As you would be well aware, the hot topic at almost every weekend barbecue at the moment is “house prices“. CBA have just published the attached economics report outlining pretty much all you need to know about the current state of the housing market.
I love my charts, so here are my pick of the best from the report:
After a long period of declining growth that started in 2010, now comes the growth (since the start of 2013).
Population growth is still very high, which is good for demand.
Interesting to note that low doc loans (where you don’t have to prove your income level) have virtually disappeared. These loans are basically what caused the GFC in the US.
While, little has changed over in the last seven years in terms of household debt levels.
When compared to household income, dwelling prices have not lifted for 10 years.
So this weekend, when the topic invariably arises, you can say with confidence “I know the facts about the housing market“!!!
This is of course straight after you say “ you should talk to my Smartline Personal Mortgage Adviser now“!!!
You can read the full CBA report here:Read more
With the recent RBA decision to hold the cash rate at 2.5% again, we now have a unique opportunity to make a simple but SMART financial decision.
Most people will have heard the phrase “spend money to make money“. This email is a variation on that sentiment.
Our first point is extremely important.
“Current interest rate levels represent enormous savings to borrowers”
At 5% a $300,000 mortgage will cost a borrower around $72,114 in interest over the first five years. That same $300,000 mortgage would cost around $102,149 at 7.00% p.a..
Note: 7.00% p.a. is the approximate average variable home loan interest rate over the last 15 years. This 2.00% discount represents a $30,000 saving over 5 years. Are you using this saving wisely?
Our second point is even more important.
“There has not been a better time to make additional repayments on your mortgage for 20 years”.
Let’s continue to use that example of a $300,000 mortgage. The normal weekly repayment would be approximately $372 based on a 30 year term at 5% p.a.
What happens when you spend an extra $100 per week ($472 instead of $372)?
1. You pay your home loan off 11 years faster.
2. You save $115,000 in interest compared to making the minimum repayment over 30 years.
The table below demonstrates the progressive power of paying an extra $100 per week.
Now is the time to pay down debt more aggressively. Whilst interest rates are low they absorb less of your repayments. This reduced interest expense frees up more of your repayment to reduce your debt.
As the old saying goes…MAKE HAY WHILE THE SUN IS SHINING!!!
As always, I am more than happy to run through your personal financial numbers to see what savings can be made!!!
SMART IDEAS REQUIRE ACTION!!!Read more
Home buyers who start their property investing by purchasing modest properties with smaller home loans can be financially better off than those who buy more expensive properties with associated larger mortgages.
Starting small can be a smart financial move, with the added benefit of considerably less risk AND stress.
There’s a lot to be said for buying something reasonably basic initially, to get that first foot on the property ladder. The goal should be to start off with a smaller loan size and work hard to put as much of a dent in your home loan balance as quickly as possible.
This is because in the early stages of a loan, the majority of your repayments are being consumed by interest whereas extra repayments go straight off the principal.
If you have a large loan where you can afford to pay only the minimum repayment, it will take a lot longer to make inroads than if you had taken out a smaller loan and paid extra. The following example in the table below illustrates our point:
Taking a ‘stepping stone’ approach whereby you build up equity in a modest property and then use that to upsize to a more expensive home with the benefit of having a significant deposit is a sound strategy. It means that at some stage you will have the ‘dream house’ but you minimise the associated interest bill that could total hundreds of thousands of dollars.
If you would like specific advice about the pros and cons of starting off modestly, versus buying a more expensive property, please do not hesitate to give us a call.Read more
- Michael Matusik, Founder, Matusik Property Insights, explains that property markets are driven more by numerous factors than a single reason;
- Cameron Kusher, Senior Research Analyst, RP Data, contends that maybe the best opportunity for property investors to enter some Australian property markets may have passed; while
- John McGrath, CEO, McGrath Estate Agents, provides 10 key investment property buying tips to consider this autumn.
Click on this link to find out all the details - Smartline Report – March 2014
- Monique Sasson, Founder, Wakelin Property Advisory, explains that there are many issues associated with buying a holiday home that you should take into consideration;
- Cameron Kusher, Senior Research Analyst, RP Data, contends that further increases in home values in January have pushed combined capital city values to record high levels;
- John McGrath, CEO, McGrath Estate Agents, provides some great tips for buying in a HOT market…being proactive can put you in a strong position when competing for property in a hot market; while
- Michael Witts, Economist with ING Direct, explains that the RBA is generally happy with the way the Australian economy is travelling, keeping rates on hold in February.
Click on this link to find out all the details - Smartline Report - February 2014
Well, as we are all aware, the RBA left rates steady at its Board meeting last week. You can check out the full statement from the Governor of the RBA here -
Now, the experts are predicting the RBA cash rate will remain steady for the medium term. The chart below shows that this sentiment is shared by the futures market (which is made up of people that put money behind their analysis). The market is not expecting an increase in the cash rate until February 2015. Even then, it is only predicting a 0.25% increase.
This could mean a relatively long period of historically cheap variable rate home loans!!
Whilst variable rates are currently stable, fixed rates appear to be making a slight change for the better over the last few weeks. The chart below shows that fixed rates are actually heading south.
What is even more interesting in relation to fixed rates is the gap that is opening up between the major banks and their non major rivals.
The table below illustrates this point with some sample products from Smartline’s panel of 28 lenders.
“Compare the pair“. Someone with a $300,000 mortgage would be more than $900 per annum better off over the three year period simply by choosing 4.74% p.a. rather than 5.09% p.a..
One could be forgiven for thinking that the majors offer more bells and whistles than the non majors. That would however be a mistake. Some of these non major loans (listed above) even offer 100% offset or free redraw on their fixed rates.
The last point that we want to make today is that we are currently enjoying incredibly low interest rates. As time goes by, we appear to be taking this amazing situation for granted.
With variable rates around 5.00% p.a. it is not that difficult to find an investment property that provides you with a rental return that is greater than your interest cost.
There are a lot of reasons to be positive about the future in this terrific country of ours:
- Rental yields are high and property values are stable
- Unemployment rates are low whilst wages continue to grow, albeit modestly
- Variable and Fixed home loan rates are at record lows (and appear to be staying that way in the medium term)
If you would like me to review your mortgage or discuss your next property acquisition, please just give us a call on 0407 642 484 or shoot me an email on email@example.com.Read more
Here at Smartline Personal Mortgage Advisers, we’ve always tried to build our business on what we do rather than what we say.
How many businesses have you seen that can genuinely live up to their advertising slogans??
Smartline’s plan has always been to grow our business by just taking better care of our clients, no clever “one liners” and no multi million dollar advertising campaigns. This can often seem like the hard path to travel, but it works better in the long run.
SMARTLINE WON THE AWARD FOR THE BEST MORTGAGE BROKING GROUP (Retail) in Australia!!!
This success was made all the more powerful given we overcame three high profile brands:
Mortgage Choice; and
Choice Home Loans.
Although our brand is not a household name, Smartline now has over 300 of the most productive and effective mortgage brokers in the industry. Our team takes care of over 120,000 active and loyal clients that have rated our service at an average of 98/100 for the last few years.
This is a very proud moment for us, however, we are well aware that our whole business has been built on your patronage and advocacy. Which is why this award is as much through your loyalty, as it is our dedication to you!!!
Thanks so much for your ongoing support!!Read more
Sometimes all you need is a little variety. There are a number of home loan options available, which can be matched and paired with your needs in order to help you achieve the best possible mortgage situation.
However, it can be difficult to decide between selecting a fixed or a variable rate for your loan. The two offer different experiences that can change the way you approach your repayments and influence your financial situation.
There is an option for those interested in reaping the benefits of both worlds – a split home loan.
These are great for people who want to spread their interest rate risk, especially in the event of an escalating cash rate and rising rates for credit products. Furthermore, having the security of the fixed home loan allows for easy budgeting.
This type of loan also allows for the opposite scenario to occur. Having a variable rate home loan means you can take advantage of the lower interest rates that often come along with a reduced cash rate – something that has been happening over the last few months.
These splits are often done by ratios, with the most common being 60% variable / 40% fixed rate or a straight 50% / 50% split. This customisation can help you to make a personally tailored mortgage package, which could put you in complete control of your financial situation.
Get in quick to secure a reduced interest rate for a fixed period on your home loan to avoid missing out in the long run. You can contact me anytime via SMS or give me a call on 0407 642 484, or even send me an email…it is that simple!!!
Remember, I am only too happy to help out.Read more
The 12th of March 2014 heralds several significant changes to credit file reporting and information on your credit history.
We recognise that this may seem like a very dry subject but it is VERY IMPORTANT FOR YOU TO BE ACROSS THESE CHANGES!!!
Until now, Australia’s privacy act has limited the credit reporting agencies to only providing negative information about your credit background. This includes credit defaults, bankruptcies and any credit enquiries / applications that you have made. That limited level of information reporting is about to change in a significant way.
To see exactly what new information will be available on your credit background you can click the following link to a very comprehensive website:
The main points of change are as follows:
- Information about your monthly repayment conduct (ie paid on time) over the past two years can now be reported;
- If you apply for credit, the decision by the credit provider can now be reported (declined or approved);
- The current limit on all of your credit cards (and other credit facilities) can now be reported. This also means that if you get a limit increase, this can now be reported on your credit record;
- The repayment term and repayment type on all of your credit facilities can now be reported;
- A credit provider can now also provide an opinion that you have fraudulently attempted to get credit or fraudulently evaded your obligations to repay credit, or that you do not intend to comply with your repayment obligations;
- Credit defaults can be lodged on any outstanding amounts over $150 if you are more than 60 days behind on your repayments.
For the majority of people, there should be great benefits associated with this new credit reporting system. The overall cost of credit fraud in Australia is quite high and this new system could go a long way toward reducing the cost of credit for all of us. Let’s hope credit providers pass on the savings!!!
It is also important to note that the 12th of March is only the point where the credit providers can legally start reporting this information. Most credit providers will take time to build the systems capabilities needed to take full advantage of their new found freedom.
If you (or your family or friends) are currently experiencing difficulties in relation to any credit facilities, please call me. I have a range of options that may be available to you to rectify or improve your credit before these changes come are implemented.
Well, by now you would be aware that the Reserve Bank of Australia (RBA), has left Official Interest Rates on hold for another month. You can read the full statement from the Governor of the RBA at the attached link:
This decision has largely been made because the inflation rate is holding steady.
We are always asked by clients and media representatives to provide interest rate forecasts. This is a dangerous game as the world economy is unpredictable. However, we do believe that a greater understanding of the RBA’s objectives will help us make better interest rate choices.
The RBA’s approach is fairly simple and predictable…..
Low inflation and high unemployment indicate that our economy is weaker. Conversely, high inflation and low unemployment point to an overheated economy. The RBA strives to smooth out the booms and busts to have a steady rate of growth.
If an economy is weak, the RBA reduces interest rates to put more cash in borrower’s pockets. If the economy is overheating, the RBA takes money out of our pockets via higher interest rates.
This approach sounds relatively sensible. However, the Aussie Dollar represents a potential ”spanner in the works”.
If the exchange rate experts are right, the Aussie dollar is expected to continue on a downward trend. This is largely due to the fact that the USA is going to stop flooding the world market with US dollars. If this happens, the cost of imported items will become more expensive. These higher prices will push up the inflation rate. The RBA could then move to quell rising prices (inflation) by raising our variable home loan interest rates.
So, as you can see, if the Aussie dollar does continue its downward trend, there is a good chance that we will see higher variable home loan rates.
With fixed home loan rates at historic lows, this analysis does provide food for thought when it comes to that ”fixed vs variable” decision.
As always, if you would like to discuss your property or finance ideas, please let me know. I am only too happy to help out to ensure your finances are working as hard as you do!!!Read more