Current Market Conditions - Premium Broker's Perspective

The Reserve Bank has cut interest rates, fixed rates are dropping, rental returns are increasing and the supply of quality properties on the market are very low. This means that home affordability is up and quality properties are being snapped up very quickly. In our opinion there is no doubt that the property market is up, maybe by as much as 10%.

RP Data Market Indicators show that Sydney auction clearance rates are now around 75% up from 50% a year ago. New listings are down 12.7% from a year ago and the average time a property is on the market is down to 35 days.

Many economists have predicted that it was Sydney's time for some capital growth and it appears to be happening right now.

What to do if you are looking for property now.

RESEARCH

Does as much research as you can - Ask us for some Free RP Data Reports, attend as many open houses and auctions as you can.

PRE-APPROVAL

Make sure you have a pre-approval so you can jump on a property as soon as you can. You need to be more prepared than those other buyers in the market.

CONSIDER A PRE-AUCTION BID

Most vendors will consider an offer prior to auction. It saves them time an money. Don't be afraid of making an offer prior to auction . . . . just make sure you have an approval and the contracts are checked by your conveyancer or solicitor.

UPFRONT VALUATION

If you need act quickly, then Premium Broker can help with obtaining an Upfront Valuation. We have access to a number of lenders who allow us to order the Valuation upfront. This can save days that can be critical to obtaining your dream house . . . . . . before someone else does.

Newsletter - July 2012

Hello

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

Equitimax Pty Ltd PO Box 929 Chatswood NSW2057 Tel: 02 9411 5322 Mob: 0417 448 691 Fax: 02 9411 5200

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

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.

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. Click here if you would like to unsubscribe from future newsletters.

Reserve Bank Cuts Rates by further 0.25%

Sydney Morning Herald 05/06/2012

The Reserve Bank has cut its cash rate by 25 basis points, marking the biggest back-to-back monthly reductions since the depth of the global financial crisis.
The central bank today dropped its key lending rate from 3.75 per cent to 3.5 per cent - its lowest level since November 2009. The onus will now fall on commercial lenders to pass the reduction on to borrowers.
Today’s cut was expected by 13 of 27 economists polled by Bloomberg, with four of them tipping the RBA would repeat May’s surprise 50 basis-point reduction. The rest predicted no change.

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The central bank has now lowered its lending rate four times in its past seven meetings as slowing economic growth gives it more room to spur demand without risking a surge in inflation.
The outlook for global growth, though, is dimming almost daily as Europe struggles to avoid a break-up of the eurozone, the US revival falters and China’s expansion slows. Financial markets bet that combination will result in more RBA interest rate cuts in coming months.
The Australian dollar moved up from 97.54 US cents to 97.83 US cents immediately after the decision was announced, and local shares rose slightly.

Read more: http://www.smh.com.au/business/rba-cuts-rates-to-35-20120605-1ztil.html#ixzz1wtGZhe39

Westpac hints at four rate cuts this year

A Westpac bank economist has predicted as many as four more rate cuts before the end of the year.
Westpac chief economist Bill Evans has told Fairfax that the Reserve Bank could drop the official cash rate as low as 2.75% by the end of 2012. Evans said economic conditions are fragile, necessitating deep rate cuts.
"You can't ignore what's going on in the market. There's a fair degree of disquiet. Monetary policy is too tight given the shock to confidence and fragility of the economy. Retail has lost its momentum, house prices have edged off, capital spending is quite soft excluding mining," Evans said.
Evans forecast successive 25bp cuts in June, July and August, followed by one more before the end of 2012.

ANZ Media Release - 0.06% increase

Media Release
For Release: 10 February 2012

ANZ February 2012 Interest Rate Review
- variable rates for mortgages and small business increase by 0.06%pa;
three year fixed rate mortgage cut by 0.15% to 5.99%pa -

ANZ today announced it will increase interest rates for variable rate mortgages and small business lending by 0.06%pa while reducing the three year fixed rate package mortgage by 0.15%pa maintaining competitive interest rates for customers.

The decision follows ANZ’s monthly interest rate review which considered:
• the intense pressure on retail and business margins in recent months being sustained following:
- increased competition among banks for consumer and business deposits that has provided higher relative returns to ANZ’s 2.9 million deposit customers;
- higher costs paid by ANZ for $8 billion in long-term wholesale funding raised since October 2011 as a result of the economic and financial crisis in Europe which has made money more expensive for all banks to borrow.
• the stable monetary policy setting announced this week by the Reserve Bank of Australia following successive reductions in the cash rate in late 2011.
• the competitive environment, the impact of higher rates on customers and on loan growth, and also the need to act in a considered way with growing pockets of weakness in the Australian economy.

Effective 17 February 2012, ANZ’s new standard variable mortgage rate will be 7.36% pa
(7.46%pa comparison rate). New small business rates are effective from 17 February.

The 0.06% increase will add $6.50 per fortnight to the average home loan of $280,000. For small-to-medium sized business customers, the increase will add $3.00 per fortnight to an average loan of $130,000. Most customers will not need to make additional repayments with 85% of ANZ mortgage customers already ahead on their repayments.

ANZ will cut its three year fixed rate mortgage by 0.15% to 5.99%pa as part of its Breakfree banking package. ANZ’s Breakfree package currently provides the lowest fixed rates of the major banks across two, three, four and five year terms. ANZ CEO Australia Philip Chronican said: “This month we faced a serious dilemma in our review, balancing the rising cost of bank funding including deposit customers’ interests in receiving highly competitive rates, and the expectation of borrowers that we keep lending rates as low as possible.
“In December and January we absorbed the additional funding costs in the hope that funding pressures would ease and that no change in lending rates would be necessary. However, margins in retail and business banking have now been squeezed for a number of months and we’ve taken the difficult decision to pass on part of the higher costs to customers while we also get on with taking action to reshape the bank for tougher times.

“Our new monthly interest rate review process recognises that the Reserve Bank’s cash rate alone is not an accurate reflection of bank funding costs, particularly since the global financial crisis which has left all banks with the task of raising funds in volatile global markets and through stronger competition for deposits.
“This change comes with a duty to explain to our customers what drives our decisions and provide greater transparency about our funding costs.
“We also want to assure customers that we are committed to providing competitive products and we hope there will be an opportunity to lower rates in the coming months as greater confidence returns to global funding markets,” Mr Chronican said.
Mr Chronican added: “There has been much debate on banks in recent days. While we recognise our decision may leave some people frustrated and even angry, we believe Australia needs safe, well-run commercial banks that aren’t a burden on taxpayers and that can continue to lend. The alternative of weak, constrained banks that we see in the United States and in Europe is a recipe for stagnation and recession in Australia.”

ANZ has a number of options available to help customers concerned about interest rates manage their repayments. These include extending loan terms or switching to a fixed rate loan to provide greater certainty on future repayments, or to an ANZ Simplicity PLUS home loan, with fewer features at a lower interest rate. Customers who would like assistance should visit any ANZ branch, log on to anz.com or contact ANZ on 13 13 14.
Today’s monthly interest rate review follows an announcement by ANZ in December 2011 that it would review variable rates for retail mortgages and small business lending on the second Friday of each month.










 


• ANZ Criteria used to Assess Interest Rates
1. Ensuring attractive returns for depositors: ANZ is committed to providing customers with competitive returns and absolute security for their savings.
2. The cost of wholesale funding: This covers the interest we pay on funds from wholesale markets. The cost of these funds has become more volatile and expensive since the GFC and has been elevated in recent months as a result of the European debt crisis.
3. Our competitive position: ANZ is determined to remain competitive by attracting customers, winning business and managing our costs.
4. Our customers’ ability to afford loan repayments: We are committed to pricing loans and lending in a responsible way and giving consideration to the financial health of our customers, the economy and the banking system in Australia.
5. Regulatory requirements: As a bank, ANZ works within a strong prudential and regulatory environment. For example, we must hold capital reserves and levels of liquidity to operate safely and securely for customers.