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.

Frustrating bank habit triggers probe into home loan pricing

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You know that infuriating habit the big banks have of failing to pass on the RBA’s cash rate cuts in full? Well, it’s finally triggered the federal government to order an inquiry into home loan pricing.

The inquiry, which is being conducted by the Australian Competition and Consumer Commission (ACCC), comes just weeks after the Reserve Bank of Australia (RBA) slashed the official cash rate by 25 basis points for the third time this year to a record new low of 0.75%.

What really drew the ire of the public and politicians alike, however, was that the big banks only passed on between 0.13% and 0.15% (out of 0.25%) of the latest RBA cut to customers.

This is after they only passed on 0.40% to 0.44% (out of 0.50%) for the previous two RBA cuts.

How much is it costing you?

Treasurer Josh Frydenberg said if the big banks had passed on the recent rate cuts in full, a family with a $400,000 mortgage would be paying around $2,200 a year less in interest payments.

That compares to the $1,680 they’re saving from the 57 basis point rate cut that they are currently getting (on average), he added.

“In other words, families would be $519 better off if the banks had passed on the rate cut in full, not just a part of it,” Treasurer Frydenberg said.

So what will the ACCC probe?

The ACCC will investigate a wide range of issues – on top of why RBA cuts aren’t always passed on in full – including the rates paid by new customers versus existing customers (in other words: the ‘loyalty tax’).

In addition, the inquiry will consider what prevents more consumers from switching to cheaper home loans.

“We have evidence that customers can save considerable money by switching providers, and we want to fully understand what the barriers are that stand in their way, particularly barriers created by the banks,” ACCC Chair Rod Sims said.

“It is also very difficult for customers to find out what mortgage rate they could pay with another financial institution, without going through a lengthy and time-consuming application process.”

Mr Sims added the inquiry will aim to provide answers to the questions that banking customers have long asked.

“For example, there is an unusually large difference between the headline rate and the actual rates many customers are paying, which can be confusing for consumers,” he said.

The ACCC is expected to produce a preliminary report by the end of March 2020, with a final report due 30 September 2020.

Get in touch

All in all, the ACCC inquiry is aimed at increasing transparency when it comes to how banks price their home loans.

The good news for you is that you’re not alone. If you ever have a question about your home loan that you need clarity on, all you need to do is get in touch with us. We’d be more than happy to look into it.

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.

SMEs need more support from lenders to grow: RBA

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The ‘pendulum may have swung a bit too far’ when it comes to the tight lending standards currently imposed on small businesses, says the Reserve Bank of Australia (RBA).

Since the RBA cut the official cash rate to a new record low of 0.75% on Tuesday, most of the attention has been on whether the banks would pass the full 25 basis point cut to home loan customers (spoiler: the big four banks only passed on 0.13-0.15%).

As such, several pointed remarks made by RBA Governor Philip Lowe in regards to lenders’ “tight” lending standards imposed on SMEs have flown under the radar.

“In some areas the pendulum may have swung a bit too far,” Dr Lowe said at the Reserve Bank Board Dinner on Tuesday night.

“It is important that our financial institutions support small businesses in particular. Lenders should not be so scared of making a loan that goes bad that they don’t provide the credit that the economy needs.

“We will all be better off if businesses have the confidence to expand, invest, innovate and hire people.”

Many SMEs struggling

Dr Lowe’s comments come just weeks after a number of reports highlighted many small businesses were struggling due to financing complications.

One report, by market analysis firm East & Partners on behalf of Scottish Pacific, showed that more than one-in-five business owners said that being rejected from a lending product was the main reason for their cash flow issues.

Another report, by the Australian Banking Association (ABA), showed that while 9 million Australians have dreamed of starting their own business, 60% are held back from their dreams due to ‘access to money’.

‘RBA Governor’s advice should be heeded’

The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, has urged lenders to heed Dr Lowe’s advice.

“The overwhelming feedback to my office from the small business community is that a lack of access to funding is their biggest barrier to growth,” Ms Carnell said.

“If our financial institutions change the way they do business with SMEs, it might just give small businesses the confidence they need to grow, which would be of significant benefit to the Australian economy.

“It’s time we all sit up and listen to the RBA Governor.”

What next?

Let’s face it: sitting around waiting for everyone else to listen to the RBA Governor probably isn’t the most proactive business strategy if you’re in need of equipment or asset finance for your business.

So if you’re an SME owner looking to fund your business’s growth, then get in touch.

We’ve got a number of lenders on our panel and would be happy to run you through some options to help you grow your business.

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.

RBA cuts cash rate, but will the banks pass it on?

The Reserve Bank of Australia (RBA) has cut the official cash rate by 25 basis points to a new record low of 0.75%. But will the banks pass on the interest rate cut in full to you?

RBA Governor Philip Lowe said this third rate cut in five monetary policy meetings was made to support employment and income growth.

“The Board also took account of the forces leading to the trend to lower interest rates globally and the effects this trend is having on the Australian economy and inflation outcomes,” he said in a statement.

“It is reasonable to expect that an extended period of low interest rates will be required in Australia to reach full employment and achieve the inflation target.”

The RBA previously cut the official cash rate on July 2, just one month after making its first rate cut in almost three years (since August 2016).

Now the real question is: will you benefit?

Will the banks pass on this third rate cut in full?

This little infographic by the ABC makes for pretty interesting reading.

It shows just how much of the last two RBA rate cuts each of the big four banks passed on to its customers in June-July.

Indeed, not one of the big four banks passed on both rate cuts in full, with each bank passing on somewhere between 0.40-0.44% (out of 0.50%).

As such, it will be worth keeping an eye on just how much of this most recent rate cut your lender passes on, not to mention how that stacks up against the competition.

Want to know what this rate cut means for your home loan?

With three RBA cuts so close together, it can get a bit confusing as to just how much of these cuts your lender is passing on to you.

The good news is we’re following the market closely and can tell you which lenders pass this third rate cut on to their customers in full, and which lenders don’t.

So if you’d like to find out, then please get in touch – we’d love to help break it down for you.

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.

Business loan rejection causing SME cash flow issues

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More than one-in-five SMEs are having cash flow problems due to business loans being rejected, according to new research.

The report, by market analysis firm East & Partners on behalf of Scottish Pacific, also shows just one in 10 SMEs believe they are on top of their cash flow.

One of the main culprits?

More than one-in-five business owners cite being rejected from a lending product as the main reason for their cash flow issues, the report states, and a similar proportion of SMEs were unable to take on new work because of these cash flow problems.

“[This] is a massive wake up call to SMEs and their advisors to make sure they are funding their business in a way that optimises cash flow,” says Scottish Pacific CEO Peter Langham.

“A business struggling with cash flow can only stretch working capital so far before something has to give.”

Other major cash flow issues

Business owners see government red tape and compliance as the biggest thorn in their side, with almost three-quarters naming this as their greatest cash flow issue.

Other major cash flow problems stem from suppliers reducing payment terms and customers paying late.

Australian SMEs seeking other lending options

Another interesting tidbit arising from the report is that – for the first time – Australian SMEs are more likely to use a non-bank lender, ahead of their main bank, to fund their 2019 growth plans.

The report shows that over the next six months, 19% of SMEs intend to choose a non-bank lender to fund their growth, compared to 18% of SMEs who intend to stick with their main bank (down from 38% in 2014).

According to East & Partners Head of Markets Analysis, Martin Smith, the rising demand for non-bank lending options to fund new growth investment reflects the reality that there is now a broader array of non-bank lending alternatives to match business owners’ funding requirements.

Still a long way to go

While SMEs are now increasingly looking to lenders beyond the main banks, Scottish Pacific CEO Peter Langham says many SMEs fail to take advantage of the alternatives available to them.

“When it comes to funding growth, overwhelmingly SMEs opt to put their hands in their own pockets – 83% of business owners say this is how they plan to fund revenue growth,” Langham says.

“Some business owners remain unaware of funding alternatives.”

Get in touch

If you’re an SME owner experiencing cash flow problems, or looking to fund your business’s growth, then get in touch.

We’ve got a number of lenders on our panel and would be happy to run you through some options to help secure your business now and into the future.

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.