Are you a spender or a saver?

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Are you paid weekly, fortnightly or monthly? New research indicates that how often you’re paid has a pretty big bearing on whether you’re a saver or a spender.

The research, conducted by small business platform Xero, shows that Aussies who receive their salaries weekly are more likely to splash their hard-earned cash than those who are paid monthly due to a term they’ve dubbed ‘payphoria’.

This, in turn, can play a big part when it comes to your ability to save for a home loan deposit.

What the research found

The research analysed the payday habits of 1,000 Australians and found that a whopping 63% of workers claim to have financial difficulties before payday and rely on short-term fixes for support.

In fact, one in three workers have less than $100 in the lead up to payday, resulting in them foregoing luxuries such as coffee and eating out, or even delaying household bills.

“It’s not surprising that when payday does come around, Aussies are experiencing rushes of ‘payphoria’ and are wanting to reward their hard work by spending up,” explains Xero small business advocate Angus Capel.

Hence, the research suggests that the more paydays we experience, the more of these ‘payphoria’ spending sprees we reward ourselves with.

Below is Xero’s breakdown of Aussie savers versus spenders.

Characteristics of savers:

– 70% of Australians identified as savers (despite much of the research suggesting otherwise!)

– they’re more likely to be paid monthly

– they’re more likely to budget and keep track of expenses and spending habits (87%)

– they feel worried if they don’t have enough savings (95%)

– they’re more likely to be married with no children and live in metro areas

– their key financial goals are on financial management such as retirement, having an emergency fund and paying off mortgages.

Characteristics of spenders:

– 30% of Australians identified as spenders

– they’re more likely to be paid weekly

– they don’t want to give up luxuries that come with saving (77%)

– they believe lifestyle is more important than saving for the future (56%)

– they’re more likely to use their income to pay off debts like credit card bills

– they’re more likely to have children under the age of 18 and live in regional areas.

Get in touch

If you think you’re leaning more towards spender than you are saver, then get in touch.

We can provide you with some effective saving techniques that can help put you on the right path to saving for a home loan deposit.

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.

Four ways to dive into the property market with a smaller deposit

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Three-in-five prospective first home buyers intend to buy soon with a smaller deposit, rather than wait until they have saved a 20% deposit. So how do they plan on doing so?

It usually takes between seven to 14 years for first home buyers to save a 20% first home deposit, according to a new report by Genworth on recent and prospective first home buyers (FHBs).

With that in mind, it’s no wonder that 59% of prospective FHBs are eagerly exploring their options to buy now in the current market, rather than risk waiting until house prices rise.

Indeed, about two-thirds of recent and prospective FHBs are of the opinion that property prices will stabilise or increase over the next 12 months.

So what options are available for prospective FHBs with a deposit of less than 20%?

Option 1: First Home Loan Deposit Scheme

The first option, which doesn’t come into play until 1 January 2020, is the Federal Government’s ‘First Home Loan Deposit Scheme’, which three in four prospective FHBs intend to apply for.

Under the scheme, some FHBs will be able to borrow up to 95% of the value of their property without forking out for Lenders Mortgage Insurance (LMI).

But with the scheme limited to just 10,000 FHB loans each year, and the number of Australians who bought their first home in 2018 totalling 110,000, it’s important to have a Plan B up your sleeve.

Option 2: Paying Lenders Mortgage Insurance

In recent times, one-in-three FHBs have opted to bite the bullet and fork out for LMI in order to secure a home loan with less than a 20% deposit.

LMI usually costs between $3,000 and $13,000, depending on the size of the home loan and how much of your deposit you’ve saved.

It’s an insurance policy you’re generally required to take out if you have a deposit of less than 20% (it reimburses a lender if you fail to make repayments and your home is repossessed and sold for less than its outstanding mortgage debt).

Option 3: Bank of Mum and Dad

The third option, which is being considered by one-in-four prospective FHBs, is to ask the ‘Bank of Mum and Dad’ for assistance.

Of recent FHBs that pursued this strategy, 28% had their family gift them some money, 21% had their family lend them some money, and 16% had their family act as guarantor.

Option 4: Off-the-plan

The fourth option, which is not covered in the Genworth report, is to buy off-the-plan, which often requires a deposit of 10% to be paid to the developer to secure the property.

This means you’ll have more time to save for the remaining 10% before settlement while the property is being built.

That said, buying off the plan isn’t without its risks, so be sure to do your research on every facet of the development that happens to catch your eye (the internet is littered with stories of off-the-plan purchases that have gone awry).

Get in touch

If you’re a prospective FHB and you want to find out more about entering the property market sooner rather than later, please get in touch.

We’d be more than happy to run you through your options if you’re looking to buy a home with a deposit less than 20%.

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.

Home-ownership within reach: will you qualify for new buyer scheme?

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Imagine buying your first home with only a 5% deposit and not having to pay lenders mortgage insurance (LMI). Well, that dream is one step closer to reality after the government introduced legislation to implement the First Home Loan Deposit Scheme.

Currently, people with a deposit of less than 20% usually have to pay LMI.

But under the scheme, some first home buyers will be able to borrow up to 95% of the value of their property without forking out for LMI.

The result: first home buyers stand to save up to $10,000 in LMI, allowing them to enter the property market earlier than they would have otherwise.

Now, the scheme is due to commence on 1 January 2020.

But here’s the catch: it’s limited to just 10,000 first home buyer loans each year.

That number is less than 10% of the 110,000 Australians who bought their first home in 2018.

So who gets dibs?

When the Coalition announced the scheme prior to the last election it warned that in order to be eligible first home buyers could not have earned more than $125,000 in the previous financial year, or $200,000 for couples (and both need to be first home buyers).

The recently introduced legislation further stipulates that there will be dwelling price caps which will differ from state to state, as well as between city and regional areas.

These caps haven’t been quantified just yet. But the keyword is that the scheme will be limited to ‘modest’ dwellings.

“Setting caps on the value of properties that can be purchased under the scheme will be a key lever used to constrain potential demand. It will be necessary to set these caps so that only modest properties in regional towns and capital cities can be purchased,” the legislation reads.

“This will also help to target access to the scheme to those first home buyers in more genuine need of assistance.”

So, while we don’t know what these caps are, it’s fair to say that you’re not going to be able to use the scheme to turn a 20% deposit on a $300,000 unit into a 5% deposit on a $1.2 million house.

Who will do the assessing?

To implement the scheme, the National Housing Finance and Investment Corporation (NHFIC) will contract with a panel of lenders, and smaller banks and non-bank lenders will be prioritised to encourage competition.

Participating lenders or mortgage brokers will then assess scheme eligibility alongside normal considerations such as loan serviceability tests.

An alternative model being considered is to have borrowers apply to the NHFIC directly to confirm eligibility. Approved borrowers would then approach a participating lender (directly or via a mortgage broker) to obtain the loan.

What next?

Well, preliminary consultations were initiated in late-May and involved a large number of meetings with a broad range of stakeholders, including lenders (large and small), LMI providers, industry associations, mortgage brokers, and consumer advocates.

Further consultation will continue on the legislative framework before the scheme’s eligibility and operations are fully revealed.

Want to know more?

If you’re a first home buyer looking at cracking into the property market in 2020 – or know someone who is – then get in touch.

Rest assured that we’ll be closely watching how the First Home Loan Deposit Scheme develops and will be able to help you get your application in pronto.

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.

Has the tide turned? Household lending surges

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Lending to Aussie households spiked 3.9% in July, the strongest growth seen since October 2014, according to the Australian Bureau of Statistics (ABS).

The bumper month follows a 1.9% rise in June 2019, suggesting the tide has finally started to turn in the lending market.

“Whoa. Quite the surge in housing credit in July,” remarked CoreLogic’s head of research Tim Lawless, “haven’t seen numbers like this since 2015/16”.

Lending for investors rose 4.7% in July with rises across all states and territories, while lending to owner-occupiers also recorded substantial gains at 5.3%.

Meanwhile, home loans to first home buyers rose 1.3% in July. This is the fourth consecutive month of growth for this segment.

Why the surge?

The rise came the same month that the prudential regulator, APRA, eased loan serviceability standards.

Essentially, APRA stopped telling lenders to assess whether borrowers could afford their repayment obligations based on a minimum interest rate of 7%.

BIS Oxford Economics’ Maree Kilroy adds that investor sentiment also received a boost following the Coalition government’s federal election victory, and pointed to back-to-back rate cuts in June and July.

“After withdrawing from the market for several years, investors have reacted positively,” Kilroy says.

Lawless agrees that the surge is due to “two rate cuts, easier credit, sentiment boost post-election and removal of macro-prudential”.

And his colleague, Cameron Kusher, suggests this might only be the beginning.

“Importantly this is only to July. We could see these figures go much higher by the time we are right in the middle of spring,” Kusher says.

Get in touch

As Kusher suggests, this might just be the beginning of a lending surge.

Spring usually brings plenty of new properties onto the market – everything looks nicer in spring!

So if one of them happens to catch your eye, get in touch and we’ll be happy to guide you through the process of obtaining finance.

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.

Buy now, pay now: the importance of budgeting for gifts

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How much do you think the average Aussie spends on gifts each month? $20, $50 or 100? (hint: we’re a generous bunch). Today we’ll look at why it’s important to budget for these expenses correctly, rather than succumbing to ‘buy now, pay later’ services.

Did you know Australians spend nearly $20 billion a year on gifts?

That’s about $1,200 each per year, or $100 a month, according to a new research report by the Financial Planning Association of Australia (FPA).

It turns out that Gen Y is by far the most generous age bracket (25-39), spending $130 on gifts each month, well ahead of Gen Z ($91), Boomers ($89) and Gen X ($87).

The importance of budgeting for gifts

Ok, so here’s where this feel-good story starts to get a tad concerning: three in four Australians (73%) do not budget for gifts at all.

Now, with the average gift costing between $66 and $137 (depending on the occasion), that’s enough for some households to turn to ‘buy now, pay later’ services.

And make no mistake: these ‘buy now, pay later’ services are booming.

Market leader Afterpay saw its shares rise by 8% this week alone, with the company now valued at more than $7 billion.

In fact, in the 12 months to January 2019, 1.59 million Australians used one of the latest ‘buy-now-pay-later’ digital payment methods, with a whopping 40.6% of its customers being Millennials.

That’s right – Millennials, who are not only by far the most generous gift-givers, but are also seeking to enter the mortgage market for the first time.

So what’s the big deal?

According to recent media reports, lenders are increasingly trawling through bank statements for evidence of outstanding ‘buy now, pay later’ accounts when prospective borrowers apply for a loan.

In one incident, a 21-year-old NSW woman said a couple of hundred dollars worth of Zip Pay purchases, all of which had been paid off, almost prevented her from getting a bank loan to buy her first car.

“I honestly never thought it would impact me being able to get a loan. I am now petrified of using it at all, as I really want a house,” she said.

In another incident, a big 4 bank knocked back a 26-year-old Perth woman’s mortgage application after discovering she had an outstanding Afterpay balance.

These are just two examples of the importance of making sure you factor gifts into your monthly budget to ensure you aren’t setting off a lender’s warning bell by using ‘buy now, pay later’ services.

Need help getting your accounts in order?

If you’ve used a ‘buy now, pay later’ service to buy a gift for a friend, family member or even yourself, there are steps you can take to help minimise the impact it might have on your next loan application.

Your most obvious course of action is to pay it off as soon as you can, and then avoid using the service again in the future.

And look, let’s be honest, no one likes a Scrooge, so your next step would be to ensure you’re including an allocated (and realistic) amount for gifts in your monthly household budget moving forward.

If you’d like to know more, or want a hand getting your monthly budget in order before applying for finance, then get in touch – we’d love to help out.

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.