Responsible lending laws to be axed: what that means for you

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You might have recently heard that ‘responsible lending laws’ are set to be scrapped early next year. Rest assured though that you’ll still be able to borrow responsibly. Let us explain how.

The planned scrapping of the responsible lending laws is the federal government’s latest key initiative to boost economic recovery from the COVID-19 recession.

Now, the federal government (and the banks) say it will simplify the regulatory landscape and free up access to credit for home buyers and small businesses.

Consumer rights advocates, on the other hand, argue it’s all about “giving a free-kick to the banks” and will put borrowers at risk.

But, here’s the good news.

Not only can we assist you in making the most of the upcoming changes, but we can help you determine your borrowing power so that you’re confident to repay any loan you take out.

Sounds like a win-win, right?

Let’s break it all down in a little more detail, and how it might affect you come 1 March 2021.

What are responsible lending laws?

Basically, they put the onus on the lender to determine whether or not a loan is suitable for the applicant, and that the borrower can repay the loan without going into substantial financial hardship.

They were introduced in the wake of the Global Financial Crisis as part of the National Consumer Credit Protection Act 2009.

If you’ve applied for a loan recently, you’ll know firsthand that the bank scrutinises your ability to repay the loan very, very closely.

Ordered take-away a little too much? Had a punt on the latest sports match? Too many streaming subscriptions like Netflix? Chances are these non-essential expenses would draw some very close scrutiny from the lender.

Once the laws are scrapped, however, lenders will be able to rely on the information provided by borrowers.

That means if a would-be borrower overlooks expenses or provides misleading information in their loan application, the lender won’t be the one facing the heat.

Instead, the responsibility is flipped back onto the borrower.

That said, lenders will still be required to comply with APRA’s lending standards, which require sound credit assessment and approval criteria. So it’s not open-slather for banks.

Why it’s changing

Put simply: the federal government is pulling out all stops to kickstart the national economy in 2021.

“What started a decade ago as a principles-based framework to regulate the provision of consumer credit has now evolved into a regime that is overly prescriptive, complex and unnecessarily onerous on consumers,” says Treasurer Josh Frydenberg.

By scrapping the laws, the federal government hopes to reduce the cost and time it will take you to access credit.

“Now more than ever, it is critical that unnecessary barriers to accessing credit are removed so that consumers can continue to spend and businesses can invest and create jobs,” adds Mr Frydenberg.

What it means for you going forward

As mentioned above, the proposed changes will reduce red tape and make it easier for the majority of Australians and small businesses to access credit.

But you’ll still want to make sure you’re not taking on debt that you can’t afford to pay back.

And that’s where we can make ourselves especially useful.

Not only will we be able to guide you through the updated process, but we’ll be able to help you work out your earnings and expenses so that you take on a loan that you’ll be able to confidently repay.

That way you’ll get the best of both worlds: responsible borrowing and easier access to credit.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or 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.

JobKeeper 2.0 is about to begin: here’s what you need to know

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Like most sequels, JobKeeper 2.0 won’t be as big a blockbuster as the original. But that’s not to say it won’t help many SMEs navigate the difficult times ahead. Today we’ll cover what you need to know about making the transition for your business. 

It’s hard to believe that JobKeeper 2.0 is due to begin next week.

But it’s actually been half a year (or 13 fortnightly payments) since the scheme was first launched, over which time around 42% of small businesses have accessed it, according to a MYOB survey.

Today we’ll look at whether your business might be eligible for JobKeeper 2.0, and if not, some other potential options that might be worth considering instead.

28 September 2020, JobKeeper extension 1 starts

The first extension will cover seven JobKeeper fortnights between 28 September 2020 and 3 January 2021.

The rates of the JobKeeper payment in this extension period are:

Tier 1: $1,200 per fortnight (for eligible employees or business partners who worked 80+ hours within a four week designated period)

Tier 2: $750 per fortnight (all other eligible employees and eligible business participants).

To claim JobKeeper payments for this period, you will need to show that your GST turnover has declined in the September 2020 quarter relative to a comparable period (generally the corresponding quarter in 2019).

But here’s the good news just in: if the quarter ending 30 September 2019 is not an appropriate comparison period, you may be able to use the alternative tests, the ATO has just confirmed.

These alternative tests are broadly in line with the original seven alternative test circumstances, and cover businesses that started after the comparison period, had a substantial increase in turnover, had an irregular turnover, or were affected by drought or a natural disaster.

The key difference this time around, however, is that the tests must be applied on the basis that the turnover test period is a quarter (rather than the choice between a month or quarter, which you had for the first version of JobKeeper).

What if my business is no longer eligible for JobKeeper?

If your business is no longer eligible for JobKeeper, please know there may be other financing options available to assist you through the coming period.

One option to explore is the federal government’s Coronavirus SME Guarantee Scheme, which allows lenders to provide eligible SMEs unsecured loans more cheaply and more freely than regular business loans.

Another potential option is something like invoice financing, which brings forward payment of your invoices so you have cash in hand sooner, rather than having to wait for your client/s to cough up the cash.

But to be honest, there’s a whole range of possible routes available, some of which might suit your business, others that won’t.

To discuss your options, your best bet is to get in touch with us today so we can sit down with you and see if we can help you work out a path moving forward.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or 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.

Lenders begin contacting borrowers who have deferred loans

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If you’ve deferred your home or business loan then it’s likely your bank will reach out to you in the coming weeks. Here’s what to expect and what options are available to you.

As the initial wave of six-month loan payment deferrals comes to an end, banks have started contacting customers to discuss the next step, which could include further support, assistance or deferral.

Of the more than 900,000 loans which have been deferred during the pandemic, at least 450,000 borrowers will be contacted as they approach the end of their loan deferral in September and October.

That includes 260,000 mortgages and more than 105,000 business loan deferrals to small and medium businesses that will be assessed.

The important thing to know is this: you have options

No one likes to be caught flat-footed. And if you’ve deferred your loan, the last six months have understandably been quite a stressful period.

Rest assured, however, that there are a range of options we can help you consider before the bank phones to see if you can resume your pre-covid loan repayments.

Those options include:

– switching to interest-only repayments for a period of time
– renegotiating your rate with your current lender
– refinancing to another lender
– debt consolidation, or
– a combination of these and other measures.

And if none of the above options are feasible right now you can seek a further four-month deferral with your lender – but at least you’ll know that you’ve fully explored the other potential avenues first.

We’re here for you

If you’d like to explore some of the above options before your lender contacts you then please feel free to get in touch today.

We’re here to help you with your loan any way we can – whether that be deferring, refinancing, or renegotiating.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or 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.

There’s a good chance you have a lazy $6k lying around your home

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Whether you’re looking for extra cash to purchase a property, or could do with a few thousand dollars to pay off your existing mortgage, the average Aussie household could make nearly $6,000 from selling their pre-loved items.

Turns out we’re a bunch of hoarders that’d make the Kerrigans blush, according to the 2020 Gumtree Second Hand Economy Report.

Indeed, more than 85% of us have unwanted items collecting dust around our homes that we could sell on second-hand trading platforms.

Just how much you ask? Well, the average Aussie household has 19 items, worth $5,800, scattered around their home that they should probably sell.

That’s a $500 increase per household from this time last year.

Tell him he’s dreamin!

It kind of makes sense when you think about it.

When was the last time you jammed on your guitar or keyboard? Or cooked in nan’s cast iron pot? Maybe it’s been a while since you shifted the gears on the exercise bike, bench-pressed those weights, or popped up on the surfboard.

Need some more inspiration for your big spring clean? Here are the most common pre-loved items households could sell:

Clothing, shoes and accessories: 53% (of households)
Books: 45%
Music, DVDs or CDs: 44%
Electronic goods (including phones, PC’s): 41%
Games and toys: 35%
Home decor/furniture: 28%
Tools/gardening/DIY items: 21%
Appliances: 20%
Kitchen/dining items: 17%
Chairs: 17%
Lamps: 15%

Covid-19 isn’t deterring buyers or sellers

Quite the opposite.

In fact, 42% of Australians surveyed in the report say they’re more likely to sell items through the second-hand economy now than before the pandemic.

That’s probably because 63% say they’re concerned about their ability to pay household expenses such as their mortgage, bills and food.

Just be sure to practice COVID-19 safe trading if your buying or selling, by:

– scheduling a video inspection of an item where possible
– washing your hands before and after meeting in person
– cleaning items before using (and asking the seller to do the same before purchase)
– considering contactless delivery via a courier service.

Final word

As mentioned above, if you’re looking for extra cash to purchase a property, well, you know where to find us when it comes to getting finance for it.

If, on the other hand, you’re simply wanting to pay off your existing mortgage faster, then be sure to get in touch with us – we have plenty of other tips and ideas we’d love to share with you.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or 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.

Where you’re most likely to score a $50,000 discount on property right now

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Home sellers across the country are lowering their price expectations in droves, new data reveals. But which two capital cities have seen the highest percentage of sellers discount their asking price?

Here’s an exciting stat for all you property bargain hunters out there: the percentage of sellers dropping their asking price during COVID-19 has more than doubled in our capital cities across the country, new Domain data shows.

So which two cities have seen the biggest increase in sellers offering discounts?

Well, the head-and-shoulders leader is Sydney, followed by Melbourne, with Adelaide only just nudging out Brisbane and Perth in a photo finish for third.

But all cities are offering median discounts between $22,000 and $50,000, which we’ll look at below.

A closer look at the stats

Prices dropped on one-in-seven (14.7%) Sydney properties for sale last month, almost a threefold increase from the 5.3% of sellers who offered discounts a year earlier in July 2019.

In Melbourne, the percentage of sellers dropping their asking price during the COVID-19 pandemic increased nearly four-fold from 3.1% in July 2019 to 11.5% in July 2020.

Adelaide recorded the next highest discount figure at 10.1%, up from 3.1% last year, while in Perth the percentage of discounters almost doubled to 10% from 5.3%.

Brisbane followed closely with an increase to 9.7% from 4.4%, Canberra increased to 8.6% from 6.3% and Hobart to 5.4% from 2.8%. Darwin was the only capital to record a slight drop – with 5% of sellers offering a discount this year, compared to 5.5% a year earlier.

So what does that mean for prices?

With most capital cities offering a median discount around 4-5%, the savings you could receive on a median-priced property in each city are: $49,150 in Sydney, $35,254 in Melbourne, $26,810 in Brisbane, $26,210 in Canberra, $24,553 in Perth, $24,351 in Hobart, $23,745 in Darwin, and $22,121 in Adelaide.

But remember, that’s just the median. Better (and worse) discounts are sure to be found.

Here’s a quick table for you to compare the numbers yourself

The percentage of listings with discounts from July 2019 to July 2020:

Sydney: Increased from 5.1% to 14.7%

Melbourne: Increased from 3.1% to 11.5%

Adelaide: Increased from 3.1% to 10.1%

Perth: Increased from 5.3% to 10%

Brisbane: Increased from 4.4% to 9.7%

Canberra: Increased from 6.3% to 8.6%

Hobart: Increased from 2.8% to 5.4%

Darwin: Dropped from 5.5% to 5%

A quick note on the value of the discounts

Now, it’s important to note that the value of the discounts isn’t increasing – just the percentage of properties offering discounts.

Domain senior research analyst Dr Nicola Powell explains: “We’re seeing a broader slowdown in properties, rather than prices tanking, which is good news.

“And I think we’ll continue to see price weakness but the falls to date have been minimal and they’ll stay that way, rather than some of those outrageous predictions we saw at the start of COVID-19 of 30% falls.”

Think you might have found a bargain?

Have you recently stumbled across a discounted property that’s too hard to ignore?

If so, get in touch today and we can help you get your finances in order and apply for a home loan. The lending market can be a little tricky to navigate at present, but rest assured we’re here to help guide you through it.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or 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.