Why are houses becoming so much more expensive to build?

Construction costs just rose at the fastest annual pace since 2005. So why is it getting so expensive to build your own home? Today we’ll look at the materials that are becoming more expensive and why all homeowners should take note – not just renovators and builders.

“Your grandpa built this place with his own two hands”, or so your dad used to boast.

So if Pop could do it with his trusty hammer, some nails, and a bit of hard yakka, why is it so expensive to build a home of your own these days? (Your own handiwork inadequacies aside…)

Well, for starters, national construction costs increased 7.3% in the 2021 calendar year alone, which was the highest annual growth rate since March 2005.

And the not-so-great news is that property market data company CoreLogic is expecting growth in residential construction costs to remain above average over the coming quarter as supply chain disruptions persist.

“There is a significant amount of residential construction work in the pipeline that has been approved but not yet completed,” explains CoreLogic research director Tim Lawless.

So what materials are getting more expensive and harder to source?

Data shows that cost increases are being driven primarily by timber (mostly structural timber).

In fact, in the final quarter of 2021, the value of select wood imports reached their highest level on record, says Housing Industry Association (HIA) economist Thomas Devitt.

“Timber is predominantly produced domestically but excess demand, such as in a boom year like 2022, is largely sourced from overseas markets,” says Mr Devitt.

Other segments of the market also remain volatile, with increasing pressure currently on metal costs.

“With some materials such as timber and metal products reportedly remaining in short supply, there is the possibility some residential projects will be delayed or run over budget,” adds Mr Lawless.

And with building approvals for detached housing recording their strongest year on record in 2021 (with 150,000 approvals), demand isn’t expected to slow down anytime soon.

“This boom is set to keep builders busy this year and into 2023,” adds Mr Devitt.

Mr Lawless says: “With such a large rise in construction costs over the year, we could see this translating into more expensive new homes and bigger renovation costs, ultimately placing additional upwards pressure on inflation.”

Why current homeowners should also take note

Higher construction costs are likely to add to affordability challenges in the established housing market, making it harder for homeowners to upgrade.

And CoreLogic Head of Insurance Solutions Matthew Walker warns that higher building costs mean homeowners and property investors should also review their insurance cover.

“In these times of rapidly rising home and construction costs, under insurance can quickly become a real threat to what is a most valuable asset,” says Mr Walker.

“It’s important that homeowners keep track of their sum insured and annually check that it is sufficient should the worst occur by using their insurer’s rebuild calculator or giving them a call.”

How to get the right kind of finance for a construction project

Finding the right kind of finance for a construction project can be tricky at the best of times – let alone when building supplies are becoming more expensive and wait times are blowing out due to supply constraints.

That’s why it’s important to team up with a professional like us when looking for a construction loan.

Not only can we help you secure a great rate, but we can also help you select a loan that allows flexibility for any unforeseen contingencies.

So if you’d like to explore your options for your next building or reno project, then get in touch today – we’d love to help you map out a plan for your 2022 building and property goals.

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.

Which cities are expected to have the biggest price growth in 2022?

National property prices are predicted to rise by up to 9% in 2022, according to REA Group, but which cities are tipped to lead the way in price growth this year? Let’s take a look.

National housing values grew a whopping 22.1% in 2021, and while things are expected to slow down throughout 2022, the fun ain’t over yet.

Especially so if you’re a homeowner in Hobart (9% to 12% predicted growth), Brisbane (8% to 11%), Adelaide (6% to 9%) and Canberra (6% to 9%).

“Brisbane and Hobart have the strongest price growth forecasts among the capital cities thanks to their low supply of stock for sale, heightened demand and relatively lower prices compared to Sydney and Melbourne,” explains Cameron Kusher, REA Group’s executive manager of economic research.

Meanwhile, property prices in Perth (3% to 6%), Sydney (4% to 7%), Melbourne (4% to 7%) and Darwin (5% to 8%) are still expected to grow – just not as much.

“Perth has shown a stronger slowdown in price growth already relative to other capital cities, while the more expensive property prices in Sydney and Melbourne may increasingly see demand shift to more affordable housing markets,” adds Mr Kusher.

2022 dwelling price forecasts

Here’s the predicted price growth for 2022 for each capital city, broken down for you in a nice and easy format:

Sydney: 4% to 7%
Melbourne: 4% to 7%
Brisbane: 8% to 11%
Adelaide: 6% to 9%
Perth: 3% to 6%
Hobart: 9% to 12%
Darwin: 5% to 8%
Canberra: 6% to 9%
All capital cities combined: 6% to 9%

So why are property prices expected to slow down throughout 2022?

For starters, it’s because buyers can expect more choice in 2022.

Buyer demand peaked in August 2021, according to REA Group’s PropTrack data, and a more balanced market is expected in 2022.

For vendors, this means that they may have to lower their price expectations, warns Mr Kusher, and the increase in housing stock, should it continue, will likely contribute to a slowing of price growth in 2022.

“The recent lift in new listings should go some way to allow more buyers to find a home,” adds Mr Kusher.

“After that, the question will be … How large is the next wave of buyers? We believe this next wave is likely to be big, but not as large as the current one, so that should result in a better supply and demand balance.”

“We expect a smaller wave of buyers because prices have increased, rapidly pricing some buyers out.”

Need help to finance your 2022 purchase?

As property prices are tipped to continue rising throughout 2022, it’s never been more important to have a broker like us in your corner when it comes to securing your next property purchase – be that your dream home or adding to your investment portfolio.

In the current market, it’s also important to know your borrowing capacity before you start house hunting so you don’t stretch yourself beyond your limits.

If you’d like to find out what you can borrow – get in touch today. We’d love to sit down with you and help you map out a plan for your 2022 finance and property goals.

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.

Your suburb’s 2021 property report card is in

With all the talk of record-breaking property growth throughout 2021, do you know how exactly your suburb and property type performed? Today we’ll show you how to find out in just a few clicks.

You’ve probably heard all the talk of national housing values soaring in 2021 – by 22.1%, to be exact.

But that doesn’t really tell you much about how your particular neck of the woods fared, does it?

Well, you can find out a bunch of important property information about your suburb’s houses and apartments, and those in surrounding suburbs, using realestate.com.au’s recently released PropTrack 2021 Suburb Report Card (desktop version, mobile-friendly link).

What the PropTrack interactive tool can show you

Ok, so the two main functions of the PropTrack tool are the ability to select “suburb” and “property type”, which is broken up into houses or units.

This is important because PropTrack data shows house prices grew 26.8% nationally in 2021, much more than the 13.4% growth in unit prices.

Also worth noting is that you can see how much change in demand there was for your suburb and property type, and even how many “highly engaged buyers” there were throughout 2021.

Other important insights you can check out include “average estimated value”, “average weekly rental value”, “rental yield” and “median days on market”.

How does your suburb compare to your state’s best suburbs?

While using the tool, you can immediately see how your suburb compares to its immediate neighbouring suburbs.

But if you also want to see how your suburb stacked up against your state’s best, you can do so via the below direct links.

Just click the > button at the bottom (or top) of each linked page to scroll between the national and state tables.

– Suburbs with largest growth in average estimated house value.

– Suburbs with largest growth in average estimated unit value.

– Suburbs that were most in-demand in 2021.

– Suburbs with largest growth in demand in 2021.

– Suburbs with shortest median days on market in 2021.

Planning on making your move in 2022?

With house prices having just experienced their fastest pace of growth since 2004, it’s as important as ever to find a finance option that’s right for you.

This is especially true as the finance market is starting to go through a shift, with more and more economists predicting the RBA will increase the official cash rate this year.

So if you’re a keen homebuyer who wants to explore what options are available to you – whether that be upgrading your home or buying an investment property – get in touch today to discuss your borrowing capacity. We’d love to run through it 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.

What was Australia’s top-selling vehicle in 2021?

Some of us buy cars for work, others for play. So it’s no surprise that the top two cars in 2021 can do both. But which vehicle took the crown? Well, it was super close, so let’s have a look.

Ok, let’s cut straight to the chase.

Taking out pole position in 2021 was the Toyota HiLux with 52,801 new vehicles sold, very closely followed by the Ford Ranger (50,279 new vehicles sold).

And get this: with 1,049,831 new vehicles sold across Australia in 2021, those two particular models made up almost 10% of all new vehicles that hit the road over the past 12 months, according to Australia’s peak body for the automotive industry, the FCAI.

While the HiLux took out the top spot, it must be noted that the Ranger is closing the gap – in 2020 a total of 40,973 new Rangers were sold, compared to 45,176 Toyota HiLuxes.

So it’ll be interesting to see what happens in 2022!

Utes vs SUVs

While light commercial vehicles, including utes, have dominated the top two spots in recent years, far more SUVs are sold across the board.

In fact, a total of 531,700 SUVs were sold in 2021, compared to 253,254 light commercial vehicles.

The highest selling SUV in 2021 was the Toyota RAV4 (35,751), which came in at 3rd place overall.

Rounding out the top five was the fourth-placed Toyota Corolla (28,768) and the Toyota Landcruiser (26,633) in fifth.

And yep, as you might’ve noticed, Toyota impressively took out four of the top five spots.

The top 20 new vehicles sold in 2021

Below is a full list of the top 20 models sold in Australia throughout 2021, including the number of vehicles sold (got your eye on anything below?).

1. Toyota HiLux – 52,801 (new vehicles sold)
2. Ford Ranger – 50,279
3. Toyota RAV4 – 35,751
4. Toyota Corolla – 28,768
5. Toyota Landcruiser – 26,633
6. Hyundai i30 – 25,575
7. Isuzu Ute D-Max – 25,117
8. Mazda CX-5 – 24,968
9. Toyota Prado – 21,299
10. Mitsubishi Triton – 19,232
11. MG ZS – 18,423
12. Kia Cerato – 18,114
13. Mazda BT-50 – 15,662
14. Nissan Navara – 15,113
15. Mitsubishi ASX – 14,764
16. Mitsubishi Outlander – 14,572
17. Hyundai Tucson – 14,194
18. Mazda3 – 14,126
19. Nissan XTrail – 13,860
20. MG MG3 – 13,774

Want to explore your finance options?

If you’re thinking of purchasing a new vehicle and want to explore your finance options for it, then please get in touch.

Taking out a loan for a vehicle is much more common than you might think. In fact, recent research shows 52% of car buyers took out a loan for their vehicle purchase in the past decade, with an average loan size of $25,000.⁣⁣⁣

And just like using a broker to finance a home purchase, using our services when purchasing a vehicle also comes with a number of advantages, which we’d be more than happy to run you through.
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So to find out more, please get in touch with us today – we’d love to help you hit the road in a new set of wheels.

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.

Borrowing soars: average loan up almost $100,000 in 12 months

How much do you need to borrow to buy a typical Australian home these days? Well, the average loan size has increased dramatically over the past year – up almost $100,000.

The national average loan size for owner-occupier dwellings rose to an all-time high of $596,000 in November 2021, according to the latest Australian Bureau of Statistics data.

And the national average has been going up (and up and up) in recent months.

In October it was $571,000, while in November 2020 it was $503,000.

And with wages not growing anywhere near as fast, it’s more important than ever to have a professional like us in your corner when it comes to securing finance for your next home purchase.

State by state breakdown

Average loan sizes reached new highs in all states and territories in November 2021, except Western Australia (which only dropped a smidgeon below its October record high).

Here’s a quick state-by-state breakdown as of November 2021, compared to November 2020.

NSW: $769,000 – up from $644,000 (in November 2020)

Victoria: $619,000 – up from $499,000

Queensland: $514,000 – up from $440,000

South Australia: $422,000 – up from $384,000

Western Australia: $440,000 – up from $417,000

Tasmania: $446,000 – up from $373,000

Northern Territory: $433,000 – up from $380,000

ACT: $586,000 – up from $527,000

So what can you do about the rapid rise in home loan values?

Here’s the good news – especially for first home buyers.

Most of the average loan values listed above still fall below the state and territory property price caps for a number of federal government schemes, such as the First Home Loan Deposit Scheme and New Home Guarantee initiatives.

These two schemes allow eligible first home buyers to build or purchase a home with only a 5% deposit, without forking out for lenders’ mortgage insurance (LMI), which on average helps people purchase their first home 4 to 4.5 years sooner.

That’s right – 4 years sooner!

Another factor working in your favour is that the RBA’s official cash rate is at a record low and interest rates are also very low as a result (which helps when it comes to your borrowing capacity).

Speaking of which, one very important step you can take is to get in touch with us so we can help you assess your borrowing capacity.

This way, you can work out whether that property you have your eye on is a goer, and if not, identify steps you can take to help bring it within reach.

To find out more, give us a call today – we’d love to help you explore your borrowing options.

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.

One in five young adults are saving to start their own business

Ever dreamed about telling your boss to “shove it” and starting up your own business? Well, there’s been a big jump in Millennials and Gen Zs who are saving up to do just that (well, maybe except for the “shove it” part!).

There’s something romantic about the notion of starting your own business.

You know, opening up a hole-in-the-wall cafe or little alleyway bar, growing a loyal band of merry locals, and waxing lyrical with them into the wee hours of the morning.

Of course, as any small business owner will attest, the realities of running a business are very, very different.

That won’t stop our next-gen though!

Say one thing for the Millennials and Gen Zs of the country, and that is that they’re an entrepreneurial bunch who won’t let something like a once-in-century-pandemic get in the way of their business aspirations.

According to a ME Bank survey of young Australians with no children, 18% stated their current financial goal was “investing in their own business”.

That’s up from just 4% six months prior!

To put that into a bit of perspective – compared to some of the other 15 options they could choose from – the top response was “paying off a mortgage” at 34%, while 19% of respondents were aiming to “save enough to buy a property to live in”.

So, not far behind the top two responses at all!

If you need help funding your dream, get in touch

What a lot of young Australians don’t realise is that you don’t have to bootstrap your way into starting up a business.

There are finance and funding options we can help you explore to accelerate your launch – and they’re not as scary as they might sound (5-in-6 businesses don’t find it difficult to pay back their business loans).

So whether your financial priority in 2022 is starting your own business, or trying to buy your first home, get in touch with us today. We’d be excited to help you take that first step.

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.

Homeowners nearly four years ahead on their mortgage repayments

Australian homeowners are loading up their offset accounts in record amounts, so much so that the average household is now almost four years ahead on their mortgage payments.

Quick question: do you have an offset account (or several) attached to your mortgage?

They’ve become quite popular in recent years, especially since the RBA’s official cash rate has hit record low levels and impacted the amount of interest you can earn in savings accounts (which we’ll explain in more detail further below).

But first, how much have offset balances increased?

Research from the Australian Prudential Regulation Authority (APRA), provided to The Australian, shows the average balance sitting in offset accounts is now nearly $100,000 – up almost $20,000 since the pandemic kicked off in March 2020.

In total, $222 billion was in offset accounts across the country as of September 2021 – up almost $50 billion from $174 billion in March 2020.

In fact, in the September 2021 quarter alone, offset account balances increased by 10%.

All of this has helped contribute to mortgage holders now being, on average, 45 months ahead on their repayments – up from 32 months prior to the pandemic.

In terms of the various ways Australians have gotten ahead, 57% of prepayments came from offset accounts, 40% via available redraw balances, and 3% through other excess repayments.

So what’s an offset account?

Basically, an offset account is a regular transaction account that is linked to your home loan.

The advantage is that you only pay interest on the difference between the money in the account and the mortgage.

Some banks allow you to have 10 offset accounts attached to your mortgage, too, with cards linked to them that you can use for everyday spending.

How exactly does it work?

Say you owe $350,000 on your mortgage, and have $50,000 in a savings account.

If you move that $50,000 into a full offset account, you’ll only pay interest on $300,000 (which is the loan value minus the amount in your offset account).

The offset account can then continue to be used for all your daily needs, like receiving your salary or withdrawing cash.

So why would you consider an offset account over a savings account?

With the RBA’s cash rate at record low levels, the interest rate you’ll receive on the balance in your bank’s savings account is also at record low levels too.

Say for example that you had a savings account with a 1% interest rate and a mortgage with a 2.2% interest rate.

By allocating money into your full offset account, you’d save more money on interest than you would earn in your savings account.

Additionally, interest on your savings accounts is subject to tax, whereas the interest-saving on your mortgage isn’t.

Is an offset account for you?

Of course, there are additional factors you’ll want to consider, such as account keeping fees and the minimum amount needed in the account to make it useful.

And obviously, savings accounts and offset accounts are not the only two places you can park your hard-earned money. Depending on your risk appetite, there are other options you could consider that might yield a higher return.

The long and the short of it is everyone’s situation is different, but if you think an offset account might be for you, get in touch and we can help you explore your options.

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.

2022 forecast: places where housing prices aren’t slowing down

National housing values grew 22.1% in 2021, and there are two capital cities and one region in particular that are not ready to slow down just yet. Can you guess where?

Happy New Year everyone! To kick off 2022, we’re looking at how the property market performed across 2021, and what we can expect over the next 12 months.

The most recent CoreLogic data reveals there’s a two-speed housing situation emerging across the country, with prices in Sydney (+0.3%), Melbourne (-0.1%) and Perth (+0.4%) slowing down in December.

On the other hand, Brisbane (+2.9%), Adelaide (+2.6%) and regional Queensland (+2.4%) are set to defy 2022 slowdowns, with CoreLogic saying there’s “no evidence of their growth slowing just yet”.

In fact, the monthly rate of growth for each of these regions reached a new cyclical high in December.

“In Brisbane and Adelaide, housing affordability is less challenging, advertised stock levels remain remarkably low and demographic trends continue to support housing demand,” explains CoreLogic’s Research Director Tim Lawless.

Hobart (+1%), Canberra (+0.9%), and Darwin (+0.6%) meanwhile performed smack bang in the middle of the pack in December.

So what’s causing the slowdown in other markets?

The annual housing value gains in the nation’s two biggest cities, Sydney (+25.3%) and Melbourne (+15.1%), were stellar in 2021.

But momentum has slowed sharply, with both cities recording their softest monthly reading since October 2020.

The slowing trend can partly be explained by a bigger deposit hurdle caused by higher housing prices alongside low-income growth, says Mr Lawless, as well as negative interstate migration.

“A surge in freshly advertised listings through December has (also) been a key factor in taking some heat out of the Melbourne and Sydney housing markets,” adds Mr Lawless.

Slower conditions across the Perth housing market, meanwhile, may be more attributable to the disruption to interstate migration caused by extended closed state borders.

“This has had a negative impact on housing demand,” adds Mr Lawless.

So what can we expect in 2022?

For starters, housing stock is very low across regional Australia in particular, with advertised stock levels finishing the year 35.9% below the five-year average.

This compares to combined capital cities seeing stock 14.2% below the five-year average.

“It is likely regional markets, especially those with lifestyle appeal, will continue to benefit from higher demand as remote working policies are more normalised, and demand for holiday homes remains strong amid continued international border restrictions,” says Mr Lawless.

“However, as interest rates begin to bottom out, and affordability constraints extend to regional markets, these housing markets may also move into a downswing phase over the course of 2022.”

And while sellers held the upper hand at the negotiation table in 2021, buyers are expected to regain some leverage in 2022.

That’s because the average time properties spend on the market is beginning to increase, while auction clearance rates are trending down.

Need help to finance your 2022 purchase?

The juxtaposition of higher housing values against low-income growth has resulted in higher barriers to entry.

“It is becoming increasingly harder to raise a deposit and fund transactional costs such as stamp duty,” says Mr Lawless.

This is why it’s never been more important to have a broker like us in your corner when it comes to securing your next property purchase, be that your dream home or adding to your investment portfolio.

In this current market, it’s also important to know your borrowing capacity before you start house hunting so you don’t stretch yourself beyond your limits.

So if you’d like to find out what you can borrow – get in touch today. We’d love to sit down with you and help you map out a plan for your 2022 property goals.

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.

Three (financial) New Year’s resolution ideas

Cut calories, increase your steps, abstain from alcohol: each year we set ourselves some pretty lofty New Year’s resolutions, most of which are doomed to fail. So why not add a nice straightforward financial goal to the list this year? Here are three to get you started.

Ambition is an admirable quality, but somewhere between the Christmas pudding and the “three, two, one, Happy New Year!” we tend to overcommit.

So this year, we’re encouraging you to add a financial goal to your list of New Year’s resolutions.

Here are three to get you started.

1. Set yourself a finance or property goal

Perhaps you’ve reached a point in your life where you can start making additional payments on your mortgage each month.

Or, you might have saved up enough money to buy your first investment property, or upgrade from an apartment to a house.

Or maybe the thought of owning your first home still feels a long way off, but you haven’t yet heard about the federal government’s First Home Loan Deposit scheme, which helps first home buyers crack the market four years sooner, on average.

Whatever your position, consider taking stock of what you want to achieve in 2022 so that you can work out a plan to achieve it.

And when you narrow in on what it is you to achieve, get in touch with us to explore some funding options that can help turn your goal from pipe dream to reality.

2. Call us for a home loan health check

Do you know the interest rate on your home loan?

Don’t fret if you don’t, about half of mortgage holders can’t recall it.

But not knowing the rate is usually a good sign that it’s time for a home loan health check.

That’s because an RBA study found that for loans written four years ago, borrowers are charged an average of 40 basis points higher interest than new loans.

For a loan balance of $250,000, that equates to an extra $1,000 in interest payments per year.

Other good reasons for a home loan health check could include seeing whether locking in a fixed rate might suit you better over the next few years, or switching to a home loan that has extra features, such as an offset account.

Rest assured we’ll make it all very quick and painless. Simply get the ball rolling by giving us a call today.

3. Go through your bank statements and trim the fat!

When was the last time you had a thorough look through your spending account?

Subscription services have taken off in recent years in Australia, so much so that the average Australian household pays $42 per month for their streaming service.

If you can halve that, you can save between $200-$300 per year.

Other micro-transactions that most families can cut back on include food delivery services such as Uber Eats, as well as alcohol, and takeaway coffees.

In fact, buying a $4 takeaway coffee each day costs you a whopping $1460 per year, whereas making it yourself using a french press or Aeropress costs just $260.

That’s another $1200 in savings each year. And for two family members, you can save $2400.

Take steps to achieve your goals today

Resolution inertia can be a real thing – it sets in when once you’ve set your goals, and when you realise now you’ve actually got to start taking steps to achieve them.

That’s where we come in – get in touch today for resolutions one and two: setting yourself a property/finance goal and getting a home loan health check.

And by getting the ball rolling on these resolutions you can be well on your way to resolution three: saving money!

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.

Season’s greetings! Here’s to a prosperous 2022!

To all our terrific clients: thank you for your ongoing support and for being such wonderful, loyal clients.

We are always so appreciative of any opportunities – be they big, small, or anywhere in between!

Life has thrown many of us all sorts of challenges these past two years, so we hope you’re shifting into holiday mode and getting ready to relax and unwind (or looking forward to a few public holidays at least!).

Whether you’re planning to feast alongside family and friends you haven’t seen in a while, or go on a long-overdue holiday somewhere a little more exotic than your local park, we hope you have a Merry Christmas and Happy New Year!

It’s been an absolute pleasure and an honour working with you towards your lifestyle and business goals in 2021. We look forward to helping you towards a prosperous 2022!

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.

Up to 4,600 first home buyer guarantees back up for grabs

Want to buy your first home with a deposit of just 5% and pay no lenders’ mortgage insurance? You could be in luck – the federal government will soon reissue up to 4,651 unused Home Guarantee Scheme spots.

First home buyers who use the Home Guarantee Scheme fast track their property purchase by 4 to 4.5 years on average, because the scheme means they don’t have to save the standard 20% deposit.

The government usually issues spots in the scheme once a year (July 1), but this time it’s reissuing guarantees that went begging earlier.

Where are these extra spots coming from?

The government states the scheme will reissue “up to” 4,651 unused guarantees for first home buyers from the 2020-21 financial year”.

It adds many of the spots have been unused because of COVID disruptions, but it’s unclear exactly how many guarantees will be made available.

It’s also unclear exactly when the spots will be reissued, with the government entity overseeing the scheme – the NHFIC – saying it’s working with its panel lenders and “looks forward to reissuing unused guarantees soon”.

All in all, that means we’re going to have pretty short notice of when these spots officially become available to apply for, and they could be in short supply.

So if the guarantee is something you’re interested in, you’ll want to get in touch with us today so we’re ready to act when the spots do drop.

Back up, what’s the Home Guarantee Scheme?

Ok, so the Home Guarantee Scheme is broken up into three separate schemes: two for first home buyers, and one for single parents called the Family Home Guarantee scheme.

At this stage, it’s believed (but not confirmed) that the reissued spots will mainly be for the first home buyers through the New Home Guarantee scheme (new builds) and First Home Loan Deposit Scheme (includes existing builds).

These two schemes allow eligible first home buyers to build or purchase a home with only a 5% deposit, without forking out for lenders’ mortgage insurance (LMI).

This is because the federal government guarantees (to a participating lender) up to 15% of the value of the property purchased.

Not paying LMI can save buyers anywhere between $4,000 and $35,000, depending on the property price and deposit amount.

There are price caps on eligible properties, ranging from $950,000 for new builds in Sydney, ​​Newcastle, Lake Macquarie and Illawarra, down to $350,000 for existing properties in regional South Australia.

A full list of the price caps can be found here.

Get in touch today to get the ball rolling

With these schemes, allocations are generally granted on a “first come, first served” basis.

And it’s worth re-iterating that spots this time will be limited and will likely fill up fast.

So if you’re a first home buyer looking to crack into the property market sooner rather than later, get in touch today and we can explain the schemes to you in more detail.

And when the reissued spots become available, we can help you apply for finance through a participating lender.

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.

How many SMEs find it difficult to repay business loans?

Ever thought about taking out a loan for your business but hesitated because you were worried about meeting your repayments? Don’t worry, it’s a common concern. But some promising data has just come out that might help you put those fears aside.

You gotta spend money to make money, so the saying goes.

But what if your business’s cash flow has been heavily impacted this year due to COVID-19? What options do you have at your disposal?

Well, according to the Australian Banking Association’s latest report, $10 billion in new lending was made to small businesses in the three months to August 2021 – a 26% jump ($7.9 billion) on last year.

Which means as many as 50% of SMEs now hold a borrowing product of some sort.

So while taking out finance for your business might feel daunting, rest assured it’s something most businesses do, and there are a range of different finance products and options available to suit businesses of all shapes and sizes.

How difficult do most businesses find it to pay back loans?

So, here’s the good news.

Despite the difficult business conditions during 2021, just 1-in-6 small businesses (16%) found it difficult to meet their financial commitments.

That’s opposed to 41% of SMEs that found it “easy” or “very easy”, while 36% were indifferent.

And many of these businesses are taking out finance to help keep their doors open and operations running smoothly.

The top reason small and micro businesses gave for recently seeking finance was to ‘maintain short-term cash flow or liquidity’ (about 50%), while the second most common reason was to ‘ensure survival of the business’ (about 40%).

Replacing, upgrading or purchasing equipment or machinery came in third (20-30%).

Want to explore your finance options?

The SME lending space is an evolving one, with a surge of new lenders and products recently hitting the market.

And as brokers, we’re constantly upskilling and learning to make sure we stay abreast of the expanding options available to small business owners.

So if you’re an SME owner who might be in need of funding, get in touch today OR book a call with one of our specialists.

The sooner we can discuss your options with you, the better placed your business can be to hit the ground running in 2022 and thrive beyond.

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.

Don’t drown in Buy Now Pay Later debt this Christmas

Christmas is fast approaching and there’s a good chance you’ve started turning your attention to gifts for family and friends. But be careful this silly season: more than half of Buy Now Pay Later (BNPL) customers are struggling to pay day-to-day living expenses.

Christmas and overindulging: name a more iconic duo.

But one temptation to avoid indulging in this silly season is BNPL services such as Afterpay and Zip.

There are more than 5 million active BNPL accounts in Australia, which make up about 20% of online retail transactions.

And a new report by Financial Counselling Australia has revealed BNPL debt is causing significant financial stress to users who have overcommitted to the products.

The BNPL report, titled “It’s credit, it causes harm and we need safeguards”, shows ​​61% of financial counsellors say most or all their clients with BNPL debt are struggling to pay day-to-day living expenses.

“Financial counsellors are seeing people with multiple BNPL debts. They are really concerned that so many clients are using the product to cover essentials like food, medications and utility bills,” said Financial Counselling Australia CEO Fiona Guthrie.

“This is very worrying, especially as we head into Christmas which is traditionally a time of heavy spending. Buy Now Pay Later could leave people with a financial hangover come January.”

The emergence of the BNPL market

These days, BNPL can be used for small purchases such as a pair of shoes, to a night out at the pub, to larger purchases of up to $30,000 for cosmetic surgery or solar panels for your house.

“And as the market grows, financial counsellors are seeing more clients with BNPL debt.

“84% of financial counsellors surveyed said that about half, most or all clients presented with BNPL debt now. This compared to just 31% a year ago,” says Ms Guthrie says.

And it’s a trend that has the federal government worried – this week Treasurer Josh Frydenberg announced plans to reform and tighten the rules around new digital payment systems, including BPNL and cryptocurrencies.

Other important reasons not to overcommit to BNPL

While financial regulators and credit reporting agencies have been caught a little flat-footed by BNPL, one of the three main credit reporting agencies in Australia, Equifax, recently announced that BNPL accounts and transactions will be included in credit reports from 24 July 2021.

And most (if not all) lenders pay attention to whether or not you use BNPL services when they’re assessing your home loan application.

That’s because BNPL is still a credit liability that needs to be disclosed when applying for a home loan.

So if you have any doubts about whether a BNPL purchase might affect your ability to secure a home loan – or pay off your existing one – then feel free to get in touch.

We’re all about the Christmas cheer around here, and there’s nothing more cheerful than not suffering from a BNPL financial hangover once the silly season has come to an end.

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.

Netflix and too chill: house hunters cutting corners on inspections

More than half of Australian house hunters spend the same amount of time inspecting a property as they do watching an episode on Netflix, according to new research.

We get it. You see a house you like and you immediately want to buy it, warts and all.

But take a breath, as FOMO can be costly – with a third of recent purchasers admitting to “buyers regret”.

Not doing your due diligence on a property can also have implications when applying for finance if the lender’s valuation doesn’t come in at what you expected.

And it turns out that a lot of house hunters are leaping before they look right now.

A recent survey of 1,000 property owners by lender ME revealed that 55% of house hunters spent less than 60 minutes checking out the property they eventually purchased, despite it being one of the biggest purchases of their lifetime.

That’s about the length of a standard 55 minute Netflix episode.

The impact of COVID-19

Turns out we haven’t just become better at bingeing during COVID-19.

COVID-19 has also reduced the time buyers have to check out properties.

But it’s not always the purchaser’s fault.

About two-thirds (65%) of recent buyers said “real estate restrictions impacted their ability to inspect and purchase their property”.

And surprisingly, almost half (45%) of buyers restricted by lockdowns admitted to doorknocking vendors to ask for an inspection on the sly, as well as looking at photos and/or videos of the property.

Hidden issues

The lack of inspection time led to around 61% of Australian home buyers discovering issues with their property after moving in.

Around 40% of this group said they missed picking up the issues because they “lacked the skill or experience in inspecting the property”, while 33% simply “fell in love with the property and overlooked them”, and 18% were “impatient and concerned by rising prices”.

Overall, the top post-purchase problems included construction quality (32%), paintwork (28%), gardens and fences (23%), fittings and chattels (21%) and neighbours (17%).

Among owners who identified issues:

– 34% experienced a degree of “buyers regret” following the purchase.
– 58% would have paid less for the property had they discovered the problems earlier.
– 84% spent money fixing, replacing or improving the issues identified, or have plans to do so.

The moral of the story? Emotions are always involved when purchasing a home, which can cloud your judgement.

“Give weight to any niggling hunches that give you cause for concern and get a professional property inspector to do the looking for you,” says ME General Manager John Powell.

“It is also important to know your borrowing capacity in advance so you can buy your home with full confidence knowing you’ve got solid financial backing.”

Get in touch to find out your borrowing capacity

As mentioned above, it’s important to know your borrowing capacity before you start house hunting so you don’t stretch yourself beyond your limits.

So if you’d like to find out what you can borrow – get in touch today. We’d be more than happy to sit down with you, take a breath, and help you work it all out.

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.

FOMO factor: more Aussies looking to buy with mates or siblings

Ever thought about buying a property with a friend or family member? You’re not the only one. The rising cost of property and FOMO has led to more than a quarter of Australians considering buying a property with a ‘non-traditional’ partner.

Most of us long for a place to call our own.

But what do you do if the price of your dream home seems to be rising out of reach?

Well, more and more young Australians are shedding the “mine” mentality, and adopting the “ours” approach in order to get a foot on the property ladder.

In fact, according to a 1,000 person nationwide survey by CommBank, a quarter of home buyers have considered buying a property with their mates, siblings or parents because of increasing concerns about housing affordability.

And this co-ownership mentality is being strongly driven by the fear of missing out (FOMO), with 35% of respondents admitting to being bitten by the FOMO bug.

What’s driving the trend?

In a nutshell: housing affordability, with more than 60% of survey respondents worried about being priced out of the market.

Other driving factors for teaming up with a mate or family member include being able to buy a bigger and better property, as well as spreading the financial risk if anything goes wrong.

And then there’s additional pressure from family and friends!

More than 4-in-10 prospective buyers admitted to feeling pressure from friends/colleagues who have already bought, or their parents/family who want them to buy.

Co-ownership hurdles and challenges

So, if purchasing a property with family or friends is a viable option, why don’t more people do it?

Well, that’s because there are a number of challenges involved.

For example, the vast majority of respondents said they harboured concerns about putting their relationship with a family/friend under strain/pressure.

Meanwhile, 1-in-10 respondents didn’t even know co-ownership with friends or family was possible.

Another hurdle is that co-buying and co-owning can be a more complicated process.

But rest assured that if it is possible and suitable for you, we can help guide you through it, including making sure that all involved parties are across their financial and legal obligations.

Get in touch to explore your co-buying or guarantor options

Co-ownership with friends or family, or having a parent go guarantor for you, isn’t suitable or possible for everyone.

But there are people out there for whom it might be a good fit.

If you think that could be you, and you want to learn more, then please get in touch.

We’d be happy to run you through a number of possible structured options and opportunities, as well as the challenges, hurdles and pitfalls you’ll want to consider.

And if co-buying doesn’t look like a good fit for you, we can run you through a range of other buying options – including federal government schemes – that might be more suitable.

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.

Open banking is ramping up, so how are lenders using your data?

Open banking is here and it’s charging full steam ahead. So just how are lenders and fintechs using your shared data in this brave, new, data-fuelled world? A new report has shed some interesting insights.

With all that’s gone on over the past two years, one of the nation’s biggest banking overhauls in recent memory has slipped under the radar.

It’s called ‘open banking’, and it aims to allow you to easily and securely share your banking data with your bank’s competitors to make it more convenient for you to switch banks when you think you’ve found a better deal on a financial product.

For example, instead of spending hours and hours gathering documentation (such as bank statements, expenses, earnings and identification documents) to refinance your home loan, you could simply request that your current bank sends the info across for you.

But, like most things, it comes with a trade-off: you’ve got to share your banking data with the prospective lender, fintech or allied professional to make it happen.

So just how do they use your data?

Australian open banking provider Frollo has just published the second edition of its yearly industry report, The State of Open Banking 2021, which surveyed 131 professionals representing banks and lenders, fintechs, technology providers, and brokers across the country.

The report shows open banking data availability has accelerated dramatically.

In the first 10 months of 2021, 70 banks started sharing consumer data and 14 businesses became accredited data recipients – including three of the four big banks.

This is an increase from just five data holders and five data recipients in 2020.

And more financial institutions are getting ready to jump on board.

The industry survey shows 62% of respondents plan to use open banking data within the next 12 months, and 38% within the next 6 months.

So what are they using the open banking data for?

Well, the most popular uses can be grouped into three categories:

– Lending: income and expense verification is highly valued by 59% of survey respondents.

– Money management: multi-bank aggregation and personal finance management were highly valued by 50% of respondents.

– Verification: customer onboarding (49%), identity verification (38%), account verification (34%) and balance checks (30%) were all highly valued.

For open broking, get in touch

Now, it’s important to note that open banking isn’t the only way you can make life easier on yourself when it comes to switching up financial products.

That’s what we’re here for!

We’re an open book – always happy to check whether you can apply for a better deal on your home loan somewhere else.

And as you know, we pride ourselves on taking on the vast majority of the legwork, whether we’re harnessing the power of open banking or not.

So if you’d like to explore your options, get in touch today – we’d love to 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 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.

How well has your salary kept up with house prices?

You’ve probably noticed that house prices in Australia consistently outstrip growth in wages. But by how much? And what can you do to make sure you’re not forever chasing the great Australian dream?

Each generation faces its own unique set of challenges (and opportunities!).

And for the current crop, one big challenge can be breaking into the property market. Especially when you’re competing against older generations that have had at least a decade (or two, or three) headstart on the property ladder.

That’s not to say it can’t be done. Far from it. But it does require good planning, discipline, and motivation to stick to a plan.

Because historically speaking, and as you’ll see below, the longer you leave it, the harder it is to keep up.

How much have house prices grown compared to wages?

Over the past year there was a 2.2% annual increase in the Australian wage price index (WPI) – just short of the decade average growth of 2.4% – according to the Australian Bureau of Statistics.

Meanwhile, Australian housing values have jumped by more than 20% over the past year.

But hey, that’s just one year – and an absolutely bonkers year at that.

Let’s look at the trend over the past two decades to give us a clearer picture.

Over the past 20 years, wages have increased 81.7%, while Australian home values have grown 193.1%, according to this CoreLogic cumulative growth graph.

And here’s a state-by-state breakdown. As you can see, Tasmania has the biggest disparity between wages growth (79.6%) and house price growth (294%), followed by ACT, Victoria, NSW and then Queensland.

What does this mean for your next property purchase?

In short? It’s becoming tougher to save for a house deposit.

In the year to October, a 20% deposit on the median Australian dwelling value has increased by $25,417 to a total of $137,268, according to CoreLogic.

“With wages increasing just 2.2% in the year to September, it is difficult for household savings to keep up with this kind of increase,” explains CoreLogic’s Head of Research Eliza Owen.

“​​This tends to lead to less demand from first home buyers through periods of rapid property price increase.

“Another important implication of high house prices relative to subdued wages growth is lower purchasing power when it comes to mortgage serviceability over time.”

So what can you do about it?

Well, besides demanding a big pay rise from your boss, rest assured there are a number of options at your disposal.

For first home buyers, most states offer grants and stamp duty concessions/exemptions to help give you a leg up.

There’s also a number of federal government options, including the popular First Home Loan Deposit Scheme and New Home Guarantee initiatives, which on average enable first home buyers to make their home purchase 4 to 4.5 years sooner.

That’s right – 4 years sooner!

Then there’s the First Home Super Saver scheme, which allows you to save money for a first home inside your superannuation fund, which helps you to save faster due to the concessional tax treatment that super offers.

And for those of you looking to purchase an investment property, rest assured that there are ways to leverage the equity in your existing property to help you grow your portfolio.

So if you want to become less dependent on your annual wage for your wealth and retirement, and more invested in property, get in touch today.

We’d love to sit down with you and help make a plan to suit your current situation.

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.

How to protect your business and your customers from scams

When you pay a supplier or service provider, are you certain you’re paying the right account? You’ve got to be super careful these days, as scammers are compromising inboxes and requesting payments to a new account. Here’s how to protect your business and its customers.

It’s Scams Awareness Week 2021, and over the past year scams have hit Australian businesses hard, resulting in $128 million in losses.

And as alarming as that is, one-third of people who are scammed never tell anyone, so the true numbers are probably much higher.

So what scam is catching out businesses this year?

Perhaps the most dangerous scam this year is “spoofing”, which involves scammers compromising a business’s email correspondence by imitating either your, or your customer’s, email account or website.

The scammers then email you, or your customers, requesting that payments be made to a new account for all future invoices.

The unsuspecting business or customer then makes the payment – in this example $10,000 – not realising they’ve paid the scammers. This not only costs the victim money, but disrupts business cash flow and operations too.

How to pay and receive with confidence

While spoofing is on the rise, there are some simple steps you can take to make sure your business and its customers are sending money to the correct account.

“If you have staff, talk to them about this scam to make them aware of how it works and what to look for if they are targeted,” warns small business ombudsman Bruce Billson.

Small businesses are also being encouraged to register for PayID, use BPAY, or implement e-invoicing when paying or receiving payment for invoices to help beat scammers.

That’s because these payment services will show who you’re paying before you pay, ensuring money is going to the intended account.

“PayID for example is a unique feature that will help prevent scams for individuals and businesses,” explains Australian Banking Association CEO Anna Bligh.

“Unlike paying to a BSB and account number, PayID gives the user the ability to confirm the name of the account holder before you transfer your funds.”

And the good news is that PayID is easy to register for and use.

So far, there are more than 8 million PayID’s registered across Australia, many of which are for businesses.

“As banking becomes more digitalised, no longer do customers prefer to sign a cheque or pay with cash. As a result, we all need to be more cautious about scammers and utilise services that ensure our money is being sent to the right business or individual,” Ms Bligh said.

Other steps you can take to protect your business from scammers

Other steps to protect your business from scammers are to use services such as two-step authentication where possible, and double-check the authenticity of webpage links before you click.

“These are easy and simple steps to protect yourself from these very costly and abhorrent scams,” says Alexi Boyd, Chief Executive Officer at the Council of Small Business Organisations Australia.

And last but not least, if you ever have any doubts about whether you’re making a payment to the right account, or if you receive a request to change payment account information, simply pick up the phone and speak to your contact at that organisation.

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.

Think property prices will dip when rates rise? Don’t bet the house on it

Whether you’re looking to buy, sell or hold, there’s a good chance you’ve wondered whether the property market will tumble when interest rates rise, right? Today we’ll look at what happened to house prices when interest rates were hiked in the past.

Past performance does not predict future results – we’ve all heard that before.

But it’s also said that an understanding of history can help us prepare for the future.

So with all the recent talk of the Reserve Bank of Australia (RBA) increasing the cash rate in 18 months (or so), and fixed rates already going up as a result, now’s an important time to look at what has happened to property prices when interest rates rose in the past.

What does history show us?

History suggests that interest rates do not force property markets into booms or busts, rather it’s often affordability, local economic conditions, consumer sentiment, or access to lending that does, according to a Property Investment Professionals of Australia (PIPA) analysis.

The PIPA analysis looks at the six periods of increasing cash rate movements since 1994, and the corresponding national house price movements, which we’ve summarised below:

June 1994 to December 1994: Cash rate increase: 2.75%. House price increase: 1.1%.

September 1999 to September 2000: Cash rate increase: 1.50%. House price increase: 7.5%.

March 2002 to December 2003: Cash rate increase: 1.00%. House price increase: 35.7%.

March 2006 to December 2006: Cash rate increase: 0.75%. House price increase: 8.4%.

June 2007 to March 2008: Cash rate increase: 1.00%. House price increase: 8.9%.

September 2009 to December 2010: Cash rate increase: 1.75%. House price increase: 10.5%.

So what can we take from those figures?

Well, for starters, for those holding out for a cash rate rise in the hope of buying during a price dip, history is not on your side – not once did house prices fall during the above periods.

PIPA Chairman Peter Koulizos says the strength or weakness of property markets is often influenced by more than just cash rate adjustments.

“There has been much conjecture over the past 18 months that record-low interest rates are the singular reason why property prices have skyrocketed, when the cash rate was already at a former record low of 0.75% before the pandemic hit,” Mr Koulizos pointed out.

“There are clearly a number of factors at play, including some buyer hysteria I’m afraid to say, but one of the main reasons for our booming market conditions is easier access to credit, which was simply not the case two years ago when rates were also low.”

Most borrowers can also afford a rate rise: RBA and PIPA

The RBA doesn’t seem overly concerned about borrowers being able to afford their mortgages when the cash rate rises.

RBA assistant governor (economic) Luci Ellis recently told a parliamentary committee that the majority of borrowers were paying off more of their home loans than required by their contracts, particularly during COVID.

“People have been socking away money in offset accounts and redraw accounts during this period. And particularly where you had lockdowns, some people were not spending as much as they ordinarily would,” Dr Ellis explained.

“If and when rates do eventually rise, a lot of people will not actually need to raise their actual repayment, because they’re already paying more than they need to.”

It’s a sentiment shared by Mr Koulizos: “While we don’t expect rates to rise for a year or two yet – and when they do, they are unlikely to ramp up rapidly – the monthly mortgage repayments on an (average) $574,000 loan may increase by about $73 per week if the interest rate increased one percentage point.”

Get in touch if you’d like to know more

The moral of the story? You don’t have to sit around and wait for a cash rate increase to make your next move.

If you’re looking to crack the property market with your first purchase, get in touch today and we can run you through a number of government schemes that can help make it easier for you.

And if you’re already a homeowner and are concerned about what an increase in the cash rate might mean for your current mortgage (or next purchase), we’d be happy to run you through a number of options available, which could include fixing your rate, or putting extra funds into an offset account in advance.

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.

Are your cashflow needs in order ahead of the summer trading season?

The summer trading season poses a raft of tricky cash flow and stocking challenges for retailers at the best of times, let alone following a global pandemic slowdown. But if done well it can set your business up nicely for the good times ahead.

Ahh summer, how we’ve longed for you – especially this year as much of the nation reopens its stores and borders following another winter of lockdowns.

But there’s just one (more) challenge facing many business owners this year.

Fewer than half (49%) of Australia’s small businesses have the trading stock in place to make the most of the end of lockdowns, according to research by small business lender OnDeck Australia.

And to make stock ordering matters even more tricky, 44% of small businesses say their cash flow has suffered as a result of lockdowns.

The findings aren’t too different from a recent Prospa survey, which found that 37% of SMEs required access to finance to ride Australia’s reopening wave, with the average amount of financing $46,000 per business.

For SMEs less than five years old, that figure jumps to $58,000.

The importance of cash flow during the global pandemic

The top reasons cited in the Prospa survey for requiring additional funds included purchasing tools, equipment, or machinery; restocking inventory; and investing in digital software.

The Prospa survey also found that 87% of respondents feared opportunities could be missed without access to additional finance.

Mr Nick Reily, National Partnerships Manager at OnDeck Australia, said with the pandemic continuing to create significant disruptions to global supply chains, cash flow can be critical for small businesses in the re-stocking process.

“Today, businesses need to be able to act fast, and order stock well in advance given possible delays in procurement,” he explains.

“When businesses have appropriate cashflow funding in place, they are in a strong position to have conversations with alternative suppliers if their regular supplier cannot have stock to them on time.”

Get in touch to find out about cash flow solutions for your business

If you think you might have a gap in your business’s cash flow over the months ahead, then it’s important to start considering your funding options before the summer trading season really heats up.

The sooner we can take you through your options, the better your stock levels can be ahead of the Christmas and new year period!

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