The WA Housing Centre (http://www NULL.wahousingcentre NULL.com NULL.au/)is advertising home loans to first time buyers that do not require applicants to have saved a deposit. Would-be purchasers are implored to ‘not waste time saving for a deposit.’ See ad left of text.

First of all, this carries echoes of the kind of risky lending that was widespread in the lead up to property crashes in the US and Ireland. Remember, the development of property bubbles in those countries (and others)  was dependent on there being plenty of willing lenders and even more willing borrowers.

But the fundamental question is if an individual, couple or family is unable to save even a modest deposit to put towards the purchase of their first home, is it prudent to place them in a position were they will be obliged to pay a monthly mortgage payment on a loan amounting to hundreds of thousands of dollars for 25 years or more?

Also, traditionally deposits are not just sought by banks as proof of credit worthiness. When a deposit is used in the purchase of a new home it gives the buyer equity in the home. This, obviously, ceases to be true if no deposit was used in the purchase. Thus, should property prices deflate even slightly the ‘no deposit’ household will find themselves in a position of negative equity ie the outstanding value of their loan will be more than the value of the asset (house).

Defaulting on mortgage payments when the household holds significant equity in the home is one thing. But if a mortgage goes delinquent in a negative equity situation, households are left in a situation where even selling the house will not cover the cost of the outstanding mortgage loan.

CHCWA fails to see how offering what amounts to sub-prime loans to WA home buyers, as is the case here, is a sensible move for any of the parties concerned.

 Civil property repossessions in 2011-12 were the highest ever recorded, according to new data released by the Supreme Court of WA.

1500 repossession applications were lodged with the Supreme Court in the year ending June 2012. This is a jump of 10.5 per cent from the previous peak of 1342 recorded at the height of the Global Financial Crisis in 2008-09.

“The upward trend in repossessions provides further evidence of severe housing stress in WA,” said Barry Doyle, Executive Officer of the Community Housing Coalition WA. “What these figures demonstrate is that an increasing number of home owners are struggling to balance mortgage payments and other household expenses. Low to moderate income households in particular are extremely vulnerable to factors such as interest rate increases and hikes in the cost of household essentials such as utilities and petrol. Property repossession orders show us who has gone over the edge; it’s likely than many more are hanging on by their fingertips.”

“Helping households and families in this situation through access to financial counselling and other services must be a priority, said Mr Doyle. “But we must also have a long hard look at bank lending practices in WA. Certain households have acquired levels of mortgage and personal debt which push the boundaries of sensible lending and the upward trend in repossession orders is evidence of that.”

The Supreme Court figures come on the back of mortgage data released by the ABS and Council of Australian Governments (COAG). Census data released by the ABS at the end of June showed WA recorded the highest increase in mortgage repayments in the country with monthly repayments increasing 60.8 per cent from $1213 in 2006 to $1950 in 2011.

Low income West Australians had the second highest rate of mortgage stress in the country, according to COAG. Over 40% of low income households in WA are paying more than 30 per cent of their incomes on mortgage repayments.

High rates of civil property repossessions are indicative of high levels of mortgage stress in the community.

In the seven years before the GFC, the Supreme Court of WA statistics show little variation with an average of 565.5 civil property possession applications per annum. The 2008 financial year finished with 686 applications. By the end of the 2009 fiscal year, the number of applications rose more than 90 per cent. The trend has continued to rise.

For more information, telephone Barry Doyle, CHCWA Executive Officer on 0415502 060 or 08 9221 7933.

On Friday, 29 June, the COAG Reform Council released its third report assessing progress under the National Affordable Housing Agreement. The report showed mortgage and rental stress increased across Australia while the number of homes affordable to low income households decreased. WA performed particularly poorly in a number of areas. Here is a summary of some of the reports significant findings:

Read more →

Falling interest rates are behind the marginal rise of mortgage holders a month or more behind in their mortgage repayments in the first quarter of the year, says ratings agency Fitch (http://in NULL.reuters NULL.com/article/2012/06/27/markets-ratings-australia-idINWNA008820120627).

In the latest Dinkum Index, Fitch records that mortgage delinquencies rose from 1.57 per cent in the December 2011 quarter to 1.6 per cent in the first quarter of 2012. According to an article in The Property Observer (http://www NULL.propertyobserver NULL.com NULL.au/news/mortgage-delinquencies-rise-marginally-in-first-quarter-but-rate-cut-forestalled-higher-rise-fitch/2012062855334)this equates to about $35 million loans turning bad.

Because Christmas spending usually temporarily affects some households’ repayments, Fitch usually anticipates a higher rise in mortgage delinquencies in the first quarter of the calendar year.

James Zanesi, director of Fitch’s structure finance team, says the stable 30-59-day arrears figures show the two cash rate cuts at the end of last year outweighed the Christmas spending in combination with minor increases in bank standard and variable rates.

Read more →

The 2011 Census (http://www NULL.abs NULL.gov NULL.au/websitedbs/censushome NULL.nsf/home/census?opendocument&navpos=10) released Thursday shows an increasing number of  Western Australians are under housing stress.

Housing stress, which includes mortgage or rental stress, occurs if loan or rent payments take more than 30 per cent of the household income.

Around WA, the average weekly rent was $300. For 8.9 per cent of households, rent was more than 30 per cent of their income. This is 1.5 per cent more than recorded in the last Census in 2006. In Perth itself, the median weekly rent was $320 and rent took more than 30 per cent of household income for 9.2 per cent of households.

The median monthly mortgage repayment in WA was $1,950. For 10.2 per cent of households, their mortgage repayment was more than 30 per cent of their income. In 2006 this was 7.8 per cent, translating to an increase of 2.4 per cent in the number of households under mortgage stress in the last five years.

Census figures also show that income growth has been outstripped by rent increases. In 2006, the average weekly wage was $500 and the average weekly rent was $170. In 2011, the average weekly income rose modestly to $600, an increase of 20 per cent. However the average weekly rent skyrocketed to $300, an increase of 76 per cent in five years.

Furthermore, despite increasing reports of families and individuals unable to afford housing in WA and a rental vacancy rate below 2 per cent, there are 109, 328 unoccupied dwellings in the State. This is up nearly 20,000 from 2006.

The Census data confirms CHCWA’s findings that rents are fast outgrowing incomes and a greater number of households are in financial difficulties.

Further Census figures will be released in the next few months.

Other Census items:

• The most common type of occupied dwelling in the State is ‘owned with a mortgage,’ with a percentage of 37.8 per cent Statewide and 39.8 per cent in Perth. The second-most common dwelling type was ‘owned outright’ at 29.3 per cent. Rented properties number 27.6 per cent, lower than the national average of 29.6 per cent. Proportions are much the same as the 2006 survey although all have increased by about 2 percentage points.
• In Perth, 20.2 per cent of households had a weekly household income of less than $600 and 14.8 per cent of households had a weekly income of more than $3,000. Statewide, 21.1 per cent of households had a weekly household income of less than $600 and 14.1 per cent of households had a weekly income of more than $3,000.
• There is an average of 2.6 people per household and the average number of bedrooms per home is 3.3.
• WA’s population is now 2,239,170. There are more men (1,126,178) than women (1,112,992).
• The average age is 36.

Visit the Census website (http://www NULL.abs NULL.gov NULL.au/websitedbs/censushome NULL.nsf/home/Census)