House prices have slumped at their highest rate since 1992, the time of the last property crash, a new survey reveals today. After asking 315 members, the Royal Institution of Chartered Surveyors (Rics) noted half had reported property price falls. The seasonally-adjusted minus stood at 49 per cent, a sharp change from the revised minus 41 per cent in the three months through April. Completed sales to unsold property stood at 29 per cent for the third month running, up slightly on 28 per cent in February. The report came after the government released figures for April showing a 3.5 per cent drop off in the cost of the average detached house, with the sale price of flats 0.4 per cent lower.
In a pessimistic message for sellers, Rics spokesman Jeremy Leaf said with gloomy retail figures and confidence “very sensitive” present market forces meant sellers would have to adapt to conditions. “Boom conditions of recent years have ended,” he cautioned, adding interest rates had certainly played a part in the drop off.
The noose is tightening on zero-down-payment home loans in the Twin Cities. With portions of the area now flagged as a declining market, lenders are curbing 100 percent financing to adhere to lending rules set by mortgage-buying giants Freddie Mac and Fannie Mae. Housing professionals say it’s too early to gauge how the pullback will affect sales, but acknowledge it spells trouble for anyone shopping around with little or no cash. Low- or zero-down-payment home loans have been a key tool for getting low- and moderate-income families into their first house, although such loans also have been fingered as a factor in the rising rate of foreclosures.
Now if first-time buyers can’t pony up a down payment, they may need to polish their credit score or show they have two months’ payments already stashed in the bank to get a loan.”It’s a change in the market that we didn’t have a year ago,” said Mark Teteris, CEO of Bloomington-based Lakeland Mortgage. “We’ve seen transactions not come together because (applicants) did not have the down payment.”Specifically, Freddie Mac and Fannie Mae have said they are lowering their maximum financing in declining markets by 5 percentage points. With home prices declining across the Twin Cities, that’s prompting the two government-sponsored agencies to look at loans from this normally super-stable area differently.
A mortgage that previously would have been funded at 100 percent of the home’s value would “It’s an old policy but it’s starting to bite now that home prices are in decline in some areas,” said Brad German, spokesman for McLean, Va.-based Freddie Mac. Fannie Mae and Freddie Mac buy the bulk of U.S. mortgages and so have great influence on how home loans are structured. SunTrust Mortgage, a leading wholesaler in Atlanta, sent a memo Dec. 31 to at least one Twin Cities mortgage broker saying that effective immediately they must deduct 5 percent from the allowable ratios on all loans secured by Minnesota properties with loan-to-value ratios above 80 percent.
SunTrust declined to discuss the policy change. Lenders admit they now are more reluctant to approve zero-down loans for fear that they will get stuck with them. Dan Arrigoni, president of U.S. Bank Home Mortgage, estimates that about 40 percent of borrowers who qualified for no-money-down loans a year ago would get them today. now be funded at 95 percent.
Anticipating a cut in key interest rates by the Reserve Bank of India (RBI) in its monetary policy meeting slated for 30 January, bankers feel that home loan and personal loan interest rate might get softer by 50- 75 basis points. The slack credit growth experienced by most banks during the last year might prompt RBI to provide necessary correction.
Almost all the bankers are unanimous that the interest rates, particularly on home loans have peaked and a decline is inevitable however, they have different opinions on the timing of such event. While Ashvin Parekh of Ernst & Young believes to drop by 50-75 basis points during the last quarter of this financial year, Rana Kapoor, CEO and MD, Yes Bank says, “while there might not be a reduction in the interest rate in January, there could be a slash in the interest rate during April by half a per cent.”Though, a decline in home loan and personal loans is very much on the cards, bankers feel that auto loans will remain at present levels, at least in near future. A slack demand in auto loan segment is being cited as the main reason for the rates staying at the same levels.
The demand for car loans has been satisfactory but the high interest rates have made the two-wheeler loan segment, an absolute non-performer. Bankers also feel that the reduced interest rates will also have its impact on the default rates, which climbed steeply after the home loan interest rates skyrocketed. Home loans, auto loans, two-wheeler loans, personal loans, all the major segments witnessed a high delinquency rate. Some leading are experiencing a default rate as high as 10 percent for personal loans.
An MP is being investigated by the Anti-Corruption Agency (ACA) for allegedly using forged documents to obtain bank loans. It is learnt that the senior politician used forged ICs to obtain hundreds of thousands of ringgit from the banks to start businesses and buy property. The ACA is also investigating if he used forged documents or ICs to open shell companies to get government projects. Sources said he had been on the ACA radar for several months. They said several ACA officers from Putrajaya were in Kota Kinabalu last week to question the MP and seized documents from his office.
They recorded statements from several people linked with the politician. The politician is said to have been experiencing financial problems since 1995. However, he has managed to avoid any investigations by the authorities so far. It is believed that the ACA is also investigating if the politician used his influence to obtain government projects. ACA director-general Datuk Hamdan Mohd Said and ACA director of investigations Datuk Shukri Abdul could not be reached for comment. At least 20 politicians were investigated by the ACA in 2006 for various corrupt practices.
The best unsecured personal loans are offered to those with excellent credit records only. So anyone with a tarnished history must consider making ‘tactical applications’. I mentioned this idea once before, in an article with seven tips in it. Unaccountably, I called it Personal loans. As I’m a personal finance writer who appears to be unable to count, I guess it’s lucky that this idea is quite simple.
It’s been just four months since I first suggested this, yet in that short time it has become even more relevant. It’s got significantly harder to take out a loan. Being realistic, most borrowers won’t get the best interest rates, which are currently around 6.5% APR to 7% APR. So people who have missed payments, had a CCJ, or have borrowed too much or too little*, will have to set their sights a bit lower to increase their chances of a successful application.
What you shouldn’t do in this situation is simply try your luck on the cheapest loan first. The odds of you getting it are very low to non-existent, and it’ll cause problems. Firstly, you’ll feel disheartened. Secondly, you’ll be miffed. Thirdly, you’ll have delayed getting a loan. Fourthly, and most importantly, it’ll add a mark to your credit record; the more applications you make for loans and credit cards, the worse your record looks.
THEY used to be totally different animals but the credit card and personal loan are becoming more similar. Ratings agency Cannex said the two products were now competing head for head when consumers wanted to consolidate loans. “After car purchases, debt consolidation is the second most popular reason for taking out a personal loan but credit cards are challenging this with very appealing zero per cent balance transfer offers,” said analyst Harry Senlitonga.
While personal loans still on average offer lower interest rates, Harry said faster and easier approvals were giving credit cards the edge. He warned that those choosing the credit card route needed to be very disciplined and not buy anything further on the card. If you can do that, a $10,000 debt paid off over three years can actually be $300 cheaper due to the six month interest free period. In the same example, if the person relapsed and started only repaying the minimum monthly balance, their three year credit card loan would blow out by 16 years.
I had a 8.75% mortgage with a balance of $45,000 on one rental, and a 7.85% loan on the other with a balance of $68,000. Given the relatively high interest rates, I decided to refinance Rental A at about 6%, and use the equity from that property to pay off the loan on Rental B. Effectively, I refinanced both in one deal. A month after closing, I received my new payment book and other papers and discovered that instead of paying off the loan on Rental B, the boobs paid off the loan on my personal home, which had roughly the same balance. When I informed the closing company of the mistake, nothing was really said or done, and after several attempts to fix things, I got tired of unreturned calls and gave up.
Besides, I thought, “Cool. I have all my risk in Rental A and two houses paid off.” The only rub is I am still paying an interest rate of 7.85%, when the rate on my house loan was around 6.25%. I plan to own rental houses forever as my “401(k)” plan, and expect to buy more. I will likely sell my home sometime in the next 10 years, once I have a family, so I will be in a better school district. Am I missing any savings by having it structured like it is? Chad Mankins, Denton, Texas.
The last quarter saw most of the banks reporting significant increase in interest margins and profit figures. However, industry analyst believe that there is more to it than what meets the eye. The splendid performance of stock market is being cited as one of the major reason for this profit making and experts fear that at the bottom line banks might face increased risks from the mounting bad loans.
The defaults in various loan segments have risen significantly and the figure is huge in case of small ticket personal loans. ICICI Bank, which has about Rs. 2500 crores outstanding in the small ticket segment, and was one of the largest provider of such loans has backed off completely and has decided not to lend small ticket personal loan to sub-prime segment any more. Other banks have decided to approach such customers more cautiously and lend only after rigorous screening procedure.
A growing number of Texans struggling with delinquent property taxes are turning to risky tax loans even as the state attempts to crack down on the lenders. Consumers who use property tax loans risk losing their homes if they default on even a small loan. Fees can run into thousands of dollars, and interest rates top out at 18 percent. “They are the payday lenders for property taxes,” said Robert Doggett, an attorney with the Texas Low Income Housing Information Service, referring to the quick-cash loans issued by storefront lenders at often exorbitant interest rates. An estimated $100 million in taxes was paid to local governments in
Tax lenders receive the tax lien on the homeowner’s property from the county or school district as part of the loan agreement. They say their loans can help consumers avoid high penalties assessed on the unpaid taxes. The Texas Property Tax Lenders Association, which represents about 75 percent of lenders, says that it initiated 11,750 loans in 2006 and foreclosed on only 34 homes.
But consumer advocates and mortgage lenders say there are better ways to pay the taxes, including unsecured credit card loans, creation of escrow accounts or refinancing. Most counties offer payment plans to help homeowners. An indication of the growth of property tax loans is reflected in the increase in the number of tax lien transfers — from a local government to a loan company — in the state’s largest counties, according to a recent report by the Center for Public Policy Priorities. The jump was most remarkable in
Banks’ outstanding loans rose 6.9 percent in November from a year earlier, compared to the previous month’s annual growth rate of 7.1 percent, the central bank said on Tuesday. In November 2006, annual growth in outstanding loans was recorded at 4.4 percent, it said. In the first 11 months of 2007, bank lending grew an average 6.2 percent, with monthly figures ranging from 4.7 percent to 7.1 percent.
Seasonally-adjusted lending declined 0.6 percent in November from the previous month. “Lending to all sectors of the economy continued to grow except for agriculture, fisheries and forestry and manufacturing,” central bank governor Amando Tetangco Jr. said in a statement.