Archive for July, 2007
Homeowners Turn to Discount Mortgages
The number of mortgage applicants choosing discount mortgages over fixed rate deals is on the up.
While interest rates have been increasing rapidly many UK mortgage customers have been opting for fixed rate deals. Quite understandably people have been after a level of certainty in what is an uncertain market.
Research from mform suggests the number of applicants selecting fixed rate deals has fallen from around 70% to 48% in the last month. The data also showed that of the near 60% of applicants plumping for variable deals discount mortgage offers were increasingly popular.
With fixed mortgages deals (including the fees) becoming evermore expensive it would seem people are prepared to move away from the ‘safety’ of fixed rates and take a chance on variable alternatives.
With many industry experts tipping interest rates to peak at 6 percent before falling back this could well be a wise move. Other than the initial ‘discount’ the main benefit of a discounted rate is that it reduces in line with falls in the base rate of interest.
The main point being interest rates have risen to the point where a fixed rate deal is not necessarily the most competitive option and fixing your rate should no longer be an automatic decision.
The tides may be about to turn and deeper analysis of the rate type you select is now a vital necessity.
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See this interesting article detailing how a mortgage broker or mortgage adviser can help you .
Mortgage advice
Residentail land developer says mortgage rate increase will not affect sales
Australian residential land developer Australand Property Group Ltd says a mortgage interest rate rise in August would have little impact on its business, as the company had avoided projects likely to be affected by such a change.
Australand reported a 34 per cent lift in first half profit, saying it is on track to record an improvement in annual earnings.
The diversified property group made a net profit of $119.596 million for the first six months of calendar 2007, up from $89.256 million in the same period last year.
The result was mainly driven by strong performances in its commercial, industrial property and investment property divisions.
However, the residential development business did record a small increase in pre-tax earnings, as it weathered mixed fortunes in housing markets across Australia.
The residential division’s pre-tax profit rose five per cent to $34.3 million.
Asked if a rate rise later this year would affect the company, acting chief executive John Thomas said Australand had shielded itself against such an increase, in particular, by distancing itself from the first-home buyer market.
A rise of 25 basis points to 6.50 per cent has been predicted by many economists after last week’s surprisingly strong inflation figures.
“From Australand’s perspective, the markets that we are focussed on are unlikely to be affected significantly by interest rates,” Mr Thomas said.
“The first home owners market is not where our focus has been. Our focus in on … quality projects with existing underlying demand, fundamentally from the people who still have plenty of money.
“People in Sydney, for instance, in the eastern suburbs, on the North Shore, likely to be less affected by an interest rate rise.
“Interest rates will really have an effect in the longer term on affordability, particularly in the first home owner market, and those markets that are not performing strongly are the ones we’ve been pretty careful to keep ourselves out of.”
Housing affordability, however, remained a concern for the company, said executive general manager residential, Peter Bourke.
“We still have affordability concerns in Perth and in Sydney, where it takes about 39 per cent of a weekly earnings to service a mortgage,” he said.
“That is far too high, especially when you’re talking Melbourne at about 28 per cent.”
Mr Bourke attributed the affordability problems and spiralling rents in part to a lack of apartment construction, particularly in NSW.
“We have got a lack of apartment construction and some land constraints, and that is adding pressure on the demand supply relationship,” he said.
“Apartment construction in the eastern states has basically stalled.”
At 1218 AEST, Australand securities had fallen three cents to $2.27.
Source: AAP