Why don’t lenders drop my repayments when the interest rate falls?

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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.

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.

How to avoid underinsuring your home

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With Australia currently enduring its worst bushfire season on record, we all want to do our little bit to help out, so today we thought we’d discuss the important topic of underinsurance.

Indeed, researchers are warning that the nation is facing an underinsurance crisis, according to a recent report by the ABC, with the Insurance Council of Australia saying more than four out of every five homes affected by bushfires are underinsured.

Federal MP Susan Templeman had her home destroyed by a bushfire in 2013 and had one thing on her mind as she was walking past burnt-down houses on her street: “Gee, I hope I’ve paid the insurance”.

Fortunately, her insurance payments were up to date. However, her insurer still didn’t give her the news she was hoping to hear.

While her insurer said they’d pay out her claim, they advised they wouldn’t rebuild her home as she was underinsured.

You see, even though Ms Templeman had insured her place for its market value of $400,000, the cost to rebuild was about $600,000.

“And that was just like a bolt from the blue. It completely threw us,” she said.

Ms Templeman ended up selling an investment property to help make up the shortfall. But her neighbours on either side never rebuilt.

How are homes underinsured?

Chloe Lucas, research fellow at the University of Tasmania, explains that most homeowners don’t find out that they’re underinsured until it happens to them.

“Most people use insurance calculators online and it’s very hard to get those to give you a calculation that really reflects the real value of your property,” Ms Lucas told the ABC.

“They are most often based on the market value of your property, and that’s very different to the cost of rebuilding after a disaster.”

Ms Lucas suggests owners consider adding at least 20% to what they think their house is worth to avoid underinsurance.

How else could it affect me?

Chances are, if you haven’t updated your home and contents insurance in several years, you could be underinsured.

There is also an astounding 23% of Australians who have no home and contents insurance at all, says the Insurance Council of Australia.

How can I avoid underinsurance?

Here’s a quick checklist to see whether you’re sufficiently covered:

1. Check your policy and talk to your insurer to understand how much they will currently pay and under what circumstances.

2. Pay attention to clauses around fires and floods, particularly if you live in a higher-risk area.

3. Make sure all your items are covered – many people find they are underinsured because they forgot to include new pieces of technology, home renovations or jewellery.

4. Consider the worst-case scenario – if your house and contents were to be destroyed, does your policy cover the full cost of rebuilding? Make sure you consider building costs today, rather than the original cost of building your house.

Final word

If your home or suburb has been affected by this bushfire season, please know that our thoughts are with you – we know as much as anyone how important the family home is.

If you’re in an area that’s susceptible to bushfires or other natural disasters but has not been affected this season, we hope you stay safe and that this article has been helpful.

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.

How to spread some free Xmas cheer these holidays

Did you know there’s around $1.1 billion owed to Aussie families in unclaimed shares, bank accounts and life insurance? With the festive season just around the corner, here’s how to find some long lost funds for you and your family in less than one minute.

They say Christmas is a time for giving. But let’s be honest, it’s always nice to get a little surprise, too.

The beauty of this little life hack is that – if you’re lucky – you might experience both ahead of the budget-blowout that is the festive season.

Don’t believe us? A friend who gave us the idea for this timely post found $1140 for his aunty and $68 for his brother. That’s more than $1200 by simply searching his last name in a government register.

Sure, he didn’t find any money for himself – but his brother has promised to finally fork out for the family Xmas turkey this year!

How to find unclaimed money

Ok, so it’s super quick and simple.

Just click on this ASIC MoneySmart website link. Then type in your name in the search bar.

If nothing comes up try typing in just your last name and you might even spot some relatives who are owed money.

If the search brings up money that’s owed to you, simply scroll down the bottom of the ASIC MoneySmart website link for steps on how to claim the money.

But wait, there’s more

The above link is run by the federal government. But there are also state and territory registers for unclaimed money as well, including:

NSW – Revenue NSW

Victoria – State Revenue Office Victoria

Queensland – Public Trustee of Queensland

Western Australia – WA Department of Treasury

South Australia – SA Department of Treasury and Finance

Tasmania – Tasmanian Department of Treasury and Finance

ACT – Public Trustee and Guardian for the ACT

Northern Territory – Northern Territory Treasury

Searching for unclaimed money in the above registers is straightforward and similar to the process for the MoneySmart register.

Have a great festive season

Whether your search for unclaimed money is fruitful or not, we hope that you enjoy celebrating the festive season with family and friends in the coming weeks.

And when 2020 rolls around, if you need to check anything finance-related, please don’t hesitate to reach out to us. We’d love to work with you again in the new year.

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.

Could you flick Netflix? ASIC updates responsible lending guidance

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Could you say goodbye to Netflix to take out a loan? That’s one example corporate watchdog ASIC has included in its responsible lending update.

Now, rest assured that you don’t actually have to say goodbye to Netflix to take out a loan. It’s just a “non-essential” expenses example ASIC has provided in its updated Regulatory Guide 209 (RG 209) to provide greater clarity and support to lenders and brokers.

In one of the 39 guidance examples in the updated guide, a prospective borrower named Leah “advises her lender that she could cancel her monthly streaming services” to cover the monthly repayment of a proposed smaller loan.

Rough. We know. Apparently Leah didn’t even get to finish the latest season of The Crown.

But rest assured that if (unlike Leah) you can’t live without your fix of Netflix there’s scope for other non-essential expenses to be cut instead – if you need to make cuts at all (it depends on your financial situation).

“Examples in this guide are purely for illustration; they are not exhaustive and are not intended to impose or imply particular rules or requirements,” ASIC explains in the principles-based guide which it says allows for “flexibility to determine what is appropriate in individual circumstances”.

ASIC has also included a section that confirms small business lending is not subject to responsible lending obligations, irrespective of the nature of the security used for the loan.

Anything else I need to know?

Absolutely. There’s an interesting section in the updated guidance where ASIC states:

“We recognise that a consumer may be able to reduce their spending and change their lifestyle in order to afford a particular loan and be able to do so without substantial hardship.”

And a related section that states: “There may be some lifestyle changes the consumer would not be prepared to make to afford credit.”

So come in for a chat. We can discuss with you what your essential expenses and your non-essential expenses are, and how they may impact your credit application.

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.

The ‘Airbnb of pools’ splashes into Australia

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Got a pool you’re constantly scooping leaves out of but never use? Or perhaps you’re looking to cool off this summer in the privacy of someone else’s backyard. Well, a new pool-sharing app has just launched in Australia.

We Aussies love to swim. In fact, we’ve won the second most swimming gold medals at the Olympic Games – only behind the US.

And it’s no wonder why: research shows that nearly 2.7 million Aussies live in a house with a pool – the highest per capita in the world. That means either you or one of your nearby neighbours likely owns a pool.

To help us make the most of this tapped resource, an online marketplace for pool sharing called Swimply has launched.

How does it work?

Described as the ‘Airbnb of pools’, the service allows pool owners to rent their pool out by the hour.

The website and app features a platform where owners are able to list their pool and include customised information on availability, rules and prices.

Glancing at the website, listings range between $25 and $75 an hour – not too bad for an asset that would sit there collecting leaves otherwise.

Swimply makes its money by taking 15% of the hire fee paid to hosts and charging users a 10% service fee.

Interested in diving in?

If you own a pool and are interested in listing it, it’s worth noting that Swimply has entered into a partnership with pool maintenance supplier Poolwerx.

As part of the partnership, Poolwerx will undertake compliance checks of all pools to make sure they meet Swimply’s hygiene and safety standards.

Other money-spinning ideas

The sharing economy is taking off in Australia. In fact, according to the Sharing Hub, one in 10 Aussies make on average $1100 month from the sharing economy – that’s $13,200 a year that could help you pay off your mortgage.

Here are some other ways you can make an extra buck courtesy of your unused assets or time:

Car Next Door – got a spare car that’s sitting unused in the garage? Someone would likely rent it off you for $35 a day.

Airbnb – rent out a spare room, or even an unoccupied investment property, for anywhere between $60 and $250 a night.

Camplify – owners of caravans, campervans, motorhomes and camper trailers can earn $280-$2100 per week hiring to holidaymakers.

Spacer – Australia’s premier peer-to-peer marketplace for self-storage. Rent your garage or car park for a few hundred dollars a month.

The Volte – this website is changing the way Australians consume fashion. It’s a designer fashion rental marketplace connecting borrowers and lenders.

Mad Paws – who doesn’t like pets? Even better, get paid to look after someone else’s for $30-$50 a day.

Drop us a call

If you want some more tips to help you pay off your mortgage, then get in touch. We’ve got a range of tips and techniques that can help you 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.