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Do you Feb-fast?

Are you one of those people who Feb-Fast? Whereby you eliminate something from your diet in February? Namely alcohol, or in the case of Commissioner Kenneth Hayne, mortgage brokers…

Well, you’re not alone if you do.

50% of people surveyed said they do it too. (OK, so my survey was 2 people and one of them might have been drunk when answering… but a survey nonetheless).

Eliminating something from your world is a good thing, if the thing is a bad thing (had to re-read that line).

  1. For instance, getting rid of your home loan = a good thing.

  2. Getting rid of your home = bad thing.

At the moment, it’s a tough time for those selling their home due to increased days on market and lower values but a good time for those buying for the same reasons.

It’s a good time for those who are cutting out unnecessary spending and instead sending it to their home loan (or deposit account) BUT a very bad time for those taking on more consumer debt (yeah I’m talking about you Afterpay and credit cards).

If you have been living under a rock and you hadn’t heard, the royal commission drove a bus over us mortgage brokers in Feb BUT due to fierce lobbying (by the public, small lenders and the broking industry – plus a dose of common sense) the treasurer has opted to implement most of the recommendations made and importantly leaving the banks to foot the bill for a mortgage broker’s service… for now anyway.

This is great news as it ensures that competition is alive and well and that the banks don’t get a free kick by making you pay for our services!

As long as Labor doesn’t get into power, as they have agreed to ensure mortgage broking is decimated, by halving our incomes and forcing people into bank branches (Big 4) with reduced competition and higher interest rates as a result.

Also, there has been a lot of negative press about the Australian property market lately, in particular many articles about house prices collapsing (dramatic, I know) and about the drop-off in consumer sentiment as a result. Chicken? Egg?

I guess, with negative sentiment, a global recession knocking on the door and journalists constantly writing about how hard it is to even get a home loan these days, it’s no wonder that people are sitting on the sidelines and letting it play out.

I for one am still looking at buying because Australia still has massive net immigration each year and most want to settle in Sydney or Melbourne.

This bodes well for my long term buy and hold asset position so I only see current conditions as a time to buy good quality property with a long term view.

Plus, chances are I’ll get a better deal than a few months ago 🙂

And if you own property, don’t fret, it will bounce back. You can’t control the market but you can control your spending and how much you pay down your home loan by.

Whilst we have interest rates at all time lows (currently as low as 3.49%) it’s worth making extra payments on your home loan now so any future increases are of little consequence to you. I mean, there has been rate rises from almost 10 lenders in February alone, so it’s safe to say we might be near the bottom of this rate cycle.

There is talk of 40% decline rates in home loans, but it’s important you take this with a grain of salt, because at Fidget Money we have a less than 5% decline rate on our loans, because we know which lenders to place the loans with!

So, whilst it’s true that some people are getting stuck, having the right mortgage broker on your team is now more important than ever.

If you need help with anything finance related, your existing loan, or purchasing and investing in property or a good healthy pancake recipe (yes, I’m serious) let’s chat!

What Investors Need to Know in 2019

In late 2018, APRA lifted two significant restrictions against banks; a cap on the number of interest only loans they could provide and a limit on how much a bank could grow its lending to investors. As the above chart shows, these restrictions impacted investor lending.

Despite these developments, it will remains a challenge for investors to access and refinance loans in 2019 because of strict serviceability criteria. One specific issue investors need to consider is the cash-flow implications of moving to a loan with principal and interest repayments.

Why Does Cash Flow Matter?

In the past, many investors were able to lower their repayments and increase their cash flow by only paying the interest portion of their loan. Now, many investors will have higher repayments which could affect a number of areas within their investment(s) structure.

What as an Investors you need to know:

  1. Lenders all have widely varying policies for investment lending, so it’s critical to shop around and find the right lender

  2. Banks will be assessing your investment off your current situation instead of how things were when you first got your investment. It is imperative that you have everything in order

  3. Understand all the implications of switching between a positively and negatively geared investment

If you’re looking at either investing in property or refinancing an existing loan, give me a call to speak about your situation. I am here to help ensure that you’re maximising your investment returns.

What’s happening in the property market?

From a national point-of-view we’re in a housing downturn but conditions are highly variable between capital cities and regional areas.

Besides median house prices, an important set of data to consider is the extremely low vacancy rates across the country. These low rates demonstrate the very real demand for housing in Australia.

It does mean that if you’re looking to get into the market soon, having a large deposit is more important than ever. Doing so means that:

  1. You can save money on Lenders Mortgage Insurance (LMI)

  2. You can potentially access lower rates

  3. You’ll have an equity buffer against any temporary drops in property value.

In many respects it can be a great time to buy property.

So if you’re looking, give me a call and I’ll help you find the most competitive deal (even if you don’t have a huge deposit saved!)Contact us to guide you on your next purchase

Fidget Money

Level 20, 31 Queen St

Melbourne VIC 30000401 272 505

Australian Credit License Number 481374

Credit Representative Number 479206


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