NAB Last Among The Big Four To Cut Rates

By Shane | News

NAB (National Australia Bank), one of the 4 major banks in Australia, has updated its mortgage serviceability assessment policy.

Their amendment is in response to APRA’s (Australian Prudential Regulation Authority) changes to its home lending guidance earlier this month which allowed banks greater flexibility to set their testing rates after scrapping a minimum of 7% interest for loan applications by up to 2.5%.

With APRA’s easing credit conditions, it is intended to boost the borrowing capacity of many new customers, the RBA (Reserve Bank of Australia) has stated that the conditions in the housing market were gradually stabilizing following a drawn-out property downturn, but noted fall in prices had slowed in some markets and auction clearance rates increased.

NAB has lowered to a minimum of 5.5%, in line with its major peers. its interest rate floor to 5.5% and increased its interest rate buffer to 2.5% which covers all new home loan applications starting August 5.

It is the latest among the 4 major banks to amend it serviceability policy and joining all other competitors, the ANZ (Australia and New Zealand Banking Group), Westpac, and CBA (Commonwealth Bank), Macquarie, MyState Bank, Bendigo and Adelaide Bank, Suncorp, the Bank of Sydney and Auswide Bank.

The new NAB interest rate floor is in line with ANZ’s announcement that they would lower their interest rate floor to 5.5%.

The bank’s announcement has seen it undercut CBA and Westpac as they are the 2 major competitors which dropped their rates to only 5.7%.

At this point, Macquarie holds the lowest interest rate floor of 5.3%, on the other hand, MyState dropped its interest rate floor to only 6.2%.

RBA Made Changes For Their ESA Policy

By Shane | News

What Is ESA (Exchange Settlement Account)?

ESA is an account that all banks should have for the purpose of making payments with each other within the Australian payments system. These Exchange Settlement Accounts are owned by the Reserve Bank of Australia, there must be positive balances and are used to settle debts that have accumulated in the clearing process.

They are also used as a precautionary measure, as the RBA has committed to cover any gaps in payments among the members, this is to ensure the Australian payments system functions all the time.

Continue reading

Why You Should Care About Your Superannuation?

By Shane | Invest

What Is Superannuation?

Superannuation as it is popularly known as “Super”, it is an amount of money that is set aside while you are working just in time when your retirement comes. Your money is being deposited as a fund, where it is invested in your name by a trustee, so as to help you earn returns and increase your savings.

There are some factors that would affect how much money you will be receiving when you will be retiring. It includes the amount of your contribution, how long have you been investing, on what type of investments that you have chosen, the amount of your money earned from the investment returns, and also the total amount of the fees that you have paid.

Continue reading

Increased Percentage Rate Of First Home Buyers

By Shane | News

A research conducted by CBA (Commonwealth Bank of Australia) has shown that 91% of First Home Buyers are confident that their dream of owning their own home is already within reach.

The percentage came from a total sample size of 1,012 home loan clients, including non-CBA mortgagors. The result from CBA, which gives an outstanding 91% only means that home ownership is now feasible. The research result has a significant difference in comparison to the research result in the previous year, in which 1 out of 5 Australians or 20% have said that home ownership is not feasible.

Continue reading

SME’s Prefer Non-Bank Lenders According To PayPal

By Shane | News

SMEs (Small-to-Medium Enterprises) struggles to get a loan application from traditional bank lenders over the years. It is the reason why they go instead to Non-Bank Lenders. A study has shown that SMEs turn their backs away from banks and explore their options for loans to Non-Bank Lenders and their numbers are more likely to increase in the future.

Continue reading

APRA’s Move To Increase Borrowing Power Capacity

By Shane | News

The critical constraint on borrowing limits that were implemented in late 2014 has been removed by APRA (Australian Prudential Regulation Authority). It is another move that may encourage the idleness of the property market.

To make it more specific, APRA has removed its quantitative guidance on the level of the serviceability floor rate at 7%, which ADIs (Authorized Deposit-taking Institutions) or banks use to assess home loan applications.

Continue reading

Highest Debt Recorded In The Australian History

By Shane | News

Household debt to income ratio is the highest in Australian history. It is based on the recently concluded statistics by the RBA (Reserve Bank of Australia) as of March this year. It stated that the household debt is already at 189.7 times the average household disposable income which is the highest level recorded.

This highest level recorded can be associated with the increased household costs, stable wage growth and higher mortgages which is an integral part of the major Australian cities’ high-priced housing market.

On the other hand, the above statement disregards the complications of the debt problem in Australia. It overlooks the technological changes to payment methods and spending habits which may be the reason for the rapid growth in consumer debt.

Continue reading

How Is It Hard To Buy A Home In Australia Nowadays?

By Shane | Buy

Purchasing a Home In Australia is often the single largest investment a person or family will make. However, the younger generations are giving up hope of ever buying their own home.

Buying A Home In Australia Reshapen By Younger Generations 

A report from the AIHW (Australian Institute of Health and Welfare) pointed out that the younger generations may be restricting themselves out of their market needs on their personal choices. Research shows these younger generations of Australians are living with their parents for longer because of the high cost of living, and they are getting crippled by debt. This is what Australia is experiencing right now, the change of generations when it comes to homeownership, with younger households being influenced by factors which limit their ability to become homeowners such as economic challenges, lifestyle choices, and work-home preferences.

Continue reading

What Does All The Interest Rate Cuts Mean?

By Shane | News

The Interest Rate Cuts from the Reserve Bank of Australia have different effects on society. The four major banks have managed to answer these changes implemented basic standard variable mortgage rates one after another.

Many, but not all, would benefit from this interest rate cut changes. There still some that would not be benefited or feel that these changes would be a disadvantage on their part. The interest rate cut is a very important move because as we know, there are so many borrowers in Australia and most of them are having difficulty when they are already dealing with the housing repayments. The level of indebtedness in Australia is also increasing and it also means that the interest rate cut has a stronger impact than it used to be in previous years.

Continue reading

AFCA To Further Assess Broker-Originated Loans

By Shane | News

A brokerage director has expressed his regret for the widening gap between the funding that would likely be acquired by the borrowers through a direct application from the bank and those who go through a broker.

Loan Saver’s Adviser, founder, and director, Mr. Colin Kidd, has stated that he had observed an evident risk concerning the brokers. He mentioned that brokers are not completing detailed expenditure analysis, and there is a difference between the way expenses are obtained by brokers and lenders.

Mr. Kidd has said that brokers are able to match the expenditure requirements of the lender but that the risks involved with the analysis will stay with the broker, he continued.

The Loan Saver Director added that in order to reduce the compliance risk, the brokers need to obtain valuable information about expenditure by the use of bank statements than any other requirements if they will directly apply in the bank. He then added that a signed budget is not acceptable as an expenditure analysis.

Upon considering the recent dealings with lenders,

the Loan Saver Director said that there are cases where he had included a significant singular expense in the required analysis. He had explained in the notes that it is a singular expense linked to a new business to be launch. However, the lender has indicated that the new small-business owner’s expenditure was too big to pass its serviceability assessment. This happened despite a clean credit record of the customer.

Lenders now need to follow the indicated expenditure noted in the statement of position. Thus, notwithstanding the singular expense, they will use the full amount. Now, if clients will go directly to their lender, they don’t need to go through with the expenditure analysis, but rather, the lender will accept the client’s statement of position, and the loan will be processed.

MR. Kidd had noticed that some borrowers have been able to acquire a loan directly from the bank which they could not do through a broker. Having a higher chance of obtaining a loan directly from the bank than through a broker will affect their means of deciding where to apply for finance.

One of the main reason why clients go directly is because of the long waiting period that if they go directly through a bank, they won’t wait for too long as they will be getting an approval. Therefore, bank managers write loans that were declined by the brokers. This is why there is an existing widening gap between what can be funded through a lender and what can be funded through a broker. 

Moreover, the AFCA (Australian Financial Complaints Authority) has been assessing historical cases based on the current credit policy requirements around expenditure. They have been applying retroactively the current assessment criteria to loans written before the Global financial crisis, and this is a cause for alarm, especially for the brokers who write large amounts as they will probably face litigation.