It's not just swimming and cricket that Australia does well at, it seems our economy scores top marks against the rest of the world.According to the Reserve Bank, the Australian economy is in "better shape than most" and "will remain one of the better performing economies in the developed world".


Compared to the United States and the UK, where cash rates sit at a range of 0-0.25% and 0.5% respectively, Australia still has significant room to move with monetary policy. While there is no guarantee this will insulate us from the worldwide recession, it does put us in a good position to benefit from the renewed global expansion when it comes.

Experts are now predicting 2010 as the year most likely to bring about the start of the global upswing. The International Monetary Fund and the US Federal Reserve anticipate that fiscal measures put into place now by the world economies will go a long way towards stimulating this turnaround.

G20 Summit leaders recently agreed on a $US1.1 trillion plan for recovery and reform, which adds up to a staggering $US5 trillion spent in stimulus measures this year and next. Australia's own stimulus plan and recent injection of cash bonuses is well underway, and when coupled with the positive impact of interest rate cuts, many are hopeful that our economy may well hit a home run.

Last year you could take out a home loan without so much as a deposit. This year you need money in the bank and a good credit history at your disposal. The financial crisis has seen mortgages with Loan-to-Valuation Ratios (LVRs) of 100 per cent withdrawn by banks and building societies across the developed world, with Australia more recently following suit.


Commonwealth Bank and ANZ are among the big lenders who now require a maximum of 90 per cent LVR, while most major lenders have introduced genuine saving requirements around the 3 to 5 per cent mark.

What this means as a prospective home buyer is that instead of borrowing up to 95 or 100 per cent of the value of the property, you will now require a deposit of at least 10 per cent or more. Lenders will also be looking at your ability to service your repayments, so your disposable income, savings and credit history will come under increased scrutiny.

The move towards tighter lending criteria may make it more difficult for some home buyers to enter the market, but on the flipside it is widely considered as a responsible way to avert a US-type property disaster. With record low interest rates and the increased First Home Buyers Grant bringing more buyers into the market, lenders now want to be certain that as the borrower, you have the ability to repay your loan.

More conservative lending is also expected to slow down activity at the lower end of the property market and safeguard against a blowout in housing prices - which are already among the highest in the world relative to income.

As your mortgage broker, I can offer advice and expertise on how to negotiate your way through these more stringent credit requirements. Here are some tips to get you started:

• Think carefully about the amount of money you wish to borrow. Make sure it is realistic and can suit your means. Take into account future interest rate rises and make sure you allow a margin in your budget.
• Check your credit record: you could be refused a loan if you haven't paid your bills, had your power cut off, skipped payments or exceeded credit card limits.
• Don't skip jobs: employment stability shows your income stream is secure.
• Keep saving: lenders want to see evidence of a regular savings pattern of three to six months.

If there's a good news story to come out of the gloom of a recession, it's that Australia's property market may no longer be under the hammer.Record low interest rates and the First Home buyers boost have done their job in re-energising the market, with strong signs that people are once again confident about buying property.


First home buyers now represent over a quarter of all borrowings, with investors tipped to be the next growth market.

Investors make a come-back

Rising rental yields, low interest rates and an improvement in home values are expected to encourage property investment. As the gap between mortgage repayments and rents continues to shrink, the amount investors will have to dip into their own pockets to cover borrowing costs is diminishing.

According to the latest QBE LMI Half Yearly Property Update, compiled by BIS Shrapnel, the differential between rental yields and interest rates is only 2 per cent. Residential rents are continuing to rise strongly, spurred by the low vacancy rate of less than 2 per cent in most capital cities.

The report shows that conditions for investors are at their best since the late 1990s. Stagnant property prices combined with low interest rates has made it significantly more affordable to purchase a property, with overall rents predicted to rise by another 10 per cent this year, according to BIS Shrapnel property analyst, Jason Anderson.

Buying becomes more affordable

A dramatic improvement in housing affordability has taken place in recent months.

According to the Housing Affordability Report from the Real Estate Institute of Australia (REIA), released March 09, the cost of buying a home improved by a record 6.4 per cent in the December 08 quarter, compared to the September 08 quarter.

The percentage of family income needed to service a home loan decreased to 32.4 per cent from 38.8 per cent over the same period. This is the largest quarterly change recorded by the REIA since calculations of this affordability measure were first introduced in 1995.

With so much positive research available, there are plenty of good reasons to buy into property right now. It is our role to guide you through this process to ensure an easy transition to home ownership so please call us to discuss your borrowing or refinancing needs.