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Malcolm Edey speaks to Property Council of Australia

Malcolm Edey, assistant governor of the Financial System of Australia, recently spoke about issues concerning the nation’s financial situation. He mentioned several factors that contributed to Australia’s steadfast recovery amidst the global financial crisis, attributing resilience within the financial sector in part to an economy still growing despite the severe recessions affecting other nations, in particular Europe and as the US. Most banks stayed profitable and since the crisis have strengthened their capital and liquidity positions.

He talked of his responsibilities at the Reserve Bank of Australia as including the production of the half annual Financial Stability Review, which provides information on the developments and risks encountered by the financial system, both domestic and international. He said that according to the reports from the Review Australia has already passed the most intense stage of the financial crisis. It corresponded more or less to the six month period starting from September 2008 until March 2009, which followed the fall of Lehman Brothers, as well as the other high-profile losses in Europe and America.

Edey said that it was a period of huge losses in global equity prices, and severe dislocation in credit markets. Banks worldwide announced their losses, and there was a contraction in output and trade across Asia, Europe and the US.

Financial conditions within the global economy have since improved, with China at the forefront of economic growth followed by India and other developing nations.

He said that countries which were severely affected by the crisis are showing signs of recovery with banks returning to profitability, recovery in the asset quality in banking systems, equity markets showing signs of recovery from their 2009 slumps, and improvements in credit market conditions.

Building Your Own Home

Building a home is always a tough process. However, it shows some advantages. Figures show that the expenses for building from scratch is 20 to 30 percent cheaper than renovating on a per square meter basis. Also, there is a sense of achievement once you have seen that the house has been finished. You can build your own home in a number of ways and one of them is via house and land packages.

The house and land package is the all-in-one aspect of buying a property. In this package, you will buy the land and the house from the developer. The developer will offer various house designs and allotments within his developed community. Once you are sure in purchasing the house, a ten percent deposit must be paid and the balance will be paid via monthly repayments.

When deciding on a loan for your new property it is important that you know how much you have and how much you can afford to borrow in real terms. Finding the right loan is as important as finding the right home.

Then, you would have to sign a building contract. This contract contains the architectural blue prints for the property, quotations and the actual building contract document itself. Any labour job that is above $200 must always have a written contract. Before signing, make sure that a lawyer has checked the contract first in your behalf.

The warranties for the project must also be contained in the contract. These warranties include the materials used for construction, the project’s legal compliance, the builder’s quality of work, the completion time for the property and the physical qualifications of the builders for the job. This warranty will protect you from fly-by-night construction work.

However, be mindful of the fact that uncontrollable delays can come as the property is being constructed. Some of these uncontrollable circumstances are price blowouts, construction delays due to lack of manpower, bad weather, price blowouts and even disputes with building authorities or neighbours. To avoid disputes, you should get a fixed price contract from the builder.

Factors in buying a property

Home buyers consider two main factors in buying a property: price and comfort. If you purchase a property that you plan to live at for five to ten years, you must make sure that the property you wish to purchase is comfortable. As a large amount of money is put towards this purchase, boosting your wealth when selling should also be a factor considered.

To get the most out of the investment, buyers must understand the market very well. Reading up on and keeping up to date with the latest in the real estate market would be very helpful. It is important that you hold off on purchasing until you have done proper research.

Take your time to research the area you would like to live as well as hunting for prospective properties. You may also take a visit to houses that are open for inspection and pay attention to what agents tell you. Attend auction when research is another great way to get a feel for the market you wish to enter.

To get the real value of the market and to determine how much a property is worth it is worthwhile getting a property valuation. When you have an estimated price for the area you wish to enter you can use a home loan calculator to determine your mortgage repayments and the amount you can afford to borrow.

Home Loan Interest Rate Types

Home loans are generally classified into two types: fixed home loans and the variable home loans.

Fixed home loans have a set repayment amount that will not be affected by interest rate changes. If you want to lessen the risks that are brought by volatile interest rate movement, this home loan is for you. Fixed home loans offer repayment stability though there might be changes in the official cash rate.

This home loan type is ideal for handling your finances well as you can allot a fixed amount for your repayment and use the rest of your money for other expenses.

Meanwhile, the variable home loan allows a borrower to pay in varied amounts. More loaners avail of this option since it is heavily dependent on the market interest rate so repayments can either be high or low. Likewise, its interest rates go up when the Reserve Bank of Australia cash rate goes up as well. And because they have more features as compared to a fixed home loan, they usually incur higher interest rates.

You can also have a split home loan which has the features of both the fixed and variable characteristics. For this, you sign up for a split home loan. With this deal, you can pay part of your loan via a fixed rate and another through variable conditions.

This type of home loan makes repayment faster too. Interest only home loans let you pay only the interest rate for about one to five years but you must start paying the principal amount afterwards. This type of home loans can trim down the expenses for purchasing a residential property. However, lenders will determine your capacity to pay the loan through your repayments.

Interest-only home loans initially cut the expenses for purchasing a residential property which allows you to use the money for other needs. On the downside, lenders will weigh your capacity to shoulder the loan through your repayments and this can limit your chances of borrowing more funds. Also, honeymoon home loans would suit start-up families for it carries a low initial interest rate for a year or two and an offset account is set for you. But after the honeymoon period, the rate reverts to standard interest rates.

There is also a no deposit home loan which allows you to borrow the full amount of the house’s purchase price. Also, this option also makes you eligible for the First Home Owners Grant. However, this deal entails additional fees for stamp duty and conveyancing. And last but not the least, an equity home loan is part of your options too. Also called the Line of Credit home loan, this deal has a continuing pre-set limit that does not reduce over time. The funds that will be generated can be used for shares and renovations of a personal or an investment property. However, its interest rate is slightly higher than the standard rate.

Also, the fund redraw capability can turn out to be expensive if it is not used wisely. Utmost discipline is needed to regularly pay principal repayments.

Mortgage: How To Get The Best Deal

Mortgage: how to get the best deal

If you are thinking of purchasing a house through mortgage then you must be considering the mortgage rates also. Getting a mortgage loan approved should not be your ultimate aim. You should try to achieve a mortgage with considerably low rate of interest and should also check important phrases. But, in order to land up with the best mortgage deal, you need to follow some important steps that are discussed below:

Steps that you should follow in order to get the best mortgage rates

• Before finalizing any mortgage deal, you need to undertake a thorough research regarding the prevailing market interest rates. You should obtain the mortgage quotes of various mortgage lenders from internet sites and newspaper ads and should compare the mortgage interest rates. Do not jump to a mortgage deal with a lender only because you had financial relationship with that lender earlier. Just shop around in order to get the best deal.
• When you apply for a mortgage loan, the lenders check your credit score before approving your loan. A poor credit score not only affects your mortgage approval but also the interest rate at which you get the mortgage loan. Your credit score largely depends on the fact whether you pay your bills on time or not. So, when you are considering taking a mortgage loan, you should start paying bills on time. There should not be any record of late payment at least within last few months of your credit report. Otherwise you will be considered as a risky borrower and as a result you will be charged with high rates of interest on your mortgage. Because of a poor credit score you can also be denied of a mortgage.
• Your credit score has a direct link to the amount of your available credit. So, if you have substantial credit card debt, try to pay it down. If you can reduce the outstanding balance of your credit cards then it will positively affect your credit score and you will be able to get a mortgage loan with low interest rate.
• Your credit history and credit score significantly influence the interest rate, payable on your mortgage loan. So, if any erroneous information exists on your credit report, you should immediately take initiative to correct that before applying for the mortgage.

Types of Home Loans Guide

Type of Home Loans Guide

There are lots of different types of home loans to look for and every person has different needs. You should look for the best deal to suit your needs.

The two types of home loans according to interest rate are the fixed home loan and the variable home loan. The fixed home loan gives you a stable payment no matter what happens with the market interest rate. However, in the event that the market interest goes lower, your loan stays at a higher rate.

On the other hand, the variable home loan allows a borrower to pay in varied amounts for the life of the loan. More borrowers opt for this option since market conditions change from time to time. The variable home loan interest rate is heavily dependent on the market interest rate so repayments can either be high or low.

If you cannot decide between the home loan terms, why not get both? Apply for a split loan. Once you are under this deal, you can pay a portion of you loan via a fixed rate and another portion through a variable rate. This type of home loan can make your repayment faster as well.

You can also go for interest only home loans wherein you only have to pay the interest on the principal during the loan term deal. Repayments are lower than that of the standard home loans but you must start paying the principal terms after the interest only period of around one to five years.

Self-employed buyers and investors can avail the low document home loan. Financial documents and tax declarations are not needed for this home loan but it usually has a higher interest rate. People with bad credit history can also go for a non-conforming home loan as long as they can guarantee that they can satisfy the repayments.

Meanwhile, honeymoon home loans are suitable for families or businesses that are starting up. This type of loan has a low starting interest rate for a year or two. After which, the rate reverts to standard interest rates. It is presumed that you have saved in the grace period which makes you able to pay the standard rate afterwards.

You can also opt for a no deposit home loan which allows you to borrow 100% of the house’s purchase price. This option also makes you eligible for the First Home Owners Grant of $7,000. However, there are several additional charges to this like stamp duty fees.

And last but not the least, an equity home loan is part of your options too. Also called the Line of Credit home loan, this deal has a continuing pre-set limit that does not reduce over time. The funds that will be generated can be used for shares and renovations of a personal or an investment property. However, its interest rate is slightly higher than the standard rate.

These are some of the home loans that you can consider. If you are still confused, better consult a home loan consultant who will give you more information and valuable tips on this matter.

A guide to buying a home

A Guide to Buying Your Home

When you found a property that you would like to buy, you make an offer via the real estate agent.

Once your offer is accepted, you then sign a contract with the seller so that the legal process of the deal can be initiated. You should be aware that even though you have an accepted offer, until you have signed the contract , the vendor may still shop the property around to get an even higher price.

Once you’ve signed the contract, you are also agreeing with the terms and conditions that are within the contract, so it’s important that you go over every page of the contract. By reading the contract, you can also make sure as to what is included in the selling price.

When the contract has been finalised, it takes four to six weeks to settle the sale. This time is used to insure the property, fill up more mortgage papers, satisfy stamp duty fees and finalize transactions with your vendor. If an existing property is being sold, you should make sure your solicitor takes into account the dates of settlement of the property sale.

Auction is another option. Here, you must have to fight for your property. You should also make sure you’ve got access to a ten percent deposit or a deposit bond guarantee.  You need to pay this immediately if you win.

Some auctions uphold that a reserve price must be met. If the highest bid for the property is lower than the reserve price, the highest bidder will have the opportunity to negotiate with the seller first. This is not a guarantee though that he will get the house.

Home Loan Owners to pay More

It might not have been the 0.5 hike that economists predicted but due to the recent 0.25-point rise of interest rates by the Reserve Bank of Australia to peg their new rate to 3.5 per cent, four of Australia’s largest banks immediately passed the burden to their patrons.

Due to this interest rate hike, Commonwealth Bank, Westpac, ANZ and the National Australia Bank re-adjusted their rates values as well. After all the developments, average homeowners must now pay an additional $46 for monthly mortgages.

If added to rate hike in October, it implies that those who are enrolled in $300,000 home loan programs are paying $100 more for their mortgages.

When compared with the recorded data before the RBA started trimming down rates due to the global financial crunch, last August 2008, loan payers have amassed $662 dollars in additional monthly payments.

Because of these recent adjustments, Federal Treasurer Wayne Swan proclaimed that these developments have been tough for average families and small scale businesses.

However, he added that these developments would mean that rates are not nailed at 50-year-low emergency rates for a long time. He also pointed out that when these banks meet in February 2010, Australia’s albeit improving economy will bring positive changes to the interest rates.

On the other hand, opposition leader Malcolm Turnbull stresses that the interest rate hikes will continue due to the Rudd administration’s overspending of the stimulus program.

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