In an unprecedented move, Australia’s big-four banks have reached the landmark agreement to help prevent struggling families from losing their homes.

Part of a comprehensive package of assistance for workers down on their luck, the the CBA, [Commonwealth Bank],  the  NAB [National Australia Bank, Westpac Banking Corporation and the ANZ Bank will put a freeze on mortgage payments in hardship cases. Mr Rudd will announce the welcome relief at a community employment forum in Melbourne in front of 150 people, some of whom have recently been retrenched.

In his speech, the Prime Minister says the stress of paying mortgage and car payments are "real bottom-line concerns around kitchen tables right across Australia''.

This plan help families whose income earners have lost their job/s to focus on that one problem of returning to gainful employment, which would in turn solve their financial problems and regain their ability to make timely mortgage repayments and car repayments.

"That's why, some time ago, I asked the Treasurer [the nuggety Wayne Swan] to negotiate an agreement with Australia’s big-four banks on a comprehensive package of assistance to workers who lose their jobs.” Mr Rudd says the move will provide for a better handling of borrowers in hardship through job loss.He says banks will postpone mortgage payments for up to 12 months, with interest to be capitalised into the loan.

The banks are also considering extending the period of mortgage contracts and reducing payment amounts. Waiving fees in financial hardship Banks also indicated that on other loans, including car loans, where appropriate, they would consider interest-only repayment options, and will also consider waiving fees in hardship cases.

“Of course, these options won’t be appropriate in every case, and banks will make assessments based on the borrower’s ability to meet new contractual obligations,” he says.” But the Government’s purpose in its negotiations with the banks has been clear – to ask the banks to provide maximum flexibility for borrowers suffering temporary hardship. through enforced unemployment for the 12 months ahead. “

“I’d like to thank the banks for the goodwill they have demonstrated in this area.’ This is just another reason why Kevin Rudd is doing such a great job at keeping the economy ticking over in a business as usual mode, underpinning property values for all of us, whilst the rest of the World struggles to get out of the global financial crisis.

American politicians seem just to talk about doing things for home owners, and meanwhile 10,000 people a day are losing their homes in the US. Where are these people to go.

In contrast, Kevin executes plans and then talks about the results,and gives credit where credit is due. Mortgage lenders and homeowners are both winners in this,, it ensures that house values remain solid. This outcome is good for lenders security and all homeowners, whether secure in their jobs, or down on their luck, and hopefully this will filter down to all mortgagors in Australia from all mortgage lenders. Maybe the long suffering American jobless homeowners will get this security and peace of mind, and hopefully soon.

The banks have been taking a beating lately. After all they have been lending “irresponsibly” over the last few years, and the Government has has the tie down solution: new responsible lending requirements placed on the banks, and due to come into effect from January 2011.

Banks remedy is a bitter pill for most of us. They want to have a full financial credit profile of everyone so that they can ensure you can afford the mortgage loan [or any other credit] that you are taking on.

In case you are thinking that this is happening already, think again.

When you currently apply for credit of any kind, including a home loan, you sign a privacy Act statement that authorises the mortgage or other credit provider to access your credit reports and discuss your credit with other lenders.

They essentially only get access to all defaults, all utility account transactions. For instance, phone bills that you or your partner, or even ex partner have not paid can be a deal breaker and unpaid judgements against you. they also get a handle on how many credit enquiries you have made over a 90 day period. That can also be a deal breaker when it comes to getting finance approved. That is, banks just need the bad stuff on you to decide if you a good credit bet. And only when you apply for credit. Now a default is considered only after 60 days of unpaid bills.

But the banks new model is to view every aspect of your finance and credit affairs, including accounts with other institutions, relationships with utility companies, when accounts are opened and closed, and, crucially, the repayment history of all accounts going back two years [currently this can be as low as 6 months to 12 months].

Can you spot the change? They now want all the credit stuff on you, the bad and the good, and will be able to credit profile you.

And the time lapse will shrink, so conducting a credit account can have a worse outcome that some of us would like.

The banks view is that by knowing more about you, will give then a better ability to ensure you are able to repay your bills and credit when due. This could be based on your payment cycle, so 30 days may be the number that is settled on.

The Australian Government believes that the proposals are in the consumers’ best long term interests because the current system allows only bad information to be considered.

Will new credit responsibility laws put a lid on house prices?

Will this affect house prices? It could well dampen demand for housing, based on the fact that many people are in my view over committing on their mortgage credit, and if this happens we could see home prices flattening, just as the decade of relaxed credit we have experienced has increased demand. It seems that the days of easy credit for home loan finance are numbered.

Author: Rick Adlam, Mr Mortgage

Affordable housing is something that both the Reserve Bank of Australia and the Rudd Government value, and home loan interest rate rises will be a part of what I believe are futile moves to dampen demand. How will rising housing prices and rising interest rates make homes more affordable?

The highest fertility rate in Australia’s history, the lowest death rate in Australia’s history and the highest migration numbers in Australia’s history, and a surging economy tell the story of why Australia has a shortage of housing stock and the demand to buy a home, and these facts also points to the remedy, without having to dampen demand with interest rate hikes.

To keep interest rates low and to provide affordable housing, Australia has to make it a priority to develop residential land, and to build homes to an over supply situation. That will have to mean developing new more efficient methods of developing land and building homes.

In the mean time, some say we may have to reduce migration, and curb the baby boom, though both would be short sighted moves, as with Australia’s ageing population we will need to see  these growing to provide workers and business development to sustain that growing segment.

Investing in a new home right now looks very tempting with the last ten years showing a doubling in value over the period, rising rents and low home loan interest rates.

And the housing shortage does not look like going away anytime soon, even if mortgage rates rise dramatically, because we all have to live somewhere, and for most of us, on the streets is not an option.

Author: Rick Adlam Mr Mortgage

NAB, Commonwealth, Westpac and ANZ Banks are the most disliked for high fees, shabby service and reluctance to pass on full interest rate cuts.

Choice says boycott banks

Consumer group Choice says customers should boycott banks behaving badly.

While people are unhappy with their mortgage lenders, they are apathetic and stick with their bank because they say it is too hard to switch, or believe “better the devil you know”.

The Big Four, expected to post a collective $15.7 billion profit for the past year, languished at the bottom of the satisfaction ladder for everyday banking. Credit unions and building societies topped the charts.

Credit unions most liked for everyday banking

Credit Union Australia and Teachers Credit Union snared the best overall score for everyday banking at 84 per cent, followed by Bendigo Bank on 82 per cent.

Niche banks do best with mortgage home loans

ME Bank, ING Direct and Bankwest customers were happiest with home loans.

Credit card ranking highest for niche banks and Credit Unions

For credit cards, ME Bank, Bendigo Bank and Credit Union of Australia got top billing

GE Money collected the wooden spoon for credit cards.

It Pays to shop around for your home loan.

Author: Rick Adlam Mr Mortgage

Growing a property portfolio is easier with the right mortgage finance

The mortgage lenders have always had some great mortgage loans tailored to the person that wants to build a property portfolio. Equity home loan portfolio mortgage products developed in the 1990’s by CitiBank, St George Bank,  State Bank [the Viridian now offered by CBA], Adelaide Bank [now merged with Bendigo Bank] and many non bank lenders  including building societies and are a great alternative, but not necessarily the better alternative to the fixed interest rate, interest only home loan traditionally favoured by property investors.

The Real Estate Investment Opportunity

Besides higher rentals, and lower mortgage rates, lower buy in prices have been achieved in some areas, but this is unlikely to present for much loanger as median house prices in the capital cities have stabled or even grown.

But there is plenty of growth left to go.

Many predict Housing property value growth, for instance that Canberra will grow by 17 per cent, Brisbane by 16 per cent, Gold Coast 14 per cent, Perth by 12 per cent and Darwin by 11 per cent over the next 3 to 5 years years.

I personally favour the evergreen, revolving line of credit, portfolio equity home loan package as the way to manage a growing property investment portfolio, but individuals need to get financial advise on the personal situation before they make any selection of mortgage loan finance.

Portfolio equity home loans can allow from maximums 6 to as many as 12 sub-accounts, with interest options of fixed, variable, interest only and in different borrower names, to maximise any negative gearing tax benefits. These accounts also make the management of the tax aspects of the investments easier to sort.

Author: Rick Adlam for Mr Mortgage