News

The RBA shocks by reducing the cash rate a further 0.25%

In what was a shock to many experts, the Reserve Bank of Australia has reduced the cash rate a further 25 basis points, taking the official rate to 1.75%.
Australia’s recent low inflation rates has been highlighted as a key reason for the latest cut. Governor Glenn Stevens of the RBA had this to say in his official statement:
“Inflation has been quite low for some time and recent data were unexpectedly low. While the quarterly data contain some temporary factors, these results, together with ongoing very subdued growth in labour costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast.”
“Monetary policy has been accommodative for quite some time. Low interest rates have been supporting demand and the lower exchange rate overall has helped the traded sector. Credit growth to households continues at a moderate pace, while that to businesses has picked up over the past year or so. These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.”
So, what does all this mean for you? It’s clear by the latest cut that interest rates can change at any moment. Now is the time to consider whether your current loan is the right one for you, right now.

The RBA continues to hold the cash rate at 2 per cent.

Off the back of encouraging inflation signs, continued economic growth and the moderation of Australia’s property market, the Reserve Bank of Australia (RBA) has announced that the cash rate will remain at 2 per cent for at least one more month.
In the latest statement from Governor Glenn Stevens of the RBA, special mention was made of the favourable financial conditions for prime borrowers:
“Sentiment in financial markets has improved recently after a period of heightened volatility….Funding costs for high-quality borrowers remain very low and, globally, monetary policy remains remarkably accommodative.”
“… Low interest rates are supporting demand, while supervisory measures are working to emphasise prudent lending standards and so to contain risks in the housing market. Credit growth to households continues at a moderate pace, albeit with a changed composition between investors and owner-occupiers. The pace of growth in dwelling prices has moderated in Melbourne and Sydney and has remained mostly subdued in other cities.”
So, what does all this mean for you? With a possible change in interest rates just around the corner, now is the time to consider whether your current loan is the right one for you, right now.

Nobody likes bills. Everyone tries to avoid them or cut
down on them or watches in despair as their bank
account trickles down as a result of them. Utility bills can be a major factor in stopping you from budgeting correctly and achieving your financial goals.
In 2010, the Australian Bureau of Statistics (ABS)
reported that 13 per cent of households are unable to pay their utility bills, while in 2012 they reported that the average household spends $99 a week on energy,
including gas, fuel, water and electricity. It’s no surprise that people are stressing out over them!
So what can you do to defeat those utility woes?

Star power
In its 2012 study on utility costs, the ABS found that Australians were spending $39 a week purely on
electricity and gas on average, but those that used solar power or water were saving $6 due to their green
technology: almost 15 per cent every week! Six dollars may not seem much, but over the course of a year that
adds up to $312.
With residential solar panel installation costs at a three year low in 2015 according to Solar Choice, you should
definitely consider solar! Look into speaking to a mortgage lender to help you find the right loan.

Don’t just standby, turn it off
This is an obvious one: rather than simply letting your electronics go to standby, power them down instead.
According to the Department of Industry, Innovation and Science (DIIS), that little flick of the switch could save you
$175 a year from game consoles alone! That’s a huge saving for a singularly small effort.
Televisions, computers and even microwaves often go on standby. A good rule of thumb is if you aren’t using it
frequently, unplug it completely.

Efficiency is key
Did you know that installing a water-efficient shower head could save you $350 a year, according to the DIIS?
There are all sorts of ways to make your household appliances more efficient, but your best bet is simply to
upgrade your existing amenities, particularly if they are getting a little old. An investment in energy efficiency now
could save you a great deal in the future, and help push you towards better budgeting results.
We hope these tips help you reach your financial goals, but if your local utility bills are getting you down, you may
want to consider consolidating your debts with a home loan.

Speak to us to find out your options.

If you are an investor, you might be reconsidering your investment strategy this year due to falling returns in certain
States. What’s happening, and how can you prevent it?
You might be having trouble finding tenants. Both Perth and Darwin have seen 4.1 per cent vacancy rates, which
means a lot of rental properties are sitting empty. Rental median rent drops are also being recorded in these cities,
making your yields a little lower than usual.
Wishing that you could see into a crystal ball to predict when these falls will happen? We’re no fortune teller, but there is one thing to watch in order to see this coming. It’s simple – keep an eye on building approvals.

But why building approvals?
The more homes there are, the more supply there is for renters. The more supply there is, the lower the demand, the more your asking rents have to reduce in order to attract tenants.

While building approvals are only a part of the construction process and supply chain, they are “a leading indicator of property investment due to the importance of this sector to the whole economy and employment” according to Harry Karamujic of the University of Melbourne in his paper on the subject.

In an article from Broker News, Managing Director of SQM Research Louis Christopher said: “[The asking rent fall] is…
a result of a combination of factors including the strong upswing in residential dwelling construction which commenced back in 2013 and will continue on into 2016.”
This increase in residential construction is a result of around 32,500 approvals from 2013 to 2014 between Western
Australia and the Northern Territory, according to the Australian Bureau of Statistics. With this huge surge in additional dwellings, it is unsurprising that the renting population of these areas are finding they have to pay less.
No matter where or when you invest, additional properties usually result in more supply and less profitability.

So what can investors do?
You keep an eye on building approvals. If you see an enormous amount in 2016, you might be seeing a far greater
supply and a housing market value fall in that area a few months or years down the line when the buildings are
finished. By taking a longer-term view, you are ensuring that your property investments remain viable for years to
come.
On the other hand, if you are looking for a first home loan, this extra supply could tip the market into your favour as a buyer.

It sounds impossible, but it really can
sometimes be cheaper to buy than to rent.
New data from the Real Estate Institute of
Victoria (REIV) has revealed that in some
suburbs of Melbourne, there are properties
where it would be cheaper to take out a
home loan and purchase the property than
to rent it.
The report showed how it was possible to
repay the mortgage on a $210,000 one bedroom
apartment for $221 a week in
Carlton, while the median rent for the same
type of property was $135 more than that.

Not just an outlier

Similar results were seen in many other suburbs across Melbourne. Assuming a fixed mortgage is paid weekly, differences ranged from a few dollars per week to over $100 difference in some areas.
In Melton, the median price for a three-bedroom house could be paid off for $258, while the median rent was $260. Two dollars may not seem like much, but considering that at the end of a mortgage you actually own the property, those two dollars a week can make all the difference.
With the whole Melbourne region seeing a 2.2 per cent annual increase in rental yield in 2015, according to CoreLogic RP Data, it’s likely that these rents are going to increase even further!

First home-buyers to benefit
“One and two-bedroom apartments allow first home buyers to get a foothold on the property ladder for what they are
currently paying in rent.”
This is particularly important for younger home-buyers who are taking their first step into the world of property,
according to REIV CEO Enzo Raimondo.
“One and two-bedroom apartments allow first home buyers to get a foothold on the property ladder for what they are
currently paying in rent,” he said. By purchasing a property rather than renting, you are appreciating the capital gains for the property rather than your landlord.

With Melbourne homes seeing an 11.19 per cent value increase in 2015, according to CoreLogic RP Data, it’s a smart plan to get on the property market early while interest rates are low and lending figures are high.
This research highlights how important it is to do your research when it comes to taking out a home loan. In order to
maintain a healthy bank account and slip a few extra treats into your budgeting plan, be sure to investigate buying a
home rather than just renting one out.
For more information on your options in purchasing a property, speak to us today and take your first step onto the
property ladder.

It comes as no surprise to many industry experts that the Reserve Bank of Australia (RBA) has left the cash rate at 2 per cent.
Having adopted a more observational strategy in the last 6 months, the RBA will wait and see whether there is any significant adjustment in either the domestic or international economies before deciding upon further movements in the monetary policy.
Governor Glenn Stevens of the RBA released his second statement of 2016, highlighting recent stabilisation in the usually ever changing credit and housing markets:
“Given these conditions, it is appropriate for monetary policy to be accommodative. Low interest rates are supporting demand, while supervisory measures are working to emphasise prudent lending standards and so to contain risks in the housing market. Credit growth to households continues at a moderate pace, albeit with a changed composition between investors and owner-occupiers. The pace of growth in dwelling prices has moderated in Melbourne and Sydney and has remained mostly subdued in other cities. The exchange rate has been adjusting to the evolving economic outlook.”
So, what does all this mean for you? With a possible change in interest rates just around the corner, now is the time to consider whether your current loan is the right one for you, right now.

Saving money has some very distinct similarities with
going on a diet. It can affect your lifestyle, as you
consume less of what you love in order to achieve a goal
that often takes forever before you see any results.

The recent Suncorp Bank Australians’ Saving Habits
Report found that many people in our nation are in fact
already putting significant amounts of money aside,
particularly the younger generation. Their main
motivation? Property investment.
“On average, Australians aged 25 to 34 are saving $533
per month (12.7 per cent of their personal income). This
is $100 more than the national average (11.5 per cent or
$427),” Suncorp Bank Regional Manager Monique
Reynolds said.
Just like discovering new exciting recipes from Jamie
Oliver that fit your brutal diet regime, there are many
ways to help you save your money faster. Here’s just a
few to take on board before seeing your mortgage lender.

1. Focus on the cost of your time
The saying ‘time is money’ rings true when it comes to
saving for home loans. The Australian Bureau of
Statistics (ABS) found that the average household in our
country spends around $1,200 a week on goods and
services. However, before you buy, say, that new pair of
shoes, think about its worth in time rather than the price
tag.
For example, the shoes cost $200 and you earn $20 an
hour, therefore they will cost you ten hours of work – is
that really worth it?

2. Trick yourself
When it comes to the devil and the angel with a shoulder
each, it’s normally the former that eats into your savings
account. However, there are ways around this, including:
• Arrange an automatic payment into a savings
account that coincides with your pay day – once you
adjust you won’t even realise you’re putting it aside
• To reduce the chance of transferring money back to
your spending account in moments of weakness, make
your savings account inaccessible by electronic means
• They all taste pretty similar, so go generic with food
brands, as the Suncorp Bank survey found that
Australians spend a whopping 17.5 per cent of their
personal income on food

3. Get smarter with household use
According to the ABS, for the year of 2014 the average
family household in our nation spent more than $50 on
energy per week. This results to around $2,600 a year,
and is money that can be easily saved with some slight
tweaks.
The Department of Industry, Innovation and Science
recommends reducing your reliance on heating and
cooling systems, as these generally make up for about 40
per cent of your power bill. Instead, wrap up with a few
blankets and a friend, or snuggle an ice pack in the
warmer months.
Reducing your energy use will mean you have more
money left over once your bills have been paid.

4. Or you could…
“The saving strength of younger Australians could also be
attributed to the fact that people in this age bracket are
increasingly staying at home for longer, with the most
current data indicating one in four adults (20 to 34 years
old) still live at home,” said Ms Reynolds.
While you may see it as a last resort, moving back in with
your folks is actually a terrific way to save money, not to
mention being able to take advantage of your mum’s
famous meatballs, lasagne and Sunday roast (although
these dishes may not be the best for your diet).

There are a plethora of reasons to invest in property, including the tax benefits and retirement planning. But let’s be honest, the main motivation is to be able to line your pockets with cash, purchase a sports car, own a property that smells of rich mahogany and be such a big deal that you need kidnapping insurance.

OK, perhaps not that far, but research from the Australian Bureau of Statistics (ABS) has shown that this dream is actually not implausible.

Over the year to June 2015, the combined capital city values of dwellings (both houses and units) increased by nearly 10 per cent. What’s more, residences in Sydney skyrocketed 18.9 per cent!
To put this into perspective, had you bought a $600,000 home in Sydney in June 2014, you would have made nearly
$115,000 in capital gains in just 12 months. Meanwhile, the ABS asserts that the average yearly income in Australia is around $75,000.
While these figures can make it seem like you need to get your foot in the door right away, the property market is not
without its pitfalls. Before making any financial commitments to properties, there’s one thing you should do first:
Get your finance sorted
The Australian Securities and Investments Commission states that visiting your mortgage broker to find the right loan is one of the first things you should do. The main benefit being you will be able to get an idea of your limit. Not only will this help ensure you don’t purchase more than you can afford, it can also help make your search much more efficient.
Property prices can differ significantly within suburbs, as a rather extreme example from CoreLogic RP Data shows. The lower quartile price for houses in Sydney’s Point Piper is in excess of $4.7 million, while at a hefty $30 million, the upper quartile is more than six times the size.
Knowing your exact limit will help remove all the properties from your search that are out of your price range. Bearing in mind that you shouldn’t blow your entire loan on a home’s price tag, as there are a number of ongoing costs associated with managing and maintaining an investment property.
According to the Australian Taxation Office, these can include:
 Advertising for tenants
 Council rates
 Repairs and maintenance
 Insurance
 Interest expenses
This isn’t to mention any unforeseen periods where your investment property is empty, leaving you without rental returns.
If you would like to know more about investing in property, we can offer expert advice, helping you to find the right loan for your unique situation.

Saving takes real steel and tenacity. How much of a
deposit do you need to gain finance for your first home
does it need to be an alp or just a hill?

The first hurdle to buying your first home is possibly one
of the hardest. Putting your money aside to accumulate
for a deposit takes real steel and tenacity, and can seem
a bit like climbing Mt Everest. However, every mountain
has its peak, and once you’ve reached it then it’s all
downhill!
There are plenty who have gone before you, as according
to the Australian Bureau of Statistics (ABS), first home
buyers make up for about 15 per cent of the lending to
owner-occupiers every month – this amounts to almost $3
billion.
In light of this, how much of a deposit do you need to gain
finance for your first home, does it need to be an alp or
just a hill?
20 is the magic number
Just about every authoritative source will tell you the
same thing when it comes to saving for home loans – “The
bigger the deposit the better”.
The ABS asserts that the average loan size among those
fresh to the market is around $340,000, which gradually
rises year after year in tune with prices and inflation.
Despite this, the proportion of deposit that it is
recommended you have remains the same. In order to
take advantage of lower rates, you should have at least
20 per cent of the purchase price.
According to the Australian Securities and Investments
Commission (ASIC), if your deposit is less than 20 per
cent of the purchase price, you will likely be charged a
one-off payment to cover lender’s mortgage insurance.
This is simply because they will see you as a bigger risk
to default on your payments, and therefore want some
cover.
What’s the smallest deposit you can have?
Generally, the major lenders are willing to provide finance
to home buyers with deposits as little as 5 per cent.
However, the ASIC affirms that in this case there are a
number of other factors that will influence your appeal as
a borrower, including:
• A strong employment history and income
• A history of saving
• Minimal debts
• Clear credit history
Typically, the size of the loan you can access will be
much less than the average mortgage.

Rates to stay on hold, but are borrowers still losing out?

As expected, the Reserve Bank of Australia (RBA) has left rates on hold for the sixth consecutive month, yet this isn’t necessarily good news for borrowers.
In recent weeks, a number of banks have independently increased their interest rates for residential housing investment loans. This is based on a rise in the cost of funding, as banks adjust their rates to protect their profit margins. RBA Governor Glenn Stevens had this to say about the changing credit market:
“Low interest rates are acting to support borrowing and spending. While the recent changes to some lending rates for housing will reduce this support slightly, overall conditions are still quite accommodative. Credit growth has increased a little over recent months, with growth in lending to investors in the housing market easing slightly while that for owner-occupiers appears to be picking up. Dwelling prices continue to rise in Melbourne and Sydney, though the pace of growth has moderated of late. Growth in dwelling prices has remained mostly subdued in other cities. Supervisory measures are helping to contain risks that may arise from the housing market.”
So, what does all this mean for you? With the recent changes in interest rates, now is the time to consider whether your current loan is the right one for you, right now.