SO YOU'VE heard that mortgage exit fees have been banned and banks, led by National Australia Bank, are cutting or axing many hated fees and charges.
But beware. Banks are busily replacing that lost income with new fees and higher charges.
Some are clear, upfront and easy to avoid for savvy bank customers who are prepared to compare and switch products. Others will be hidden and passed along the supply chain to consumers who will be unable to dodge them, bank analysts say. The total bank fee take last year was down for the first time, but only slightly, according to the latest Reserve Bank data.Banks raked in $4.25 billion, down 16 per cent, in bank fees levied on households, but their total fee take remained steady, falling just $14 million or less than 1 per cent."Only exception (penalty) fees have gone down," said Damian Smith, chief executive of financial comparison service RateCity.
"Other types of bank fee income have gone up to largely make up for that lost fee income.
"Ongoing fees for maintaining a mortgage have gone up, for example. In 2009, ongoing fees on mortgages listed on our database averaged $165, and now they average $240 per year. That's a rise of $75." Commonwealth Bank, ME Bank, Greater Building Society and Aussie Home Loans have announced increased upfront fees on some of their variable rate home loans recently.
Those fee increases come as exit fees disappear from the market. As of yesterday, all lenders have ceased charging exit fees on their variable mortgages, compared with just 56 per cent on June 1, according to RateCity. The highest average increase in upfront fees was $600, by the Commonwealth Bank, which lifted upfront fees across its suite of mortgages from $64 to $664 on average, Mr Smith said.
However, over the whole mortgage market, the average upfront fee on a standard variable mortgage has gone up just $32, from $374.40 in June to $406.40 now, according to data supplied by RateCity.
At the same time, early exit fees have gone down an average of $326."And upfront fees are both more readily comparable and 'negotiable' than exit fees," Mr Smith said.
Borrowers refinancing to get a better deal are a big driver of growth in the mortgage market, he said.
"We believe that removal of exit fees is the key driver behind this greater level of switching."
Fees on credit cards are changing as well and will change further as new consumer credit protection laws kick in this year.Credit card late-payment and over-limit penalty fees have gone down, but other credit card fees have gone up in recent years. "Some credit card 'exception fees' have dropped," said Mr Smith. "Others, such as ongoing fees, have increased. "For instance, in 2008, the average annual credit card fee (out of all cards that charge a fee) was $78.52, and now it's $92.45. "That's an increase of nearly $14, or around 18 per cent, in just three years, which is more than double the inflation rate over that same time."
The number of credit cards with annual fees has also risen. Three years ago, more than a quarter (28 per cent) of credit cards being offered to Australian consumers carried no annual fee.
Now just 31 credit cards, or 13 per cent, have no annual fee. Another 18 credit cards waive the annual fee if the cardholder meets a minimum spend each month, usually $1000.
Mr Smith recommends comparing your credit card rates and charges with some of the low-rate, low-fee cards now on the market.
Saturday, July 23, 2011
Thursday, July 21, 2011
Inflation and the housing market
There is mounting evidence to suggest that Australia’s housing market rests at a critical juncture. The evolution of Australian dwelling values since 2000 and 2006, respectively show the latest innovation in the housing cycle, where overall Australian home values have tapered by a modest 2.3%. So the question here is what lies ahead?
Sydney dwelling values have massively underperformed the rest of the Australian market over the last 11 years or so according to current data even though the Perth and Brisbane housing markets have suffered 7.5% and 5.9% declines in the past year, they have actually been our two best-performing conurbations over the past 11 years.
The near-term destiny of Australia’s housing market very much depends on next week’s second-quarter inflation numbers. If inflation is low, the RBA will likely be on the sidelines for the rest of the year. It can argue that it was vindicated for not responding to the very high first-quarter results, and will in any event be downgrading its economic growth forecasts for 2011, which were always on the high side.
Talk in the media will galvanise more firmly around rate cuts. Consumers will start to scale back their still extraordinarily hawkish interest rate views with 84% anticipating rate hikes. Given the average Australian thinks he will be hit by two or more rate hikes in the next 12 months, it is no surprise that underlying economic conditions have been so soft.
In this low-inflation scenario with no future hikes and the prospect of cuts, the forecast predicts that Australia’s housing market has the ability to start grinding out very modest capital growth, which, of course, should be complemented by healthy rental returns
In the less favourable alternative, where inflation next week is reported high – at, say, 0.8% for the quarter or more the central bank will be very much on the interest rate warpath. That means the likelihood of a rate hike, or hikes, before the year is out and the hold that the RBA currently has on Australia’s housing market will only tighten.
The divergence of beliefs between economists and the financial markets are that ANZ’s interest rate forecasts contrasted against the futures market’s expectations. Whereas the futures market is predicting rate cuts, ANZ thinks we will get hikes.
Who is right? That all depends on inflation. So, if you are looking to buy but have not found a place yet, you should be hoping for a high inflation outcome, which will inevitably result in persistent, interest rate-induced pressure on prices. If, on the other hand, you are looking to sell, you should be praying for a low number next week
Sydney dwelling values have massively underperformed the rest of the Australian market over the last 11 years or so according to current data even though the Perth and Brisbane housing markets have suffered 7.5% and 5.9% declines in the past year, they have actually been our two best-performing conurbations over the past 11 years.
The near-term destiny of Australia’s housing market very much depends on next week’s second-quarter inflation numbers. If inflation is low, the RBA will likely be on the sidelines for the rest of the year. It can argue that it was vindicated for not responding to the very high first-quarter results, and will in any event be downgrading its economic growth forecasts for 2011, which were always on the high side.
Talk in the media will galvanise more firmly around rate cuts. Consumers will start to scale back their still extraordinarily hawkish interest rate views with 84% anticipating rate hikes. Given the average Australian thinks he will be hit by two or more rate hikes in the next 12 months, it is no surprise that underlying economic conditions have been so soft.
In this low-inflation scenario with no future hikes and the prospect of cuts, the forecast predicts that Australia’s housing market has the ability to start grinding out very modest capital growth, which, of course, should be complemented by healthy rental returns
In the less favourable alternative, where inflation next week is reported high – at, say, 0.8% for the quarter or more the central bank will be very much on the interest rate warpath. That means the likelihood of a rate hike, or hikes, before the year is out and the hold that the RBA currently has on Australia’s housing market will only tighten.
The divergence of beliefs between economists and the financial markets are that ANZ’s interest rate forecasts contrasted against the futures market’s expectations. Whereas the futures market is predicting rate cuts, ANZ thinks we will get hikes.
Who is right? That all depends on inflation. So, if you are looking to buy but have not found a place yet, you should be hoping for a high inflation outcome, which will inevitably result in persistent, interest rate-induced pressure on prices. If, on the other hand, you are looking to sell, you should be praying for a low number next week
Monday, July 18, 2011
Westpac ratecuts
Westpac’s chief economist Bill Evans has shocked the market by forecasting a series of interest rate cuts.
Mr Evans said low consumer sentiment could force the Reserve Bank of Australia to slash the official cash rate by up to 1 per cent in 2012.
“We were all talking not long ago that rates could go up, but if the consumer remains subdued there may be interest rate reductions and if that occurs that would be a very strong stimulus for the consumer to save less and spend a little bit more,” he said.
But it seems not everyone shares Mr Evans’ view on rates.
Last week ANZ’s head of Australian economics and property research Ivan Colhoun said he expects the Reserve Bank to keep the official cash rate on hold at 4.75 per cent until February 2012, when it will start raising rates again.
Mr Evans said low consumer sentiment could force the Reserve Bank of Australia to slash the official cash rate by up to 1 per cent in 2012.
“We were all talking not long ago that rates could go up, but if the consumer remains subdued there may be interest rate reductions and if that occurs that would be a very strong stimulus for the consumer to save less and spend a little bit more,” he said.
But it seems not everyone shares Mr Evans’ view on rates.
Last week ANZ’s head of Australian economics and property research Ivan Colhoun said he expects the Reserve Bank to keep the official cash rate on hold at 4.75 per cent until February 2012, when it will start raising rates again.
Thursday, July 14, 2011
Home prices predicted to fall
Home prices are predicted to fall over the next 12 months after a sharp decline in the expected value of Victorian houses dragged the national forecast lower, says a new report.
The National Australia Bank NAB residential property index, which predicts houses prices, rents and real estate market conditions over the coming year, said national home prices would drop by 1.4 per cent in the 12 months from June, reversing an earlier prediction that home values would rise 0.6 per cent in the 12 months from last March.
In New South Wales, the NAB index declined from 39 points in March to 18 points in June, making it the strongest state in the national market.
For Victoria, however, the index plunged to minus 16 in the June quarter from a positive 23 point reading in the March quarter."There has also been a notable deterioration in house price expectations across the country since our last survey," said NAB chief economist Alan Oster.The June quarter's expectations were pushed lower by Queensland, where respondents predicted a 2.3 per cent fall over the year, and Victoria, where they saw a 2.1 per cent slide.But in sobering news for homeowners elsewhere, the survey predicted house prices would drop in all states except Western Australia, where values were forecast to rise by 0.2 per cent over the year. Homes in New South Wales would fall by a modest 0.7 per cent, while South Australian homes would lose 1.7 per cent.
After performing strongly in 2010 the Australian housing market shifted into a lower gear in 2011. Auction clearance rates have hovered in the 50 per cent range in New South Wales and Victoria, down from the highs of 80 per cent seen last year, and borrowers appeared to be less willing to take out large loans for fear of interest rates rising.RP Data said in June that national home prices have slumped 2.7 per cent in the first five months of the year.
The survey, drawn from the opinions of real estate agents, managers, property developers, and other industry voices, said tighter lending criteria and higher interest rates were the two major burdens on the market in the June quarter."Housing affordability was also identified in the current survey as a 'significant' constraint and was viewed as being most problematic in Victoria and Western Australia," the report said."The sustainability of house price gains was also cited as a 'significant' concern, with these concerns highest in Western Australia and NSW."In Queensland the index sank to minus 27 in June from minus 5 in March. In South Australia, the index moved from minus 8 to minus 6 in the same period, while in WA it remained in positive territory, moving from 12 in the March quarter to 5 in June.
The NAB survey also showed rental yields softening over the year, falling to 1.3 per cent in June from 1.7 per cent in March.
The National Australia Bank NAB residential property index, which predicts houses prices, rents and real estate market conditions over the coming year, said national home prices would drop by 1.4 per cent in the 12 months from June, reversing an earlier prediction that home values would rise 0.6 per cent in the 12 months from last March.
In New South Wales, the NAB index declined from 39 points in March to 18 points in June, making it the strongest state in the national market.
For Victoria, however, the index plunged to minus 16 in the June quarter from a positive 23 point reading in the March quarter."There has also been a notable deterioration in house price expectations across the country since our last survey," said NAB chief economist Alan Oster.The June quarter's expectations were pushed lower by Queensland, where respondents predicted a 2.3 per cent fall over the year, and Victoria, where they saw a 2.1 per cent slide.But in sobering news for homeowners elsewhere, the survey predicted house prices would drop in all states except Western Australia, where values were forecast to rise by 0.2 per cent over the year. Homes in New South Wales would fall by a modest 0.7 per cent, while South Australian homes would lose 1.7 per cent.
After performing strongly in 2010 the Australian housing market shifted into a lower gear in 2011. Auction clearance rates have hovered in the 50 per cent range in New South Wales and Victoria, down from the highs of 80 per cent seen last year, and borrowers appeared to be less willing to take out large loans for fear of interest rates rising.RP Data said in June that national home prices have slumped 2.7 per cent in the first five months of the year.
The survey, drawn from the opinions of real estate agents, managers, property developers, and other industry voices, said tighter lending criteria and higher interest rates were the two major burdens on the market in the June quarter."Housing affordability was also identified in the current survey as a 'significant' constraint and was viewed as being most problematic in Victoria and Western Australia," the report said."The sustainability of house price gains was also cited as a 'significant' concern, with these concerns highest in Western Australia and NSW."In Queensland the index sank to minus 27 in June from minus 5 in March. In South Australia, the index moved from minus 8 to minus 6 in the same period, while in WA it remained in positive territory, moving from 12 in the March quarter to 5 in June.
The NAB survey also showed rental yields softening over the year, falling to 1.3 per cent in June from 1.7 per cent in March.
Friday, July 8, 2011
Property listings
Property listings remain some 25% higher within Australia’s capital cities than last year, and 29% higher across the country, according to RP Data.
The 50,854 new house and unit listings over the past month take the total for sale across Australia to 279,605. There were 217,442 listings across Australia this time last year.
“Less than 48% of total listings nationally are within the capital cities,” RP Data research director Tim Lawless said earlier this month. New listings saw 50,854 properties added over the past month, with the capital city new listing volumes 2.8% higher than the same period last year.
As the winter hibernation sets in the number of new properties advertised for sale increased by 1.8% across the country in the last four weeks, compared to the previous four weeks ending 26 June 2011.
Queensland has the highest number of total listings at 86,188, followed by 73,673 in NSW.
The number of new properties advertised for rent has fallen by 2.7% over the past four weeks.
Capital city new rental listings fell by 3.1%.
Despite the fall, new rental listings nationally are 14.3% higher than the same time last year, and in the combined capital cities they are 11.9% higher.
Rental listings remain at much higher levels than the same time last year, up 12.8% nationally and 10.7% in the capital cities, Lawless said.
This article first appeared on Property Obsever, Australia's top site for property investment news
The 50,854 new house and unit listings over the past month take the total for sale across Australia to 279,605. There were 217,442 listings across Australia this time last year.
“Less than 48% of total listings nationally are within the capital cities,” RP Data research director Tim Lawless said earlier this month. New listings saw 50,854 properties added over the past month, with the capital city new listing volumes 2.8% higher than the same period last year.
As the winter hibernation sets in the number of new properties advertised for sale increased by 1.8% across the country in the last four weeks, compared to the previous four weeks ending 26 June 2011.
Queensland has the highest number of total listings at 86,188, followed by 73,673 in NSW.
The number of new properties advertised for rent has fallen by 2.7% over the past four weeks.
Capital city new rental listings fell by 3.1%.
Despite the fall, new rental listings nationally are 14.3% higher than the same time last year, and in the combined capital cities they are 11.9% higher.
Rental listings remain at much higher levels than the same time last year, up 12.8% nationally and 10.7% in the capital cities, Lawless said.
This article first appeared on Property Obsever, Australia's top site for property investment news
Subscribe to:
Posts (Atom)