Welcome to the February edition of Finance For Tomorrow for 2010.

In this edition we discuss why it is important to have a regular home loan check as well as the announcement that first home buyers will have to stump up at least $37,500 as a deposit to get an average home loan from Westpac -- or $12,500 more than before -- under new lending policy changes.

We hope you enjoy this edition of Finance For Tomorrow and look forward to providing you with more updates throughout the year.

If you have any questions about your finances or would like a home loan check, please contact me on 4928 8500 or click here  if you would like me to contact you at a convenient time.

 

Kind Regards,




Alan Johnston
Lending Manager, Cutcher & Neale Finance Brokerage

Westpac requires higher deposit for first-home loans Tip of the month - Why should I have a regular home loan check? Breaking news this month

Westpac Requires Higher Deposit For First-Home Loans

	FIRST-HOME buyers will have to stump up at least $37,500 as a deposit to get an average home loan from Westpac -- or $12,500 more than before -- under lending policy changes that came into force January 20 at the bank.

Westpac advised its managers and mortgage loan brokers that new customers will not secure a loan unless they can meet a loan-to-valuation ratio of 87 per cent, instead of the former 92 per cent. That means on an average home loan of $250,000, new borrowers will need to have the much bigger deposit as well as be able to meet a monthly repayment of $1726 on a 25-year loan.

In December, Westpac lifted its variable home loan rates -- by 45 basis points after a 25-point official rate rise -- to a market-leading 6.76 per cent on a standard home loan, amid an outcry from potential borrowers and the federal government.

The rules are tougher at Rams, Westpac's brokers who write more than 20 per cent of the bank's home loans. A spokesman confirmed yesterday that a loan through Rams must meet a loan-to-valuation ratio of 85 per cent instead of the former 90 per cent.

• Tim Blue
• From: The Australian
• January 21, 2010 12:00AM

Tip of The Month

Why Should I Have a Regular Home Loan Check? Because things change: interest rates, products and you. Just because you've spent ages making sure you have the right mortgage, it doesn't mean it will always be right for you. You need to contact Cutcher & Neale regularly for a Home Loan Health Check to see if refinancing your mortgage would benefit you. Reasons to refinance your mortgage: 1. You change Over time, your personal and financial situation may change. You may get a pay rise, or decide on a sea-change. You might go from a safe corporate salary to the more uncertain income of the self-employed. You might want to start a family, or need to finance their education. As your needs and priorities change, you'll probably find the right Home Loan product for you will change, and you'll need to refinance your Mortgage. 2. Rate rise In stable economic conditions, a variable interest rate might look more attractive, while in more volatile periods you could prefer the predictability of a fixed interest rate. Refinance your Home Loan to suit the economic times. 3. New products In the past, there was limited innovation in the Mortgage market. But now competition between Lenders is fierce and new products are constantly emerging that might suit your situation better. Cutcher & Neale can keep you up-to-date with new Home Loan products that may make it worthwhile to refinance your Mortgage. Talk to us today.

Breaking news this month

Consumer Confidence Surges Consumer confidence continues to remain strong, despite three consecutive rate hikes late last year. According to the Westpac-Melbourne Institute’s consumer sentiment index, consumer sentiment jumped 5.6 per cent in January to 120.1 and is now 33.6 per cent higher than a year ago.

Westpac's chief economist Bill Evans said that while the jump in consumer confidence was thanks to better than expected job growth, it would also increase the chance of another rate rise next month. “It is likely that the most important fillip to confidence in the month was the continuation of positive surprises on the employment situation. Last week it was reported that the national unemployment rate had surprisingly fallen from 5.6 per cent to 5.5 per cent in December,” Mr Evans said. “Supporting the importance of the jobs market in buoying confidence, we note that over the course of 2009 the Westpac–Melbourne Institute measure of how households assess their job security has improved substantially.” Mr Evans said the high level of confidence suggested that consumers had comfortably absorbed the higher interest rates. “The confidence of those respondents who currently hold a mortgage has reached its highest level since 1994 when we first collected data using categories defined by home ownership. These categories of the Index are not seasonally adjusted but suffice to note that the rise in the confidence of those respondents with a mortgage was up 16.7 per cent in January compared to the average rise in January of 8.6 per cent,” he said. “Clearly a major source of relief for households was the absence of a further rate increase. With no meeting of the Board of the Reserve Bank in January the record run of three consecutive monthly increases in interest rates was interrupted.”

Rental Rates on The Rise

 

A healthy economy and higher interest rates could spark steep rent increases.

According to a report in the Sydney Morning Herald, AMP economist Matthew Bell stated: "It is clear that in 2009 rents were generally kept in a holding pattern as landlords and the market waited to see the end of the global financial crisis".

Figures from Australian Property Monitors revealed that house and apartment rents in Sydney increased by 2.2% and 2.4% respectively.

Bell predicted that Sydney rents would at least double the 2009 rate of 2.2% to approach the $500 per week level for houses.

Rents were kept down in 2009 by increases in the number of first home buyers who were exiting the rental market. However, the end of the first home buyer grants will put greater pressure on the rental market in 2010.

 

Median House Price to Top $1m in 10 Years 

 

Sydney’s median house price will top $1 million before the decade is out, new data from Residex has found.

Just a decade ago, Sydney’s median house price was $328,000 with few believing it would surpass $500,000. It is currently around $630,000.

Residex chief executive officer John Edwards said this level of growth is expected to continue throughout the decade, which would take properties to approximately $1.2 million.

“Traditionally, Sydney houses have experienced a price growth of 8 per cent. Over the past couple of years, this level of growth has fallen to approximately 6.5 to 7 per cent,” Mr Edwards told Mortgage Business.

“But, even if we calculate what the median house price would be at the end of the decade based on this lower growth rate, we should still see properties in the inner city top $1 million before 2019.”

Mr Edwards, said a one million price tag on a Sydney property would force a lot of Australians to rent because they simply would not be able to afford a house in the inner city.

“Blue-collar workers would be pushed out of the bottom end of the market and into rental property. Those employed in lower middle management would be forced to move into cheaper homes, while middle and upper management would buy typical housing stock,” he said.

However, it is not just Sydney dwellers that would be faced with unaffordable homes.

“Melbourne is currently 10 years behind Sydney, however, it is gaining on the city fast. I expect by 2019, Melbourne will only be five years behind Sydney in terms of house prices.”

 

Inner West is Sydney's Top Performing Property Market

Sydney’s inner west is fast becoming the city’s best performing residential property market, with land values outflanking eastern and lower northern suburbs.

According to a report in the Sydney Morning Herald, the inner west, Warringah and Pittwater recorded the strongest rise in land values last year.

Meanwhile, some of the state’s priciest area codes were the worst performers last year.

Woollahra, which has a median land value of $1.23 million, recorded a 5.4 per cent drop in land value during 2009.

The land value in Randwick also took a dive, falling 3.6 per cent.

Across the state, land values rose only 0.18 per cent, compared with 3.3 per cent a year earlier.

''While it is difficult to generalise, … overall land values have barely changed in 12 months,'' said the NSW Valuer-General, Philip Western.

According to Mr Western, CBD property values fell by the largest amount since the collapse of the early 1990s, with the 12.5 per cent drop in land values largely due to the financial downturn.

''In late 2008-early 2009 this impacted particularly on the Sydney CBD with a number of larger corporations reducing their employee numbers and consolidating their office space,'' he said.

 

Parents' Property Help Could Harm - CHRIS ZAPPONE, January 8, 2010

Financial planners are warning parents not to help adult children buy homes with large mortgages that could ultimately become unaffordable.

Rising house prices - especially for homes at the more affordable end of the scale - and economic uncertainty are prompting young people to stay within the bosom of their family longer, and many parents feel compelled to help out with cash hand-outs.

But some experts say it might do more harm than good.

"The message we give to older clients (is) if you are helping a child get used to a lifestyle they can't afford, you're not helping them in the long term," said Landmark Financial Management director Paul Little.

"Ultimately they need to stand on their own two feet and live in the kind of house they can afford."

Mr Little said he had seen many clients at his Brisbane-based financial planning agency who were worried about their kids' ability to enter the housing market. And their children had much higher expectations for a first home - in the expensive inner city, for instance, rather than in a more affordable fringe suburb - than would have been the case a generation ago.

"Each generation wants more and expects more and having lived at home, you have all the nice mod-cons," Yellow Brick Road Investment Services adviser Louise Lakomy.

"Well you just expect that, 'Hey, that's my standard of living'," said Yellow Brick Road Investment Services adviser Louise Lakomy.

"More and more parents, because of children's demands, are helping them out in getting that first property," she said. Some offered to go guarantor; others might make provide a cash gift on a no or low-interest loan.

"Parents are much more generous," she said. "I try to encourage them not to do it."

Wayne Barber, senior adviser at Maximum Wealth Strategies in Wodonga on the NSW-Victorian border, said many young adults had enjoyed luxuries such as international travel. Consequently, they had no assets behind them and lacked the saving ethic of generations past.

"The children have got to demonstrate an ability to stand on their own two feet," he said.

Ms Lakomy said one of the reasons more adult children were staying at home longer was because many things cost much more than they used to.

Home affordability, as measured by the Housing Industry Association, sank in the September quarter by 3.3 per cent to 147.9 points from 153 points. With interest rates on the rise, affordability is set to fall even further in coming months.

At the same time, home prices have risen, almost continuously, since 1986.

Ironically, the impact of adult children living at home longer may be adding to house-price pressure, some say, which is already soaring because of a combination of migration, a shortage of housing stock and a relatively strong economy.

ANZ Bank real estate economist Paul Braddick said that to the extent that the trend of adult children living at home "is permanent, then it will clearly increase the demand (and prices) for these types of homes - in part because it delays the downsizing by 'empty nesters'."

George Bougias, senior economist at Charter Keck Cramer, a property consultancy firm, said there was a clear increase in the number of young adults staying at home longer.

"Because they are delaying - because of affordability - they're saying, 'If I've got to delay, I'm going to get something really good'. In a sense, they're almost causing their own unaffordability."