Switch lenders if rate cut is not passed on: RBA

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Mortgage holders and business operators are being encouraged by the RBA to switch lenders if their bank doesn’t pass on the latest cash rate cut.

The Reserve Bank of Australia (RBA) delivered mortgage holders and business operators a Melbourne Cup Day win by cutting the official cash rate by 15 basis points to a new record low of 0.10%.

Better yet, the RBA board says it’s “not expecting to increase the cash rate for at least three years”.

However, there are concerns that not all the banks will pass the rate cut on to borrowers across all of their products.

For example, within 24 hours of the RBA rate cut several of the big banks announced cuts to their fixed rates and business rates, but not their variable rates.

RBA Governor Philip Lowe says if the banks don’t lower their standard variable rates, “ask them for a better deal”.

“And if they don’t give it to you, switch to a bank that will,” Governor Lowe adds.

Federal Treasurer Josh Frydenberg is also urging lenders to pass on the RBA rate cut to reduce the cost of borrowing for households and small businesses.

“It’s my expectation that the banks will now look for ways to pass on those rate cuts. Pass it on to small businesses and pass it on to mortgage holders,” he says.

How we can help you play hardball

Now, here’s the important part.

It’s all well and good for our nation’s leaders to urge the banks to pass rate cuts on to you, but whether or not your lender will actually do so is another matter altogether.

The good news is, the power is with you – the borrower. And we can help you harness that power.

That’s because competition amongst lenders is fierce right now, so if your lender won’t budge, there’s a good chance another lender will.

We’re keeping a keen eye on which lenders are passing the rate cut on to their customers, and which lenders aren’t.

So if you’re keen to explore your options during this time of record-low interest rates, get in touch today.

We’d love to help you pay less interest on your mortgage each month.

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.

RBA trims cash rate to new record low 0.10%

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If you didn’t back a winner on Melbourne Cup Day then fret not: the Reserve Bank of Australia (RBA) has delivered mortgage holders a win by cutting the official cash rate by 15 basis points to a new record low of 0.10%.

RBA Governor Philip Lowe says the cash rate cut is part of a package of measures to support job creation and economic recovery from the COVID-19 pandemic.

“Given the outlook for both employment and inflation, monetary and fiscal support will be required for some time,” Governor Lowe said in a statement.

As such, Governor Lowe added the low cash rate is likely here to stay until actual inflation is sustainably within the 2 to 3% target range.

“Given the outlook, the board is not expecting to increase the cash rate for at least three years,” Governor Lowe said.

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

This is the last rate cut the RBA is able to make before venturing into negative territory (which it’s previously indicated it won’t do).

It’s also the sixth RBA rate cut since June 2019, which means if you haven’t had a home loan health check in the past year, there’s a good chance you’re paying more interest than you need to on your home loan each month.

So if you’d like to explore your options – whether that be refinancing with another lender or renegotiating with your current one – then get in touch today.

We’re here and ready to work through your options 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.

Housing affordability best it’s been in a decade: report

Great news for homeowners and prospective buyers: housing affordability is at its best level in a decade and should continue to improve throughout 2021.

Housing affordability improved in all major Australian cities over the year to September 2020 despite the ongoing global pandemic, according to a new report by investor service Moody’s.

“Owning a house was the most affordable it’s been in a decade in most major capital cities during the last six months,” Moody’s says.

What is housing affordability?

Put simply, improved housing affordability means that households are spending a smaller portion of their monthly income on their mortgage.

Two-income households, for example, needed 23% of monthly income to repay new mortgages in September 2020, down from 25.1% a year earlier.

Better yet, Moody’s predicts that housing affordability will continue to improve moderately over the next 12 months because of low mortgage interest rates and a continuation of the mild dip in housing prices.

How is housing affordability measured?

Alrighty, so Moody’s measures housing affordability based on three things: median housing sales prices, average discounted variable mortgage interest rates, and average household income.

Let’s start with median housing sales prices.

Australian median housing sales price fell 1.5% over the six months to September 2020, according to Moody’s.

With a number of economists predicting housing values will continue on a mild downward trajectory until about mid-2021 (before going on a two-year surge), that would continue to assist housing affordability over the next year.

Next, interest rates.

At present, the RBA’s official cash rate is at historically low levels, and competition amongst lenders for borrowers is fierce.

That all spells extremely low interest rates for borrowers, which allows for lower monthly mortgage repayments.

And the good news is that most experts expect interest rates to stay low for the next few years while the economy gets itself back on track.

Finally, let’s look at income.

As mentioned earlier, the report found two-income households needed 23% of their monthly income to repay new mortgage loans in September 2020, down from 25.1% a year earlier.

How is this possible during COVID-19?

Well, no doubt a big factor in keeping the nation’s average household income buoyant was the federal government schemes JobKeeper and JobSeeker.

And although household incomes will come under pressure as these support measures come to an end, Moody’s says “this should not outweigh low mortgage interest rates and lower housing prices”.

So is now a good time to buy?

With all of this positive housing affordability news in mind, is now a good time to buy?

Well, more than a quarter of Australians (26%) believe now is the time to invest in property to safeguard their future, according to the latest ING Bank survey of 2,000 people.

And Tim Lawless, head of research at leading property expert group CoreLogic, agrees:

“For people with confidence in their own financial circumstances and household balance sheets, arguably this is a good time to be considering a home purchase thanks to the low cost of debt and certainty that rates will remain low for at least the next few years.”

There is also a raft of federal and state government incentives you could take advantage of, including the $25,000 HomeBuilder scheme, first home buyer grants and stamp duty exemptions.

So if you’re looking to buy your first home, or add to your existing portfolio, get in touch today.

As mentioned above, competition amongst lenders is fierce, and we’re here to help you use those competitive conditions to your advantage.

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.

Flow of credit to small businesses remains strong

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Small business owners in need of credit will be buoyed by new data that shows the approval rate for loans has remained strong throughout the coronavirus crisis.

In fact, about 70% of SME business loan applications received by lenders have been approved since early February, according to Australian Banking Association (ABA) statistics.

That’s resulted in more than 128,000 Australian sole traders, small businesses and medium-sized businesses receiving loans, with an average loan size of $320,000.

Breaking it down further, that’s 500 new SME loans a day for more than 250 days.

The ABA data is in line with the latest Sensis Business Index, which shows 26% of businesses that applied for finance over the past three months were knocked back.

Why the flow of credit remains strong despite COVID-19

The figures have no doubt been assisted by the relaxation of business lending rules, the federal government’s Instant Asset Write-off Scheme (now expanded to “temporary full expensing”), and the Coronavirus SME Loan Guarantee Scheme.

Temporary full expensing allows businesses, both big and small, to immediately write off any eligible depreciable asset, at any cost, up until 30 June 2022.

This can help improve your business’s cash flow by allowing you to reinvest the funds back into your business sooner.

The Coronavirus SME Loan Guarantee Scheme, meanwhile, allows businesses with a turnover of up to $50 million to apply for loans of up to $1 million with participating lenders.

The loans can generally be offered by lenders “more cheaply and more freely” compared to ordinary business loans, as the government will guarantee 50% of the new loans.

How we can help

While 70% of loans being approved is great news, it’s obviously not quite a done deal when you apply for finance in the current financial landscape.

So, to help avoid being among the unfortunate remaining 30% of businesses, get in touch with us today.

Our job is to act as a conduit between you and the lender, which allows you to focus on your business while we focus on getting you the finance that your business needs.

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.

Housing market confidence ‘booms’, cash rate cut expected

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Consumer sentiment is surging, confidence in the housing market is booming, and the number of experts tipping a Melbourne Cup Day cash rate cut is increasing. Let’s look at why households and businesses are becoming increasingly optimistic.

Ahh, spring. It’s fair to say we love it around here.

Not only do we usually see an uptick in property market activity (houses always look much nicer in spring), but this year – in particular – we’re seeing consumers more upbeat about what lies ahead.

This can be seen in the latest Westpac-Melbourne Institute Index of Consumer Sentiment survey, which saw consumer sentiment increase by 11.9% to 105.0 in October (up from 93.8 in September).

“This is an extraordinary result,” says Westpac’s chief economist Bill Evans.

“The index has now lifted by 32% over the last two months to the highest level since July 2018.”

Confidence in the housing market is also high

One of the biggest takeaways from the latest consumer sentiment survey is that more and more people believe now is a good time to purchase property.

“Confidence in the housing market has boomed,” explains Mr Evans.

“The ‘time to buy a dwelling’ index increased 10.6% to its highest level since September 2019.”

House price expectation sentiments also rose strongly, up 31.5% to 117.3 (from 89.2), with all states registering impressive recoveries.

Why is consumer sentiment soaring?

While leaving the doom and gloom of a COVID winter behind and entering spring sure doesn’t hurt, it’s not the only reason for the uptick in consumer sentiment.

This latest survey came right off the back of the federal government’s October Federal Budget, which allocated a record amount of spending and support measures to businesses and households.

There’s also an increasing “expectation that the Reserve Bank (RBA) board is likely to further cut interest rates at its next meeting on November 3”, says Mr Evans.

In fact, according to financial market pricing, there’s now around a 75% chance that it will happen.

That’s because, while previous communications from the RBA indicated that the “effective lower bound” of its official cash rate was 0.25%, in recent weeks it’s changed its tune, hinting at a willingness to cut it to 0.10% on Melbourne Cup Day.

“Recently, we have detected a change in attitude (from the RBA) indicating more confidence that the plumbing of the financial system can operate effectively at an even lower set of policy rates,” says Mr Evans.

“With that in mind, and the commitment towards full employment and the target for inflation, there seems to be no reason for the board to delay its decision.”

How’s your outlook at the moment?

So, how about you? Have things on the financial and property front started to look a little rosier recently?

If so, feel free to get in touch with us today. We’d love to run you through some of the financing options that may available to you in the current financial landscape.

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.