The Reserve Bank of Australia (RBA) has shown some Christmas spirit, with a second consecutive cash rate cut coming just in time for the festive season.
The RBA cut the official cash rate on 6 December by 0.25 per cent, bringing the official rate down to 4.25 per cent.
The central bank shocked the nation in November, when it reduced the cash rate from 4.75 per cent to 4.5 per cent on Melbourne Cup Day – the first reduction in more than two and a half years and a stark contrast to 2010’s Melbourne Cup Day rate rise upset.
Benign inflationary growth, slow employment growth and poor consumer confidence all contributed to the November rate cut and with similar conditions persisting into December, many economists were not surprised that the RBA moved downward once again. “The rate cut should not come as a surprise from a housing market perspective, considering that the soft market conditions that first became evident in June of last year
have created no inflationary pressures and have persisted,” commented RP Data’s Cameron Kusher. “In fact, capital city home values are down four per cent from their December 2010 peak and rental rates have increased by just 4.6 per cent over the 12 months to September 2011.”
In addition to flagging the soft property market conditions, the RBA noted in its monetary policy statement that growth in the global economy has moderated in 2011.
Europe’s sovereign debt and banking problems are also “likely to weigh on economic activity there over the period ahead”, the statement said. With more difficult financial market conditions ahead and both businesses and households remaining cautious, “the likelihood of a further material slowing in global growth has increased”, the RBA said.
The November and December rate cuts might actually be a taste of things to come, with many economists predicting another reduction on 7 February 2012 (with no RBA Board
meeting scheduled for January).
National Australia Bank chief economist Alan Oster said the outlook for global growth is bound to be worse when the Board meets in February, providing good grounds to bring the cash rate down to four per cent. A cut could be delayed for a month or two – or not happen at all – if the local economy holds up. Alternatively, an economic meltdown in the eurozone could see an out-of-cycle emergency reduction.
Thursday, December 15, 2011
Wednesday, November 30, 2011
Economic wrap
The Reserve Bank of Australia (RBA) now seems quite content to sit tight on rates for the remainder of 2011. At its September rate meeting, the RBA Board said it could not find enough evidence to support a rate reduction. While the conditions in global financial markets have been very unsettled over recent weeks, the Australian economy remains resilient – with new data showing sound GDP growth.
The economy grew by 1.2 per cent in the quarter, exceeding the market’s expectation of a 1 per cent expansion, showing there was strength in sectors outside of the powerful mining boom. In addition, the 1.2 per cent contraction in the first quarter caused by the Queensland flood crisis in January, which slowed major coal production, was revised to a better 0.9 per cent slowdown.
There was also a surprising 1 per cent bounce in consumption, which occurred despite the recent wave of consumer caution. It was the fastest quarterly growth in consumer spending in more than a year.
Speaking about the current Australian economy, Royal Bank of Scotland chief economist Kieran Davies says while there has been a lot of talk about our two-speed economy, and the potential of a “recession double dip”, the future looks surprisingly positive. “With all the talk of a two-speed economy in Australia, you would be forgiven for thinking that the economy outside of mining was in recession,” Mr Davies says.
“That certainly isn’t the case, as there was strong growth outside the resources sector.”
Mr Davies says he expects to see resurgence in consumer spending over the coming months, which would be good news for industry sectors the nation over who have struggled under challenging conditions for the past 12 months.
In terms of home loans, while consumer caution has plagued the mortgage market for some time, recent data suggests buyers are starting to return to the property market.
According to Veda’s quarterly Consumer Credit Demand Index (CDI), mortgage enquiries grew 6.3 per cent over the June quarter as borrowers took advantage of a highly competitive lending environment.
This data was supported by the Australian Bureau of Statistics (ABS), which recorded a 1.7 per cent increase in the number of finance commitments in July. In trend terms, increases were recorded in all states and territories. Queensland recorded the largest increase, up 2 per cent, Real Estate Institute of Australia (REIA) acting president Pamela Bennett says.
“Increases were evident for the construction of new dwellings (up 1.3 per cent), the purchase of established dwellings (up 1.7 per cent) and the purchase of new dwellings (up 2.3 per cent).
“The upturn in lending commitments reflects stability in interest rates and the housing market as well as increased competition among lenders,” she says.
Improve your financial position by refinancing
Here are a number of ways refinancing can really boost your current financial situation:
- Find a better interest rate: Bank competition, coupled with interest rate stability, has created some real opportunities for borrowers. Refinancing your mortgage to a fixed rate product will give you certainty around loan repayments. However, you should also consider break costs which may apply if you break your term early.
- Unlock the equity in your home: Investors can use refinancing as an effective way to unlock the equity in their home, giving them more funds to act sooner. It is also a terrific way to gain some extra cash when renovating your home.
- Debt consolidation: Finding it difficult to keep track of all your debts? Refinancing can place all your debts, including store and credit cards, into one loan. This will help you manage your debt more effectively and potentially save you thousands in interest rate repayments.
- Which option is best for you, even staying with you current loan, will depend on your circumstances.
Making the switch
Cash rate stability, increased product choice and flexible mortgage interest rates have created the prime environment for consumers planning to renew their home loan. Competition in the mortgage market is certainly heating up.
Major lenders are slashing rates and releasing some enticing mortgage products in a bid to win over your business. As the banks continue to battle over market share, an increasing number of borrowers are realising the potential savings on offer should they decide to make the switch to a new lender.
The mortgage you have now may no longer be the most appropriate or most affordable option available. If you are unable to remember the last time you had a credit check, now may be the time to do so. Whether you are looking to drive down your mortgage balance or reduce your repayments, refinancing may be the ideal strategy. Refinancing refers to the process of switching from one home loan to another. This is a fast and flexible way to keep you abreast of your current financial circumstances and to ensure you are not paying any more than you should on your mortgage. While the federal government abolished exit fees for new loans earlier this year, there are some additional costs that you will need to consider before changing lender.
Switching home loans can carry additional costs such as new application fees, legal fees and mortgage insurance.
However, establishing which home loan best fits your needs can be quick and relatively stress free. Mortgage brokers can help ensure the transition from one home loan to another is as safe and hassle free as possible. Moreover, we can work with you to identify the most appropriate product to meet your needs as well as help you through the application process If refinancing is the way to go for you.
Give us a call so we can work with you on highlighting associated costs and determining the best course of action. Making the switch
Blitzing your backyard
There’s no end of TV shows dedicated to property renovation, but all too often they just concentrate on what’s on the inside. What about what’s outdoors? Australians have a strong affinity with the great outdoors, so it should come as no surprise that the backyard often represents a focal point for many potential home buyers.
Whether you are fortunate enough to enjoy a modest backyard or prefer the simplicity of a smaller courtyard, there are plenty of ways to maximise the space available.
Inside and outside design – Choosing materials, textures and colours that complement or match your interior design is a sure fire way to connect the backyard to your home. This does not mean you have to pull up the entire yard; rather, you need to effectively manage what you already have. If you are new to the renovation game, sticking to natural lighting is your safest bet. Use dim colours wherever your garden is light and light colours wherever your backyard is dim.
Using the space – Add some flare to your backyard with striking features such as fountains, pebbles or landscaping stones. A water feature will add a splash of class to any backyard, while pebbles and stone landscaping will add some extra colour and texture to your outdoor living space.
Keep in mind the layout and design of the backyard when selecting a feature item always choose objects that make the most of the space you have.
Jazz up the garden – Spruce up the yard with some vibrant plants and bushes. The types you select should, again, be determined by the layout and design of your backyard. However, if you find that space is a concern, a raised garden bed will let you fit more plants into a smaller area. Potted plants require little to no space and are a worthy addition to all yards. When choosing plants, keep in mind how much sunlight your backyard receives during the day as nothing looks worse than a neglected garden.
Outdoor living – After you’ve spent many hours improving the garden and lighting up the yard, it makes sense to create an area where you can sit back and enjoy your hard work. Unfortunately, outdoor living areas don’t come cheap, but there are ways to avoid the financial strain. Large umbrellas can provide shade and shelter at one quarter of the cost of a gazebo. Moreover, stylish outdoor furniture can be found at most local hardware/gardening stores so be sure to shop around and
grab yourself a bargain. If you’re looking to spruce up the backyard with some solid landscaping, keep in mind they you may be able to draw on some of the equity built up in your home to finance the improvements, rather than using cold hard cash, credit cards or personal loans. Give us a call to discuss financing your backyard renovations and some of the options available.
Capitalising on a buyer’s market
There are real opportunities awaiting home buyers and investors who are willing to take
the plunge. The property market has been relatively flat in some areas. We have seen prices soften across some segments and also new home sales fall.
With the number of listings soaring and fewer buyers around the traps, it is prime time for those armed with a sizeable deposit.
Get your house in order
A buyer’s market, in which the volume of property listings exceeds buyer demand, typically exists during periods of weak or negative consumer sentiment. Understanding the right time to buy is key to successful investment, and while the risks may appear high, the likely returns can make buying a worthwhile decision. With doubts surrounding the global economy beginning to wane and a possible
interest rate cut in the offing, now is the time to strike. Many investors aim to capitalise on a market with fewer buyers actively in search of a new home as this puts greater negotiating power in the hands of those willing to buck the trend.
Investors and home buyers with a sizeable deposit behind them will have greater ability to influence the price of a property. Even more important, buyers that have finance pre-approved can more quickly and
with more authority negotiate with an agent, as they will know that you’re a serious player and will therefore negotiate knowing an outcome can be realised.
If you’d like to assess your current borrowing capacity with view to capitalise on the current market, and to arrange a mortgage pre-approval, give us a call today.
Wednesday, June 29, 2011
Honing your negotiation skills - Capitalise on market conditions and negotiate yourself a bargain
There are now sections of the property market in Australia that are flat.
Opportunities emerge for a savvy buyer with the finances organised and proactive strategy in place.
Where there are fewer buyers in the market for the number of properties available for sale, and properties taking longer to sell, that is a ‘buyer’s market’. In those circumstances there is greater scope for driving vendors down on price.
Buyers that have sound negotiation skills can score themselves a better deal. Here are some key tactics for becoming a smooth property operator.
When making your initial offer the trick is to make it low but not so low that your offer is dismissed. You want to offer enough to get the seller interested. If you are making a low offer, afford a decent reason – perhaps there’s no garage or the house needs a paint job, for example.
To get a lower price, you may also need to offer the seller some kind of incentive. One of the best ways to become an attractive buyer is to offer a quick sale, or if required, an extended settlement time. Remember: find out what’s important to the vendor, use it as leverage.
Opportunities emerge for a savvy buyer with the finances organised and proactive strategy in place.
Where there are fewer buyers in the market for the number of properties available for sale, and properties taking longer to sell, that is a ‘buyer’s market’. In those circumstances there is greater scope for driving vendors down on price.
Buyers that have sound negotiation skills can score themselves a better deal. Here are some key tactics for becoming a smooth property operator.
- Know the market – Attend as many inspections and auctions as you can to find out what’s on the market, in the area you want to buy, and at what price properties are selling. Talk to agents and compare quoted prices with final prices. You might think a property is worth $500,000, but in that market it may be worth less. By knowing what properties are selling in your market for you’ll avoid over-paying.
- Don’t be afraid to start low – Where there is a buyer’s market, properties will usually sell for less than their quoted price. There is no golden rule, but start seeking a discount upwards to 10 per cent (or more) than the price the vendor has listed. You’ll be surprised what you might be able to drive the price down to.
- Consider a professional valuation – This may help you determine whether you’re paying fair market value.
- Don’t set your limit at an obvious, rounded number, because most people will do the same – Put your final price in at a more unusual number such as $358,500 rather than $360,000.
- Get in quick – The early bird catches the worm… so move fast.
- Know thy vendor – Find out as much as you can about the seller, including why they are selling, why they’ve set the price they have, how long the property has been listed for and how much interest/how many offers they’ve had. The more you know the more power you’ll have in terms of negotiation.
- Keep your cards close to your chest – Play it cool and don’t reveal too much to the agent. If you’re really keen you don’t want them to know it.
When making your initial offer the trick is to make it low but not so low that your offer is dismissed. You want to offer enough to get the seller interested. If you are making a low offer, afford a decent reason – perhaps there’s no garage or the house needs a paint job, for example.
To get a lower price, you may also need to offer the seller some kind of incentive. One of the best ways to become an attractive buyer is to offer a quick sale, or if required, an extended settlement time. Remember: find out what’s important to the vendor, use it as leverage.
Planning your renovations
Some areas of the property market have relatively low growth at the moment.
In those areas, there’s a widening gap between demand for property compared to the number of properties available – there is greater latitude for buyers to negotiate on price. Combined, for many home owners these dynamics may influence your decision to not sell now.
If you’re looking for a new home or more space, rather than selling why not look at improving your current property – and, potentially, adding to its value to boot.
Before you seek to renovate it is crucial to have a game plan to ensure the most successful outcome. Here’s five sure fire ways to capitalise on a renovation.
Research
Seek out a professional, such as a licensed builder, structural engineer or a certified plumber, for advice to determine whether there is enough scope in your property to benefit from renovation.
Understand what adds value
Different features hold different value on different properties, so focus on identifying what additions are likely to generate the most interest from prospective buyers for your specific property.
Plan
Even though the sums may add up and a profit (should you choose to sell) can be turned, all your hard work can be undone if you don’t plan which areas to direct your funds to.
Make sure you set a budget and stick to it so you don’t over capitalise the property. It’s all too easy to let prices spiral out of control… successful renovators know their limits and know when to stop.
Finance
How you choose to finance your renovation can have a lasting impact on how much profit you make, plus the scope of works you’re able to undertake.
There are a number of different scenarios to finance your renovation, such as refinancing or using equity currently in your home. Give us a call and we can determine the best plan of attack.
Seek advice from the experts
Get a building inspector to take one last look to see if your property is structurally sound and doesn’t have any major problems. Renovations can sometimes reveal significant problems you were unaware of; for this reason be conservative in your estimates and factor additional funds into your budget in preparation for unexpected expenses.
Properties with potential
Not all properties were created equal, with some properties more ideal to renovate than others. Properties with a greater potential for renovation have:
In those areas, there’s a widening gap between demand for property compared to the number of properties available – there is greater latitude for buyers to negotiate on price. Combined, for many home owners these dynamics may influence your decision to not sell now.
If you’re looking for a new home or more space, rather than selling why not look at improving your current property – and, potentially, adding to its value to boot.
Before you seek to renovate it is crucial to have a game plan to ensure the most successful outcome. Here’s five sure fire ways to capitalise on a renovation.
Research
Seek out a professional, such as a licensed builder, structural engineer or a certified plumber, for advice to determine whether there is enough scope in your property to benefit from renovation.
Understand what adds value
Different features hold different value on different properties, so focus on identifying what additions are likely to generate the most interest from prospective buyers for your specific property.
Plan
Even though the sums may add up and a profit (should you choose to sell) can be turned, all your hard work can be undone if you don’t plan which areas to direct your funds to.
Make sure you set a budget and stick to it so you don’t over capitalise the property. It’s all too easy to let prices spiral out of control… successful renovators know their limits and know when to stop.
Finance
How you choose to finance your renovation can have a lasting impact on how much profit you make, plus the scope of works you’re able to undertake.
There are a number of different scenarios to finance your renovation, such as refinancing or using equity currently in your home. Give us a call and we can determine the best plan of attack.
Seek advice from the experts
Get a building inspector to take one last look to see if your property is structurally sound and doesn’t have any major problems. Renovations can sometimes reveal significant problems you were unaware of; for this reason be conservative in your estimates and factor additional funds into your budget in preparation for unexpected expenses.
Properties with potential
Not all properties were created equal, with some properties more ideal to renovate than others. Properties with a greater potential for renovation have:
- A desirable location
- A floor plan and structure that can be altered
- Structural soundness, free of pests
- Room to expand
- Significant scope for work
- Appealing neighbouring properties
Realities of refinancing
With the government set to ban exit fees from the start of the coming financial year, a greater number of borrowers are reconsidering their current mortgage commitments and opportunities offered through refinancing.
There are a number of key reasons why borrowers should consider refinancing. Importantly, while your home loan might have been right for you when you purchased your property, there’s a good chance there might be a more appropriate product on the market that meets your changing needs.
Perhaps you’ve recently had a child and moved to one income, for example; maybe you’ve changed jobs and have greater earning capacity – all of these factors can influence the relevance of your mortgage.
As well as ensuring that your mortgage is right for your current situation, refinancing has a range of other usages.
You can refinance your mortgage to finance a renovation, free up funds to cover the deposit on an investment property, consolidate high interest rate debts, or even help your children raise a deposit for their first home.
The good news is that if you’d like to take advantage of refinancing your mortgage, it’s easy to arrange. However there a number of key points you need to consider.
Importantly, there may be fees and charges associated with refinancing – so before you make any decision to move your mortgage do your sums to ensure you will be better off in the short and long term.
If you are unsure whether refinancing is right for you, give us a call.
We can determine whether refinancing is the best option as well as assist you with identifying the products most suitable plus coordinate the application process.
The cost of refinancing
While it certainly has its advantages, refinancing also has its pitfalls – including potential fees and charges.
To avoid being caught off guard and out of pocket, here are a few fees you may possibly incur:
There are a number of key reasons why borrowers should consider refinancing. Importantly, while your home loan might have been right for you when you purchased your property, there’s a good chance there might be a more appropriate product on the market that meets your changing needs.
Perhaps you’ve recently had a child and moved to one income, for example; maybe you’ve changed jobs and have greater earning capacity – all of these factors can influence the relevance of your mortgage.
As well as ensuring that your mortgage is right for your current situation, refinancing has a range of other usages.
You can refinance your mortgage to finance a renovation, free up funds to cover the deposit on an investment property, consolidate high interest rate debts, or even help your children raise a deposit for their first home.
The good news is that if you’d like to take advantage of refinancing your mortgage, it’s easy to arrange. However there a number of key points you need to consider.
Importantly, there may be fees and charges associated with refinancing – so before you make any decision to move your mortgage do your sums to ensure you will be better off in the short and long term.
If you are unsure whether refinancing is right for you, give us a call.
We can determine whether refinancing is the best option as well as assist you with identifying the products most suitable plus coordinate the application process.
The cost of refinancing
While it certainly has its advantages, refinancing also has its pitfalls – including potential fees and charges.
To avoid being caught off guard and out of pocket, here are a few fees you may possibly incur:
- Applications, establishment and handling fees when applying for your new loan
- Early settlement fees on your existing loan
- Valuation fees
- Mortgage insurance
- Discharge fees on your existing mortgage and registration fees on your new one
- Stamp duty
Insure your family’s future
What would happen if a serious accident or illness left you unable to meet your mortgage repayments or other obligations?
Nobody likes to think about falling ill, suffering a serious accident, or worse still, dying, but the truth is sometimes serious illnesses or misfortunes may happen.
If you have substantial obligations, such as a loan for a family home, and have a family to think of, what would you and your family do should you no longer be able to earn an income?
When it comes to taking out a home loan you may wish to consider whether it is appropriate to take out mortgage protection insurance, illness, accident, or total or permanent disability insurance, to cover you if anything goes wrong.
Covers, types and levels will vary from one provider to another but usually you will be able to take out cover for the total value of your home loan. There could be a cap or limit or different circumstances when cover could apply.
Types of illness cover vary but can include Life Cover and Terminal Illness which provides lump sum benefits in the event of loss of life or terminal illness. Some types of insurance may also cover you in the case of accident and trauma. It may also cover heart attack, cancer, stroke and coronary artery bypass surgery. Cover can vary according to your individual needs and budget and you may be able to pay for your insurance in full or via instalments.
If you’re a household with limited assets and you depend largely on one income, you may wish to consider your insurance needs. Call us today and we can put you in touch with qualified insurance advisers who will look after your needs.
Nobody likes to think about falling ill, suffering a serious accident, or worse still, dying, but the truth is sometimes serious illnesses or misfortunes may happen.
If you have substantial obligations, such as a loan for a family home, and have a family to think of, what would you and your family do should you no longer be able to earn an income?
When it comes to taking out a home loan you may wish to consider whether it is appropriate to take out mortgage protection insurance, illness, accident, or total or permanent disability insurance, to cover you if anything goes wrong.
Covers, types and levels will vary from one provider to another but usually you will be able to take out cover for the total value of your home loan. There could be a cap or limit or different circumstances when cover could apply.
Types of illness cover vary but can include Life Cover and Terminal Illness which provides lump sum benefits in the event of loss of life or terminal illness. Some types of insurance may also cover you in the case of accident and trauma. It may also cover heart attack, cancer, stroke and coronary artery bypass surgery. Cover can vary according to your individual needs and budget and you may be able to pay for your insurance in full or via instalments.
If you’re a household with limited assets and you depend largely on one income, you may wish to consider your insurance needs. Call us today and we can put you in touch with qualified insurance advisers who will look after your needs.
Economic wrap - Winter 2011
The RBA’s decision to leave the official cash rate on hold for the seventh consecutive month has done little to improve consumer confidence.
Data from the Australian Bureau of Statistics shows consumer caution continues to sit at an all-time high, despite the fact that rates have not increased since November last year.
Annual retail sales have endured sluggish growth of just 2 to 3 per cent. Pre-GFC, this growth historically hovered around the 6 per cent mark. Similarly, the household savings ratio has increased to 11.5 per cent from zero just six years ago.
So why have consumers become so cautious?
AMP’s chief economist Shane Oliver says there are several factors at play behind the new found caution of consumers, mainly an attitudinal change towards debt and savings.
“From the mid-1980s until about five years ago, consumer spending was supercharged by a combination of rising household debt levels and a fall in the household savings rate from around 15 per cent to zero,” he says.
“Debt was in, saving was out. This was driven by a combination of easy credit post financial deregulation, falling interest rates making debt more affordable, younger generations becoming more comfortable with debt as memories of serious economic problems faded, and rapidly rising wealth levels making active savings seemingly less necessary.”
But this trend has since reversed. The GFC provided consumers with a long overdue reminder that debt is indeed risky. In addition, it warned borrowers that their jobs aren’t as secure as they first thought.
As a result, savings are now back en vogue and the pace of increase in household debt slowing to a crawl.
In addition, the debt build-up of the past has left households very vulnerable to higher interest rates. This is particularly so for those who entered the housing market on the back of the first home owners’ boost and generational lows in mortgage rates in late 2008 and 2009.
So talk and the reality of higher interest rates have only added to a more cautious attitude on the part of consumers.
Moreover, the portion of the household budget allocated to necessities such as power and water bills, fuel, rent, insurance and health is rising rapidly.
Genworth Financial’s mortgage trends report released earlier this year found the rising cost of living was deterring Australians from jumping onto the property ladder. And this is now evidenced in falling auction clearance rates.
Data from the Real Estate Institute of Australia shows auction clearance rates have slumped to 60 per cent from 75 per cent this time last year.
It seems Australians feel happier and safer saving their money rather than investing it in property. And the RBA’s decision to leave the cash rate on hold at 4.75 per cent in June is unlikely to change this trend.
Data from the Australian Bureau of Statistics shows consumer caution continues to sit at an all-time high, despite the fact that rates have not increased since November last year.
Annual retail sales have endured sluggish growth of just 2 to 3 per cent. Pre-GFC, this growth historically hovered around the 6 per cent mark. Similarly, the household savings ratio has increased to 11.5 per cent from zero just six years ago.
So why have consumers become so cautious?
AMP’s chief economist Shane Oliver says there are several factors at play behind the new found caution of consumers, mainly an attitudinal change towards debt and savings.
“From the mid-1980s until about five years ago, consumer spending was supercharged by a combination of rising household debt levels and a fall in the household savings rate from around 15 per cent to zero,” he says.
“Debt was in, saving was out. This was driven by a combination of easy credit post financial deregulation, falling interest rates making debt more affordable, younger generations becoming more comfortable with debt as memories of serious economic problems faded, and rapidly rising wealth levels making active savings seemingly less necessary.”
But this trend has since reversed. The GFC provided consumers with a long overdue reminder that debt is indeed risky. In addition, it warned borrowers that their jobs aren’t as secure as they first thought.
As a result, savings are now back en vogue and the pace of increase in household debt slowing to a crawl.
In addition, the debt build-up of the past has left households very vulnerable to higher interest rates. This is particularly so for those who entered the housing market on the back of the first home owners’ boost and generational lows in mortgage rates in late 2008 and 2009.
So talk and the reality of higher interest rates have only added to a more cautious attitude on the part of consumers.
Moreover, the portion of the household budget allocated to necessities such as power and water bills, fuel, rent, insurance and health is rising rapidly.
Genworth Financial’s mortgage trends report released earlier this year found the rising cost of living was deterring Australians from jumping onto the property ladder. And this is now evidenced in falling auction clearance rates.
Data from the Real Estate Institute of Australia shows auction clearance rates have slumped to 60 per cent from 75 per cent this time last year.
It seems Australians feel happier and safer saving their money rather than investing it in property. And the RBA’s decision to leave the cash rate on hold at 4.75 per cent in June is unlikely to change this trend.
Wednesday, May 11, 2011
Strategies for spotting a property lemon
Not knowing how to spot a property lemon can turn the sweetness of owning your own property into a sour experience.
Unfortunately when it comes to spotting a lemon, signs such as insect holes or water affected walls will be hard to recognise if masked with a fresh lick of paint.
While the best way to safeguard against buying a dud property is to have a comprehensive building inspection performed by a qualified professional, there are some warning signs that should flash up on every buyer’s radar.
Not every property is built on solid foundations and cracks in the walls are a tell-tale sign that there may be serious problems with the property.
If you spot a crack that is wider than the width of your fingernail, or the bricks are out of alignment, then this could signal a major structural issue.
When inspecting a property’s structure always take an extra pair of eyes along with you as your chances of locating any hidden defects are doubled.
There are also other senses that should come into play when it comes to unearthing potential problems.
If the property smells damp and musty there is the possibility of potential plumbing issues, such as leaking pipes.
Prodding around toilet, shower and sink areas should reveal any soft spots hidden from view that may conceal leaks.
And a ceiling with bulges could hide a multitude of sins, so be sure to check every room.
By shining a light on the ceiling situation you can uncover most issues, like mould or roof leaks.
And sure fire sign of potential pest trouble is bubbling paint, wood powder or crumbling timber around door and window frames.
Lastly, if the property looks like it’s been renovated make sure you can be sure that these improvements were done in accordance with council regulations.
This is vital because if improvements have been done illegally then you’ll be responsible for bringing them in line with industry standards – and that could prove very expensive.
Unfortunately when it comes to spotting a lemon, signs such as insect holes or water affected walls will be hard to recognise if masked with a fresh lick of paint.
While the best way to safeguard against buying a dud property is to have a comprehensive building inspection performed by a qualified professional, there are some warning signs that should flash up on every buyer’s radar.
Not every property is built on solid foundations and cracks in the walls are a tell-tale sign that there may be serious problems with the property.
If you spot a crack that is wider than the width of your fingernail, or the bricks are out of alignment, then this could signal a major structural issue.
When inspecting a property’s structure always take an extra pair of eyes along with you as your chances of locating any hidden defects are doubled.
There are also other senses that should come into play when it comes to unearthing potential problems.
If the property smells damp and musty there is the possibility of potential plumbing issues, such as leaking pipes.
Prodding around toilet, shower and sink areas should reveal any soft spots hidden from view that may conceal leaks.
And a ceiling with bulges could hide a multitude of sins, so be sure to check every room.
By shining a light on the ceiling situation you can uncover most issues, like mould or roof leaks.
And sure fire sign of potential pest trouble is bubbling paint, wood powder or crumbling timber around door and window frames.
Lastly, if the property looks like it’s been renovated make sure you can be sure that these improvements were done in accordance with council regulations.
This is vital because if improvements have been done illegally then you’ll be responsible for bringing them in line with industry standards – and that could prove very expensive.
Mortgage reduction strategies
Make your dream of debt free home ownership a reality with a few simple mortgage
reduction strategies.
The longer you take to pay off the principal amount you have borrowed for your home the more interest you will end up paying – it therefore makes sense to try and put a dent in your mortgage as quickly as possible.
Mortgage reduction is much easier and less painful than most people think, and with a few simple steps you’ll be sure to drive your mortgage down.
Review your home loan
With the home loan wars running hot, lenders are now offering heavily discounted loan packages to win over your business.
Ensuring that your home loan still offers a competitive interest rate could save you thousands of dollars over the short, medium and longer term. However be sure to give us a call for advice on the most appropriate product for you and any fees or costs that are associated with switching before jumping ship.
Increase your repayment frequency
Changing from monthly to fortnightly repayments is the safest and most effective mortgage reduction strategy.
By paying fortnightly you are effectively making a total of 13 monthly repayments over the course of a year, giving you one month’s extra repayment every year.
At first glance this figure may not seem significant but you could essentially wipe more than 4 years off the life of a 25 year loan term and save tens of thousands of dollars should you engage this simple strategy.
Make lump sums
Whether you’ve just received a tax rebate, Christmas bonus or an inheritance, use every opportunity to drive down the principal amount of your mortgage. The more cash you drive into your mortgage, the earlier you’ll repay your loan.
And remember, if necessary, you can usually release any additional repayments from your home if you have to unlock those extra dollars at some stage in the future.
reduction strategies.
The longer you take to pay off the principal amount you have borrowed for your home the more interest you will end up paying – it therefore makes sense to try and put a dent in your mortgage as quickly as possible.
Mortgage reduction is much easier and less painful than most people think, and with a few simple steps you’ll be sure to drive your mortgage down.
Review your home loan
With the home loan wars running hot, lenders are now offering heavily discounted loan packages to win over your business.
Ensuring that your home loan still offers a competitive interest rate could save you thousands of dollars over the short, medium and longer term. However be sure to give us a call for advice on the most appropriate product for you and any fees or costs that are associated with switching before jumping ship.
Increase your repayment frequency
Changing from monthly to fortnightly repayments is the safest and most effective mortgage reduction strategy.
By paying fortnightly you are effectively making a total of 13 monthly repayments over the course of a year, giving you one month’s extra repayment every year.
At first glance this figure may not seem significant but you could essentially wipe more than 4 years off the life of a 25 year loan term and save tens of thousands of dollars should you engage this simple strategy.
Make lump sums
Whether you’ve just received a tax rebate, Christmas bonus or an inheritance, use every opportunity to drive down the principal amount of your mortgage. The more cash you drive into your mortgage, the earlier you’ll repay your loan.
And remember, if necessary, you can usually release any additional repayments from your home if you have to unlock those extra dollars at some stage in the future.
Avoid the holiday hangover
There’s no doubt that holidays help you achieve a better work/life balance but while it’s important to get away, coming home to financial strain will be a burden.
But with the right approach you can treat the family to a well-deserved holiday without breaking the bank.
The journey begins with a frank assessment of your current financial situation. This will allow you to determine how much you can allocate to your trip, and how it will be spent.
Start off by lining up your credit cards and totting up how far you’re in the red. Then look at any store cards, furniture finance and other debts that need servicing.
It’s also important to look at any upcoming bills and expenses such as school fees, car rego or council tax that are likely to hit your hip pocket in the next six months.
Taking such a stark view of your finances may be unsettling but your financial commitments could come back to bite you if they are swept under the carpet for the sake of an over extravagant vacation.
Knowing where you stand financially will allow you to create a realistic and effective budget to be used for the trip.
And should you need to, speaking to us can be an effective way to help consolidate existing debts or even release extra equity that you’ve accumulated in your property.
Cheap tricks
If a holiday is out of the question, planning a series of day trips could be a cost effective solution. Here are few quick getaway ideas that’ll keep the whole family smiling.
The great outdoors – Australians love the feel of being at one with nature and best of all it’s a very cheap option. There’s nothing better than a picnic or bush walk – and our beautiful national parks are everywhere. All the benefits of exercise and family enjoyment couldn’t be easier.
Hit the city – There’s always something happening in the city, so it’s well worth taking a look at what’s on. Annual events seem to run endlessly and with only a few minutes spent online you are sure to find hundreds of activities from heritage tours, art galleries, museums and festivals.
But with the right approach you can treat the family to a well-deserved holiday without breaking the bank.
The journey begins with a frank assessment of your current financial situation. This will allow you to determine how much you can allocate to your trip, and how it will be spent.
Start off by lining up your credit cards and totting up how far you’re in the red. Then look at any store cards, furniture finance and other debts that need servicing.
It’s also important to look at any upcoming bills and expenses such as school fees, car rego or council tax that are likely to hit your hip pocket in the next six months.
Taking such a stark view of your finances may be unsettling but your financial commitments could come back to bite you if they are swept under the carpet for the sake of an over extravagant vacation.
Knowing where you stand financially will allow you to create a realistic and effective budget to be used for the trip.
And should you need to, speaking to us can be an effective way to help consolidate existing debts or even release extra equity that you’ve accumulated in your property.
Cheap tricks
If a holiday is out of the question, planning a series of day trips could be a cost effective solution. Here are few quick getaway ideas that’ll keep the whole family smiling.
The great outdoors – Australians love the feel of being at one with nature and best of all it’s a very cheap option. There’s nothing better than a picnic or bush walk – and our beautiful national parks are everywhere. All the benefits of exercise and family enjoyment couldn’t be easier.
Hit the city – There’s always something happening in the city, so it’s well worth taking a look at what’s on. Annual events seem to run endlessly and with only a few minutes spent online you are sure to find hundreds of activities from heritage tours, art galleries, museums and festivals.
5 repairs that will burn a hole in your pocket
- Wrecked wiring: Blackened areas on power points can be the first indication of bad wiring. Re-wiring will involve hiring a professional, which can be a huge project and expense.
- Fixing foundations: This is a major undertaking that involves replacing shoddy stumps which hold up the entire house and can take months to execute.
- Roof repairs: A roof with faults can present a safety risk for the entire home. Expect repairs to climb into the thousands – worse still is a replacement!
- Poor plumbing: Problems to your plumbing will not only cause damage to your property it can also attract termites. Repairing issues, such as leaking pipes, especially in older properties, can end up being a financial burden.
- Pest problems: Expect your bank balance to take a big hit if your property is infested with pests. Ensuring they are eradicated once and for all can be a huge endeavour.
Application assistance
Having your home loan approval delayed as a result of not having all your required documentation ready to go could end up costing a lot more than just time – it could mean losing your dream property.
Ahead of applying for your loan it is crucial that you get all your affairs in order so that your application will go through as seamlessly as possible when you find that perfect property.
An ID check will be one of the first things any lender will perform, so make sure you obtain a copy of your driver’s licence or birth certificate and also have at hand copies of your Medicare Card, utilities bills or tax assessment notices as proof of identity.
Proof of saving and income will also need to be provided so that the lender can assess whether you have the means to service your home loan debt.
In addition, your credit record will have a huge impact on getting your loan approved so pay off any arrears or outstanding bills that have crept in before you approach a lender.
Your lender will require you to provide information regarding any current liabilities so get a hold of any HECS statements, credit card statements or other loan documentation you still owe.
You will also have to detail what your monthly expenses are, so take the time to calculate your expenses including what your rent, council rates and weekly travel costs amount to.
We are well geared to help you with every step of the home buying process – from identifying the best loan products, through to making an application. If you have any questions on the information you’ll need to support your loan application please feel free to give us a call.
Loan application documentation
What you’ll need to supply with your loan application:
Ahead of applying for your loan it is crucial that you get all your affairs in order so that your application will go through as seamlessly as possible when you find that perfect property.
An ID check will be one of the first things any lender will perform, so make sure you obtain a copy of your driver’s licence or birth certificate and also have at hand copies of your Medicare Card, utilities bills or tax assessment notices as proof of identity.
Proof of saving and income will also need to be provided so that the lender can assess whether you have the means to service your home loan debt.
In addition, your credit record will have a huge impact on getting your loan approved so pay off any arrears or outstanding bills that have crept in before you approach a lender.
Your lender will require you to provide information regarding any current liabilities so get a hold of any HECS statements, credit card statements or other loan documentation you still owe.
You will also have to detail what your monthly expenses are, so take the time to calculate your expenses including what your rent, council rates and weekly travel costs amount to.
We are well geared to help you with every step of the home buying process – from identifying the best loan products, through to making an application. If you have any questions on the information you’ll need to support your loan application please feel free to give us a call.
Loan application documentation
What you’ll need to supply with your loan application:
- Identity – Includes drivers licence, birth certificate, passport, Medicare Card
- Income – Includes pay slips, group certificates, bank statements
- Liabilities – Includes HECS statements, lease agreements, existing loan statements, such as a car or personal loan
- Expenses – Includes rent payments, bills, general living costs, rates notices
- Savings – Includes bank statements, term deposit statements
Economic wrap - Autumn 2011
The waters may have subsided, but the economic impact of the recent flood disaster is likely to be felt for some time.
Economists predict the Queensland and northern New South Wales floods will knock around one per cent off the Australian economy in the December and March quarters. However rebuilding should see at least half of this recouped by year’s end.
Given the extent of the flooding, damage to public infrastructure such as roads, railways, bridges, electricity and water supply could easily top $10 billion.
Yet until the true cost of the damage is calculated, economists widely believe the Reserve Bank of Australia (RBA) will keep rates on hold, which is good news for borrowers.
AMP chief economist Shane Oliver says the RBA will be more concerned with the negative impact the floods may have on economic growth than in increasing rates.
As such, he expects the RBA Board to leave the cash rate at 4.75 per cent until Q3, when positive inflation – generated by the mining sector – starts to push upwards.
At present, the mining boom remains alive and well. And, if anything, the boom is strengthening with the terms of trade continuing to rise. The impact is feeding through the economy via higher wealth levels and dividend payments, higher employment, higher tax receipts and higher business investment.
Mining investment, which accounts for 4 per cent of Australian GDP, is set to add around 1.5 percentage points to Australian economic growth this financial year and 2.5 percentage points to growth for the 2011-12 financial year, according to ABS business investment intentions data.
Overall this suggests an environment of reasonable – albeit still somewhat disparate – economic growth, consistent with around 15 per cent profit growth.
So, while the floods may result in soft economic growth in the near term, from mid-year onwards there is a risk that the economy will start to overheat. This is a result of reconstruction following the floods and a boost in replacement spending by consumers combined with a surge in mining investment.
This will lead the RBA to resume tightening, which may result in the lifting of the cash rate.
With potential rate hikes towards the end of the year borrowers should now be thinking about how this will impact their capacity to meet mortgage repayments and what steps need to be undertaken to help relieve any stress.
Feel free to give us a call to discuss your situation – I’d be happy to run some scenarios and explore whether there may be a more appropriate home loan for your circumstances and financial goals.
Economists predict the Queensland and northern New South Wales floods will knock around one per cent off the Australian economy in the December and March quarters. However rebuilding should see at least half of this recouped by year’s end.
Given the extent of the flooding, damage to public infrastructure such as roads, railways, bridges, electricity and water supply could easily top $10 billion.
Yet until the true cost of the damage is calculated, economists widely believe the Reserve Bank of Australia (RBA) will keep rates on hold, which is good news for borrowers.
AMP chief economist Shane Oliver says the RBA will be more concerned with the negative impact the floods may have on economic growth than in increasing rates.
As such, he expects the RBA Board to leave the cash rate at 4.75 per cent until Q3, when positive inflation – generated by the mining sector – starts to push upwards.
At present, the mining boom remains alive and well. And, if anything, the boom is strengthening with the terms of trade continuing to rise. The impact is feeding through the economy via higher wealth levels and dividend payments, higher employment, higher tax receipts and higher business investment.
Mining investment, which accounts for 4 per cent of Australian GDP, is set to add around 1.5 percentage points to Australian economic growth this financial year and 2.5 percentage points to growth for the 2011-12 financial year, according to ABS business investment intentions data.
Overall this suggests an environment of reasonable – albeit still somewhat disparate – economic growth, consistent with around 15 per cent profit growth.
So, while the floods may result in soft economic growth in the near term, from mid-year onwards there is a risk that the economy will start to overheat. This is a result of reconstruction following the floods and a boost in replacement spending by consumers combined with a surge in mining investment.
This will lead the RBA to resume tightening, which may result in the lifting of the cash rate.
With potential rate hikes towards the end of the year borrowers should now be thinking about how this will impact their capacity to meet mortgage repayments and what steps need to be undertaken to help relieve any stress.
Feel free to give us a call to discuss your situation – I’d be happy to run some scenarios and explore whether there may be a more appropriate home loan for your circumstances and financial goals.
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