Tuesday, July 10, 2012

Newsletter - July 2012

Equitimax Pty Ltd


July 2012

Please find your Jul/ August newsletter below. If you have any questions or changes please email john@powerport.com.au
There is a lot of media hype about out-of-cycle interest rate movements but little in the way of explanation. We have fielded many questions from clients about why lenders are moving their interest rates out of cycle with the RBA and what it means for home owners.
Our page two article attempts to answer these questions by explaining the case for both sides of the argument. To understand more about this topic, your mortgage broker is always a good person to turn to for reliable unbiased advice.
In this issue we also look at how to build equity in your home loan quickly - page 3 - and the changing face of the Aussie household - below. Our page 4 article explores the topic of empathy and how important it is for effective relationships and communication.
Kind Regards,

Robert Ward & John McLennan
Directors - Equitimax Pty Ltd

Robert Ward & John McLennan
Equitimax Pty Ltd
PO Box 929
Chatswood NSW2057

Tel: 02 9411 5322
Mob: 0417 448 691
Fax: 02 9411 5200

In This Issue

1. A Typical Home In Profile

2. Out-Of-Cycle Rate Hikes

3. Book Review

4. Useful Tips When Purchasing A Property

5. Finding Empathy

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A Typical Home In Profile
The stereotypical Aussie family home made up of mum, dad and a couple of kids is on the wane, as couples without children fast become the family norm.
As our population ages and baby boomers become 'empty nesters', it is predicted that couples without children will increase the fastest of all family types, making up 43% of all families by 2031.
Other big changes include a massive increase in the number of Australians living alone - again largely a result of an ageing population. This type of household is expected to increase by up to 91% over the next 25 years, representing the fastest growing household type over the period 2006 to 2031.
The number of people in our households will continue to decline until it reaches an average of between 2.4 and 2.5 by 2031. By 2016 Australia's household size is projected to be the same as Japan and New Zealand and larger than England (2.2) and Scotland (2.1).
Although there will be fewer people per house, the number of households continues to rise. Estimates place the number of Australian households at over 11 million by 2031, an increase of 4 million households since 2006. Over the same period, Australia's population is projected to increase by 39% to 28.8 million people.
So what picture does this paint for property investors? It shows there will be plenty of demand for property into the future but it will pay to keep an eye on projected demographics when planning your next property purchase.

Out-Of-Cycle Rate Hikes
There's a very public stoush going on between the banks and the politicians about out-of-cycle rate rises.
While each side argues its case, consumers are left confused about whether they are getting a raw deal.
Since the RBA began cutting interest rates by 125 basis points from last November, there has been a shift in the tradition of lenders moving their rates in line with the RBA. Lenders have instead chosen in many cases to withhold part of each reduction and to make their rate announcements up to two weeks after the RBA's first-Tuesday-of-the-month announcement.
We have lately fielded many questions from confused clients, asking 'who is driving rates', 'am I being ripped off', 'why are out-of-cycle rates rises happening'?
Here we'll take a look at both sides of the argument and what it means for you as a mortgage holder.
The government argues ...
The banks are protecting their profits at the expense of consumers. We've all heard Treasurer Wayne Swan's very public criticism of the banks for moving out of cycle with the RBA. He has suggested they have a responsibility to match the RBA's rate cuts and their 'high returns' give them the profitability to be able to do so.
The banks argue ...
They have always been independent of the RBA when setting their interest rates and they are under no obligation to follow the Reserve Bank.
Their profit margins have been hurt by an increase in 'funding costs' (the amount of interest cost paid by a financial institution for the money they have acquired from various sources), largely as a result of Europe's debt problem and they have a duty to shareholders to adjust rates based on these pressures.
The Australian Bankers Association has warned that lenders can't follow the Reserve Bank's cash rate moves without risking the stability of Australia's financial system. "The risk is that if international investors become concerned that the banks in Australia are politically constrained from managing their higher costs, they will perceive us as riskier and they will reflect this in what they charge for the money we raise, adding further funding cost pressures on the banks, and ultimately, customers."
We say...
If you feel unhappy with the rate movement your lender has made, give us a call to find out if there is a better alternative out there for you. When you come to us you can be sure we will help you find the best deal, answer your questions honestly and provide clear unbiased advice.

Book Review
A young woman walks into a laboratory. Over the past two years, she has transformed almost every aspect of her life. She has quit smoking, run a marathon, and been promoted at work. The patterns inside her brain, neurologists discover, have fundamentally changed.

Marketers at Procter & Gamble study videos of people making their beds. They are desperately trying to figure out how to sell a new product called Febreze, on track to be one of the biggest flops in company history. Suddenly, one of them detects a nearly imperceptible pattern--and with a slight shift in advertising, Febreze goes on to earn a billion dollars a year.

An untested CEO takes over one of the largest companies in America. His first order of business is attacking a single pattern among his employees--how they approach worker safety--and soon the firm, Alcoa, becomes the top performer in the Dow Jones

Useful Tips When Purchasing A Property
How to build equity in your home quickly
Every home owner has the chance to build equity in their home over time, but here's how to speed up the process.
Equity is the difference between the market value of your property and the amount you still owe on your loan. The quicker you build equity, the earlier the opportunity to invest further, expand your portfolio and build your wealth.
Buy at a good price
At the start of your investing career, it doesn't hurt to knock $25-50k off an average priced home. Paying a lower price not only saves money up front, but also long term through reduced interest payments.
Mastering the art of negotiation is your best bet for knocking down the purchase price. Start by doing your sums and knowing your limit, but never let on to the seller what your top price is. Place a time limit on your offer and tempt the seller with something like a quick sale. Stay calm during the process; keep a clear mind and a cool heart.
Buy in an up-and-coming area
Look to buy your property in areas that market demographics show are just about to boom or that will soon receive new infrastructure or an injection of new business. It can take time to put in the research but the payoff is you will be able to buy a property for a reasonable price and it won't be long before its value starts to rise.
Buy a property that can be improved
Renovation can increase the value of a property but be aware that it takes time, money and experience. For those would-be-investors not able to make this kind of commitment, the alternative is to buy a property that only needs a bit of cosmetic work. Freshening up the exterior, a lick of paint, new storage areas or a simple bathroom/kitchen tidy up will cost less and can significantly improve property value.
Pay your loan off sooner
Aim to make your initial down-payment at the time of purchase as high as possible. Then look for ways to repay your home loan early: increase the regularity of your repayments, make larger repayments and make lump sum repayments (ensure your loan has the flexibility to allow this without penalty). Another option is to use the interest offset accounts that come with many loans - these reduce the amount of interest that is charged by offsetting your savings to the value of your loan.
As your mortgage broker we are happy to guide you through various strategies for building equity in your home loan.

Finding Empathy
Despite the common adage 'never judge a man until you have walked a mile in his moccasins', many of us are too quick to judge others without considering the full picture.
How long since you have given someone the benefit of the doubt rather than forming a quick judgement? How long since you stopped to take in someone else's perspective? If your answer was 'today', then congratulations, it means you have what it takes to be empathetic - to place yourself in the shoes of another person and be able to identify and understand their situation.
It has been said that a common characteristic of people who are successful as business leaders, teachers, parents, spouses and healthcare professionals is their ability to be empathetic. By gaining an insight into what others are feeling and thinking, they are able to create bonds of trust. They are also able to understand how or why others are reacting to a situation and use this to inform their decisions.
Empathy is sometimes wrongly confused with being too soft, giving in or not being assertive. You can be empathetic and yet disagree with another person - it simply means you are in tune with what they are going through and respond in a manner that acknowledges their thoughts, feelings or concerns.
How to develop empathy
You can strengthen your ability to emphasise by learning to listen attentively and ask questions.
To listen attentively means putting your complete focus on that person without getting distracted. For example, if you're doing chores and your child wants to tell you something, stop what you're doing and turn to your child. If you need a few minutes to finish that task or email before comfortably being interrupted by an employee, then let the person know that.
To be curious; to ask questions is to learn what the person is feeling and to gain a clearer understanding of the full picture. It also demonstrates you want to know more and you care about what they have to say.

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Disclaimer: This newsletter is intended to provide general news and information only. Readers should rely on their own enquiries before making any decisions regarding their own interests. Please do not rely on any part of this newsletter as a substitute for specific legal or financial advice. All material is copyright 2012.

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