A just-released First Home Loan Deposit Scheme (FHLDS) report has highlighted the key trends and insights from the initiative's first six months in operation spanning from January to June 2020.
The available settlement data from the National Housing Finance and Investment Corporation (NHFIC) indicates one in eight of all first home buyers (FHBs) accessed the scheme to purchase a home; according to analysis from the corporation, the scheme enabled FHBs without alternative financial means to bring forward their purchase by an average of four years.
First time buyers across age and income spectrum's around the country accessed the scheme, and we saw strong interest from buyers in outer metropolitan and regional areas.”
Cairns Mortgage Brokers named state finalist at MFAA’s Excellence Awards
Cairns Mortgage Brokers has been announced as a finalist in the QLD State Community Champion Award category at the annual Mortgage & Finance Association of Australia (MFAA) State Excellence Awards. The Awards highlight brokers, broker businesses and staff who have demonstrated exceptional customer service, professionalism, ethics, growth and innovation.
This is the second time Cairns Mortgage Brokers has been nominated in this category and they previously were named QLD Winner for the Community Champion category and QLD Regional Mortgage Broker of the year.
The MFAA Excellence Awards are the most rigorous in the Australian mortgage and finance industry and are judged by an independent panel of industry specialists, business professionals and experts.
“I am honoured to have been recognised by our industry peers and to have been selected from all the entrants across the State and named as a finalist for this Award,” said Roger Ward, Director of Cairns Mortgage Brokers.
The last year has been full of change and increasing challenges for the finance broking industry, but Cairns Mortgage Brokers has been delivering better customer outcomes than ever due to their commitment to our customers and expertise in the lending market.
“After previously being QLD Mortgage Broker of the year for 2 years this is confirmation we are still honouring our commitment to be industry leaders providing great professional advice to our valued clients in Cairns and in this uncertain time, it’s even more important for people to get good impartial advice on such an important thing as their home loan’ says Roger Ward.
“The MFAA has acknowledged Cairns Mortgage Brokers as a state finalist out of more than 520 total award submissions received nationally. Roger Ward has been rewarded for demonstrating their professionalism, integrity, ethical conduct, growth and innovation,” the MFAA stated.
“To be recognised as a finalist speaks volumes of their exceptional practice and professionalism in the mortgage and finance industry,” the MFAA added.
Over the last 18 years the awards have played a key role in lifting the standards of service and professionalism in Australia’s mortgage and finance industry.
All finalists, including Cairns Mortgage Brokers, have an opportunity to be recognised as their state’s winner. State winners will then have the opportunity to win the prestigious national title at the National Awards.
During these times of uncertainty, we understand there could be challenging periods ahead due to COVID-19 and want to reassure you that we are here to help.
It’s important to know if you are facing difficulties with making repayments on your home loan, then you can seek relief on the grounds of financial hardship directly with your lender.
Some potential options include:
• Request a lower interest rate
• Switch to interest only repayments
• Request a repayment holiday for 3-6 months (interest is still incurred but repayments are stopped for a period of time)
• Extend the loan term to reduce the repayments
• Ask for fees and charges to be waived
• Consolidate debts to make repayments more manageable
Not all banks and lenders will have a COVID-19 specific relief package prepared. However, they still have standard policies in place to help those who are facing financial hardship for any reason.
While financial hardship requests need to be made directly to the lender by the client, we can help you prepare for the conversation or suggest alternative solutions based on your individual circumstances.
Importantly, if you are facing financial hardship please act immediately and do not delay. The CEO of the Australian Banking Association, Anna Bligh said, "Banks stand ready to support customers, and if anyone is in need of assistance, they shouldn’t wait but come forward as soon as possible."
We are ready to assist, so please don’t hesitate to get in touch today.
Buying your first home is an exciting time! Did you know that the Australian Government has two new initiatives that support first home buyers? These are the First Home Loan Deposit Scheme (FHLDS) and the First Home Super Saver (FHSS) scheme.
First Home Loan Deposit Scheme (FHLDS)
What is it? FHLDS helps first home buyers purchase a home sooner by providing a guarantee allowing those on low and middle incomes to buy a house with as little as 5% deposit (lender’s criteria apply).
Who is eligible? Singles and couples that meet the following key checks: an income test, a prior property owner test, a minimum age test, a deposit requirement, and an owner-occupier requirement. Get in touch soon so we can check if you meet the criteria.
First Home Super Saver (FHSS) Scheme
What is it? FHSS allows you to make voluntary before-tax and after-tax contributions into your super fund to save for your first home. Eligible candidates can then access these contributions and associated earnings to buy their first home. As of July 2019, there have been changes to the scheme, including only applying to buy your first home in Australia, compared to the previous version that applies to any location.
Who is eligible? First home buyers who live in the premises they are buying or intend to live there as soon as practicable; and who intend to live in the property for at least six months within the first 12 months they own it. The buyer also must have never owned a property in Australia and have not previously requested a FHSS release authority.
Get in touch today to learn more about these schemes and explore opportunities suitable for you. I can provide details on how each scheme works, the ins and outs, and the pros and cons that apply to your current situation.
The Reserve Bank has cut the official cash rate for the second month in a row, with focus now shifting to the response from the mortgage market.
The Reserve Bank of Australia (RBA) has cut the official cash rate to a new record low of 1 per cent, in line with the expectations of most industry pundits.
In minutes released from last month’s board meeting — in which the RBA dropped the cash rate for the first time in almost two years — the central bank acknowledged that further cuts to the cash rate were “more likely than not”, with governor Philip Lowe also conceding that the market was not “making any inroads into the economy's spare capacity”.
The RBA’s unusually strong signal to the market prompted observers to predict back-to-back rate cuts in July and August, as part of an aggressive strategy to stimulate the labour market and boost GDP growth.
ANZ Research’s head of economics, David Plank, had said: “[Clearly] there is a very real chance the cash rate is cut in both July and August given the RBA’s assessment that “we are not making any inroads into the economy’s spare capacity.”
AMP Capital’s chief economist, Shane Oliver, who also predicted cuts in both July and August, stated that the RBA could lower rates by a cumulative 2 per cent.
“We remain of the view the RBA will [cut] in July/August, November and February, taking the cash rate to 0.5 per cent,” he predicted.
However, governor Lowe has noted the RBA’s reluctance to exhaust its monetary policy tool by dropping the cash rate to a “dangerous low”.
Expected rate cuts from the Federal Reserve in the United States and from the European Central Bank (ECB) have been flagged as a potential catalyst for a revision to the Reserve Bank of Australia’s (RBA) monetary policy strategy.
Analysts have observed that rate reductions from foreign central banks may undermine the RBA’s hopes for a lower Australian dollar to improve the domestic labour market’s competitiveness in the global arena, prompting it to ease further .
In a panel discussion hosted by the ANU Crawford Australia Leadership Forum, governor Lowe acknowledged the challenges but said the central bank would not look to out-cut its foreign counterparts.
“If everyone’s easing, the effect that we get from exchange rate depreciation [isn’t there], so we don’t get the same stimulus that you would normally expect from monetary easing,” he said.
“It may be possible if you ease more than others, but that’s quite a dangerous path to go down.”
He added: “There are limits on what further monetary policy can achieve.”
Mr Lowe renewed his call for alternative policy measures to stimulate the domestic economy.
“In my mind, that means we need to focus on fiscal policy and structural reforms,” he said.
Attention shifts to mortgage market
The RBA’s June cash rate announcement prompted an immediate response from the market, with several lenders, including the big four banks, passing on the reduction to their mortgage customers.
However, despite warnings from both RBA governor Philip Lowe and Commonwealth Treasurer Josh Frydenberg, some lenders opted not to pass on the cut in full, citing margin pressures and considerations for deposit customers.
Ahead of the RBAS’s July board meeting, Mr Frydenberg renewed his call for full 25bps mortgage rate reductions.
“[We] do expect the banks to pass on in full to the Australian people the benefits of sustained reduction in their funding costs,” Mr Frydenberg told the media.
However, CoreLogic’s research analyst, Cameron Kusher, has said that lenders would look to protect their savings customers and ease margin pressures.
“Our expectation is that banks will be holding back on passing on the full cut as they seek to balance out mortgage rates with deposit rates and protect net interest margins,” he said.
The Australian Prudential Regulation Authority’s (APRA) latest quarterly ADI institution performance statistics, revealed that the collective net profit after tax of Australia’s banks fell by 12.6 per cent ($1 billion), from $8.31 billion in the March quarter of 2018 to $7.26 billion in the March quarter of 2019.
When assessed on an annual basis, the collective net profit after tax of Australia’s ADIs dropped by 4.1 per cent ($1.6 billion), from $36.1 billion in the 12 months ending 31 March 2018 to $34.5 billion in the 12 months ending 31 March 2019.
he number of home loans is down on the previous year in all but two of the states and territories, according to the latest State of the States report from CommSec.
The Northern Territory and New South Wales came in the weakest, both showing loan commitments 14.8% down as compared to last year.
The only two regions to show an increase were Tasmania, up 3.9%, and South Australia, up by 0.1%.
The survey also measured the quantity of home loans against the decade average in each state and territory.
With this parameter, the ACT topped the list with the number of commitments up 17% on the long-term average. Tasmania was not far behind, its home loans up by 16.4%.
Victoria and South Australia were both also up on the average, 5.0% and 1.1% respectively.
The Northern Territory yielded the weakest result, home loan commitments 32.1% lower than the long-term average.
Western Australia was down 24.5%, Queensland down 7.4%, and New South Wales down 4.9%.
According to the report, “Housing finance is not just a leading indicator for real estate activity and housing construction, but it is also a useful indicator of activity in the financial sector.”
While values have changed, the ranking remains the same from the previous quarter.
Myth 1: Trail commissions are a fee for no service
Reality: The remuneration model is a deferred payment to the broker and a sharing of the loan’s risk and revenues. Historically, the upfront commission mortgage brokers receive from lenders were much higher than they are today, with no subsequent trail payments. To reduce their upfront costs, lenders adopted a lower upfront commission model with ongoing trail during the entire loan’s life
Trail commissions provide recognition and incentive for brokers so they can offer additional support and services to customers. This ensures customers of receiving the most appropriate product for their specific need. Removing trail will only further diminish competition in the home lending industry and increase the banks’ profit.
“If I have a million-dollar loan and a broker takes my interest rate down from 5% to 4%, he or she saves me $10,000 a year on an interest only loan, and if the broker gets $1,500 or 0.15% trail, I don’t care,” Peter Switzer articulated in the Switzer Report released last 5. February.
Myth 2: Mortgage brokers act on behalf of lenders, not borrowers
Reality: Majority of mortgage brokers are small businesses who generally rely on references and word-of-mouth to survive. Quality of service and integrity are critical to brokers.
Since upfront and trail commission rates are largely similar across the home loan industry, brokers won’t benefit from acting on behalf of a lender instead of their customers. Volume-based payments, soft dollar benefits and other lender-provided incentives which can potentially influence brokers were prohibited in 31 December 2017.
More choice for consumers means greater pressure on interest rates. This results in positive outcome for all consumers, regardless whether they use a broker or go directly to a lender. According to Connective, 96% of Australians were satisfied with their brokers compared to only 67% who deal directly with lenders.
Myth 3: Mortgage brokers are excessively remunerated for relatively simple work
Reality: Most people don’t see the time brokers dedicate in helping customers file a successful application on time, or in educating customers to make good decisions.
Apart from dealing rates, flexibility and convenience, brokers solve and manage the ever-increasing complexity of Australia’s home lending market. Their ongoing service is helping customers move through the complexity.
Brokers also assist customers with post-settlement matters, much of which don’t draw in additional revenue for the broker and, in certain circumstances, even result in a revenue deduction.
Myth 4: Shrinking – or killing – the mortgage broking industry won’t kill competition in the home lending market
Reality: Choice, convenience and healthy competition top the benefits brokers provide borrowers based on commentaries that came out since the Royal Commission released its final recommendation. There were also predictions that the recommendation, if implemented, could significantly shrink and even diminish the mortgage broking industry; thus, adversely affecting competition.
The report shows that first home buyers have been strongly returning to the market, with lending to that segment reaching the highest level since 2010. The surge is expected to continue for another 12 months at least.
In 2017, lending to first home buyers increased by 74% in Sydney, and nearly 30% across the rest of the country.
“We haven’t seen the first home buyer market this strong since the government’s 2008 stimulus plan following the Global Financial Crisis, which saw $1.5bn allocated to first home buyers,”. Affordability and first home buyer incentives from some state governments have contributed to the volume increase of first home buyers. “A mortgage is, undoubtedly for most people, the largest financial commitment that they’re ever going to make in their life. That’s particularly pertinent for the first home buyer segment of the market,”. “Our business as brokers is all about helping people get into a home. But we’re also conscious that it’s just as important that once they’re in there, they can actually stay there.” Need to secure a great low interest Home Loan? Call Cairns Mortgage Brokers on 07 40579746
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Short-term rental properties like Airbnb have flourished in recent years, yet lenders still struggle to accept them as a valid income stream for borrowers.
Cairns Mortgage Brokers director Roger Ward feels that lenders think such properties are merely “a casual-type income, when in reality they’re used in different ways in the short-term rental community”.
Ward told MPA there’s a large portion of the Airbnb income stream that comes from full-time short-term rental opportunities, with years of figures to look back at.
“This group has a minimum of two years of fully documented rental income, which in my books should be considered because the property looks more like a commercial property,” Ward said. “Banks just don’t seem to recognise this as a serious business. I have a client who generates over $300,000 per annum from four properties.”
Ward recognises the great returns brokers can get from Airbnb properties. But he reminds them that, as in any sales environment, the client’s needs should be considered first. Brokers can suggest their clients invest in tourism areas, where Airbnb properties seem to particularly thrive — especially areas located near transport systems with a high standard of accommodation. Many online forums can help clients market the property, Ward added.
From a lending point of view, brokers need “to make the lending stack up on a permanent rental basis”. Ward tells brokers to brief borrowers who are looking to leverage their fantastic returns that banks will not assess all their income; at best, the assessment will be restricted to a 6% return on the asset value.
He also advises brokers to source banks that will best utilise a client’s income to achieve his or her goals. For him, banks that disregard such income do so at their own peril, and those with policies that recognise the billion-dollar industry will benefit from it. However, if a borrower has a two-year income history, the bank should take either the full net income or the discounted net income, which can be 80% of its value.
Ward has been educating lenders via their BDMs about the strong income that comes from clients with Airbnb properties. He said that while everybody knows how slow credit policy moves, “banks are missing out on high quality borrowers with investment propertiesconsistently returning 10-15% per annum”.
“History is full of missed opportunities, and simply put, the Airbnb genie is out of the bottle and isn’t going anywhere,” Ward said. “The first lender that treats this income seriously will have the entire broking network at its door.”
With over 20 years experience in Home Loan Lending and Financial Planning, You can feel confident Cairns Mortgage Brokers will get you the best deal on the market. Call us today: 4057 9746