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October 2013

 

Welcome to our October newsletter


At its monthly board meeting, the Reserve Bank of Australia (RBA) decided that the official cash rate will remain on hold at 2.50 per cent for the month of October.

This decision was widely predicted, with the RBA's monetary policy appearing to be having a positive effect, as consumer and business confidence shows an improvement and the real estate market continuing to recover.

'Overall, global financial conditions remain very accommodative' RBA governor Glenn Stevens said. 'Changes in the outlook for US monetary policy have increased volatility in the financial markets, but long-term interest rates remain very low and there is ample funding available for creditworthy borrowers' he said.

While the news is positive overall, according to Mr Stevens, the Australian economy has been growing a bit below trend over the past year in line with the economy adjusting to lower levels of mining investment and unemployment rates edging higher. This could be good news for property buyers as further cuts to the official cash rate at future RBA meetings cannot be ruled out as a result.

'There has been an improvement in indicators of household and business sentiment recently' Mr Stevens said 'though it is too soon to judge how persistent this will be. Inflation has been consistent with the medium-term target. With growth in labour costs moderating, this is expected to remain the case over the next one to two years, even with the effects of the lower exchange rate.'

The Australian dollar rose recently, but is still 10 per cent below its level in April. Mr Stevens said 'a lower level of the currency than seen at present would assist in rebalancing growth in the economy' and this may also have an effect on the RBA's decision to cut rates further in future.

'The easing in monetary policy since late 2011 has supported interest-sensitive spending and asset values.' He said. 'The full effects of these decisions are still coming through and will be for a while yet. The pace of borrowing has remained relatively subdued to date, though recently there have been signs of increased demand for finance by households. There is also continuing evidence of a shift in saver's behaviour in response to declining returns on low-risk assets.'

Based on Australian Bureau of Statistics housing finance commitments data, the number of mortgage commitments for new housing rose by more than 50 per cent over the 12 months to July this year and with the RBA encouraging record low interest rates, the outlook remains positive for property buyers and investors.

Sydney and Melbourne property markets appear to be driving a national recovery. Sydney housing auction clearance rates have been at or above 80 per cent for most of the year and Melbourne's have hovered around 70 per cent and are rising. Sydney property prices have climbed 8.2 per cent in the past 12 months and those in Melbourne 5.3 per cent, with the average capital city home price rising 1.6 per cent to $500,000 in September alone.

Despite increased activity in the construction sector, housing stock levels remain low which together with historically low interest rates, is a major factor in increasing home prices. Research released during the week shows the total number of properties on the market is down 28.9 per cent in Sydney and by 13.8 per cent in Melbourne from the same time last year.

The rapid increase in home prices has given rise to speculation regarding a property price 'bubble'. However, most analysts agree that this is unlikely given that housing supplies are also on the rise and this should help to keep housing price rises in check.

For more information about how the current low interest rates may affect your financial position and property investment decisions, contact us today.

Sincerely, the Team at Great Aussie Dream

 
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Australia’s new comprehensive credit reporting regulations


How will they affect you? In March 2014, Australia will be subjected to new rules and regulations with regard to our credit reporting system. These rules and regulations will affect how banks and lending organisations go about approving loans and credit facilities for every day consumers like you and me.

The new regulations are designed to give lenders access to more information about your credit history so they can more accurately assess your credit worthiness and reduce the risk of you defaulting on a loan or credit card.

What's new?

As of March next year, lenders will be able to review your repayment history as far back as December 2012. They will be able to make a more detailed assessment of your financial situation and use the information to calculate their risk.

In the past, lenders were only able to access a limited amount of information such as major credit infringements and view any credit application enquiries. They were not able to find out whether your credit application was approved or declined, or find out if you made your repayments on time.

In the future, as well as serious credit infringements, lenders will be able to see the last 24 months of your credit repayment history on all open credit accounts in your name. That means they will be able to see your payment history on your rent, telecommunications accounts including your mobile phone, your energy and water bills, credit card payments, personal loan and mortgage repayments and so on.

The information they can access about you will include the amount of credit accounts you have open, the date the accounts were opened/closed and your repayment performance on each account. They will be able to use this evidence to decide whether or not you have too much debt and can afford to take on more.

Why the changes?

These changes are being made so that lenders can get a better idea of your financial situation and therefore make a more informed decision about your capacity to repay your loan. The changes are designed to reduce the number of people defaulting on loans and therefore lower the costs of credit for everyone. In terms of benefits to the consumer, this should help to reduce interest rates on lending facilities like credit cards in the long term.

What does it mean for you?

If you are not very conscientious about keeping up to date with your bills, you may give a lender the impression you are a bad credit risk when you are not. A payment that is as little as five days late could show up on your credit history report as a credit infringement.

So it is now more important than ever to keep your finances in order. If you pay your bills on time, this reform will be of benefit to you because lenders and credit providers will be able to see you as a model borrower, helping your chances of obtaining a loan or credit facilities.

Protect your credit rating.

In light of the new comprehensive credit reporting rules, a few simple precautions will help to ensure you maintain a good credit rating. First of all, always pay your bills on time. Organising to pay your bills using your bank's automatic payment system is a very good idea. You can also get applications for your mobile phone that remind you to pay your bills on time.

Be aware, educated and informed when helping others to obtain credit in case they default. If you are a renter, make sure you pay all of your utility bills when you change residence and if you are living in share accommodation, ensure your name is removed from any bill commitments when you leave.

Last but not least, regularly check your credit report. We can help you with this, and doing so will help you keep track of the information lenders can access about you. You can also take action if any mistakes are recorded by accident.

If you would like more information in relation to how these changes may impact you, please call the office.

 
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To fix or not to fix? Fixed interest rates explained


Home loan interest rates are currently at their most competitive levels for some time. We are seeing loads of options for home buyers, in particular some great fixed rates. So should you lock in to a fixed interest rate mortgage or are you better off with a variable rate loan? What are the pros and cons of getting a fixed interest rate loan now?

The benefits.

The major benefit of a fixed interest rate mortgage is stability. You can usually lock in your interest rates for a period of one, two or five years and be protected from interest rate rises during your fixed interest rate period. It means you know exactly how much your monthly mortgage repayments will be and this makes money management easier.

Fixed interest rate mortgages are popular with first home-buyers and first time property investors for this reason. Fixed rates are a great idea when the market is volatile and interest rates are on the rise, because you always know how much you will have to pay and may make great savings if interest rates go up whilst you are in the fixed interest period of your loan.

So if you fix your loan interest rate whilst rates are at the bottom of the market, you can reap the benefits of a secure, low rate while the rest of the market bears the risk of higher interest rates being introduced. The trick is to fix your interest rate whilst they are at their lowest point.

At the moment, fixed rate loans are being offered at up to a quarter per cent lower than variable rate loans and it may make them sound like a good idea. But the recent market trend has seen interest rates falling and the current difference in savings between a fixed interest rate and a variable interest rate may not be enough incentive to lock in your rate at this time.

The disadvantages.

Fixed interest rate loans have some important policies you need to be aware of.  Picking the right time to fix your interest rate is important. If you pick the wrong time to fix your interest rate, you could end up paying a lot more interest than you would otherwise have to pay on a variable rate mortgage if interest rates happen to fall. That could leave you wishing you had chosen a variable rate loan instead.

Fixed interest rate loans also carry some other disadvantages. They can carry hefty exit fees, so if interest rates fall while you're in the fixed period of your loan, you are pretty much locked in.

They can also be basic, no frills packages that may prevent you from paying your loan off faster.

If you have a variable interest rate loan and interest rates fall, you may be able to afford to make extra repayments to get ahead on your loan, but this usually isn't possible with most fixed interest rate mortgages. Making extra repayments early on in the loan can make a big difference to how much interest you pay down the track. And you can usually redraw the money if you need it.

So, to fix or not to fix? Sourcing the best mortgage involves more than just looking for the cheapest rate. There are other things you need to consider such as the ongoing fees and charges, the loan's flexibility and the level of service the lender provides.

And with fixed interest rate loans, timing is everything.

The best course of action is to consult your mortgage broker. That way, you can get some great information about timing the market, find out which mortgage is right for you and ensure you get the best deal available to suit your personal circumstances.

 
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Buying off the plan


5 tips for a successful purchase.

First time homebuyers and property investors love value for money. There’s nothing like buying a property for less than its market value to get ahead on the property ladder. That’s why buying a property ‘off the plan’ can offer some real advantages.

In most states buying off the plan incurs considerable stamp duty savings. Potentially, capital growth on the property can occur prior to settlement as most developers offer lower prices and financial incentives to get in on the project early. So buying off the plan can offer more opportunities to profit, but there is a lot more to consider when buying off the plan. These tips will help you focus on what's important and assist in avoiding some of the common pitfalls when buying off the plan.

1. Make sure you pay the right price.

Getting in on a development early can help you to get a better price because developers need fast, early sales to get a project off the ground. Together with stamp duty savings and government incentives, this could put you well ahead on the value of the property you're buying.  But there is no guarantee that the price you pay will reflect the market value of the property when it's completed.

Do your homework about the area you are buying in. Consider other developments in the area and the number of new properties that will be coming on to the market at the same time as yours. Oversupply could reduce the value of your property so check with the council to see what other developments are underway, talk to local real estate agents and seek professional advice.

2. Research the developer and builder.

An experienced developer with a good reputation is always a wise place to start. Ask to see some of the other projects the developer has completed and talk to the property owners if possible. Visit the company website and learn what you can about the developer's business.

Once satisfied about the reputation of the developer, ask for the license number of the builder that will be used to construct the property. You can then run a check on local government websites to make sure the builder is qualified to complete the project and has no outstanding disciplinary actions or prosecutions against his business name.

3. Understand the terms of the contract.

When you buy off the plan, you are buying a property that does not yet exist and may take as long as two years to complete. In an off the plan contract, you are provided with plans and specifications of what the developer intends to build and construct as the finished product.

The contract should provide highly detailed plans that include specifications for every item involved, from a floor plan layout with measurements in millimetres, to specifications for the fixtures and fittings, right down to the name and model number of the appliances that will be installed in the kitchen. Also make sure your contract includes specifications for all common areas, lifts, gardens and car parking and specifies additional costs like annual strata fees.

Off the plan contracts must also include a 'sunset clause' which defines the amount of time the developer has to complete the project. Make sure the time allowed is realistic, an 18 month sunset clause is common, so you should be wary of longer timeframes.

It's important that the words of the contract match your understanding about what you will be getting for your money. Before signing or leaving your deposit, go over it with a legal professional who understands property law.

4. Choose wisely.

Buying off the plan gives you more opportunity to get the property you want because you get to choose from a variety of properties on the plan. Make sure you choose a property with a good aspect and check local building approvals to make sure your view won't get built out by another development.

When buying off the plan, the right choice of property can make your purchase worth more than the others in the same development whilst actually costing the same amount. This maximises its potential for capital growth.

5. Make sure of your financing before you sign the contract.

With up to two years between placing your deposit and settlement, it may be tempting to postpone organising the finance until after you've signed the contract, but this could result in you losing your deposit if finance cannot be arranged.

Many lenders provide long term loan approvals for off the plan purchases. Talk to us about how we can assist you in organising finance for off the plan purchases or your other property investments, to make sure you'll always come out on top!

 
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Wine review

2010 Koonara The Seductress Shiraz

Not only does this superb wine have a very enticing name, the 2010 Koonara The Seductress Shiraz is one of the finest table wines from the Coonawarra district.

It's a stylish wine smelling of dark plum and subtle spices with a lick of peppermint and coconut. It's soft, fleshy and smooth as satin on the palette. Densely flavoured and multi-layered, this wine will age extremely well so it might be worth buying a case to put down for those special occasions.



Rating : 3.5 stars
RRP : $25.00

 

App review

Bills Monitor Free – Bill manager & reminder

Seeing as we have told you about Australia's new credit reporting regulations, we thought we'd find an app to help you keep up to date with your bills.

If you are looking for a smart, full featured and easy to use app to manage your bills, then this free Bills Monitor is a goodie. You can use this handy little app to remind you when your bills are due and pay them quickly and easily.

It includes a clear and tidy user interface, a calendar overview of your bills, a visual pie chart report of your expenditure and a handy table so you can check your bills at a glance.



RRP : FREE
Available on :  Compatible with iPhone, iPad and iPod touch. Requires iOS 5.0 or later.

 
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Contact us

 
 

 

 

 

 

 

Great Aussie Dream

T 1300 72 68 48
F 02 4733 4115
E info@gad.com.au

www.greataussiedream.com.au

Australian Credit Licence Number: 387787 | ABN: 84129326352

 

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Disclaimer.This newsletter does not necessarily reflect the opinion of the publisher or supplier. It is intended to provide general news and information only. While every care has been taken to ensure the accuracy of the information it contains, neither the publishers, supplier, authors nor their employees, can be held liable for any inaccuracies, errors or omission. Copyright is reserved throughout. No part of this publication can be reproduced or reprinted without the express permission of the publisher and supplier. All information is current as at publication release and the publishers or suppliers take no responsibility for any factors that may change thereafter. Readers are advised to contact their financial adviser, broker or accountant before making any investment decisions and should not rely on this newsletter as a substitute for professional advice. We are committed to protecting your privacy. We use the information you provide to assist you with your credit needs, including the preparation and submission of loan applications. We also use it to send you product information and promotional material. From time to time this will include direct marketing communications but we will always give you the option of not receiving these communications. We do not trade, rent or sell your information. Our Privacy Policy contains information about how you can access and ask us to correct your information, or make a privacy related complaint. You can obtain a copy by contacting us directly.