The recap of this weeks mortgage, home loan and housing news in Australia.

The top stories for the week ending 11/05/08:

Real World Facts Emerge on ‘Mortgage Stress’
Genworth Financial, who provide Lenders Mortgage Insurance, have released details of a report indicating that out of the one million policies currently in place that 5000 of those may be classified as under stress being 90 days in arrears.

Genworth’s Country Executive, Peter Hall, said “There is no doubt that rising mortgage repayments, increases in living expenses, on top of high levels of consumer indebtedness puts pressure on the family income. However, this, combined with a significant lifestyle event, often acts as a trigger for the borrower’s inability to meet their total debt obligations.”

The report reveals many factors that may lead to mortgage stress and that it’s more than interest rates alone, citing factors such as seasonal financial strains such as the obligations from Christmas spending coming due, unemployment, drop in income, illness and more.

Genworth provide a Hardship Solutions program for borrowers in (or facing) hardship with repayments, only around 2% of applications to the program are due to rising interest rates alone. Their statistics show:

• 16% – cases that relate to decreased income or earning capacity

• 11% – cases that are a result of maternity leave

• 4% – cases that can be connected to a relationship breakdown

• 2% – cases that are a result of over-commitment to a mortgage

They also, as many are, expressed concern over the property market in general - “Though the fundamentals of the domestic market are sound, there is still the concern that some Australian borrowers may face the unpalatable prospect of negative equity as house price appreciation slows and uncertainty remains around future interest rate movements.”

When in Trouble…
Genworth also suggest that borrowers facing hardship or mortgage stress don’t have to wait for arrears notices to make a call to their lender indicating stating that both Genworth and the lender would prefer to work with borrowers. “Mortgage commitments can be managed, as long as they are addressed early,” says Mr Hall of Genworth.

Lenders may be able to offer borrowers a range of solutions including:

• Deferring repayments and capitalising them into a borrower’s mortgage.

• Decreasing repayments, or allowing for half repayments.

• Capitalising borrower’s mortgage arrears onto their loan if they are able to begin making basic repayments again.

• Switching a borrower’s loan to an interest-only option, for up to 10 years.

• Extending loan terms up to 40 years to reduce ongoing repayments.

Another Call for More Education
Genworth, like many, suggest that many borrowers know that interest is payable on debt but don’t realise quite what they are paying out each month. They also suggest that prudent spending and smart budgeting can help ease the pressure.

You can view the full report from Genworth in PDF form here

More Home Loan News:

Australians clueless about home loans
The Daily Telegraph
John Beveridge reveals research indicating that many Australians have the wrong idea about how home loans work with a startling 41 per cent of people think you can get a home loan without a steady income… View Story »

Free financial advice push for budget
The Australian
First homebuyers could be offered free financial advice before they sign big loans under a mortgage assistance package under consideration for next week’s budget, in line with a scheme proposed by the Housing Industry Association to improve financial literacy. View Story »

The debt hangover
smh.com.au
Annette Sampson takes a look at the growing wealth of Australians and the growing debt levels with commentary from Associate Professor Steve Keen, Michael Clancy of MLC, Associate Professor Simon Kelly, Dr Shane Oliver of AMP and Saul Eslake of ANZ. View Article »

Are we there yet?
smh.com.au
The global economy effects us all and and article at SMH presents five predications about possible directions of Australia’s economy in light of the global credit crunch and falling share markets. View Article »

No guarantee on rate rises: Tanner
The Australian
Finance Minister Lindsay Tanner can’t guarantee that working families won’t be worse off after next Tuesday’s budget, or that interest rates won’t need to rise again. Asked if he could guarantee that interest rates would not rise again, Mr Tanner said: “I’m not in the business, nor do I have the authority, to hand out guarantees”. View Story »

From the RBA

Statement on Monetary Policy
Rates on hold but the Reserve Bank Governor is putting forward no indications that interest rates may be at the top of their cycle. View Release »