ouch Mac now 10.46%

[Dunsborough]

Ouch My Macquarie LOC now 10-46%, where does it end, i hope they dont just put it up .20 or .40 each week.
Maybe the theory they will push everyone away is correct, anyway we will see.
Theories?

cheers

 

[Ausprop]

ooh that one gets a logie, even beats my pepper loan. well for this week anyway?! is making these 2% net rental yields almost immaterial in the whole scheme of things, may as well leave it empty and save the wear and tear

 

[Rolf Latham]

Hiya

I do suspect they are looking to get rid of the lo and no doc loans to make the next round of bond refinances more attractive .................maybe

ta
rolf

 

[Qlds007]

Oh Rolf you synic you.

Surely MB dont play those securitised games.

Funny I just placed a rent roll finance deal at a cheaper rate that they are now charging existing clients for Nodoc secured home loan finance.

 

[Dunsborough]

hey rolf
can you put that in laymans terms? re new rounds of bond refinances?
cheers

Peter

 

[kathryn d]

Dumb question..but here it goes.

Your interest rates for LOC seem to be very high.
Here we still have posted rates for mortgages under 6 %.
Are you able to have mortgages like this, or are they always LOC.

 

[Qlds007]

Kathryn

The Australian Reserve Bank cash rate is 7.25% which is the overnight rate for lenders and is seen as the yardstick to where mortgager rates are usualy set.

A simple IO or P & I loan is an option here as well as LOC as mentioned. However the reason for the rate being so high is the fact that the loan was done under a limited or no income documentation loan requirement.

Similar to the US the cost of funds has increased for such loans and many lenders have factored in a margin to retain profitability on thios part of their portfolio.

 

[Rolf Latham]

Hi Duns

My simple understanding of the securitised market is that the money for a 30 year mortgage is placed in bite size pieces (half a bill plus or so) over short to medium terms with institutions such as super funds.

These bonds arent for 30 years.......they can be typically as short as 12 mths to say 5 years.

Getting rid of the "more risky" stuff would improve the quality of that book to be onsold .............even though most ( but not all) all these loans are mortgage insured .............so have equal risk on the surface

What seems to be driving the fear train at the moment is if the mortgage insurer falls over.............then the perceived risk of

Some of the bank guys and economists posting probably have a better idea of what may be going on.


ta
rolf

 

[WinstonWolfe]

Australia's 2 largest LMIers have some interesting reading.

PMI and Gemworth


- PMI had a 65% increase in losses and loss adjusted expenses in Australia between Q4 of 06 and 07.

- PMI's S&P credit rating dropped from AA to AA- in April 08.

Nothing as nasty as what their US parents have been exposed to though.

 

[josko]

Ouch My Macquarie LOC now 10-46%, where does it end, i hope they dont just put it up .20 or .40 each week.
Maybe the theory they will push everyone away is correct, anyway we will see.
Theories?

cheers

I also have a Mac loan at 10.36%. I guess it ends when they want it to end>

If it makes you feel any better my Mobius loan is 11.45% on a 330k loan!
(I'm showing off, because mine is bigger than yours!)

Rolf's post makes sense and reflects what I had thought.


Jo

 

[Token Funder]

hey rolf
can you put that in laymans terms? re new rounds of bond refinances?
cheers

Peter

As a rough guide to securitisation:

• All banks use it to varying degrees...for MB it is their dominant funding mechanism.
• In essence, it is a process of bundling and selling parcels of debt to allow you to free up capital and re-lend.
• The lender bundles up mortgages (contrary to popular belief, the better stuff rather than the poorer) and puts them into a trust.
• By transferring the loans into a trust and (essentially) on-selling the loans, they are technically no longer on the lender's balance sheet and the funds are available to be re-used.
• Though the lender technically doesn't "own" the debt, they continue to manage and service the deals so the end borrower isn't impacted in any practical way
• Investors invest in the trust and the lender pays a share of the interest charged.
• The interest paid to the investor is priced off the 30 day bank bill rate plus a margin. The margin is fixed for the term of the deal.
• Pre the credit meltdown, 30 day bb would have been about .10% over the RBA cash rate and the margin for a decent deal around .20%. A lender was therefore paying about .30% over the cash rate.
• Today, the 30 day bb is around .35% over the cash rate (a lot better than it has been for the last few months)
• Therefore, a lender who put set a deal prior to the credit crunch is now paying .25% more than they would have expected to pay.
• A lender looking to go to the market today to issue debt to investors (if they could find a buyer) would be paying .35% over the cash rate plus an issuing margin of at least 1.5% (total 1.85% over the cash rate in contrast to approx. .30% over the cash rate for the same deal a year ago).
• So, old funds - more expensive. New funds, almost impossible to get and 5-6 times as expensive.
• With capital market funding harder to get, competition is now on for retail deposits and those rates are also going up.
• Short version : loans harder to get and more expensive (in relative terms) for at least 12 months.

TF

 

[RumpledElf]

Rang a few brokers this morning and found it interesting that one of them said no, we don't do no-doc loans anymore.

 

[Rolf Latham]

Hiya

Many of the previously ok nodocs are now gone or hobbled beyond belief, so that would be a reasonable comment.

I think u will also find that some "brokers" are actually mortgage managers for one product, which may have been backed by a funder thats no longer around

ta
rolf

 

[RumpledElf]

As long as there's still a few left, I have until May 30th now to find one ...

 

[asdf]

As a rough guide to securitisation:
TF

Are you guys busy pitching deals or just can't find instos to bid them?

 

[Peter_Tersteeg]

As long as there's still a few left, I have until May 30th now to find one ...

I'd suggest you move on this as quickly as possible. There are still a few No Docs around at 65% and one or two at 70%.

The problem is at the moment is that it changes on almost a daily basis. It's very unpredictable.

 

[Token Funder]

Are you guys busy pitching deals or just can't find instos to bid them?

Largely the latter. Little point pitching deals when prevailing sentiment re: pricing is such that it would be nigh on impossible to charge a rate to borrower that would support your costs.

TF

 

[RumpledElf]

I'd suggest you move on this as quickly as possible.

Quickly isn't really an option. You ring people, you leave messages, then you wait forever for them to get back to you. Or you talk to them, give them lots of details, and then wait. So slow!

I have until the end of the month to get a no-doc, or I'll be out of the property market for a Very Long Time to come.

 

[asdf]

Largely the latter. Little point pitching deals when prevailing sentiment re: pricing is such that it would be nigh on impossible to charge a rate to borrower that would support your costs.

TF

Really no end in sight is there? I think I read one of the IBs is trying the RMBS market here at 150 over. Crazy when you could've gotten away with 20bps just 12 months ago. Bring back the high margin Milken days, except this stuff is prime!

Although Macq Banks shut its home loan business, you could still get a structured products loan but wait for it - 10.6% for 5 years. 1980s here we come...