| Untagged | 22 Jun 2010 10:53 AM |
| Australian Mortgage Market Is Here To Stay by Michelle Kour | |
The Australian housing market is making a comeback, not that it had far to come mind you. According to the MIAA (Mortgage Industry Association of Australia) applications for both new mortgages as well as the refinancing of existing mortgages has increased year to date over this time last year.
Applications for new building permits is also up from a year ago and mortgage rates are at all time lows. The driving force behind this upswing is competition. As with almost any other sector of business, competition is the key to success and competition in business almost always means a better deal for the consumer. Due to the economic reforms that were put in place during the 1990’s Australia was able to avoid many of the problems experienced in other parts of the world because of the global economic crisis. The four big banks were able to retain their AA rating which allowed them the ability to get offshore funding. Smaller lenders such as credit unions have also been able to get funding. Although this does not mean that Australia was altogether immune from the effects of the crisis, it does mean that the effects were much less severe. Australia’s lending rules are basically the same as they were before the crisis, at least compared to the rest of the world.Whether talking about new home loans, an investment loan or mortgage rates the news is even better than it was a few years ago. Until the global financial crisis hit in late 2008 the mortgage business was a fairly level playing field with the big banks, and non-bank lenders on equal ground. Credit unions, large insurance companies and even some international banks doing business in Australia could get funding from financial institutions all over the world. As the global financial crisis grew into 2009 much of this capital dried up. When this happened the Federal government came in and offered the big boys a break, they would guarantee customer deposits. This lowered the big banks costs tremendously, much lower than the non-bank lenders, and gave them a distinct advantage in this market. As the crisis has begun to subside and the global economy begins to strengthen, this situation has started to level out once again. The Federal governments has decided to begin supplying capital to the non-bank lenders, this decision is definitely good news for the consumer as they look to find new home loans and investment loans. Although the low doc loan is a thing of the past it looks like attractive mortgage rates are here to stay, at least for awhile. With these institutions competing for the consumers business again, there is no doubt this competition will result in low, competitive mortgage rates for some time to come. Lenders in Australia have tightened up their lending rules regarding a borrower’s credit worthiness. They don’t allow high risk, no doc loans. As for the economy and specifically the mortgage industry, one could say that it is business as usual in Australia.
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