Weekend reads – Must read articles from the last week

There are more interesting articles, commentaries and analyst reports on the Web every week than anyone could read in a month.

Each Saturday morning I like to share some of the ones I’ve read during the week.

The weekend will be over before you know it, so enjoy some weekend reading.

Why gambling is becoming a bigger problem for borrowers

While gambling has always been considered a risky activity, it would seem that now it’s riskier thann ever.

An article on Domain.com.au explains how gambling is making it harder to get a home loan.

Gambling is the latest target of banks in the new world of mortgage lending, with many lenders now questioning betting habits great and small.

Mortgage brokers are warning prospective home buyers who gamble to rethink their habits or risk being unable to borrow from most lenders.

The increased scrutiny even extends to large cash withdrawals, which some lenders may consider an attempt to hide gambling habits.

The number of borrowers affected could be significant, with recent data from the Australian Institute of Family Studies finding 574,000 Australians regularly engaged in wagering on sports.

Steve Vicary, director of White Knight finance, told Domain the onus had shifted to borrowers to prove they were good candidates for a loan, and that gambling was one of the banks’ major bugbears.

“Any idea that someone has a gambling habit is a red flag to a lender,” he said.

“We’ve had a couple of clients who’ve had a direct impact on their finance applications because of their gambling.”

He said house hunters turning to cash-based wagers to avoid gambling transactions appearing on bank statements would still have to explain big ATM withdrawals, particularly in or near gambling establishments.

“We’ve seen a young fella withdrawing money from the ATM and giving money to his mum,” he said.

“The bank identified that ATM was near a casino and said it was a gambling habit, and he had some explaining to do.”

Despite recent attention on other areas of spending, Vicary said gambling was bad for borrowers because it instantly set them back in lenders’ eyes.

“Banks only have a certain amount of money they can lend,” he said.

“If a credit officer saw a regular expense for a gym or a regular expense for gambling, I know which application would be more likely to be approved.”

He said gambling had always been “the dirty word in borrowing money” but with banks looking back even further into borrowers’ spending habits, anyone looking to clean up their habit needed to start now.

“They’ve got to understand the rules of the game if they want to buy a property,” he said. 

“The golden rule in this is it’s their gold and their rules.”

Vicary said an applicant earning the average income of $82,436 who bet $50 a week would reduce their borrowing capacity by almost $32,000, while someone with a $200 per week habit would reduce their borrowing capacity by $127,000.

And that’s assuming they can even get a loan.

Loanworx chief executive Pauline Ryan told Domain she’d seen the impact first-hand, including one client who was a professional gambler.

“If we see they’ve got gambling there some lenders won’t touch them,” she said.

“They’re worried you can’t pay your loan because you’re a gambler.”

Punters looking to borrow more than 80 per cent of value of the property were in the “danger zone” according to Ryan, because buyers borrowing with high loan-to-value ratios would need lender’s mortgage insurance, and insurers steered clear of gamblers.

She said gamblers needed to change their habits at least three months out, if not longer, to prove they could be trusted.

Will Unkles, director of 40 Forty Finance, told Domain it was unsurprising gambling was now in the spotlight.

“One of the key pillars of lending when you assess is character,” he said.

“Gambling would be a negative point when figuring out what type of character a borrower has.

“Gambling is purely a discretionary expense, it’s not like putting fuel in your car or paying your rent.”

Read the full article here

Fewest new listings in years

Results show that we’re at an all time low for new listings.

This Blog by Pete Wargen looks at the statistics.

Stock shortage

New listings in Sydney are tracking at the lowest level in years by far, according to CoreLogic’s latest figures.

It’s something that anyone searching right now would know from first-hand experience.

Buyer enquiries have lifted sharply since the election too.

Read the full article here

Home loan arrears are rising but no cause for panic, RBA says

With the rise of home load arrears – is it time to be concerned?

According to comments from the RBA in this article on Abc.net.au it is too early to panic.

Despite the lowest home loan rates in decades, more Australians are falling behind in their repayments.

The head of the Reserve Bank’s financial stability department, Jonathan Kearns, broke the news to developers in a speech to the Property Leaders Summit in Canberra.

“The share of banks’ housing loans in arrears is now back around the level reached in 2010, the highest it has been for many years,” he said.

“But arrears are still well below the level reached in the early 1990s recession.”

But they are at the highest level since that recession, as this graph from Mr Kearns’s presentation shows:

Mr Kearns was keen to emphasise the positives in the data.

“Another way to look at the arrears rate in Australia is to note that over 99 per cent of housing loans are on, or ahead of, schedule,” he said.

He also pointed out that Australia’s level of home loan arrears was well below many other developed economies.

The figures appear a little less rosy when you look at mortgages that are more than 30 days behind on repayments, as opposed to the RBA figures looking at 90-day-plus arrears.

Figures released by S&P Global Ratings show 30-day arrears rose slightly from 1.51 per cent in March to 1.53 per cent in April — S&P noted that arrears were up 0.17 percentage points on a year earlier.

“Arrears have continued to rise during the past 12 months, albeit from low levels, despite low interest rates and stable employment conditions,” S&P observed.

Investors spooked by housing downturn want higher returns

Financial news service Reuters has reported that investors are now receiving up to 40 basis points more than they were last year to buy lower-rated and unrated residential mortgage-backed securities — financial products that institutions use to effectively on-sell home loans, where the investors receive the repayments from borrowers.

The rise in returns that investors are demanding means they now view the loans as riskier than they did a year ago.

However, Reuters reported that demand for less risky mortgage-backed securities remains strong, indicating that investors do not expect loan defaults to become widespread.

S&P said the Reserve Bank’s recent 25-basis-point rate cut will help some borrowers, but is more likely to help stop people falling behind on their loans rather than assisting people who are already behind and might struggle to change bank to get a lower rate.

“Recent rate cuts will help with debt serviceability, but we expect it to make more of a difference in the earlier arrears categories,” the agency noted.

“Borrowers who are deeper in arrears are more likely to struggle due to the diminished refinancing prospects in the current lending environment.”

WA and Queensland are the problem hotspots

With employment seen as being the key for people to keep up with their mortgage repayments, it is not surprising that states and regions with higher unemployment rates have also seen higher mortgage delinquencies.

“While the unemployment rate has declined nationally, this hasn’t been the case everywhere,” Mr Kearns observed.

“Notably the unemployment rate has increased and income growth slowed in Western Australia and parts of Queensland with the end of the mining boom.

These areas have seen larger increases in arrears.”

Both the RBA and S&P have noted an increase in the proportion of property investors falling into arrears — investors have typically had lower arrears rates than owner-occupiers because they are generally more willing to sell if they get into financial difficulties.

However, falling property prices and a lack of buyers have made it harder to sell, and Mr Kearns said falling rents and empty properties have also hurt many investors.

“In Western Australia, where arrears have increased most, rental property vacancy rates have been high, reducing the income of landlords,” he observed.

This has been exacerbated for many borrowers, especially investors, by tighter lending requirements over the past few years.

“Some borrowers who may have anticipated being able to roll over an interest-only period are finding they cannot,” he noted.

“Some are then facing temporary difficulty servicing the higher principal and interest (P&I) payments at the end of the interest-only period.

“However, most borrowers in this position get their repayments back on track within a year.”

Newer loans have lower arrears rates

However, Mr Kearns said there is already evidence that improved lending standards will have longer-term benefits.

“Using the Reserve Bank’s Securitisation Dataset we find evidence consistent with more recent cohorts of loans having lower arrears rates than earlier cohorts,” he said.

Mr Kearns said tighter lending standards would take a while to feed through into lower rates of mortgage arrears more generally.

Read the full article here

Buying just got easier

Despite a slow start to the year, it would seem that buyers are heading back into the market.

In this article for Switzer, John McGrath looks at why buying has just got easier.

Buyers in Sydney and Melbourne have enjoyed almost two years of falling prices and many have been waiting until they see a floor in the market.

Over the last two weeks, a strong signal that the market has bottomed has appeared after the election result, which coincided with credit easing and talk of two rate reductions.

And buyers have marched straight back into the market as a result.

The latest CoreLogic report reveals a continued easing in the rate of decline in both cities, with the market trough now expected sooner rather than later.

Home values fell -0.5% in Sydney and -0.3% in Melbourne in May, which was the smallest decline in both cities since March 2018.

So, one or two rate cuts will provide further incentive for buyers to re-enter the market and give them confidence that the bottom has been reached.

I can’t emphasise enough the phenomenal opportunity today’s record low cash rate presents, not just for buyers but importantly, also for home owners and investors with debt.

We’ve never seen the cash rate this low.

Compare today’s cash rate of 1.25% with that of June 2008 when it was 7.25%!

And remember that was the cash rate, not mortgage rates, which are always higher than the official rate.

Your mortgage will always be your single biggest debt and the lower rates go, the easier it becomes to pay some of it down.

Here’s the other big impact of the recently lowered cash rate (which is expected to go another 25 basis points lower very soon, by the way)…

APRA has recently told the banks that instead of using the 7-7.25% benchmark for serviceability assessments, they can now use a 2.5% buffer on top of their advertised mortgage rates instead. That means every cash rate cut should enable more loan approvals.

This change hasn’t taken effect yet, with APRA still talking to the banks about how this will work. 

Probably around late June, APRA will formally announce how these changes will be implemented.

So, stand by buyers, financing for your next purchase is about to get a little easier.

Some people might have noticed that many banks cut fixed loan rates in the week or so before the RBA cut.

Continued speculation of a further RBA cut in August will assist in the Sydney and Melbourne markets re-gaining momentum this Winter.

This is an excellent time for borrowers to do a home loan health check, with the possibility of switching to a better deal after August.

Read the full article here

The ‘Seinfeld’ apartment would look like this in 2019

Have you ever wondered what the classic favourite ‘Seinfeld’ apartment would look like in 2019?

To celebrate the 30th anniversary of the show’s airing, this article on Realestate.com.au looks at what the apartments of the characters would look like today.

The apartment from Seinfeld is one of the most recognisable in TV history, but if Jerry Seinfeld still lived in his Manhattan digs today (and as a creature of ultimate comfort, we know he’d never leave), we can assume it’d look a little different.

With mismatched furniture styles, an eclectic poster collection, and a lumpy blue couch, Jerry’s digs once embodied the retro ‘90s styles. And while he’d have no doubt maintained elements of this, in 2019, the comedian would have opted for a subtle refresh.

To mark the 30th anniversary of the show’s 1989 debut, Modsy, a virtual interior design startup, reimagined Jerry’s place according to how they believed it’d appear today.

Of course, the comedian had vastly differing tastes to his motley crew that included George Costanza, Elaine Benes, and Cosmo Kramer, and so the startup took the liberty in reimaging Jerry’s digs to the tastes of these characters, too.

Jerry

A neat freak, germaphobe and creature of comfort, Jerry would have kept the shell of his place much the same.

“We couldn’t see today’s Jerry embracing huge design changes in his space, so our 2019 take will feel familiar to how the apartment looked in the show, but with a modern update,” says Alessandra Wood, style director of Modsy.

Described as “contemporary minimalism with a masculine twist”, Jerry’s place would feature a cool colour palette of blues, greys, greens. His furniture would remain fuss-free and somewhat angular –classic.

While a chic grey sofa sits in the place of his blue one, a slew of cushions in the same nostalgic hue pay homage to the years spent talking about nothing on those seats.

He’s a collector, so, of course, a peppering of mementos can be found across the space. Can you spot the famous fur coat, fusilli Jerry pasta statue, Superman memorabilia, and VHS tape collection?

Kramer

We love what Kramer has done with the place! The kooky character had style and flair. He was weird and wacky and all of this made him completely wonderful.

If we imagine Cosmo Kramer moved in from across the hall, we could assume he would have redecorated the digs to look something like this.

“His style is what we call ‘rustic traveller’ gone wild, and was largely inspired by the tropical patterns and colours of the Hawaiian shirts he often wore during the series,” says Alessandra.

Like Jerry’s apartment, Kramer’s space is littered in memories. His coffee table book sits proudly on an eccentric centrepiece, while his self-portrait makes a sneaky appearance in the back.

Elaine

“Although we’re not quite sure how Jerry would feel about her taking over his lease (or anyone for that matter), we do know that Elaine would have had a very different approach to designing the Seinfeldapartment,” says Alessandra.

She embraced a somewhat sloppy approach to interior design throughout the show, but in 2019, it’s thought Elaine would have refined her tastes.

With a “modern rustic” aesthetic, Elaine would gravitate towards classic pieces with rustic accents.

George

Despite George’s shortcomings in the series, it seems the guy managed to lock down a stunning apartment.

Modsy guesses he likely started seeing an interior designer or had his apartment completely redecorated to impress a potential date. We reckon it’s a likely theory.

He gravitates towards comfortable and luxurious pieces like this brown leather couch, where he can sit back and eat a pastrami sandwich (located on the coffee table at all times).

Read the full article here

Weekend video: Amazing String Light Illusion!

from Property UpdateProperty Update https://propertyupdate.com.au/weekend-reads-must-read-articles-from-the-last-week-91/