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Five minutes of finance

September 2018

Major pulls rate trigger

Just days after Westpac announced that it was raising rates out of cycle, both ANZ and CBA have announced similar hikes. Effective 27 September, ANZ will increase interest rates on its variable owner-occupied and investment home loans by 16 basis points.

Commonwealth Bank (CBA) is also set to lift rates on all of its variable rate home loan products by 15 basis points, effective 4 October.

CBA noted that for owner-occupiers, the standard variable home loan rate will increase to 5.37 per cent per annum for customers with principal and interest repayments, and 5.92 per cent per annum for customers with interest-only repayments. For investors, CBA stated that the standard variable home loan rate will increase to 5.95 per cent per annum for customers with principal and interest repayments, and 6.39 per cent per annum for customers with interest-only repayments.

Both banks have cited a “sustained rise in wholesale funding costs”, with ANZ adding that its decision followed a “consideration of business performance and market conditions”.

At the same time ME Bank announced:-

From Friday 31st of August, there are some important changes to ME fees and interest rates you should know about.

ME will be reducing some variable rates on its Basic Home Loan. ME will be reducing by 75 basis points the variable rate for owner occupiers paying Principal and Interest on a Basic Home Loan with an LVR over 80%. ME will also be reducing by 20 basis points the variable rate for owner occupiers paying Principal and Interest on a Basic Home Loan with an LVR equal to or less than 80%.

Contact us if you would like to know if your rate is competitive.


Gen Z thinking about home ownership

A new report has revealed exactly how the different generations view financial advice and saving for home loans. The cross-generational research by ING looked closely at how each age group planned for the future and what the most important financial considerations were.

The research showed that Gen Y (24 to 28 y/o) and Gen Z (16 to 23 y/o) ranked home ownership as one of the most important longer-term goals.

‘Saving for a home’ was in their top five concerns, as well as paying for a mortgage, whereas baby boomers (54 to 64 y/o) had neither of these as concerns.

According to the data, home ownership was more of a priority for the future for the youngest generation than saving for a car, affording children or saving for university/education fees.

In fact, nearly 50 per cent of Gen Z’s said they were most worried about saving for a home at this moment in time.

The research also looked at how the generations would rather receive advice or help with financial decisions.

At least 60 per cent of Australians across all generations preferred face-to-face advice, however younger generations were more open to receiving digital advice. The younger two generations were also happier to pay for advice.

While the younger generation were worried about buying a house, the latest figures from the Australian Bureau of Statistics (ABS) showed that while owner occupier loans were up from the previous year, investor loans had dropped.

Really driving home how the investment market has dropped are the CoreLogic and ABS figures that show the proportion of investors in all new finance commitments.

In March 2015 investors reached a record high of 55 per cent of overall mortgage demand. As of July 2018 this figure had dropped to 41per cent.

Not everywhere in Australia has seen a drop in investors. Every state and territory across Australia apart from Tasmania saw a decline. Between July 2017 and July 2018 Tasmania saw an increase of 16.3 per cent.

Spring property selling

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RFS Wealth Creation 5 Step superannuation check

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August 2018

First Home Buyers and near prime lending surges

The first home buyers’ share of owner occupier housing loans has reached its highest point since late 2012, according to the latest figures from the Housing Industry Association (HIA).

The group accounted for nearly a fifth (18.1%) of owner occupier home loans in June. On an annualised basis, this marks an increase of 11.4%.

HIA senior economist Shane Garett said a few reasons were behind the trend, such as several state governments’ enhancements of initiatives for first home buyers.

“In recent years, record numbers of newly built apartments have also come on stream. In terms of design and price point, many of these are particularly suited to first home buyers and have made the purchase of their first home possible,” Garrett said.

“On balance, the slowdown in dwelling price growth over the past year and ongoing low interest rates have also been favourable for those seeking to access the market for the first time,” the senior economist added.

Meanwhile, further data showed the value of housing investor loans hit a five-year low during June and has declined by 22.4% since its peak at the beginning of last year. “Investment participation in the housing market plays a key role in delivering new housing supply and is vital to the healthy functioning of rental markets right around Australia,” said Garrett. “Recent policy and regulatory changes have made it more difficult for investors to participate in the housing market. With our population hitting 25 million, any obstacles to housing supply must be avoided so that the industry can meet our future housing needs.”

July saw record applications and settlements for Bluestone in both Australia and New Zealand. The firm also reported a 96% increase in application volume and a 153% in settlements during the April-July period.

Near prime lending caters to borrowers who fall just short of qualifying for a prime loan. The firm sees massive opportunities in this as banks tightening lending criteria more and more borrowers, leaving more customers in this situation.

“It’s all well and good for us to move into near prime, but if we’re not keeping our DNA intact, that is, our high-touch service and the enthusiastic way we work with our brokers, it doesn’t hit the mark,” said Royden D’Vaz, Bluestone national head of sales and marketing.

In terms of market penetration, Bluestone notched a 55% increase in self-employed loans and a 115% increase in near prime loans for fiscal year 2017-2018.


Case Study – Tax Debt

Meet Andrew… A self-employed carpenter with exceptional skills, huge passion and an outstanding ATO debt. Age: 38 Turnover: $120,000 Occupation: Carpenter Assets: $650,000 home Liabilities: $520,000 mortgage; $10,000 credit cards

Background:- Andrew had recently been hit with a large ATO debt that required immediate payment. He wanted to settle by releasing equity on his home but finding a lender willing to help proved difficult despite having a successful business and clean credit history. The last thing he wanted to do was sell his home to make this real life payment.

Solution:- Luckily, Andrew knew a great broker who knew all about alternative options outside of the traditional lenders. His broker contacted a Pepper Money BDM who advised a Pepper ‘near prime’ home loan might be the perfect real life solution as Pepper could pay it out at settlement as part of the refinance.

The Outcome:- Andrew qualified for a Pepper ‘Near Prime’ product – he could pay out his ATO debt and keep his home.

Pepper Money’s Near Prime home loans cater to customers who are on the cusp of prime. The loan not only offers a host of flexible features, but it’s also available as a Full Doc loan or an Alt Doc loan.

Key Features – Available as a Full Doc or Alt Doc home loan.

No credit scoring – Expert underwriters manually assess your client’s circumstances to increase the likelihood of finding a solution.

Unlimited Credit Impairment over 24 months – Clients with an unlimited number paid or unpaid defaults, judgements or writs of any value are considered provided the credit impairment is registered over 24 months. Pepper Money will also consider a client discharged from bankruptcy.

No Genuine Savings required – Your clients can use an inheritance or gifted funds for a deposit.

Loan Purpose – Purchase, refinance or construction of owner occupied and investment properties (including vacant land on Full Doc Loans). Pepper Near Prime loans allow unlimited number of debt consolidation and cash out for acceptable purposes including renovations and business use (excluding construction loans).


1 percent off car loans

Liberty has dropped the rate on its prime car loan product by 1%, specifically available to brokers. John Mohnacheff, group sales manager at Liberty, said that within six months of buying or refinancing a property, people will usually change or refinance their car as well.

“Brokers should encourage their customers to talk to them first about obtaining finance before they buy a car.

“The whole thing about cars is once you have decided to make a new purchase – the process happens pretty quickly. We recognise this at Liberty, so we’ve refined our application process and the wonderful thing is that within an hour of submitting the deal you could have the approval.

“Then it gives the customer a better bargaining chip knowing they have got the finance secured. They can say ‘I’m prepared to pay cash here, what’s the best price?'”

Liberty’s offer runs until 31 August.

 

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