Last month, the Reserve Bank of Australia (RBA) appointed a new Governor, Dr Philip Lowe. After his very first meeting as the RBA Governor, Dr Lowe announced the RBA would be keeping the official cash rate on hold at 1.50 per cent during October. But everyone was well ahead of Dr Lowe’s announcement after he made comments to the press about the lack of effectiveness of further rate cuts in stimulating economic growth when he was first appointed in September.

The RBA last cut rates in August, bringing the official cash rate to all-time lows. However the cut did not have the desired effect of reducing the level of the Australian dollar against other currencies that the RBA intended. Analysts now appear to be undecided regarding the prospect of further rate cuts this year and the RBA is taking a wait and see attitude before indicating its next move.

Spring is traditionally the busiest time of the year in Australia’s property markets, however Grand Final Weekend slowed the market for the last week of September, particularly in Victoria where there were only 133 scheduled auctions for the week ending October 02. However these auctions did achieve a very high clearance rate of 92%. The NSW market was a bit more active with 628 auctions achieving a clearance rate of 80%.

Elsewhere around the country, the QLD market had a lot of activity with 253 auctions, but the clearance rate was very low at just 36%. SA scheduled 47 auctions with a clearance rate of 75%, ACT had 50 auctions with a clearance rate of 72%, WA had only 15 auctions with a clearance rate of 33%, NT held 14 auctions with a clearance rate of 23% and Tasmania had only 5 auctions with a clearance rate of 25%.

With increased activity in the Spring property market, home values are also on the rise in most markets. Sydney saw a rise in home values of 0.81% for the month of September, Melbourne saw a rise of 2.30%, Brisbane/Gold Coast rose 0.22%, Adelaide rose 2.11%, Canberra 2.38% and in Hobart home values also rose by 0.14%.

In the north and west of the country, home values have been trending downward during the first 10 months of 2016. Darwin’s home values fell by 2.21% and Perth’s by 2.37% during the month of September alone. It should also be noted that rental rates are also showing a downward trend in these markets.

Interest rates are currently at all-time lows and following the RBA rate cut in August, lenders are offering some great deals for all kinds of property buyers. If you’re considering purchasing a property or refinancing an existing home loan, it is a great time to see us to discuss your plans or get loan pre-approval. If also a good time to talk to us if you’ve been considering a switch to a fixed rate product to lock in a low rate for a fixed term. Whatever your financing needs we’d love to help, so please get in touch today.

With the official cash rate at an historical low and the possibility of more RBA rate cuts on the horizon, this is possibly the most frequently asked question of professional mortgage brokers today. Often the question is focused on the timing, with consumers asking if now is a good time to fix their interest rate, or if they should wait to see if interest rates fall even lower.

However, saving money on interest is not necessarily the most important thing to consider if you’re thinking about making the switch to a fixed rate loan. In this article, we talk about the pros and cons of fixed interest rate loans and the real reasons you should consider using one.

What is a fixed rate home loan?

A fixed rate home loan allows you to lock in an interest rate for a fixed term, which means your loan repayments stay the same during the fixed term even if variable interest rates should rise. It allows you to plan exactly how much your repayments will be for the life of the term, making budgeting easier and this is the major benefit of a fixed rate home loan.

Usually you can choose to fix the interest rate on your home loan for a term between 1 to 5 years. After the fixed period ends, the loan usually reverts automatically to the standard variable rate unless you refinance your loan to another product or negotiate another fixed term.

Is switching to a fixed rate product a good interest saving strategy?

For some people, the motivation for switching to a fixed interest rate product is primarily to save money in the event of an interest rate rise. These home owners are looking for ways to save money on interest any way they can over the life of their loan. Their strategy is to go with a variable rate product for now so they can pay the lowest interest possible in the short-term, then switch to a fixed interest rate product to keep their interest rate low when interest rates look as though they are going to rise.

Basically, they are interested in locking their interest at the lowest rate possible when it is most prudent to do so. That’s why we are always being asked if ‘now’ is a good time to fix.

The problem with this interest savings strategy is that no one can accurately predict interest rate movements. That makes it very difficult to know when it might be advantageous to switch, or even if switching will have the desired effect of saving on interest. How do we know when we will save more by using a variable rate product and when we will save more by switching to a fixed interest rate product?

There is really no way to tell. In order to save money on interest by switching to a fixed rate product, variable interest rates would need to rise well above the interest rate you are paying on your fixed rate loan (and fixed rate loans usually carry a higher interest rate than variable rate loans). You also need to consider that if interest rates should fall during the fixed interest term of your loan, you will be missing out on any interest savings you would have received if you had a variable rate loan.

Consider your financial circumstances before making the switch

The decision to switch to a fixed interest rate loan should be influenced by other factors besides the possibility of any substantial saving on interest. The point of a fixed interest rate loan is to help you budget your household expenses more effectively, particularly for the first few years you own a property when your finances may be tight and budgeting may be difficult. As an added bonus, you are temporarily protected from interest rate rises. If interest rates do increase during the fixed interest term of your loan, you will have until the end of the fixed interest term to plan how you will manage to cover the increased payments on your loan when the fixed term ends.

Switching to a fixed interest rate loan may not be a good idea if you need flexibility. If you are planning to sell your home in the near future, increase your loan or redraw from it, make extra repayments or refinance to access equity, staying with a variable rate home loan could actually save you money. Fixed rate home loans usually have sizeable penalties if you need to make changes or pay off the loan during the fixed term of the loan, which could cost you many thousands of dollars.

The split option is designed to help you hedge your bets

Many lenders offer a home loan product that gives you the capacity to split your loan between both the variable and fixed interest rate options. This could give you the advantage of partial protection in the event of interest rate rises, but could also offer you facilities like an offset account which could be very beneficial if you are a good saver, plus the ability to make extra repayments and redraw them if you need to.

It is important to remember that with a split loan, you are still locked into the product for the length of the fixed rate term. If you needed to sell your home or repay the fixed portion of the loan early for any reason, you would still be required to pay a stiff penalty.

To find out if switching to a fixed interest rate loan is the right move for you, it is a good idea to talk to a professional mortgage broker about your personal financial situation and goals. We’re here to help you understand which products are right for your needs and help you to choose an option that saves you the most amount of money possible. Call us today.

They’re designed to get you to make a purchase quickly and deny you the opportunity to evaluate the purchase properly and compare other options.

Hard sell sales tactics often include aggressive or forceful language and usually use strong psychological pressure to convince you to buy. Sometimes it is not immediately obvious that you are being given the hard sell – the salesman will pretend to be your friend and behave as if they are helping you out!

So how do you avoid being pushed into a purchase by a hard selling salesperson? Here are five tips to help you come out on top.

1. Learn to say no.

Saying no is surprisingly difficult for some people. We’re all brought up to be polite and delivering a flat no can seem rude. The hard sell practitioner is fully aware of this and uses your good manners to their advantage to create an opportunity to make their sales pitch. Always be polite, but be firm when saying no or they will continue to pester you until you buy something.

Learning to say no to such people is vitally important. Make the word ‘no’ your default response until you are sure you have all the facts and are in a position to make an informed and considered decision.

2. Beware of people bearing gifts.

Another common tactic, and one that is frequently used by property sellers and developers, is to reinforce your natural tendency to avoid saying no by giving you a ‘free’ gift. They know a gift will make you feel more obligated to say yes because we are all conditioned to reciprocate when given a gift.

For example, time share companies will often offer you a ‘free’ weekend away in return for attending their seminar, then try and pressure you into buying while you’re there. Or a property developer may offer you a ‘free’ furniture voucher to get you to attend an open house, then pressure you into signing a contract on the spot.

Always remember that when you accept a gift that is described as ‘free’, you are placed under absolutely no obligation to make a purchase or return the favour. Say no firmly and take your ‘free’ gift home without feeling guilty about it.

3. Keep your emotions in check.

High pressure sales tactics also take advantage of your negative emotions. They play on feelings such as fear, greed, vanity, guilt, ambition, frustration, anxiety and even loneliness. Gratification of any of these emotions is a strong motivator and makes us very susceptible to impulsive purchasing decisions that we may regret later.

When making any large purchase, it is important to be able to put your emotions aside and think logically and practically. Before you even consider looking at a home or car to purchase, protect the integrity of your decision making process by working out a budget and a buying strategy. Avoid impulse purchases by giving yourself a cooling off period when you can take the time to sit down and calmly consider the pros and cons.

4. See the bigger picture.

When emotions are running high and you’re under pressure to make a decision, it is a good idea to step back and take a wider view of the situation. Resist your impulse to purchase by taking a few deep breaths and asking yourself “What will happen if I don’t make the decision to purchase right now?”

After a few minutes have passed, more sensible considerations will come to the fore. Such as can you afford it? Does it meet your needs? Will it give you the return on your investment that the salesman has promised? Are you paying the right price? Could you get a better price by waiting and negotiating a bit more? These are the bigger picture questions that need to be answered before you make your decision to buy.

5. Do your own research.

Every property developer, real estate agent and car salesman will tell you their deal is fantastic, that buying their product is a ‘no-brainer’. They may even show you data or statistics to back up what they say. Never trust the word of a hard sell salesperson, always verify the facts for yourself. Remember, if it sounds too good to be true, it probably is.

When making any large purchase, particularly a property, the importance of conducting your own thorough research cannot be overstated. It may be time-consuming, but it is not difficult to go online and check you’re paying the right price, how likely it is that the investment will appreciate in value and what are the likely rental yields. If you are buying off the plan, or from a developer, always take the time to verify the value of the property on completion and hire an expert to help you if necessary. Do not take the developer’s word for it.

Remember, the objective of the hard sell salesperson is to make you buy now in order to take away your opportunity to consider things properly and perhaps decide not to make the purchase. The harder the sell, the more reason you have to go away and carefully research their offer.

Talk to a professional finance broker today.

One of the ways unscrupulous salespeople make their money is by selling you expensive finance. No matter how attractive the offer or how insistent the salesperson, you should never sign up for finance on the spot. It is very easy to be distracted by the price of that great car or perfect house and forget to be diligent about your financing deal – this is a major mistake that could end up costing you a lot more than you think.

Finance contracts can often have restrictive terms, unfavourable interest rates and hefty exit fees. Car dealership finance for example, is notorious for failing to take into consideration your complete financial circumstances, so you could end up with financial hardship or may actually find yourself unable to make your car repayments. This could be disastrous for your credit rating and leave you struggling to get any kind of finance in the future.

No matter the urgency, always take the time to talk with a mortgage or finance broker about your finance needs. We will help you to determine exactly how much you can afford to borrow and make sure you obtain the most favourable interest rate and finance product available for you and your needs, taking into consideration your personal financial circumstances and goals. Call us today.

The answer is equity. It’s a hidden source of wealth that grows inside your property purchases over time. Equity is one of the biggest financial benefits of home ownership, a benefit that could allow you to turn your first home into a money tree that helps you finance property investment activities and build wealth for your future.

What is equity exactly?
Your equity is the difference between what your home is worth and what you owe on it. For example, if your property is worth $500,000 and you owe $400,000 then your equity is $100,000.
In order to calculate your equity position properly, you will need to establish the current market value of your home. You can do an estimate yourself by comparing your home to the price of similar homes that have sold in the surrounding area recently. If you would like a more accurate assessment of your home equity, you will need to obtain the services of a professional valuation expert.

How do you access your equity?
Once the equity in your home has increased, it may be possible to access it. Accessing your equity requires making an arrangement with a lender. There are several different ways you can go about accessing your equity. The options that are available to you will depend on your personal financial circumstances and goals, so you should talk with a professional mortgage broker about which method is right for you.

The two most popular options to access equity are to refinance your existing mortgage to extract a lump sum, or to establish a line of credit against the equity in your home. However, it should be noted that a lender will seldom allow you to borrow against all of the equity in your home, particularly if you still have a mortgage. They usually prefer to keep back at least 20% of the equity in your first home as security.

How can you grow your equity faster?
A popular strategy to grow equity quickly is to add value to your property. This can be achieved by renovating or expanding your home. You can often create quite large equity gains with a relatively small capital outlay and the equity increase occurs as soon as you have completed the project. Improving your property also tends to help it to continue to go up in value more readily over time – out dated properties, particularly run down properties, tend to experience less value growth because prospective buyers view them as fix-me-uppers and only want to pay a bargain price.

If your property is on a large block of land, you may even like to consider subdivision as a means of accessing the equity in your home. The subdivided block will acquire a value of its own, which you can borrow against to build. Or you can simply sell the block and access the funds.

What is the equity investment strategy?
When investing in property, time is your friend. Over time, the equity grows in your first property, which you can then use as a deposit to purchase a second property. This will mean that you now have two properties growing in value over time, which has the effect of growing your total equity position twice as fast. After a little more time passes, you can access more equity from the first two properties to invest in a third property, and so on.

Whilst you continue paying the mortgage on your first property yourself, your tenants pay the mortgages on your second property and any further properties you may purchase after that. Both the tenant’s financial contributions and home value growth in the marketplace continue to increase your total equity position. The more properties you own, the more quickly your total equity grows.

Are there any risks?
There are always risks associated with any kind of investment strategy. The danger is that you will borrow too much money and when interest rates go up, your tenant’s rental contributions will not cover your mortgage repayments and you may not be able to cover the difference from your own pocket. If a decline in property prices was to occur at the same time as an interest rate rise, you may find yourself in the position of having to sell off your properties at a considerable loss.

The way to mitigate these risks is to invest conservatively and always get the advice of a professional mortgage broker to help you determine how much you should borrow. They will help you take into consideration what could happen in the worst case scenario and help to make sure you don’t get caught out.

For more information about using the equity in your home to invest, please call us today. We’ll be happy to help you formulate an appropriate strategy that’s right for your personal financial situation and goals and help you to get started by helping you access your equity and by getting you pre-approval on an investment loan.

It sounds simple, right? In fact, buying a property off the plan can be a lot more complicated than it may first appear. In this article we give you five tips on how to get it right.

What is buying off the plan?
Buying off the plan means signing a contract with a developer to purchase a property that has not yet been built. Instead of inspecting a completed home, you choose the property by inspecting the developer’s designs and plans, or by visiting a demonstration home or show room. Apartments are the most common type of off-the-plan property purchase, however you can often buy units, duplexes and townhouses that are a part of a larger development.

Tip #1. Do your research.
Putting down your deposit on a property that proves to be worth less than the original agreed purchase price could be a disaster, as you may not be able to get the finance you need to complete the sale. That’s why it is vitally important to do your research very carefully to ensure you’re buying a property that will have the value you expect when the purchase is completed.

To be sure you get it right, you should research the suburb’s capital growth rates and rental yields. You should also find out how many other, similar developments are planned to find out how this will affect sale prices, clearance rates and vacancy rates in the area.

Tip #2. Reference check the developer.
Choosing the right developer is just as important as choosing the right property. Everyone has heard stories about dodgy property developers and the way to avoid being caught out is to reference check them carefully.

Do a background check on the developer for bankruptcy, criminal record, complaints with your local building authority and ask to speak with previous clients. Ask the developer how long they have been in the industry, how many projects they have completed and visit their previous work to inspect the quality. Find out what professional industry associations they have.

Most importantly, ask the developer to provide proof of their financial status. You don’t want to run the risk of the developer going into liquidation before the property is finished.

Tip #3. Be sure of what you’re buying.
When buying off the plan, it pays to be very thorough and detail minded. You need to determine exactly what you are going to be getting for your money, so ask a lot of questions about what is covered by the purchase price and what isn’t. You should be careful to ensure that everything your developer agrees to provide is written down in the contract. Be as detailed as you possibly can in every respect.

Tip #4. Get a solicitor to check the contract.
Because they are so very detailed and comprehensive, contracts for off the plan purchases can be complex and lengthy. To make sure everything is correct, take the contract to a solicitor you can trust to check it carefully. Read it yourself and ask your solicitor to explain anything you don’t understand before you sign on the dotted line.

Tip #5. Pre-inspect prior to settlement.
Another thing that you must remember to include in your contract is a pre-settlement inspection. This will give you the opportunity to go in and check that everything the developer has agreed to deliver is there in the property. You can also take along a building inspector to help you check for defects or finishes that are not up to standard. If everything is not in order, you can delay settlement until the developer rectifies the problem. Including a pre-settlement inspection in your contract is essential to protecting yourself from having to take possession of an uncompleted property. You don’t want to hand over your money until you are completely satisfied you’re getting everything you’re paying for.

If you’re considering buying off the plan, it’s also a good idea to get pre-approval on a loan before you sign the contract. You can then keep this up to date whilst the property is being constructed to be sure you can get finance when needed. We’re here to help you crunch the numbers and make sure it’s the right purchase for you, so please call us today.