Trending Financial News 5 February 2020

Westpac shareholders launch class action

A class action claim has been lodged in the United States District Court on behalf of Westpac shareholders who bought shares between November 2015 and November 2019. The claim seeks damages relating to the bank’s money laundering law breaches. In November, Australian regulator Austrac announced that it had applied to the Federal Court for civil penalty orders against Westpac for alleged systemic non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act on more than 23 million occasions.

Westpac’s board issued an apology.

The class action claims Westpac made false and misleading statements or failed to disclose details of the law breaches to the market as well as other failures and names Westpac, former chief executive Brian Hartzer and current chief executive Peter King as defendants.

Reserve Bank keeps rates steady at 0.75%

The Reserve Bank of Australia yesterday decided to keep the official cash rate unchanged in February at 0.75%. The lowest home loan rates in Australia are now below 2.5% pa.

The governor of the RBA, Dr Philip Lowe said the outlook for the global economy remains reasonable but uncertainty over trade disputes, economic fallout from bushfires and the coronavirus continues. The Australian economy is expected to grow by around 2.75% in 2020 this year and 3 per cent next year.

Westpac chief economist Bill Evans is now predicting the next RBA rate cut for April 2020. Keep up to date with the latest forecast and outlook for interest rates in Australia at InfoChoice.

What did the RBA say about interest rates in 2020?

In February 2020, the Reserve Bank of Australia kept the official cash rate steady at 0.75%. The RBA has signalled to Australian borrowers that the outlook for interest rates in 2020 is continuing low rates with rate rises very unlikely.

The board of the RBA released a statement yesterday saying:

With interest rates having already been reduced to a very low level …. the Board decided to hold the cash rate steady …

Due to both global and domestic factors, it is reasonable to expect that an extended period of low interest rates will be required in Australia ….

The Board …. remains prepared to ease monetary policy further if needed …

40% of FHLDS loans already claimed

3,000 First home Loan Deposit Scheme home loans were made available through CBA and NAB from the 1 January 2020.

The remaining 7,000 spots for 2020 of the government’s First Home Loan Deposit Scheme (FHLDS) were made available on 1 February with almost 40 per cent claimed within 48 hours, reported Australian Broker.

As of Monday 3 February, 4,381 FHLDS places were still available. Read more about how to apply for a FHLDS home loan and see a full list of FHLDS lenders at InfoChoice.

The full list of First Home Loan Deposit Scheme lenders includes Commonwealth Bank, NAB, CUA, Bendigo Bank, Bank of Australia and 22 other banks and home lenders.

For answers to FAQs on the First Home Loan Deposit Scheme, read more at InfoChoice.

How does the First Home Loan Deposit Scheme work?

The federal government’s First Home Loan Deposit Scheme helps first home buyers access home loans with less than 20% deposit on the property purchase price.

Applications are made through lenders, such as Commonwealth Bank, NAB and others. Each lender is allocated a limited number of FHLDS places for their borrowers.

Glen Sprat, a mortgage expert from Mortgageport said borrowers should consider accreditation with a number of lenders

“Because once a lender’s maximum allocation of places has been met, they will need to look elsewhere for alternatives,” Mr Sprat told Australian Broker.

Read more about how to apply for a FHLDS home loan at InfoChoice.

REVEALED: One third of households in mortgage stress

The latest data on Mortgage Stress in Australia, released yesterday from property and finance research firm Digital Finance Analytics, reveals more and more borrowers are in ‘mortgage stress.’

In January, 1.1 million households, 32.8%, were in ‘mortgage stress.’ Mortgage Stress is defined by DFA as a negative monthly household cashflow, regardless of income. DFA’s definition of mortgage stress is different to some other measures of how households are managing their mortgages.

The DFA results suggest 83,400 Australian households could default on their home loan in 2020.

Which state has the most mortgage stress?

Almost one third of Australian households are experiencing some mortgage stress, as defined by research firm Digital Finance Analytics. On a state-by state basis:

36.9% of households in Tasmania are in mortgage stress (31,700 households).

34.1% in South Australia (99,700).

33.6% in Western Australia (152,000 households).

32.9% in Victoria (305,000 household in stress).

28.1% in Queensland (193,000).

27.3% in New South Wales (304,000).

How to deal with mortgage stress

“Mortgage Stress” is a description of borrowers who are having trouble repaying all their bills and costs as well as their home loan. Sometimes borrowers are said to be in ‘mortgage stress’ id they are paying 30% or more of their income in loan repayments. Another definition of the extent of ‘mortgage stress’ is counting the households that are paying out more each month than they earn in income -they have a negative cash flow.

All banks and lenders are obliged to assist borrowers who claim to be financial hardship caused by changed circumstances (the loss of a job, for example). Government-funded, free, independent financial counselling is available by calling the National Debt Helpline on 1800 007 007.

Which postcode has most mortgage stress?

Regional Queensland, Horsham in Victoria, Alice Springs in the Northern Territory and the Southern Half of Tasmania have the highest rates of household mortgage stress in Australia, according to research firm Digital Finance Analytics.

Mortgage default rates in January 2020 were highest in Curtin WA (at 5%) and Brand WA (4%) according to data released yesterday by DFA.

The ‘most stressed postcodes’ in Australia according to DFA are WA 6065 (Tapping, Wangara and Wanneroo) with 7,360 households in stress (50%).

Second most stressed postcode in Australia is Queensland postcode 4350 (Toowoomba) followed by NSW post code 2560 (Campbelltown) then Victorian post code 3805 (Narre Warren).

“Most of these areas are fast-growing highly developed suburbs on the fringe of our major centres,” said Martine North from DFA.

“And often with little local infrastructure, as a result, a significant proportion of income goes on transport costs so despite many households having above average incomes, their larger mortgages and high expenses are putting them under pressure.”

Big banks vs neobanks – which is better?

Australians love to complain about their banks. And many Australians are comparing deals and moving from the big banks to mobile phone app based neobanks and other small and regional lenders.

But Australia’s big four banks are among the strongest and safest financial institutions in the world.

Yesterday InfoChoice received a letter from a concerned loyal, long-term reader of InfoChoice News:

Dear InfoChoice News Desk Editor,

There is a big danger accompanying the recent big bank bashing. How much do we want to drag the big banks down? Yes, I am shocked by recent Austrac allegations but I do feel genuinely sorry for the staff of the big banks.

I have built a business with the help of great people from the big banks over the last 40 years. I know them to be good people, caring and understanding and there for us through the ups and downs.

I don’t think the mobile phone based neobanks or some of the other smaller lenders are any better or ‘more moral’ than the big banks.

Please give the big banks some fresh air to prosper. Australia needs strong banks.

Tim Wildash

(with permission)

Thank you Tim, please compare deals from 145 banks, credit unions and other institutions at InfoChoice.

– InfoChoice Editor.

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