mr. Ryder said.

Mr Findlay said Edithvale and Carrum Downs were attractive for reasons similar to Frankston.

EAST

Eastlink is set to increase the value of suburbs along its route into new territory.

Ray White’s Victorian general manager, Andrea McNaughton, listed Wantirna and Ferntree Gully as popular suburbs set to be enjoying greater demand as a result of the freeway.

Suburbs along Eastlink that also had train stations, such as Boronia, would benefit, Mr. Plant said.

Mr. Findlay added Nunawading, Mitcham and Croydon, saying they also had leafy, bigger blocks close to shops and other facilities.

Stockdale & Leggo chief executive Peter Thomas said Pakenham offered great value for money.

Berwick and Ringwood were Mr. Ellis’s choices.

WEST

Footscray was like Richmond 10 years ago, Mr. Ryder said.

“It is now becoming trendier, there has been strong price growth and there will be an upside over the medium term because the area is being gentrified,” he said.

He also listed Melton, Deer Park and Caroline Springs as suburbs attractive to first-home buyers.

Mr. Plant said Hillside had three-bedroom, two-bathroom houses less than five years old for less than $300,000. Werribee and Hoppers Crossing still represented good value for new buyers, he said.

Mr. Thomas said Tarneit was “taking off” and Mr. Harris highlighted Point Cook, Deer Park and Taylors Lakes. Mr. Findlay said Sunshine, Spotswood and Maidstone ticked the boxes buyers wanted with transport, shops and facilities.

Asked whether it was better to buy now or wait until spring, Mr. Harris said there were always good and bad buys on the market.

The best time to buy was when the buyer was ready and the property they wanted came on the market, he said.

Ms McNaughton said prices would not change much before spring. Buyers hoping to pick the bottom of the market could get it horribly wrong, she said.

“The biggest risk is not being in property, rather than where you buy,” Ms McNaughton said.

REGIONAL

Geelong, Ballarat and Bendigo had everything buyers could want, Mar Plant said.

Mr. Findlay added Warrnambool and Mildura, suggesting their economic diversity and lifestyle options would continue to generate demand.

Traralgon and Morwell offered houses for less than $200,000 close to Melbourne where there were solid sources of employment, Mr. Ryder said.

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Interest rate drops in sight

Wednesday, April 9th, 2008

Article from: Herald Sun
Stephen McMahon
April 09, 2008 12:00am

INTEREST rates may drop back to 6 per cent by late next year as the latest economic data shows a significant slowing in the economy.

NAB chief economist Alan Oster said there is a 30 per cent chance the Reserve Bank of Australia will begin cutting rates this year as economic growth deteriorates.

As the RBA looks to have won another round in its heavyweight fight against inflation, Mr. Oster is forecasting interest rates will fall steeply in 2009 from a 13-year high of 7.25 per cent back to 6 per cent.

“An interest rate cut this year is a possibility, but there may not be enough of a slowdown,” Mr. Oster said.

“But we think that by the late 2009 they will be down to about 6 per cent.”

This view comes as the latest NAB business survey shows spending patterns are slowing and business conditions have plummeted to the lowest point since late 2002.

Mr. Oster said the economic downturn is now “broad-based” and the “deceleration is gaining momentum” after the RBA’s back-to-back rate rises in February and March.

The business survey showed a double-digit fall in business conditions for retailing, transport, finance and property.

Mr. Oster expects the slowdown will result in unemployment levels jumping from just over 4 per cent to about 5 per cent next year.

This follows Monday’s job advertisement survey that registered its fourth consecutive month of declines as employers pare back hiring.

Citigroup co-head of market and economic analysis Paul Brennan said the upcoming consumer price index on April 23 will show inflation is still very high but that the RBA will look through the data.

“There is still a lot of inflationary pressure in the economy from the strong growth in the second half of 2007 but inflation pressures should begin to moderate in the next few months,” Mr. Brennan said.

“The RBA is adopting a wait-and-see approach because there has been a lot of tightening and this takes time to work its way through the system.”

Sydney Futures Exchange traders have priced in a greater than 50 per cent possibility of interest rates falling to 7 per cent in November.

But Mr. Brennan forecast that rates won’t start falling until early next year and will drop to about 6.5 per cent by the end of 2009.

Deutsche Bank economist Phil O’Donoghue said it is “a bit early to be talking about rate cuts” as the finance house is still forecasting another rate rise to 7.5 per cent later this year.

He points to the surge in coal prices as being a major threat to inflation as it could push the terms of trade even higher than February’s record $3.3 billion trade deficit.

Australian coal exporters are expected to secure a tripling of coal prices.

The higher terms of trade, tax cuts in next month’s federal budget and a rebound in farm prices are expected to offset some of the recent downturn in economic growth and bolster inflationary pressures.

Despite his short-term reservations, Mr. O’Donoghue said the RBA is getting on top of inflation and in time, the bank’s tightening bias will begin to soften.

He is predicting that as the economy slows the RBA will be forced into a series of rapid interest rate cuts next year to take official cash rates to about 6 per cent by late 2009.

The Australian economic slowdown will also be aided by the global economic slowdown stemming from a recession in the US.

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Posted in Mortgages, Why use a Mortgage Broker, Where do I find a home loan, Mrs Mortgage, Interest Rates | No Comments »

Mortgage Broker vs Bank Loan Officer

Friday, November 23rd, 2007

When you’re looking to get a mortgage loan, you may work with a loan officer or you may choose to work with a mortgage broker. People often confuse the two job types even though both will glean the same results: a new home.

However, it is important to understand the difference between the two types of jobs so you know what to expect from them during the mortgage application process.

A mortgage broker is an individual or firm that acts as an independent agent for both the borrower and the lender of a mortgage loan.

Mortgage brokers are the middle man between you and the lending institution, which can be a bank, trust company, credit union, mortgage corporation, finance company or even an individual private investor.

A mortgage broker will analyze your financial situation to determine ‘which’ lender is the best fit for ‘your loan’ needs. He or she will submit your mortgage application to one or more lenders in order to sell it, and works with the chosen lender until the loan closes. He or she receives a fee from the borrower if the loan closes.

A loan officer is a representative of a lending institution, such as a bank, who works to sell and process mortgages and other loans originated by their employer. They often have a wide variety of loans types to draw from, but all originate from that specific lender.

Also known as a loan representative or account executive, loan officers represent the borrower to the lending institution and will guide him or her through the selection, processing and closing of mortgage loan. Loan officers can be paid a commission/bonus or salary for their service.

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Posted in Mortgages, General Mortgage Information, First Home Owners, Why use a Mortgage Broker, Where do I find a home loan, Finance Broking Contract, Mrs Mortgage | No Comments »

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