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I thought you might be interested in, and possibly benefit from, this latest news.
Over the past few weeks almost 50 lenders have slashed their fixed rates - bringing the average fixed rate down to the lowest it's been in over 3 years!
If you've ever considered fixing all or part of your loans, now could be the time to discuss the fixed rate options available to you.
No-one has a crystal ball when it comes to interest rates, but if the idea of having your loan repayments set in stone for the next few years is comforting, we should talk.
Having a fixed rate can also help you budget and plan your cash-flow, because you're not exposed to interest rate rises. Of course you don't benefit from interest rate cuts, but some people do prefer certainty over savings.
Alternatively we are currently seeing some bigger discounts - maybe we can negotiate a better variable rate for you.
If you'd like us to investigate your financial situation, with no obligation of course, simply reply to this email now or give Equitimax a call on 02 9411 5322
I hope you are well and I look forward to talking with you soon.
P.S. If you have a friend or family member who might benefit from this latest news, please forward this link to them and I'd be happy to help them too.
Despite talk of a housing price bubble, ANZ research shows there is little chance of a housing market crash this year. The bank forecasts prices to remain on hold or fall slightly, but not crash.
In its recent property market assessment, ANZ argues that gains in house prices have been driven by lower interest rates and an increase in household income.
The ANZ ‘Australian Housing Chartbook’ reports: “A combination of lower interest rates, falling house prices and rising household incomes has improved Australian house purchase affordability over the past 12 months.”
“Despite the continued concerns about significant Australian house price overvaluation from some commentators, housing market fundamentals remain supportive.”
This is backed up by ANZ compiled data on international house prices, rental yields and house price-to-income ratio comparisons – showing Australian house prices have not deviated from international trends.
HSBC Bank chief economist Paul Bloxham agrees that there is little to fear from a price bubble. In the recent HSBC global research report ‘Australia in 2012’, he states there are three main reasons why prices won’t plummet: the majority of houses can service their debt; the undersupply of housing is growing at a greater rate than the decline in population growth; and there is strong demand for housing close to major urban centres.
“We remain unconcerned about the possibility of a large decline in housing prices this year,” concludes Bloxham.
What if...
Considering investing in property, but worried about all the things that might go wrong? Here we look at how to deal with a number of common ‘what if’ scenarios. What if I buy the wrong property?
Rental yield, capital growth, tenant quality and demand should be upmost in your mind when searching for properties, which means not allowing your emotions or personal preferences to influence your decision.
Think about what appeals to a tenant and what property types are in demand now and in the future. Researching your market is an important part of knowing what features tenants are looking for. What if I have problems with my tenants?
Screening tenants before signing contracts is the single most important tip for protecting yourself against this scenario. If you choose to hire a property manager to screen tenants, make sure their process is thorough and detailed, like using industry databases that list bad tenants. Conduct as many background checks as privacy laws allow and always ask for the tenant’s references to include company names (not just mobile numbers) to ensure their legitimacy.
Remain vigilant after the tenant has moved in by conducting regular general property inspections and promptly dealing with any issues that arise. Landlord insurance can cover you against damage by the tenant or loss of rent. What if I can’t get a tenant?
This is a common fear among first time investors but you only need look at the low vacancy rates for rental properties to realise you are unlikely to have trouble finding tenants. Of course nothing turns potential tenants off faster than a run-down, dirty house, so for the greatest tenant appeal ensure the property is in good condition and the rent is on par with other similar properties in the area. What if now is not the right time to buy?
Many property investors will tell you that ‘when’ to buy is nowhere near as important as actually ‘buying’. With a long term strategy in mind, so long as you take a reasonably cautious approach, a decent property is more than likely going to deliver growth in the long term. The longer you hold off, the more time you spend missing opportunities to enter the market and grow your wealth. What if I get the wrong advice?
You wouldn’t take advice from an unqualified doctor, so don’t take property advice from smooth talking sales people. Do your research and triple-check all the fine print before you enter purchasing schemes like rent guarantees and off-the-plan purchases. Remember, if it sounds too good to be true, it probably is!
Book Review
A Short History of Nearly Everything
by Bill Bryson
This book is a quest to understand everything that has happened from the Big Bang to the rise of civilization - how we got from there, being nothing at all, to here, being us.
Bill Bryson's challenge is to take subjects that normally bore the pants off most of us, like geology, chemistry and particle physics, and see if there isn't some way to render them comprehensible to people who have never thought they could be interested in science. It's not so much about what we know, as how we know what we know. How do we know what is in the centre of the earth, or what a black hole is, or where the continents were 600 million years ago? How did anyone ever figure these things out?
Bill Bryson takes us with him on the ultimate eye- opening journey, and reveals the world in a way most of us have never seen it before.
Fix or not?
A drop in fixed rates by a number of banks and lenders has increased the number of borrowers who are fixing their home loans.
If you decide to do the same, make sure you are fixing for all the right reasons not just the lure of a cheap rate. Be fully informed of the implications of locking into a fixed rate as you don’t want to later regret your decision if variable rates drop.
Your financial situation and personal preferences should always be the guiding factors in whether to choose a fixed or variable home loan. Both loan types have their pros and cons so talk to us for the best advice about what product suits your budget and lifestyle. The insurance of fixing
Choosing a fixed loan is similar to buying an insurance policy; it gives you certainty over a period of time. In the current climate of global economic upheaval, a fixed rate can be a good option if you are on a tight budget because it allows you to know exactly how much each repayment will be.
On the downside, many fixed loans charge for extra repayments and early payout (break fees). Seek advice before you sign the contract on how the break fees are calculated in case you have to sell or refinance within the set term. The more rates fall, the higher the break cost because the re-financer has to compensate themselves for the loss of re-lending the money at a lower rate. The ups and downs of variables
Variable loans have more features and greater flexibility than fixed loans but as the rate fluctuates according to various market conditions they can be risky if you’ve overcapitalised on your loan.
If your variable rate falls, you may be making lower repayments than if you had fixed your rate but if the variable rate rises, your monthly repayments increase. When choosing a variable it’s important to plan for the possibility of rate rises and be able to adjust your budget accordingly. Other options
Split rate and capped loans are hybrids between fixed and variable loans.
Split rate loans allow you to divide your loan between fixed and variable interest rates, which gives you a foot in both camps.
Capped loans are often offered as honeymoon or introductory loans and under this type of loan the interest rate is fixed for the capped period. During this period, the interest rate cannot go higher but it may go lower if the lender’s standard variable interest rate falls below the capped rate.
Technology Trends
Just as the fax machine has been relegated to dinosaur status, so too will email be considered old hat. Analysts predict that 2012 will see technologies become more social, more connected and increasingly voice controlled.
Embracing the rapid movement in technology is not always easy but investing the time and effort to take on a new technology almost always pays dividends. Let’s look at what’s in store for us over the coming year. Voice Command
The success of Siri (a speech-recognition ‘personal assistant’ that's built into all Apple iPhone 4S smartphones) will prompt this type of technology to be used in other handsets, computer tablets (mobile computers), PCs and on websites.
Email on the Out
The popularity of social networks and messaging products marks the decline in email usage. Downloading services that allow the sharing of links has also proved quicker and more smart-phone-friendly than email. App on the Up
App stores will grow in the number of available options as more companies come forward to help free us from content overload. Windows 8 - Touch
Windows 8 Touch will bring ‘touch’ into the mainstream PC market, narrowing the gap between notebooks and tablets. Users of Windows 8 devices will be able to tap and swipe their way to touch-based applications via big, touchable panels. Social media
Social media will continue to grow and insert itself into even more aspects of daily life, particularly those that are geared to photo and video based interaction. Social networks will add more features and get even more competitive, with Google+ trying to dominate the market. Mobile capabilities
There will be an increase in mobile phone capabilities in every aspect and a growing number of internet users will demand access to content through mobile devices. Phone hardware and software will become more sophisticated and phone video will continue to improve in quality. Getting Thinner
Our TVS, PCs and tablets are thin – so too will our laptops become as thin as manufacturers can allow. The emphasis will be on laptops that look great, run quietly, and are easier to carry.
Did you know?
If you apply for a fixed rate loan, the advertised rate offered is current only for that day. By the time your home purchase happens, that rate may no longer be on offer unless you opt for a Rate Lock. Some lenders offer this service automatically, while others require you to pay a fee to put the rate lock in place.
Article writtne by Lesley Parker - Sydney Morning Herald November 16, 2011
Borrowers should be cautious about taking a fixed-rate home loan now.
The rush of borrowers towards fixed-rate loans at a time when official interest rates have started to fall has Australia's credit ombudsman worried.
With one interest rate cut in the bag, Ombudsman Raj Venga has urged borrowers to carefully consider the implications of locking in a home loan rate - in particular, the possible ''break cost'' if they discharge the loan early to refinance or sell.
Housing finance data released last week showed that fixed-rate loans jumped from 5.6 per cent of all loans in August to 7.9 per cent in September as unusually cheap fixed rates enticed borrowers.
But Venga, who handles complaints about non-bank lenders, says although fixed rates are often seen as a way of reducing the risk of rising interest rates, ''borrowers should be aware that they may incur substantial break costs in a falling interest rate environment.''
In the past, fixed-rate loans have resulted in a spike in complaints when variable rates later drop significantly and people try to refinance.
While exit fees have been banned on variable-rate loans, lenders can still charge break costs on a fixed-rate loan to recover the amount they'll lose if the borrower leaves early.
If rates are falling and the financier has to re-lend the money at a lower rate, they're entitled to recompense. The more rates fall, the higher the break cost.
''Break costs can and do sometimes run into tens of thousands of dollars,'' Venga says.
They might be payable if the loan is refinanced or discharged within the fixed-rate period, possibly because the property is being sold; if additional funds are sought, which would require the existing loan to be discharged; and if a lump-sum repayment is made during the fixed-rate period (though some lenders allow you to prepay up to $10,000).
Before signing a contract, borrowers should seek advice on how any break costs would be calculated, Venga says.
If you're already on a fixed-rate loan and are thinking about refinancing, ask first for an indicative payout figure, making sure this includes any break cost. Remember that this payout figure might change if you don't act straight away.
Those who fixed in August and September won't have cause for regret yet. The typical fixed rate was 6.6 per cent to 7 per cent then and even after the recent rate cut the average big-four variable rate is 7.55 per cent - though some people qualify for discounts of 0.5 to one percentage points.
However, those who locked in about 8 per cent in November 2007 - when fixed-rate loans hit a record 24 per cent of all borrowing - know how costly it can be if you need to break a loan early when rates are falling.
A year after they fixed, the global financial crisis hit and rates plummeted, sending break costs soaring. Key points
❏ Fixed-rate loans should be used for certainty not as a ''bet'' on interest rates.
❏ Break costs can be hefty if you exit early when rates are falling.
❏ Selling or refinancing may incur a break cost.
❏ Extra repayments or loan top-ups can also trigger break costs.
