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A blog about credit, interest rates,

the property market

and whatever else I feel like writing about.

It’s our own research.

It is not mass-produced editorial

where a business pays for its name

and logo to be inserted on it

and claims it as its own.

Should the RBA follow the market's interest rate cut pricing?

Further official cash rate cuts are possible if a global Coronavirus COVID-19 pandemic develops and is sustained for longer and substantially hurts the economy.   The market’s 0.25% rate cut pricing (reflected in the below interest rate yield curve as at 29 February 2020) and expected on Tuesday, 3 March 2020, includes any negative impact on...

February 29th, 2020

Official Cash Rate & Future Direction of Interest Rates – December 2019

What is the Yield Curve implying?   The below graph plots the Implied Forward Interest Rate yield curve (blue line) which is derived from the Interest Rate Swap yield curve (red line) as at 31 December 2019. Any changes to today's yield curve will also change the implied forward interest rates and market expectations of future Reserve...

December 31st, 2019

Do rising mortgage rates trigger lower house prices?

While it certainly is true that higher interest rates increase borrowing costs, this generally happens in periods with higher economic growth, rising inflation, rising incomes, higher levels of employment and increasing consumer confidence. House prices also fluctuate on supply and demand, net immigration and other economic variables. The gre...

December 17th, 2019

The great divide

The Australian Securities and Investment Commission released their updated RG209 guidelines for all credit licensees (banks, mortgage brokers, finance companies, etc). This is the most astonishing example ASIC gave on how a lender can meet their Responsible Lending Obligations of the National Consumer Credit Protection Act 2009 (Commonwealth)....

December 11th, 2019

Openn negotiations

I have been contacted by a prospective purchaser seeking assistance with bidding on a property she was interested in and advertised on openn.com.au; and credit advice and brokering on her loan. The short answer was "Welcome to online auction bidding". Openn claims on their website, and I quote, "Welcome to transparency in real estate". I h...

December 5th, 2019

What your great grandparents paid for their home and home loan interest rate

Not often you will find graphs that show what your great grandparents paid for their house and what their home loan interest rate was at the time. Now you do. Owner Occupied Variable Home Loan Interest Rates since 1959.   Sydney Median House Prices since 1979 (Author QED Realty)

December 4th, 2019

Sydney property hits 47.8 times earnings

An Oatley apartment was sold at auction on Saturday 30 November 2019. I was not surprised that there was a dozen or so hopeful bidders, with several bidding relentlessly. The successful bidder paid 47.8 times earnings ( (rent less outgoings) divided by (the purchase price plus costs) ) to buy the property to the delight of his family. If a...

November 30th, 2019

Official Cash Rate & Future Direction of Interest Rates – October 2019

What is the Yield Curve implying?   The below graph plots the Implied Forward Interest Rate yield curve (blue line) which is derived from the Interest Rate Swap yield curve (red line) as at 29 October 2019. Any changes to today's yield curve will also change the implied forward interest rates and market expectations of future Reserve B...

October 29th, 2019

Here we go again – if you are ripped off …

  Refinance. Only if it was as simple as anyone that wants to grep a media headline tells us to – yes you guest it – refinance.   The biggest hurdle is … wait for it … affordability, i.e. are you able to pass the lenders’ post Royal Commission scrutiny on your living expenses, credit score, credit file, comprehensive credit reporting, serv...

October 7th, 2019

Loyalty Tax

  Now that we had three Reserve Bank interest rates cuts in June, July and October 2019 and banks have not passed in full the Reserve Bank cuts, the topic of the "Loyalty Tax" has surfaced.   Withhold some of the Reserve Bank rate cuts for existing loyal customers but offer ever increasing discounts for new business.   On 5 April 201...

September 24th, 2019

Best Interest Duty

The Morrison Liberal government’s proposed Consumer Credit Protection Amendment (Mortgage Brokers) Bill 2019 contains a new best interests duty obligation on mortgage brokers but not on lenders.   The application of this test would require mortgage brokers to ensure their conduct meets the standard of 'acting in the best interest of their...

September 5th, 2019

Need Some Assistance?

  ‘Need some assistance? Speak to a Mortgage Broker’ the ad boasted.   But the best part of the ad was 'Access 3,000+ loans from over 20 lenders.'   A simple arithmetic calculation equates to an average of 150 loans per lender.   Now this is simply amazing!   Does anyone know of any lender that has 150 loan produc...

August 27th, 2019

Whinging Mortgage Brokers

Recently, there has been a lot of extra whinging from numerous mortgage brokers that the time and effort required to prepare a loan application has increased, and wait for it, wait … it is eating into their profitability.   They sight noticeable differences in the way home loans are assessed by lenders and subsequently, wait for it, wait … in...

August 22nd, 2019

3 year fixed versus variable comparison August 2019

You have heard it before, many, many times before (so we shall keep it short) from brokers to branch lending experts to the media - applying for a home loan requires making many decisions ... most borrowers struggle with the decision to fix or not to fix ... banks always win when you fix your home loan interest rate ... you have limited extra repay...

August 5th, 2019

Did they not think that APRA has the last say?

On Thursday, 20 June 2019 Westpac made a bold move to reduce their serviceability assessment rate from 7.25% to 6.50% for first home buyers. APRA set a floor of 7.00% in December 2004. Late Thursday night, Westpac made an abrupt about-face back flip after incurring the prudential regulator's wrath by removing the it without approval. W...

June 20th, 2019

Responsible Lending – ASIC, Westpac and The Federal Court

The Federal Court of Australia, New South Wales | NSD293/2017 | Australian Securities & Investment Commission v Westpac Banking Corporation ACN 007 457 141.   In an opening submission on Monday, 6 May 2019 barrister for ASIC, Jeremy Clarke, SC, alleged that Westpac breached responsible lending laws 261,987 times between 2011 and 2015.  ...

May 7th, 2019

Official Cash Rate & Future Direction of Interest Rates – April 2019

The below graph plots the Implied Forward Interest Rate yield curve (blue line), and the Interest Rate Swap yield curve (red line).   The yield curve is interpreted as follows – (i) Short Term (less than 6 months) – the Reserve Bank to cut the official interest rate by 0.25%. (ii) Medium Term (12 months) – interest rates to be steady....

April 30th, 2019

Oh, by the way … this is what you will not find on our website!

Experts That we are experts, specialist and have 150 years combined experience, that we partner with our clients, continually exceed expectations, we are customer focused, or our lender panel has over 35 lenders that offer more than 2,500 products.   Biggest Financial Commitment We won't tell you a mortgage can be the biggest financ...

July 2nd, 2018

Is the Multi-Decade Bond Bull Market Over?

Yes! It is very likely that the 3-decade long bull bond market (lower interest rates) ended on 2 August 2016.   On this day, the 10-year Commonwealth government bond futures contract traded at 98.20 (equivalent to 1.80% yield) on the ASX 24 Futures platform (aka Sydney Futures Exchange). The 3-year Commonwealth government bond futures contrac...

June 24th, 2017

QED Realty Offers an Auction Bidding Service

Property Auctions Bidding at Auction need not be daunting or intimidating. Most auctioneers are predictable in their style in order to lull bidders into feeling secure. They also make efforts to create pressure and excitement so that an immediate sale may be secured under the gavel. But if you are able to read the auctioneer, size up t...

December 13th, 2016

Official Cash Rate & Future Direction of Interest Rates – December 2016

The Reserve Bank decided to leave the Official Cash Rate unchanged at 1.50% on 6 December, 2016.   Why did some lenders increased variable interest rates the day before the Reserve Bank board meeting? This is what the lenders have said. There is a need to regularly review interest rates for investment loans to ensure they reflect econom...

December 6th, 2016

Official Cash Rate & Future Direction of Interest Rates – August 2016

The Reserve Bank reduced the Official Cash Rate from 1.75% to 1.50% on 2 August 2016. Is the multi-decade bond bull market over? The 3 decade long bull bond market seems likely to be almost over because – 1. First, quantitative easing, bond purchases and negative interest rates are ineffective compare to the Global Financial Crisis. 2....

August 2nd, 2016

Nominal, Real and Complex Median House Price Indices

  House Price Indices Changes in house prices measured by this index are nominal house price movements. In isolation, this is not a true and accurate measure of property trends and price deviation from fundamental values.   What Drives Property Prices Demand The main drivers are – planning laws, particularly changes in dwelling de...

January 3rd, 2016

Implied 3 Month Forward Interest Rates

What does the Interest Rate Swap Yield Curve Imply? What is a Yield Curve? The yield curve shows the relationship between yield and the term to maturity, at any given point in time. It provides important information on what the wholesale market’s expectations are on monetary policy, economic activity and inflation. What is the Interest...

January 2nd, 2016