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BFCSA investigates fraud involving lenders, spruikers and financial planners worldwide.  Full Doc, Low Doc, No Doc loans, Lines of Credit and Buffer loans appear to be normal profit making financial products, however, these loans are set to implode within seven years.  For the past two decades, Ms Brailey, President of BFCSA (Inc), has been a tireless campaigner, championing the cause of older and low income people around the Globe who have fallen victim to banking and finance scams.  She has found that people of all ages are being targeted by Bankers offering faulty lending products. BFCSA warn that anyone who has signed up for one of these financial products, is in grave danger of losing their home.

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BFCSA: Property borrowers brace for a new round of rate hikes as funding costs rise

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Property borrowers brace for a new round of rate hikes as funding costs rise

Australian Financial Review 09 Jan 2019 11:16 AM

Duncan Hughes

 

Borrowers are bracing for a new round of interest rate rises as Bank of Queensland and Homestart Finance buckle to funding pressure and hike lending rates, slash discounts and other credit costs.

Other lenders are trying to postpone out-of-cycle rises by shaving deposit rates and restructuring loan books in a bid to cushion the impact of rising funding costs and pressure on bank deposits.

But they are being squeezed by increasing regulatory costs, falling demand for lending products, partly as a result of much tougher lending standards, and rising funding costs.

Interbank rates, which are interest rates on short-term loans between banks, have jumped more than 32 basis points in the past 11 months.

Bank of Queensland triggered a round of rate rises late last year that resulted in four of the top five banks increases borrower rates. It also announced an out-of-cycle rate rise in 2016. National Australia Bank has held headline rates steady

National Australia Bank did not raise interest rates claiming it wanted to rebuild customer loyalty after some bruising revelations at the banking royal commission.

"It's not a question of if the other lenders are going to raise rates, but when," said Steve Mickenbecker, group executive of Canstar, which monitors rates and fees.

"They are all under the same pressure," Mr Mickenbecker said.

Households under pressure

Martin North, principal of Digital Finance Economics, added: "We expect others to follow."

"These costs of funding pressures are affecting most banks so it's likely we'll see other lenders follow suit," said Sally Tindall, research director for RateCity.com.au.

It comes at a critical time for many households already under financial pressure and facing rising borrowing costs as interest-only loan terms expire and are switched to higher principal and interest rates.

Property sellers will also be anxious about the impact of another rate rise on falling auction clearance rates and weakening market sentiment.

Rates on deposits, which lenders rely on to fund loans, have been repeatedly slashed by lenders wanting to stave off increasing mortgage rates and losing new borrowers, a core source of profitability.

Lenders have also restructuring their loan books to cut introductory rates at the expense of existing borrowers.

Bank of Queensland will increase rates by up to 18 basis points on more than 20 home loan products on Friday.

The standard variable rate for owner-occupied, principal and interest loans will rise from 5.7 to 5.88 per cent. Standard variable investment rates will increase from 6.33 to 6.67 per cent.

The Economy Owner Occupied principal and interest rate will rise by 11 basis points to 3.99 per cent.

Line of credit products, which enable a predetermined amount of credit secured against the property, will also increase by 18 basis points.

Lyn McGarth, group executive for Bank of Queensland, said: "Continued funding cost pressure and intense competition for term deposits have contributed to this decision. Offsetting the impact of these costs ensures we balance the needs of borrowers, depositors and shareholders."

HomeState Finance, a South Australian government-backed statutory authority, is also raising rates on new seniors equity loan rate by 15 basis points to 6.09 per cent.

Last December, the Reserve Bank of Australia, which meets again next month, kept the official cash rate at 1.5 per cent.

The US Federal Reserve is increasingly likely to hold rates steady this year in response to a slowing economy, according to analysts.

US money market derivative contracts are betting on a single rate rise. Some Fed watchers are sticking to their predictions of four hikes.

About 900,000 loans worth some $300 billion – or about one in six mortgages based on the nation's $1.7 trillion mortgage loan book – will need to be extended with their existing lenders, switched to higher principal-and-interest repayments or transferred to a new lender over coming months.

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