Extreme Mortgages and Finance: Matt's Finance Blogg

Aussies Keen to Use a Broker

2010-11-30T18:29:00.000-08:00

More than 60 per cent of Australians would consider using a mortgage broker.

According to the latest Mortgage Choice Consumer Sentiment Survey, 61 per cent of the 1061 respondents polled said they would “consider using a mortgage broker in the future”.

Of that 61 per cent, 34 per cent said the number one reason for using a broker was to “save me from researching a range of lenders for myself”.

Interestingly, of the respondents surveyed, 24 per cent did not understand what a mortgage broker did, while 12 per cent were unsure.

Mortgage Choice senior corporate affairs manager Kristy Sheppard said it is hoped regulation will change this statistic and help consumers understand a broker’s role moving into the future.

“I believe national regulation will have a powerful influence on mortgage broker usage. It’s been a long time coming. Today, around 40 per cent of all new Australian home loans are sourced by brokers. Hopefully this will rise to 50 per cent and beyond in the near future, as the industry better promotes itself and consumer perceptions of a mortgage broker’s role and value proposition improve,” Ms Sheppard said.

Article from http://www.theadviser.com.au/breaking-news/4643-aussies-keen-to-use-a-broker by Jessica Darnbrough

Australians Hold On to Homes

2010-11-23T21:02:00.001-08:00

Australian property owners are holding on to their homes for longer, new research has found.

According to the latest statistics from RP Data, Melbourne is leading the way for the other capital cities, with the average home owner holding on to their property for 4.3 years.

On a national scale, data for the year to August 2010 showed that houses sold over this period were owned on average for 8.3 years, while units were owned for 7.2 years. Ten years prior, houses on average, were owned for 6.8 years and units for 6.2 years.

RP Data’s research analyst Cameron Kusher said the average hold period for houses has increased by 1.7 years during the past five years and by 1.4 years for units.

During the five years to August 2010, house value growth for some of the nation’s capital cities has been slower than previous years, which, as Mr Kusher explains, is probably why property owners are holding onto their properties for longer as they await capital growth and a potential boost to equity.

“But with properties transacting less frequently it may result in greater difficulty in obtaining listings for agents, particularly in established areas which are unlikely to see a substantial introduction of new supply,” he said.

Article from http://www.theadviser.com.au/breaking-news/4608-australians-hold-on-to-homes

TOP FIXED RATES

2010-11-16T17:52:00.000-08:00

Now could be a good time to consider fixing your home loan rate because there are some great deals available in the lead up to Christmas this year.

We have 3 year fixed rates available from 6.99% - this is lower than most people’s variable rate!

On top of that, some lenders are offering up to $1,000 to bring your banking to them, which makes the option of refinancing to a better rate even more attractive.

Please be in touch to see if you qualify– email enquiries@extrememortgages.com.au

Cost of Funds Just an Excuse

2010-11-16T17:49:00.000-08:00

A new report has found the banks’ interest expenses have risen by less than the RBA’s rate hikes.

According to the Australian Institute report, the major banks have been profiteering by lifting rates above the RBA’s official moves.

Australia’s majors have consistently claimed that their costs are rising by more than the official rate moves.

But senior research fellow at the Institute David Richardson said the banks’ profits have “unambiguously gone up”.

“There is no doubt that these banks are exploiting their market power to gouge excessive profits from their customers,” he said.

“This year, the big four banks earned pre-tax profit of around $1,300 per annum for every man, woman and child in Australia. The latest round of interest rate rises shows just how insatiable their thirst for profits is.

“Banking in Australia is essentially a rogue market in which a small number of winners take all. There is a clear case for government to take action with a combination of regulation, structural reform and improving competition.”

However, Australian Bankers' Association has strenuously dismissed the report.

The ABA's chief executive Mr Munchenberg said the RBA’s minutes released yesterday confirmed that costs of funds had in fact risen in the last 12 months.

“The RBA minutes recognise that funding costs have been slowly increasing. This gradual increase has had a cumulative effect over the past year that is significant. That’s why some banks and other lenders have announced increases on standard variable home loan rates by more than the 25 basis points cash rate increase,” he said.

“Banks have been absorbing these higher average funding costs for nearly a year, but there comes a point when these costs do have to be passed on.”

Article from http://www.theadviser.com.au/breaking-news/4581-cost-of-funds-just-an-excuse

Homebuyers are Getting Younger: Survey

2010-11-09T20:10:00.000-08:00

The majority of Australians are buying their first home before the age of 30, a new survey has found.

According to a recent poll by Club Financial Services, 77 per cent of first homebuyers were under 30 when they purchased property.

The group’s general manager Andrew Clouston said this statistic is unsurprising considering the recent FHB incentives.

“While showing they are financially savvy, people in their 20s have often been typecast as being focussed on wanting gratification today and paying for it tomorrow, building up lots of credit and personal loans,” Mr Clouston said.

“This assumption was somewhat confirmed with 22 per cent of people in their 20s having a personal loan, significantly higher than any other age group in the survey.

“Our advice to people in their 20s, is to identify their financial goals, to ensure they are making decisions now that put them in a strong financial position in the future. Short term goals (five years or less) may include a wedding, honeymoon, furniture, a new car or an investment property, medium-term goals could include owning a home and financing children’s educations and long-term goals may include retirement and travel.

While some of these timeframes may seem a long way off, Mr Clouston said being able to plan for the short, medium and long term will make financial goals far more achievable and ensure the younger generation remains financially savvy throughout their life.

Article from http://www.theadviser.com.au/breaking-news/4548-homebuyers-are-getting-younger-survey

Turn Your Back to Watch a Horse Race and the RBA Lifts Rates!

2010-11-01T20:55:00.000-07:00

“Reserve Bank Surprises with Cup Day Rise” Article from www.abc.net.au by Michael Janda

The Reserve Bank has raised interest rates on Melbourne Cup Day for the fourth time in five years, taking the official cash rate to 4.75 per cent.

Despite the fact the RBA has moved rates on the first Tuesday every November for the past five years (four times up, one time down), economists were generally surprised by the decision.

Seventeen out of 24 economists surveyed by Bloomberg had expected the official cash rate to stay on hold this month, although many acknowledged it would be a lineball decision.

The RBA increased rates by 25 basis points, despite last week's consumer price figures for the September quarter from the Bureau of Statistics showing both headline and underlying inflation well within the bank's 2-3 per cent target.
House price indices from the Bureau and RP Data both also showed home values remaining largely static over the three months to September.

Attention now turns to how much the retail banks will raise home loan rates by.
Current standard variable mortgage rates are between 7.24 (NAB) and 7.51 per cent (Westpac), and if they pass on only the 25-basis point official increase it would add around $49 to monthly repayments on a $300,000 mortgage on a 25-year term.

However, major bank chief executives have consistently repeated warnings that higher funding costs mean home loan interest rates will need to rise relative to the official cash rate.

More to come.

What Will the Reserve Bank do on Melbourne Cup Day Next Week??

2010-10-26T20:22:00.000-07:00

“Benign Inflation Gives Reserve Tough Call”

Article from www.abc.net.au by Michael Janda

Currency traders have lowered their bets on a Melbourne Cup interest rate rise, with benign inflation figures reducing the urgency of a Reserve Bank move.

The Bureau of Statistics September quarter inflation figures came in at 0.7 per cent for the quarter and 2.8 per cent for the year.

Both were slightly below market forecasts, of 0.9 per cent and 2.9 per cent respectively in a Reuters survey of economists.

The bigger surprise was very subdued underlying inflation figures.

The Reserve Bank's preferred trimmed mean and weighted median measures of inflation came in at 0.6 and 0.5 per cent for the three months to September, virtually unchanged from the 0.5 per cent result for both last quarter.

That leaves underlying inflation running between 2.3 and 2.5 per cent for the year to September, depending which measure you look at.

TD Securities strategist Annette Beacher was one economist not surprised by the figures - her institution's own monthly inflation gauge has been showing subdued results for months, with the September result showing an annual trimmed mean of 2.3 per cent.

She says the official figures probably remove some urgency for the Reserve Bank to lift rates.
"This buys the RBA a bit more breathing space. There are enough factors on their side to stay their hand for another month, though we are pencilling in a December hike to signal the next move is up," she told Reuters.

The Australian dollar plunged almost a cent in less than half an hour after the data came out, from about 98.6 to 97.7 US cents at 12:09pm (AEDT), on reduced market expectations of a rate rise on Tuesday.

Futures traders are now only factoring around a 30 per cent chance of rates rising, down from 50 per cent before the inflation data release.

However, any potential reprieve from a rate rise in November is likely to be short lived according to Rob Henderson from the National Australia Bank.

"There is no justification for an increase in interest rates in November... we think the chance of a November hike is quite low but we still think December is a live month for a rate hike," he explained to Reuters.

"We probably need to see stronger [economic] activity numbers between now and December to lead to an increase in rates in December."

Annette Beacher says there is almost certainly to be another string of rate rises at some point over the next year, even if borrowers escape any additional mortgage pain before Christmas.
"We do see inflation at 3.5 per cent at this time next year, so we are still looking at 100 basis points of tightening over the next year," she added.

"That is mainly domestically sourced inflation, given capacity constraints in the labour and capital markets, and at some point the lack of productivity growth will start to creep through into wage pressures."

In this quarter's results the main price increases came from new financial year increases in the price of utilities and charges, with water and sewerage up 12.8 per cent, electricity up 6 per cent and property rates and charges up 6.2 per cent.

The most significant falls were a 3.7 per cent fall in the cost of fuel, a 5.4 per cent slide in vegetable prices, a 3.9 per cent decline in the cost of pharmaceuticals, and a 2.7 per cent fall in prices for audio, visual and computing equipment.

Product Insights: Professional Packages

2010-10-12T19:49:00.000-07:00

By Matt McCombe

In my last finance blog, I wrote about the features, benefits and draw backs of Basic Variable Rate Home Loans. Today I’d like to take a look at Professional Packages which sound pretty fancy but can be explained quite simply.

Most banks have a version of a Professional Package (Pro-Pack). Some examples you might have heard of are “Premier Advantage Package”, “Mortgage Advantage Package”, “Wealth Package” or “Money Manager Package”. Although the names vary, the cornerstone features of the packages don’t vary much across the different lenders. Most include the following:

1) A discount off the Standard Variable Rate (SVR) Home Loan of up to 0.7%
2) No Application Fee for a number of home loans
3) Offset Account if a SVR is taken
4) Some offer a discount off Fixed Rate Home Loans
5) Free Credit Card
6) Sometimes a free transaction account

What does it cost for the privilege of having a Pro-Pack? Between $300 and $400 per year, depending on the bank.

As you can see, the annual fee can be worth it if you make use of what the Pro-Pack offers.

For example, if you use an offset account and a credit card it’s highly likely that you will get good value from a Pro-Pack because the sum of an average credit card fee and the savings you are likely to make from an offset account will exceed the annual fee.

Another example of how a Pro-Pack can be worthwhile is if you have more than one loan account. This can be the result of having a home loan for an investment property and a home loan for your own home. It can also be the result of wanting to set up your home loan with part variable rate and part fixed rate.
There are always exceptions to the rule but this will hopefully help you understand this type of loan.

If you have any questions about mortgages, please be in touch! You can contact me by email on matt@extrememortgages.com.au or by phone on (08) 9400 6310.

Stay tuned for next week’s instalment!

RBA Keeps Rates on Hold - Straight From the Horse’s Mouth:

2010-10-04T20:50:00.000-07:00

Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 4.5 per cent.
The global economy grew faster than trend over the year to mid 2010, but will probably ease back to about trend pace over the coming year. Recent information is consistent with a more sustainable, but still strong, pace of growth in China and most of the Asian region. In Europe and the United States, growth prospects appear to be modest in the near term, a legacy of the financial crisis and its impact on private and public finances. Financial markets are still characterised by a degree of uncertainty, and are responding both to differences in growth outlooks between regions and evident strains on public finances and banking systems in several smaller countries in Europe. Most commodity prices have changed little over recent months, and those most important to Australia remain very high.

Information on the Australian economy shows growth around trend over the past year. Public spending was prominent in driving aggregate demand for several quarters but this impact is now lessening, while the prospects for private demand, and in particular business investment, have been improving. This is to be expected given the large rise in Australia’s terms of trade, which is now boosting national income very substantially.

Asset values are not moving notably in either direction, and overall credit growth is quite subdued at this stage, notwithstanding evidence of some greater willingness to lend. Inflation has moderated from the excessive pace of 2008. The effects of the rise in tobacco taxes aside, CPI inflation has been running at around 2.75 per cent over the past year. That looks likely to continue in the near term.

The current stance of monetary policy is delivering interest rates to borrowers close to their average of the past decade. The Board regards this as appropriate for the time being. If economic conditions evolve as the Board currently expects, it is likely that higher interest rates will be required, at some point, to ensure that inflation remains consistent with the medium-term target.

If you have any questions about mortgages, please be in touch! You can contact me by email on matt@extrememortgages.com.au or by phone on (08) 9400 6210.
Stay tuned for next week’s instalment!!

Product Insights: Basic Variable Rate Home Loans

2010-09-28T22:24:00.000-07:00

By Matt McCombe

My neighbour is a hair products distributor for a large company here in Perth. I often wear hair gel so as you could imagine I enjoy receiving samples from time to time. Before meeting him I thought there was only one type of hair gel but I’ve since found out there is a myriad of different products available. Whether you want that styled ‘messed up’ look, the ‘wet’ look, the “able to be re-styled during the day” type style etc etc.

It’s a bit like that with mortgages; but loans don’t make me look cool or at least, my version of cool, like hair gel does!!

Although as a broker I sell hundreds of different products from over 40 lenders you can categorise most of those products into just a few categories in order to try and get a handle on what’s out there.

For the next few finance blogs I’m going to go into some detail about these home loan product categories. The first of those is Basic Variable Rates.

As the name suggests, these are variable rate home loans which means you get a lot of flexibility. You can pay them off more quickly without penalty (as long as you don’t fully discharge the loan) and your rate goes up and down with the Reserve Bank.

The word “BASIC” in Basic Variable refers to the fact that they are “no frills” home loan in that they usually don’t have an offset account or credit card attached to them. They are characterised by a low rate and low or no ongoing fees. Sometimes they will charge an application fee of around $600 but that’s usually it for the life of the loan.

They generally suit people who don’t have more than one loan account, who won’t use an offset account much and who like the benefits of a variable rate home loan. Of course it also attracts people who hate the idea of bank fees because there are relatively few bank fees with this type of loan.

There are always exceptions to the rule but this will hopefully help you understand this type of loan.

If you have any questions about mortgages, please be in touch! You can contact me by email on matt@extrememortgages.com.au or by phone on (08) 9400 6210.
Stay tuned for next week’s instalment!!

What to Make of the Media Hype About Interest Rates?

2010-09-21T18:42:00.000-07:00

For this week’s finance blog, I thought it’s a good time to take a look at what’s really going on with all the commentary about interest rates over the coming 12-18 months. Who better to comment on this than economist Peter Switzer – enjoy!

Interest Rate Horror Story – by Peter Switzer – Wednesday September 22 2010

The only thing good about the latest speculation that the Reserve Bank will increase interest rates by 100 basis points next year, after a 25 basis points or 0.25 per cent rise before Christmas is that this very scare campaign might prevent this prediction from becoming a reality!

Negative media

By the way, there are a number of good developments that might worry the Reserve Bank Governor, Glenn Stevens, and this is why he started this media frenzy speculation about rising interest rates. However, the media has a pathetic tendency to primarily go along for the ride with speculative stories provided that they are negative.

For example, yesterday the big story was an ex-RBA economist who now has defected to an investment bank made the big call that we will see a 0.25 per cent rise in rates before the end of the year. But wait there’s more — he tipped a 100 basis points rise over the course of 2011!

This will gut many home loan borrowers who are already feeling the pinch and will hurt house prices going forward. These predictions will work against business confidence, which already has had to cope with five months of drops and only went positive in August.

November rate rise

The question is how long will it last with this crystal ball view that rates are due to rise by 125 basis points or 1.25 per cent over the next 15 months?

I have argued and the chief economist at UBS, Scott Haslem, agreed with me last night on my Sky News Business Channel program that we have never seen a central bank effectively broadcast the promise that rates would rise by around two times before the end of 2010. This spooked consumers and small business, and until this week, it looked like this forecast by just about every economist, including the galah at the local pet shop, was going to be wrong but who knows now?

I reckon we could see one more rise with November being the more likely but these suckers on the RBA board could move in October if Haslem is right about what inflation the Reserve Bank cares about. Most economists think the September quarter inflation figure due out in late October will be the important one for determining when the Bank next moves rates up and so November has been the month that many economists have referred to as the one where the RBA could move again.

Future inflation concern

Haslem argues the Bank will be more worried about future inflation than inflation in the past or present and so he thinks they could move earlier than most of us hope.
However, it’s not all bad news. He doesn’t think rates will rise by 100 basis points next year — he thinks it will be less.

Economic growth forecast downgraded

Finally, to ensure I don't fall into the same trap as everyone else in the media, let me point out there was another story out there yesterday and that came from the Government’s commodity forecaster ABARE. These guys actually downgraded their forecast for economic growth for the financial year from 3.25 per cent to three per cent, which means these guys think we will grow a bit slower than they once expected. If these guys are right, then we will not see a 1.25 per cent rise in interest rates over the next 15 months.

I know I’m well known for being optimistic but right now I prefer optimism with a bit of a lid on it because everything turning out to be better than expected — including this nice September market rally — is coming back to haunt me and anyone with a home loan!

High LVRs back with a vengeance

2010-09-14T22:26:00.000-07:00

Making headlines [earlier this week], The Daily Telegraph has reported that Australia’s banks and non-banks are starting to feel more confident lending up to 100per cent.

According to the paper, non-bank lender Mortgage House is set to offer borrowers home loans equivalent to 105 per cent of the property’s value.

The offer comes just one month after the company launched its 99 per cent LVR home loan product.

According to the non-bank lender’s chief executive officer, the 99 per cent LVR product has been incredibly successful so far. As such, the lender has seen room to capitalise on this market and thus extended the amount of money it will lend to borrowers.

But non-bank lenders are not the only ones beefing up thier maximum LVRss.
Last month, Adelaide Bank announced it would reintroduce lending up to 95 per cent LVR, while ANZ raised its maximum LVR from 95 per cent to 97 per cent for existing customers.

Similarly, Westpac has raised its maximum LVR for new customers from 87 per cent to 92 per cent.

The major said falling unemployment and the strong economy were behind its decision to reverse the cuts it made in January.

"This change reflects our growing confidence in the economic environment, reflected in the low level of delinquencies for this market segment," the bank said.

Article from http://www.theadviser.com.au/breaking-news/4244-lenders-toss-money-at-borrowers

RBA Leave Rates Unchanged

2010-09-07T00:03:00.000-07:00

The Reserve Bank of Australia has decided to keep the official cash rate on hold at 4.5 per cent for the fourth consecutive month.

Uncertainty surrounding the global economic outlook, consumer spending and Australia's political situation forced the Board to leave rates unchanged.
Rates have been on hold since May. Prior to that, concerns about rising inflation forced the RBA to lift rates by 25 basis points in March, April and May.

While local economic data shows the Australian economy has grown at the fastest pace in three years, ongoing economic uncertainty abroad ultimately forced the RBA to err on the side of caution when making the latest rate decision.

"The current setting of monetary policy is resulting in interest rates to borrowers around their average levels of the past decade. With growth in the near term likely to be close to trend, inflation close to target and with the global outlook remaining somewhat uncertain, the Board judged this setting of monetary policy to be appropriate for the time being," RBA governor Glenn Stevens said in his statement on monetary policy.

The news did not come as a surprise, with many economists predicting the RBA would leave rates unchanged when it met in Adelaide today.

AMP chief economist Shane Oliver said the stronger than expected data culminating in above trend growth in the June quarter was balanced against uncertainty regarding the global outlook and expectations that inflation is likely to remain within the target range over the year ahead.

Article from
http://www.theadviser.com.au/breaking-news/4226-rba-leaves-rates-unchanged
by Jessica Darnbrough

GDP Data Highlights Economic Resilience

2010-09-01T00:30:00.000-07:00

The Australian economy is well placed on the road to recovery with the national gross domestic product (GDP) rising slightly more than expected throughout the June quarter.

GDP grew 1.2 per cent in the quarter, seasonally adjusted, following an upwardly revised 0.7 per cent increase in the previous quarter, according to the Australian Bureau of Statistics.

The rise brought annual growth to 3.3 per cent, marking Australia's nineteenth consecutive year without a recession.

Economists had forecast 0.9 per cent actual growth in the quarter, and 2.8 per cent actual growth year-on-year.

The federal government labelled the result "outstanding", with Prime Minister Julia Gillard releasing a statement that read: “the country continues to benefit from strong economic management as well as the hard work and resilience of the Australian people”.
Article from http://www.theadviser.com.au/breaking-news/4194-gdp-data-highlights-economic-resilience by Staff Reporter

No Bubble for the Australian Market

2010-08-24T20:32:00.000-07:00

Australia is not facing a house price bubble but a severe affordability crisis, a US analytics company says.

Speaking to The Adviser, Core Logic group executive George Livermore said the US property market faced a burst bubble during the GFC when borrowers chose to strategically default on their loans because of the dip in unemployment and the non-recourse mortgage trend.

“Some markets, like in Arizona, Florida and California, suffered a big price drop because underlying demand was never really there, so prices fell to where the underlying demand was,” he said.

“We’ve had a decade of overbuilding, over four million too many houses in the US, and it’s going to take some time to have demand back in the system,” he said.

Unlike the US market, Mr Livermore said Australia’s issue was more about average Australians being unable to buy into the property market because of a lack of supply.

“Affordability is not the same issue as a housing bubble,” he said.

“I hear talk about a housing bubble but I don’t think Australia is facing one.

“The government needs to address the issue of affordability through further supply,” he said.

Article from http://www.theadviser.com.au/breaking-news/4141-no-bubble-for-australian-market by Belinda Luc

Part Fixed and Part Variable: The best of both worlds

2010-08-10T20:14:00.000-07:00

By Matt McCombe.

One of the big things you need think about when setting up and managing your home loan is whether to go for a fixed or a variable rate. When my clients ask me about what is better I go through the advantages of each but I also point out that you can actually have your cake and eat it too!

Most Lenders give customers the option of fixing only a portion of your home loan. For example, if your total loan amount is $400,000 you could fix $200,000 and keep $200,000 variable. At today’s rates the fixed portion could be as cheap as 6.84% for two years (see my top deals update) and the variable portion as low as 6.73%. If rates go up, the fixed stays at 6.84% and if rates go down you still get the benefit of a falling variable rate. The best of both worlds!

To find out more and for an obligation free chat about your own specific circumstances, be in touch!
0400 952 897 ; matt@extrememortgages.com.au ; www.extrememortgages.com.au

Negative Gearing Here to Stay

2010-08-10T20:13:00.000-07:00

The federal government and the federal opposition party have ruled out the prospect of abolishing negative gearing.

At a debate held at the National Press Club in Canberra this week, both parties said they would not consider abolishing the investment strategy.

Real Estate Institute of Australia (REIA) president David Airey welcomed the government's unanimous stance.

"This is fantastic news for renters, affordable housing and real estate investors," Mr Airey said.

Mr Airey added that negative gearing for the purpose of property investment was necessary as it addressed the supply of rental accommodation, which benefited the overall industry.

"The Hawke Government abolished negative gearing for property in 1985 only to have it reinstated in 1987," he said.

"During that period rents increased by 57.5 per cent in Sydney, by 38.2 per cent in Perth and by 32.0 per cent in Brisbane.

"At the same time building approvals fell by 13.8 per cent," he said.

According to Mr Airey, when negative gearing was reinstated, the government said that any tax advantages conferred by negative gearing were countered by the CGT regime when capital gains were realised.

"To amend the current negative gearing provisions for housing as some critics have suggested would be treating real estate differently to other asset classes and create a resource misallocation," he said.

Article from: http://www.theadviser.com.au/breaking-news/4086-negative-gearing-here-to-stay

Top Deals Update

2010-08-10T20:10:00.000-07:00

Variable Rates

Lender A – 6.46%
Lender B – 6.47%
Lender C – 6.59%

Fixed Rates

Lender A – (2 Years Fixed) 6.84%
Lender B – (2 Years Fixed) 7.09%
Lender C – (3 Years Fixed) 7.14%

How Do People Afford an Investment Property? Part Two

2010-08-02T23:50:00.000-07:00

By Matt McCombe.

Last week I showed you an example of a couple, Mr and Mrs Giveitago, who purchased an investment property using the equity in their home. You can take a look on my finance blog below if you missed it.

Today I’d like to show you how someone renting can purchase an investment property – why would you want to do this, shouldn’t you always buy your own home first? – I hear you ask. Well, you might be renting in a nice suburb which you wouldn’t be able to afford to purchase in. On the other hand, you may be happily renting just a room in a share house but want to get on the property ladder all the same.

The benefits of purchasing an investment property rather than a home to live in are worth considering. For example, there are a lot of tax deductions you receive for an investment property – things like council rates payments, repairs, loan interest can be offset against your taxable income. There are no such deductions for the house you live in.

Let’s take Mr Versatile as an example. He has $30,000 in savings and wants to keep living in his share house paying rent of $170 per week (his landlord pays the council and water rates for him). He knows a suburb where he can buy a house for $300,000 and earn $330 per week in rental income. His $30,000 deposit is just enough for a 5% deposit and to pay for stamp duty and other fees and his weekly interest only loan repayments are $400 per week (7.3%p.a.) so he needs to come up with $70 per week to pay off the loan, effectively making the rent he pays $240 ($170 + $70) – all the while giving him ownership of a $300,000 asset and minimising the tax he pays!

To find out more about our upcoming September 1st 2010 “Spring into Investing” investment seminar please be in touch! – 0400 952 897, matt@extrememortgages.com.au ; www.extrememortgages.com.au .

Rates On Hold!

2010-08-02T23:46:00.000-07:00

Reserve Bank Keeps Rates On Hold

In good news for mortgage holders, the Reserve Bank has decided not to increase interest rates this month.

The decision comes after positive inflation figures were released last week showing consumer price increases had been lower than expected. If inflation was running outside of the Reserve Bank's target band of 2 per cent to 3 per cent, the central bank might have lifted rates at its board meeting today.

"Mortgage holders can breathe easy for another month," says Domain.com.au blogger Carolyn Boyd. "But don't celebrate by spending up too big, while the lever could be off rate rises for now, there could be more to come down the track as the economy ramps up."

Each 0.25 per cent interest rate rise adds another $50 to the monthly cost of an average mortgage. Australian mortgage holders are already paying about $300 more per month in repayments than they were in September last year.

Mortgage holders on variable interest rates are being charged about 7.4 per cent by their lenders.

If you want to keep up to date with the latest property news subscribe to our FREE weekly property newsletter.

Article from:
http://news.domain.com.au/domain/real-estate-news/no-change-for-rates-20100803-1149g.html

How Do People Afford an Investment Property? Part One

2010-07-26T00:27:00.001-07:00

By Matt McCombe.
According to recent taxation department statistics, one in 7 taxpayers own an investment property. But how do you afford it!? Well, there are many different strategies to purchasing an investment property – you only have to take a look at a book store’s Investment section to see this. Let me give you two examples that hopefully illustrate how it’s possible and within reach of most people. I’ll give you the first today and next week I’ll give you the other.

Example 1: Mr and Mrs Giveitago are Homeowners with ‘small’ mortgage of $250,000 – their house is worth $400,000. They purchase an investment property using the equity in their home for $360,000. They borrow enough money for the purchase AND for the fees (stamp duty etc) making their investment mortgage $375,000. They receive $360/week in rent income and the mortgage costs $500/week (7% interest only). They have to come up with $140/week (about the cost of an average car loan) to own an asset worth $360,000! This doesn’t even take tax deductions into account. This asset may be worth double in seven to ten years based on the last 50 years growth history.

Of course, all this being possible or not depends, among other things, on what your borrowing capacity is – a good mortgage broker can find this out for you without charging you anything.

Next week’s example will show you how someone renting with a $30,000 deposit can purchase a rental property so stay tuned!

To find out more about our upcoming August 2010 investment seminar please be in touch! – 0400 952 897, matt@extrememortgages.com.au ; www.extrememortgages.com.au .

Banks may raise 0.15pc above RBA

2010-07-26T00:25:00.000-07:00

Making headlines [this week], The Australian Financial Review has reported that Australia’s major banks will be forced to surrender $700 million in profits unless they raise their interest rates above those of the RBA.

According to the paper, analysis by Morgan Stanley show the combined profits of the big four would be $700 million lower in 2011 if funding costs continue to increase and are not offset by rate rises from the banks.

The RBA has already indicated that it may raise rates at the August board meeting if inflation continues to rise.

However, any move by the RBA will not be enough to offset the extra funding costs that Australia’s majors are currently facing.

Morgan Stanley analyst Richard Wiles estimates that banks will have to raise their rates by between 0.1of a percentage point to 0.15 of a percentage point above the RBA.

Article from: http://www.theadviser.com.au/breaking-news/3999-banks-may-raise-015pc-above-rba

Matt's Mortgage Tips

2010-07-19T21:27:00.000-07:00

Offset Accounts: The Laid Back Way to Pay Off Your Loan Sooner.

By Matt McCombe.

Last week I wrote about how only around $25 per week extra on your mortgage can save you thousands in interest. Today I want to have a look at how Offset accounts work to also save you a lot of money in interest as well as making it possible to pay of your mortgage years earlier – WITHOUT HAVING TO PAY EXTRA INTO YOUR MORTGAGE.

Most people, except for people who still store their money under their mattress, have a transaction account where their salary is deposited into and where they store funds for living costs and even savings. Well, a fully transactional offset account is the same as this except it is “linked” to your mortgage. Every dollar that is stored in your offset account (even if it’s just there for a day) counts as a dollar of interest that is NOT charged on your mortgage.

Here’s an example. Let’s say you have an average of $3,000 in your account (a bit of savings plus your salary deposit averaged out) and a 30 year mortgage of $400,000. Without lifting a finger you would save over $19,000 and over 7 months of time! Not bad for just sitting back and letting your offset account work!

To find out more and for an obligation free chat about your own specific circumstances, be in touch! – 0400 952 897, matt@extrememortgages.com.au ; www.extrememortgages.com.au .

Property Hot Spots

2010-07-19T21:23:00.000-07:00

Outer suburb dwellings hot property

Properties located on the outer skirts of the city are likely to enjoy an upswing in demand, a new report has found.

According to a recent poll by PRDnationwide, 58 per cent of Australian do not mind travelling 30 minutes to work.

PRDnationwide research director Aaron Maskrey said five hours travelling a week, or 260 hours a year, was becoming more acceptable.

“As our capital cities struggle with a growing population, more home buyers will be facing longer trips to work as inner city land becomes overcrowded.”
Mr Maskrey said there are pay-offs for long trips - such as bigger blocks or cheaper housing.

“Most of the time it is bearable if they get to go home to their beach shack or country getaway or aren’t drowning in debt from high inner city mortgages,” he said.
Nardia Guillaumier from PRDnationwide Dapto said people are willing to travel further to work if it means owning a cheaper property.

“High income earners who spend hours away from home, look for the lifestyle locations more so than proximity to work,” she said.
“They will travel further to ensure that their family has the desired lifestyle with less concern about price.”

Article from: http://www.theadviser.com.au/breaking-news/3978-outer-suburbs-dwellings-hot-property

Top Deals Update

2010-07-19T21:17:00.000-07:00

Top Deals Update:

Variable Rates
Lender A – 6.24% for 1st Year then 6.74% thereafter
Lender B – 6.46%
Lender C – 6.49%

Fixed Rates
Lender A – (2 Years Fixed)- 6.99%
Lender B – (2 Years Fixed) 7.09%
Lender C – (3 Years Fixed) 7.14%

Matt's Mortgage Tips

2010-07-13T22:01:00.000-07:00

How Much Difference Do Extra Repayments on Your Home Loan Make?

I love seeing my clients’ reactions to the effect of extra repayments. It’s surprising how much of a difference it makes when you pay a little more into your home loan each month fortnight or week.
Let me give you an example. A typical loan of $400,000 at 6.7% over 30 years would require monthly loan repayments of $2,581.

Let’s see what happens when you pay an extra $50 per month. New repayments would be $2,631 per month (an extra $11.50 per week). If you kept doing this from the first loan repayment you make, you would save a whopping $36,416 in interest costs over the life of your loan, repaying the loan 2 years and 8 months early!

As you could imagine, the story only gets better if you can put in a little more than $50 extra per month. The important thing is to do this consistently so you can get the most from the compound effect of saving interest.

Calculate it for yourself on my website’s calculators – www.extrememortgages.com.au and click the “calculators” tab.

July 14 2010

2010-07-13T21:55:00.000-07:00

Interest rates to remain on hold…for now

Interest rates are expected to remain on hold for the foreseeable future.According to NAB’s latest monthly business survey, interest rates are likely to remain at 4.5 per cent until late 2010.

But while rates remain on hold for now, NAB’s chief economist Alan Oster says the RBA will inevitably raise rates again before the end of the cycle.“Interest rates will peak at 5.5 per cent by mid 2011 and inflation will be revised up to 3 per cent before year’s end,” Mr Oster said.

Article from: http://www.theadviser.com.au/breaking-news/3956-interest-rates-to-remain-on-holdfor-now

Top Deals Update:

Variable Rates:

Lender A – 6.24% for 1st Year then 6.74% thereafter

Lender B – 6.46%

Lender C – 6.47%

Fixed Rates:

Lender A – (2 Years Fixed) 6.99%

Lender B – (2 Years Fixed) 7.09%

Lender C – (3 Years Fixed) 7.14%