Finance Achievers News
The Federal Budget is looming AND there are rumoured initiatives to help first home buyers (FHBs) into the property market. So if you - or your children - are potential FHB's it might pay to stay tuned...
Housing affordability has been a hot topic as a barrier to entry into the Australian property market. Despite this, the younger generation ARE starting to enter the property market in a variety of ways - as singles, couples, rent investors, in co-ownership and also with help from family.
So if extra government initiatives are possibly in the wings what NEW opportunities might this open up for potential FHBs?
Will you be ready to act?
Going it alone
One of the biggest hurdles for many FHBs is the deposit - on average it takes a working couple 4 years to save 20% deposit1. With price increases in some areas the required deposit could increase faster than it can be saved!
Don't yet have 20%?
Some lenders will allow you to enter into a home loan with less than 20% however lenders mortgage insurance (LMI) will then apply. LMI covers the lender but is paid by the purchaser. A one-off premium can potentially run into tens of thousands of dollars and is rolled into the mortgage by the lender.
The dilemma for many FHBs is whether paying LMI and getting into the market NOW is more beneficial than waiting and watching prices increase. That's a discussion that is worth having with us - your finance specialist.
Are there alternatives to 4 years of saving?
The bank of Mum and Dad...
In 2010 the average helping hand from parents was $23,000 - today it is more than $80,0002. In fact the bank of Mum and Dad is one of the fastest growing finance sources in Australia! The percentage of FHBs receiving help from family to enter the property market has more than doubled since the 1970s3.
But parents don't necessarily have to contribute the whole deposit. If FHBs don't have quite enough now to avoid LMI family may be able to assist with a guarantor loan for the shortfall to 20% and/or other upfront costs.
Of course not every family is in a position to help nor should we enter into home ownership seeing it as a short term goal. Saving the deposit is just the start - home ownership will probably require trimming expenses and making sacrifices for the foreseeable future.
If added incentives become a reality it's certainly worth doing the sums to see if this may assist you to take action sooner.
Interest rates remain at an all-time low but they WILL increase at some point. While lenders generally determine loan serviceability on a higher rate it may be preferable to borrow less than you can afford to build in breathing space. Other strategies worth considering might include:
- Your FIRST property doesn't need to be your dream home. Perhaps consider entering the market with a smaller, cheaper property? If you rent it out while continuing to live at home and save you may find your savings plus equity over time will assist you towards your dream home.
- Consider co-ownership with family or friends now with a view to going it alone further down the track.
The most important step is to DO YOUR HOMEWORK. As your finance specialist we can help you explore any new initiatives and options that may be suitable to YOU and your individual circumstances.
Once upon a time when the cash rate moved (up or down), most lenders would typically move their interest rate in alignment with the cash rate change.
Have you noticed that when the cash rate moves up the lenders are quick to pounce on an increase and pass these increases on to us - the consumer - immediately?
AND have you noticed that when the cash rate goes down it can take at least a month for them to respond and for them to pass on the savings?
If you have been paying attention over the last few weeks, the major banks have increased their rates independently of the Reserve Bank's monthly decision to keep the cash rate unchanged.
Not only are they penalising investors (those who provide public housing), but now owner occupiers are taking a hit as well. Even small business variable loans are being increased. We hear all the time that the banks are hiking up their rates in response to increased funding costs (which is true - but that's another story), however it is still a hard pill to swallow when they announce their multi-million dollar profits each year.
So what can YOU do as a consumer of lending products?
According to a major study reported only 12 months ago, 90% of home owners DO NOT KNOW THEIR CURRENT INTEREST RATE1. And even more concerning is that the average Aussie pays up to 1.75% more interest on their home loan than the lowest rate available. That's just over $5,000 PER YEAR for an average home loan of about $435,000 (in NSW).
You would also be aware if you have dealt with us before, the lowest interest rate is not always the best interest rate. However when we see research results indicating 90% of Australians do not know their current interest rate, then it begs to ask the question...
When was your last finance review?
If it hasn't been in the last 18 months, then it is pretty easy to suggest that there may be additional savings we could be finding for you. The CASH RATE has dropped 100 basis points (1%) in the last 2 years. How confident are you that your lender passed all of these savings on to you?
Sometimes we don't even have to change your lender to get you a better rate. Just ask us and we will negotiate this for you.
We know (from all the years we have been in the finance industry) that your current lender IS NOT going to call you and tell you they are offering better deals to new clients (rather than looking after their existing, longer term and loyal clients) AND they will certainly not tell you that there is a better deal with another lender.
The BIG four are not the only lenders in the market place. There are many other lenders in the market place who can provide similar offerings and sometimes even better facilities for your personal situation.
That's why we are here for you.
To do all the ground work and find a financial offering that not only suits your needs and circumstances, but to guide you through your financial journey as life and the world around us changes.
Jump on the phone or email us today to secure a conversation on how we may be able to improve your financial position.
*Disclaimer: This article is generic in nature. All investment decisions should be considered wisely and based on your personal and financial circumstances. Seek proper advice before committing to any course of investment action. This is not deemed as advice. 2017
At today's board meeting the Reserve Bank decided to leave the cash rate unchanged at the all-time low rate of 1.50%.
Even though the RBA cash rate - and home loan interest rates - are at historically low levels it’s interesting that a recent survey revealed 41% of Australians have credit card debt. Of those, nearly 4 million can’t afford to repay it!
February can often be the time of year when our festive season excesses stare us in the face - all in black and white on our credit card statement! That can be a bit scary when we all know that a key component of getting ahead financially involves managing our debt.
If credit card debt is on YOUR mind make sure you read 'Debt got you down? Then take action now!' Then give us a call!
We just may be able to help you get started on kicking the RIGHT financial goals this year!
A recent survey revealed 41% of Australians have credit card debt and of those nearly 4 million cannot afford to repay it! In addition:
- The average Australian household has a debt of around 185% of their annual disposable income1.
- Australian households have the fifth highest debt levels in the world with household debt increasing fourfold since 19882.
- Average debt levels are $12,643 for personal loans, $3,114 for credit card balances and $16,320 for car loans.
So what does this mean for the 'average' Australian?
Did you know if you are a prospective home buyer and have these 'average' levels of accumulated debt it could affect your borrowing power by almost $100,000?
With the median Australian house price at $623,0003 what impact might this have on your home ownership dreams?
Perhaps ask yourself these questions...
- Is your debt growing faster than your assets?
- Are you concerned about your debt situation?
- Are you struggling to make your monthly repayments?
- Does it always seem like your bills amount to more than your wages?
If you answered yes to one or more of these questions, then perhaps it's time to look at a solution for your debt condition NOW - before it’s too late.
Why do so many of us have debt problems?
Some people fail to recognise that using credit to purchase items for use TODAY means they are spending their future earnings before they have even received them.
With debt levels increasing the government is currently assessing credit card rules - there is a push for lenders to assess suitability based on a consumer's ability to repay within a reasonable period. However in the past lenders have offered credit cards, with pre-approved limits, without thoroughly checking credit histories or capacity to repay.
How have times changed? In the past we saved up or used the lay-by method, ie we used money we already HAD for items we wanted. Now, as an 'instant gratification' society with an abundance of credit at our finger tips we are tempted to use it without considering future consequences. Little wonder many people experience high levels of debt.
What are the first signs of trouble?
- You think it is unlikely you will be able to repay your existing debt with your foreseeable future income.
- You have multiple credit cards.
- You are no longer paying the balance of your debt each month - you just pay the minimum amount.
- You arranged for more credit cards (or a personal loan) to help pay off the other cards.
- You added a store card(s) because there was no room left on the credit cards...
Eventually your repayments start to approach - or even exceed - your income.
What is the solution?
We all know that good budgeting and discretionary spending discipline is the real answer, but sometimes it doesn't matter how well you budget there's just not enough money to make ends meet.
One solution (and this is NOT for everyone) may be debt consolidation.
For some of us it may be too late for budgeting because the debt level is already greater than your income and there is nothing that can be done. In this instance, debt consolidation may be the option for you.
What is debt consolidation?
This is when you take multiple debts (where the majority of the debt has a much higher interest rate) and consolidate the debt into one loan with a lower average interest rate. Generally most people opt for refinancing against their home (using existing equity) as it has the lowest interest rate. For example, your home loan rate may be 5.5% as opposed to a personal loan that might be 10.95% or higher (definitely lower than most credit cards).
How can we help?
1. If your debt levels are a concern and you think you may be experiencing the first signs of trouble CALL US NOW before it is too late. We don't judge. We are here to help.
2. Ask us for our debt consolidation spreadsheet to see how much we can potentially save you each month to go towards the payment of your debt. You may be surprised.
3. Even if you are managing your current debt, it never hurts to review your finances to see how your cash flow can be impacted favourably.
4. If you have friends or family who you think could benefit from reading this article, please forward it to them.
Post-Election Consumer Confidence Ready to Bloom
It’s not only the weather that’s looking up this September – according to a Roy Morgan Research poll, consumer confidence levels are the highest they’ve been in four months, with election madness over for another 3 years.
WE HAVE MOVED! Due to expansion we are pleased to announce our new office location
Unit 20, 11 Sainsbury Rd, O'Connor WA 6163.
If you are in the area please feel free to drop in for a coffee and a chat.
The promise of longer, sunnier days ahead is here as we slide into September and everything begins to look new and shiny again.
After the recent Reserve Bank meeting official interest rates remain at 2.5%. We accept a “wait and see” approach while they measure the mood of the election outcome.
In our spring newsletter, we investigate what’s also blooming this month – consumer confidence! And I show you how you could turn a $400 renovation investment into a cool $20K profit.
Ready to spring-clean your property investments? Get the latest on how you can capitalise on the current low mortgage rates – I’m here to talk you through all your options.