"The concern I have is the Global Financial Crisis may not have happened yet."
longrunsthe fox you could actually be correct in your concerns.
Bit off topic bu similar I guess, recently in Australia, there has been a few things happen in regards mainly to homeloans which will have an adversve affect on the mortgage industry including but limited to the public who need it.
Firstly Labor have brought in a "no exit fee" policy on any new loans from July 1 2011.
On the surface, and to the general reader, that sounds all fair and reasonable and a good thing for the public.
Not quite the case.
The removal of exit fees might save the average borrower $500-$700 with a major bank if they wish to exit.
No big deal but yes a savings.
However the concerns are this.
The banks can easily charge a standard application fee that would cover the removed exit fee = no savings, policy not work.
Some say yes but because banks compete they wont add this fee.
Ok maybe, maybe not.
Now lets move on to "non banks"
Non banks are generally lenders that are funded or backed by "banks" themselves, not always, through securitised funds. Also these lenders generally pay more for their money (less margin) yet they continue to sell mortgages at rates well under that of the big 4.
To give you just one example, a lender (non bank) has a rate at the moment of 6.45%p.a
That is some 1.3% under the standard variable at the big 4 and propabably .50% or so better than any propac product through a bank.
The isue however is because these lenders funds are higher to start with, and compete by selling loans chepaer than "banks" ...they have charged or do charge an exit fee. These can "generally" be say 2% fee if you leave in years 1 and 2 and 1% years 3 and 4.
All are different but that is a general pattern.
These non banks as of July 1 will need to cover the fee another way, meaning they will become less competitiave or will simply charge 2-3% fees upfront that will be rebated should u stay with them for 1,2,3 years.
Without non bank, we dont have competition, remember the instigator Aussie, Wizard and the like.
They took it to the banks on pricing.
The result now will be less competition.
So who really wins, proabably the banks first, then daylight, then the borrower.
Non bank may even cease to exist (well some of them)
Another issue some may not be aware.
As of Jan 1, 2011, there was the introduction of the NCCP, this replaced what is commonly known as the consumer credit code.
Under the new act, it now includes residential investment property.
This means, unlike prior, whre you simply bought a IP, told the lender you earnt millions, and they threw money at you, that lender now have to verify your income with more scrutiny.
This is another issue which deosnt help the amrket as whole for anyone.
Why?
For example, Pete the plumber is self employed on $80,000 p.a....however we know Pete probably earns $150k a year, as Pete like other tradesman do a few cashies now and then.
Rightly or worngly it happends.
I say plumbers as they also seem to have flash 4wds or the latest commy towing their tools of the trade.
So now Pete, although is showing he can pay $2000 month evident by the mere fact he is paying his mortgage, cant go and buy an IP as he cant prove his income.
This along with the fact he has a smart accountnat who helps put him in the best tax position possible, in fact is now stopping this borrower from borrowing.
These are just a couple of the issues in mortgage land at the minute.
Some will say who cares but at the end of the day, it affects us all.
So what will Pete do?
He now has to buy in a company name (outside the new NCCP) which emans he doesnt have to prove income if he goes to a private type lender that will accept some scribble on a piece of paper that he can afford it.
I dont particularly think house prices are the issue, its the tightening on lending that can stall or decline a mortgage market.
