Origin Finance held another successful careers seminar last night – this time in Melbourne.
Again there was not a spare seat in the room.
The quality of the attendees was high – many seem to have the potential to become good mortgage brokers.
If you are interested in becoming a mortgage broker, please get in touch with Origin Finance.
The Australian dollar is experiencing significant seller pressure today in response to a soft reading on the closely watched ‘flash’ manufacturing output index out of China. A ‘warning’ from S&P that it may downgrade Australia’s credit rating if political deadlock precludes meaningful repair of Canberra’s budget is also cited as contributing to the selling pressure.
The local dollar dipped below 73 cents this morning for the first time since May 2009. As of 1.30 pm Perth time, its low for the day is 72.7 cents at around 11.00 am.
The cumulative depreciation of the Australian dollar since it started to retreat in April 2013 is now 31 per cent – still less than the 37 per cent precipitous peak to trough fall in late 2008, but significant nevertheless.
Exporters would no doubt salivate if the currency dipped as low as the 61 cents it hit in late October 2008 – the darkest days in the immediate aftermath of the collapse of Lehman Brothers 7 week earlier. But the local currency recovered quickly back then. By new year’s day of 2009 it was back at 70 cents; it hit 80 cents by the first day of winter of that year; 90 cents in early October; en-route to a monthly average peak of 108 cents in July 2011 – the same month the RBA’s multi-currency denominated index of commodity prices peaked.
Given the choice between a steep fall in the $A followed by a recovery almost as sharp compared to a more modest but sustained fall, exporters will chose the latter any day.
The Australian dollar isn’t the only ‘commodity currency’ to come under pressure in recent weeks – so too the Canadian and NZ dollars are falling. The Bank of Canada lowered its equivalent of the RBA’s cash rate target last week, while its kiwi counterpart did the same thing this week – both citing, amongst other things, falling commodity prices.
Actual and prospective commodity prices are by no means the only driver of exchange rates, although they are flavour of the month in FX markets just now. As of June, on a monthly average basis, the RBA’s commodity price index had fallen by 47 per cent since its July 2011 historical high. But the Australian dollar had only dropped by 28 per cent over the same period against the US dollar, and an ever gentler 18 per cent on the currency’s trade-weighted index.
Conversely, commodity prices rose by more 300 per cent during their multi-generational bull run, but the Australian dollar rose by just a touch over 100 per cent – from its April 2001 low of just 50 cents, to its July 2011 high of 108 cents.
One of the key reasons the $A stayed ‘stronger for longer’ in 2012 even as commodity prices were falling centred around foreign central bank appetite for Australia’s AAA rated sovereign debt. So while the ‘warning’ from S&P was a long way short of strident, the FX market has latched onto it nevertheless as posing a risk that what came in 3 years ago could just as easily go back out if Australia’s debt rating were to be cut.
More generally, the Australian dollar has ‘benefitted’ from high interest rates down under compared to most other advanced economies, especially those whose central banks had to resort to unconventional monetary stimulus – the US, UK, the euro area and Japan.
Unconventional monetary policy is still in play in all four, but the Fed is carefully laying the groundwork to tighten both conventional and unconventional monetary policy, most likely before the end of this year by giving the all clear to the first increase in the federal funds rate since June 2006.
So prospective, and to some extent actual interest rate differentials that have favoured the Australian dollar for so long are already narrowing. The current pull-back in the currency can be directly traced to when the Fed fist flagged its intention to ‘taper’ the asset purchases by which it was conducting unconventional monetary policy in April 2013. The first couple of moves by the Fed are probably already priced in to the Australian dollar at around 73 cents. But as and when the reality that global interest rates will not stay near zero for much longer, downside risk to the Australian dollar is significant, particularly if the US dollar’s ascent does not stall again.
Since the Asian currency crisis of 1997, the Australian and US dollars have moved inversely to each other – in contrast to the first 14 years of the floating of the local currency in December 1983, when the two dollars moved in tandem.
And unless the post 1997 relationship breaks down, the waxing and waning of the Australian dollar will be dominated by the trajectory of the US dollar. If the Fed does not raise the funds rate this year, the big dollar will retreat, or at least go sideways for a time. But if the world’s only reserve currency continues to march higher, local exporters could yet get their wish for a 60 cent Australian dollar. That is not our base case expectation by any means, but the local unit is more likely to fall through 70 cents in coming weeks than once again threaten to rise back through 80 cents.
Some property investors may have been spooked by recent decisions by the Australian Prudential Regulatory Authority (APRA) which seeks to curb lending to property investors. But, for investors, every cloud has a silver lining.
With many banks now turning their back on property investors, savvy investors are returning to a source of funding they used heavily in the mid ‘90s – non bank lenders.
Non-bank lenders are not directly governed by APRA so are still able to offer the more generous lending policies the banks are now withdrawing.
Non-bank lenders get their funds from the money markets – often overseas. With interest rates in Tokyo, London and New York lower than they are in Australia, non-bank lenders can often offer rates that are comparable with those offered by banks over here.
This could be a second-wind for property investors and non-bank lenders who really attacked the banks in the 1990s. Then they often offered rates one to two per cent below the banks and ultimately forced the banks to reduce their margins and the rates they offer for property finance.
In addition, because these property investors use mortgage brokers, they were able to provide a higher quality service than the banks typically offered.
Everything goes in cycles, and now the non-bank lenders are again able to be nimble and provide the answer that borrowers require with products and lending policy to fill the gap the banks have left with their overreaction to APRA’s instructions.
If a property investor’s bank won’t give a reasonable or comparable interest rate, they may want to talk to a broker about non-bank lenders who could be the key to them building an investment portfolio.
Despite recent changes in the property investor market, with banks restricting giving investors loans, it is not all doom and gloom for people looking to buy a home or even refinance their existing loan.
Basically, a lot of the banks’ current loan portfolios have a higher percentage of investment loans than what the regulator (APRA) wants to see. Consequently the banks are now making loans far less attractive to investors by offering higher rates than for owner occupied loans. In some cases it is virtually impossible to get investment loans.
You may be wondering why this is making it more attractive for people seeking owner-occupied finance, whether it is for new loans or refinancing existing loans – well here comes the good bit! The banks want your business as any new loans they can secure helps them reduce their portfolio ratio against their investment loan book!
To entice new customers, there are currently a number lender offering cash-back incentives to any new loans for owner occupied properties! These range between $1,000 and $1,500 which is not to be sniffed at!
I am in Perth. It is 3.00am and I cannot sleep. So, what do all good mortgage brokers do in such instances? Reflect on the diverse nature of Australia’s property markets and where best to invest of course!
According to RP Data, Perth property declined 0.4 per cent last month. And, conversations with WA colleagues indicate that there are more falls to come.
A quick stroll through East Perth last night saw construction sites beavering away, yet there were few fluoro shirts of the Fly-In-Fly-Out workers as the resources boom comes off.
This is a far-cry from the property bubble the media goes on about. This tells me that supply will soon exceed demand; putting further downward pressure on price.
One of the beauties of Australia is that its property markets can be diverse. So while Sydney and Melbourne are hot, Perth is flat (and vice versa on other occasions).
And because Sydney and Melbourne have experienced strong capital growth, other markets offer better rental yields (Darwin 5.7 per cent or Hobart 5.3 per cent). Here is the opportunity for investors.
Let’s say you have a Sydney property whose value has increased by 16 per cent in the last 12 months, you have plenty of equity which you could use as a springboard for another purchase. Here is what you do:
If necessary, keep waiting. Eventually owners of a property in a flat market will appreciate the hard realities of market forces. And for you, the lower the price you pay the better then rental yield.
Today’s News from the Kennel
Simone had her first encounter with snow this week! It’s funny the impact the white stuff had on the office. Graeme is originally from Manchester, saw lots of snow – hates the stuff. Simone’s family came to Australia via Indonesia – loves the stuff.
Talking of love, Chris’ wedding plans are coming along a treat. His soon-to-be in-laws saw the wedding venue at the weekend and apparently like it. I have to say I am a little concerned about the venue. My concern is that it is on the harbour – where it can get very windy. Now, Chris is wearing his kilt on the big day; one gust of wind and an eyeful will ruin the day for everyone!
Chris had a great week – he had a tough fight on Monday getting clients into their new home. The key thing is that they are happy with what he has done.
We had a quick cameo appearance from our medical finance specialist, Jeff Greenwood, this week. Next time you are in one of those dentists’ reclining chair, or hear a doctor’s machine that goes “ping” – just think, Jeff probably arranged the finance on it.
Graeme and Doug have both been travelling a lot again this week. Melbourne and Perth – the main reason was to talk to brokers who want to join our group. This is great news – but I am concerned that Doug is not walking me as much as I need!
Finally, Julie is going overseas for a few weeks. Who is going to give me treats around the office? I should never have approved her leave request.
What do you get if you cross a Beatle and an Australian dog?
Dingo Starr
Are you looking to own your own business with a great income? Then come to our mortgage broking industry seminar on Wednesday, 29th July at 6.00pm in Melbourne Docklands.
The property boom has created strong demand for mortgage brokers. If you:
…then think about becoming a mortgage broker. It’s relatively straightforward compared to other professions with comparable incomes – though we do not say it is easy.
Origin Finance is one of the country’s leading broker groups. Our structured mentoring means that, even if you are new to banking, career success is highly likely for those who follow our plan.
What we offer:
We can even show you how to start your business part-time and keep your day job!
Wednesday 29 July 6.00pm, 700 Bourke St, Melbourne (NAB building). Level 3. Parking at rear and 2 mins walk from Southern Cross Station.
If you are coming straight from work, we will have some refreshments available for you to keep the hunger at bay
You heard it here first.
In May I said that the screws were being turned to cool down lending on investor properties. You can read this by clicking here.
Now, the Australian Bureau of Statistics has reported that the number of home loan approvals fell by 6.1 per cent in May.
Financial regulators have expressed concern about an overheating (investor) property market and have set a benchmark for the banks to limit the increase in the amount they lend to investors by no more than 10 per cent.
All the banks have responded in various ways. But here are some examples on what they are doing:
But this does not mean that investors cannot get a loan. Good mortgage brokers know where a borrower is best-placed to get finance.
Elsewhere, Origin Finance CEO, Doug Daniell, has called on brokers to look at mortgage managers – who are not subject to the same regulatory pressures. The chances are that a good mortgage broker will know how to arrange an investor’s loan.
Crikey these school holidays really play havoc with my schedule. A couple of us and Graeme have been juggling careers and family this week. It’s never easy being a snag – which is why the only ones that interest me are those that I can eat.
Mortgage broking really is a growth industry – which is why we are looking to put on an extra course at the start of August in Sydney– plus we are going to be running a course in Perth for the first time in ages. Of course this means that there is much work for Simone to do pulling it all together.
Talking of growing careers, Doug and Graeme ran a mortgage broking careers seminar in Brisbane on Tuesday. There were many high quality attendees there, two of whom have already committed to joining the Origin Group. One even has a dog – I am sure he will go far!
We are also running a similar session in Melbourne on Wednesday 29th. If you are interested, click here. Sorry no dogs allowed though.
Poor Doug then had to fly to Adelaide as part of our Chan & Naylor joint venture.
Julie is about to have a long-deserved break in the US – to attend a family reunion on Ohio. I must admit I am concerned that she is going away – how on earth her dog, Moresby, will cope I do not know.
This week was commissions week. It always great to see the young pups getting their rewards. I was particularly pleased that Rocco landed his first commission this month after settling a really tough loan.
Finally, can anyone tell me who this really cool dog is? I thought I was stylish, but this guy can drink wine, skateboard and smoke cigars at the same time!
Origin Finance held an excellent mortgage broking careers information session this evening.
There was not a spare seat and many attendees have said they want to begin their mortgage broking career – and with Origin.
Origin Finance is one of Australia’s most respected mortgage brokers. We provide our clients with access to a large panel of lenders with an extensive range of home loan products. Many of these lenders are well-known banks, many others are household names who only lend through brokers; others still are specialist lenders who can meet diverse financial circumstances. Origin helps you make the right home or investment loan choice. Call us today 1300 30 67 67.
Origin Finance is a
Credit Representative (No. 397786) of
BLSSA Pty Ltd ABN 69 117 651 760,
Australian Credit License 391237