Author: Shehan Wijayasinghe

You go to the gym six or seven times a week or not at all. You’re eating kale and drinking turmeric lattes or smashing a KFC zinger box for the third time that week. It’s black and white, good and bad. You’re a passenger on the all or nothing train. As humans, we simplify for efficiency or to reduce that decision fatigue we face more and more every day. 

As a finance broker, I love being able to work with a vast array of clients, be it the fast food fanatics, the half marathon runners or both at once. My clients could be starting out their property journey, growing their property portfolio, amazing developers accelerating themselves by manufacturing creative value or clients decelerating towards retirement.

Whilst these clients differ in a lot of ways, broadly speaking the successful ones tend to share a common approach to tackling their goals.Their defining qualities aren’t necessarily generational (apart from millennials and their passion for avo on toast) and when I take a step back and look at them as a collective they all share a non-binary mindset. Human beings are complex and they’re flexible in the way they think, in order to get to their goal. In fact, all the greatest value creators I’ve met understand the largest tasks in life are built on consistency. Hand in hand with that comes some of my clients least favourite word: patience.

Maintaining consistency and having patience are really the solution to this binary lifestyle. Your diet isn’t healthy or not healthy, you simply maintain a healthy lifestyle. You manage your wealth, not focus on whether you have a house or not. You plan your finance and monitor its ebbs and flows rather than thinking ‘I have savings’ or not.

There are two types of people in the world, those who always think like this and those who DON’T! Just kidding. Remember that life isn’t about a concrete end result, it’s a black, white and shades of elephant grey journey. It’s non-binary.

Downsizers are tipped to take advantage of ‘the perfect storm’ and get the most out of the property market this year, predicts the national body representing professional buyers’ agents.

With softer lending conditions and strong property prices tipped for 2020, cashed-up downsizers looking to sell the family home and move into apartments or regional areas are in the box seat, says Real Estate Buyers Agents Association (REBAA) president Cate Bakos.

“With the potential for further low interests, softer lending conditions and low stock levels, it could be ‘the perfect storm’ for downsizers this year,” says Ms Bakos.

“The sorts of challenges that most buyers face – including valuations and gaining finance approval – is obviously not a concern for a buyer who is not impacted by a shortfall.”

A ‘formidable force’

Ms Bakos adds that low loan-to-value ratios, or even cash purchases, will eradicate any concerns about valuation dilemmas and make downsizers a formidable opposition at any auction.

“There is no doubt that wealthy older buyers – downsizers, baby boomers, empty nesters, retirees – will be a powerful force in the property market in 2020 and one that won’t be going away soon,” she says.

Downsizing doesn’t necessarily mean smaller

Interested in the idea of downsizing? You’re not alone.

In fact, more than half of Australians over the age of 55 are open to downsizing, according to another recent report by the Australian Housing and Urban Research Institute (AHURI).

According to the report downsizers are mobile, with nearly half moving to new neighbourhoods; the main reasons for downsizing were lifestyle, financial considerations and reduced maintenance.

“While downsizing may include a reduction in dwelling size, to older Australians it points to a housing aspiration where the internal and outdoor spaces are manageable, and represents a financial benefit,” explains lead report author Dr Amity James.

In fact, most downsizers move into a dwelling with three or more bedrooms, the report shows.

“Most downsizers still want space and regard spare bedrooms as necessary in a dwelling,” Dr James adds.

Get in touch

If you’re interested in downsizing to improve your lifestyle and reduce home maintenance then feel free to get in touch.

We’d be more than happy to chat with you about all things finance for that new home you’ve got your eye on.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Once upon a time you were rewarded for loyalty. But borrowers with older mortgages are typically paying a higher interest rate than customers on new loans, confirms the Reserve Bank of Australia (RBA).

The RBA’s study finds that the difference in interest rates between new and outstanding variable-rate home loans increases with the age of the loan.

For example, for loans written four years ago, borrowers are charged an average of 40 basis points higher interest than new loans.

“For a loan balance of $250,000, this difference implies an extra $1,000 of interest payments per year,” explains the RBA.

And for loans more than eight-years-old, on average, you pay about 60 basis points more than a new customer.

What’s driving the difference?

The RBA says the difference in rates between older and newer mortgages can be partially explained by a shift in the mix of different types of variable-rate mortgages over time.

“In particular, the share of interest-only and investor loans in new lending has declined noticeably in recent years and these tend to have higher interest rates than other loans,” the RBA says.

“Nevertheless, even within given types of mortgages, older mortgages still tend to have higher interest rates than new mortgages.”

Strong competition for new borrowers

Here’s the real kicker, though. With competition for borrowers intensifying over recent years, banks are offering large discounts on their standard variable rates (SVRs).

What’s an SVR? It’s the reference rate that a bank prices its variable-rate loans against.

Basically, it’s the interest rate that banks and media quote when they report whether or not a rate cut is being passed through to customers.

But, as the RBA points out, very few borrowers actually pay interest rates as high as the SVR.

Instead, most borrowers are on advertised rates that are “materially lower” than a lender’s SVR, or have negotiated a further discount – and those discounts are getting bigger and bigger each year.

“In recent years, the average discounts relative to SVRs offered by major banks on new variable-rate mortgages have grown, widening from around 100 basis points in 2015 to more than 150 basis points in 2019,” the RBA says.

“By increasing the discounts on rates for new or refinancing borrowers over time, rather than lowering SVRs, banks are able to compete for new borrowers without lowering the interest rates charged to existing borrowers.”

Time to renegotiate?

The discounts borrowers receive on loans are usually fixed over the life of the loan. However, the good news is that they can be renegotiated.

“Well-informed borrowers have been able to negotiate a larger discount with their existing lender, without the need to refinance their loan,” explains the RBA.

So, if you’d like to put yourself into the RBA’s “well-informed borrower” category, then get in touch with us today.

We’d be more than happy to help you refinance your home loan, whether that be renegotiating with your current lender or looking around elsewhere.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Tens of thousands of Aussies have an extra reason to love Valentine’s Day this year, with their credit scores set to jump after civil court filings disappear from their credit file.

According to consumer and financial law firm MyCRA Lawyers, the change will allow some people to get credit where previously they were rejected, or simply negotiate lower interest rates.

MyCRA Lawyers CEO Graham Doessel says for years borrowers have had their bank funding cut off or rejected because of trivial and vexatious civil court actions that judged them guilty until proven innocent.

“Now only judgments can be recorded on someone’s credit file and those judgments must relate to ‘credit’ to impact someone’s credit rating,” Mr Doessel says.

The end of weaponised civil court actions

Mr Doessel says the change will hopefully end civil court actions by ex-business partners, disgruntled employees and jilted lovers, who use civil courts as a weapon to cripple someone’s credit.

“We’ve had a client with a business employing 120 staff almost sent to the wall because of a trivial dispute with their pool repairman over $3000 that never even went to court,” explains Mr Doessel.

“Other common weaponised civil disputes are ex-business partners suing simply to dry up funding, or even spurned partners who are out to get their ex-lover’s business.

“It’s a victory for common sense.”

Credit reporters to look for loopholes

There’s just one catch, says Mr Doessel. Credit reporting bodies have traditionally reported this information and will still want to where they can, he adds.

“Credit reporting bodies will be reading this legislation as narrowly as possible. In our discussions with one body they are already interpreting the changes differently to us and believe this change only applies to consumer files, not commercial files,” explains Mr Doessel.

This means those with the most to lose, namely small business proprietors, potentially remain in the same predicament, says Mr Doessel.

“If this is the case – and we won’t know until after February 14 when the changes come into effect – then it renders the new laws almost useless because those most affected are small business people,” Mr Doessel said.

Final word

The new requirements come into effect on Valentine’s Day and will be retrospective, so people with a civil court default on their file that isn’t the result of a judgment and isn’t credit-related will have them removed.

If you believe these changes might impact you, then get in touch. We’d love to talk to about your options moving forward.

Properties with high energy-efficiency ratings typically sell for up to 10% more, a review of international research shows.

The review, which was conducted by the University of Wollongong, compiled research undertaken in 14 countries and included data from the Australian Capital Territory (ACT), which is the only Australian jurisdiction to require that sellers disclose the energy-efficiency rating of their home.

What were the review findings?

In the ACT, the review found there was a 9.4% price premium for a house with a 7-star NatHERS rating (see below) compared to a house with 3-star NatHERS rating, and a 2.4% premium for a 6-star house.

If you consider that the ACT has a median house price of $773,635, that equates to potential price premiums of $72,721 (7-star) and $18,500 (6-star).

This latest review backs up similar research findings conducted by the University of Western Sydney in the commercial building sector, in which disclosing energy ratings is standard practice across Australia.

“Everybody wants an energy-efficient home. After all, an energy-efficient home is comfortable to live in, without large energy bills,” says Dr Daniel Daly, a research fellow at the Sustainable Buildings Research Centre, University of Wollongong.

“These can be important factors for prospective home-owners or renters.”

How can I improve my property’s NatHERS rating?

The Nationwide House Energy Rating Scheme (NatHERS) is a star rating system out of ten that rates the energy efficiency of a home, based on its design.

The government’s Your Home website is a great starting point when it comes to making your property more environmentally sustainable.

It includes information and tips on how to include more energy-saving features in your home, which may include solar panels, insulation, double-glazed windows, draught sealing, batteries, and rainwater tanks.

Need finance for your energy-efficient property project?

There are many advantages to owning a property with a high NatHERS rating.

So if you’re looking to build, renovate or simply upgrade your property, then get in touch. We’d love to talk to you about your financing options.

A question that’s been popping up a bit lately has been ‘why didn’t my lender reduce my repayments when the interest rate fell last year?’

It’s a good and timely question considering the big four bank economists all expect the RBA to cut the cash rate by 25 basis points to a new record low of 0.5% on February 4.

So why don’t lenders drop your repayments when the interest rate falls?

This question was debated in November by the House of Representatives’ standing committee on economics during its review of Australia’s four major banks and other financial institutions.

In the red corner you have Dr Andrew Leigh MP, the committee’s deputy chair. In the blue corner you have ANZ CEO Shayne Elliott.

Dr Leigh suggested the bank’s default position – to keep repayments at the same level until the customer requested that they be reduced – was not in society’s best interest.

Essentially, Dr Leigh’s argument was that if banks automatically reduced the repayments then customers would have more money in their back pocket to spend each month. As such, the flow-on effect would have a more positive impact on the nation’s economy.

However, Mr Elliott strongly disagreed.

Mr Elliot said the bank’s default position – to keep repayments at the same level, regardless of the interest rate cuts – was in the customer’s best interest because it helped them repay their loan quicker.

“I find it hard to imagine that I could ever push an argument that it is in my customer’s interest to have [a loan] for longer,” said Mr Elliot.

“Maybe we can be better at communicating. But we contact every single customer every single time there is a rate cut and offer them a chance to review their interest rate and lower their payments.”

According to Mr Elliot, just 7% of home loan holders opted to reduce their repayments off the back of the interest rate cuts last year.

Want to reduce your repayments?

Now, we don’t advocate any particular side of the argument. Basically it will boil down to your individual situation and what you believe is in your best interests financially.

But if you do decide that you’d like to reduce your repayments then get in touch and we can help you make the request with your lender.