In this issue:


October 2014


Welcome to our October newsletter

This month, the news is all good for those in the market to purchase a property! At its October meeting, the Reserve Bank of Australia has once again decided to keep the official cash rate on hold at 2.5 per cent. This is the 13th consecutive month where the cash rate has remained at these historically low levels, creating a low interest rate environment and excellent buying conditions for those in the market to purchase property.

Market analysts are predicting that it will be quite some time before we see any rise in interest rates, with most saying that we can expect rates to remain at current levels until mid 2015. This has created a very competitive loan market, with some lenders offering their lowest rates ever on both fixed rate and variable rate mortgage options.

After an unusually busy winter property market, activity remains high during spring. Major sporting events in Melbourne and Sydney had a marked effect on the number of auctions held nationally, however auction clearance rates remained quite high.

For the past five weeks, the national auction clearance rate has remained above 70 per cent, with last weekend's clearance rate exceeding 72 per cent from a total of 927 auctions. Sydney had 664 auctions with a clearance rate of 78.5 per cent, Melbourne 65 auctions with a 78.5 per cent clearance rate, Adelaide 43 auctions with a 67 per cent clearance rate and Brisbane 114 auctions with a 50 per cent clearance rate.

In more good news for property purchasers, house price growth across the country appears to have cooled slightly in the quarter just ended. In Sydney, our hottest market, price growth last month was just 0.8 per cent and 4.1 per cent for the quarter – still up by 14.3 per cent over the same period last year.

In Melbourne, price growth last month fell by 0.8 per cent, but was still up by 3.7 per cent for the quarter and by 8.1 per cent over the same period last year. The next best performing market was Adelaide showing price growth for September of 0.9 per cent, 3.1 per cent for the quarter and a rise of 5.8 per cent over the same time last year.

The Brisbane market held steady whilst Perth, Hobart, Darwin and Canberra showed slight declines in house price growth last month, with little or no price growth for the quarter - although all capital cities have seen significant growth over the same period last year.

If a property purchase is part of your plans this spring, now is a great time to talk to us about your loan options. With some of the most competitive interest rates on record available to you, it’s also a great time for a home loan health check! Give us a call today.

Sincerely, Will Foster & the Team at Foster Finance

Check out our latest market wrap video!




5 ways to improve your property negotiating skills

Whilst it's true that the number of properties on the market for sale has increased substantially over the last 12 months, competition to secure those properties is stronger than ever. Auction clearance rates remain very high, with few left-over bargains to be had. So how can you hone your skills to give yourself a better chance of securing the property you're after? Here's five great tips to give you an edge when negotiating your next property purchase.

1. Be sure of your position
It's always wise to negotiate from a position of strength. So before you make an offer or even start talking to the real estate agent or vendor about purchasing a property, do your research to make sure it is not only the right property for your needs and objectives, but to find out what the right purchase price will be, given current market conditions.

To find out this most important fact, research the recent sale prices of comparable properties in the same suburb and work out growth projections for the suburb over the period of time you plan to hold the property. You might even want to go so far as to have the property professionally valued (and if this is the case, let us know as we can help).

In addition to finding out the right price for the property you intend to purchase, make sure that you are financially situated to take advantage of the deal quickly. To do this, talk to us about getting your finance pre-approved and line up your team of professionals before you begin. Be ready for pest and building inspections, do your valuation and make sure you can include the deposit cheque with your offer.

If you do your homework properly, it will give you a solid position from which to make an offer and negotiate the right price. Even if you're forced to compete in an auction for the property you want, knowing your position and upper limit beforehand will help you bid decisively to come out on top at the end of the auction process – and remember, coming out on top means securing the property at the right price, not at all costs!

2. Assess the seller's situation
Finding a vendor who is willing to negotiate on price isn't always easy. They tend to set a price that satisfies their personal objectives instead of allowing the market to set the price. Discovering as much about the vendor as you can will help you decide if attempting to negotiate the price you want to pay for the property is worth your time and effort. If you can find a vendor who really needs to sell, then you will have more bargaining power and may get a better price. A good tip is to try and find out how many other offers have been made.
Here's some questions to ask that will help you track down vendors that need to sell:

• Why is the vendor selling?
• Have they already purchased another property?
• How long has it been on the market?
• Has the property been passed in at auction previously?

3. Don't be intimidated
Always have an upper price limit in mind before you begin negotiations. Your objective is to negotiate a price as far below this limit as you can.

If you do your research properly, you should be able to determine the right price and enter into your negotiations with full confidence. If you have your finances in place, there is no reason you should be intimidated by real estate agents and vendors quoting higher prices than you are prepared to pay. Use the evidence you have gathered in your research to persuade them that your offer is likely to be the best they'll receive, then sweeten the deal by meeting their settlement terms. Show them you are serious and they will react accordingly.

4. Control your emotions
Emotions play a big part in every property transaction. They are also the number one reason why people pay too much for a property. That's because finding your dream home is never easy. The more desperate you are to secure a property, the higher the price you will pay.

If you only choose one property to pursue, it is more likely that you will fixate on acquiring that property at all costs – and risk paying too much. This is true for all types of property purchases, whether you are buying to become an owner occupier or an investor.

Have another property as a potential back up, so that you can negotiate objectively on the property you prefer. You can use this back-up property to give you more negotiating power – if the real estate agent seems unlikely to field offers before the auction, or the vendor seems set on an unrealistic price, you can simply say to them “I have a more viable option to pursue” – the thought of losing a potential purchaser will make them more open to negotiations.

5. Be prepared to walk away
If you can't close the deal for the price you want to pay, leave your offer on the table then sit back and wait. There is a good chance the vendor will come back to you to negotiate further, particularly if no other offers meet their expectations.

Time can be a great negotiating tool, so be patient and wait for the agent to chase you. They may chase you to bring you back to the negotiating table, or to get you to attend the auction. Either way, you may get a second chance at securing the property – but make sure you hold firm on your price limit.

From an investor's point of view, missing out on a property is better than paying too much. If you're shopping for your dream home, however, it might not be so easy to take this attitude. You'll need to be realistic about your budget and what you can really afford to pay.

But don't worry. If you can't secure your dream property for the right price, then it just wasn't meant to be. Keep doing your homework and you'll soon find the perfect property for the perfect price.

The key is always to do your homework. If you don't have a reliable source of property information then let us know. We can help you get the right information so you're fully armed and ready to cut the right deal on the property you want. We can also help you get pre-approval for your financing so you can move quickly and decisively, so get in touch on the details below.




Variable rate loans – still a popular choice

At the moment, fixed interest rate loans are the hot topic with some excellent rates available. They’re a great product that allow you to lock in an interest rate for a period of time, so you know exactly how much your repayments will be. By contrast, the interest rate on variable rate loan products can change at any time, which leads to some uncertainty. With this in mind, why are variable rates still so popular? And what’s the difference between standard and basic variable rate loans? This articles looks into the difference between the standard and basic variable rate products and how we can help you choose the right option for your personal financial situation and goals.

Standard variable rate loans
Standard variable rate loans are historically the most popular loan choice in Australia. About half of all home loan borrowers take this option. This kind of loan varies from lender to lender and if you opt for this choice, we'll be able to find you a loan with the right features for you.

Standard variable rate loan features may include mortgage offset accounts, a credit card at a reduced rate, the ability to split the loan (so that part of it has a fixed interest rate), the ability to make extra repayments, and extra payment redraw facilities.

A standard variable rate loan usually has a higher interest rate than a basic variable rate loan, however its features are designed to save you money and provide financial flexibility. For example, a mortgage offset account is a separate transaction account attached to your standard variable mortgage where the balance in the offset account is deducted from your loan balance before interest is calculated each day, saving you money on interest.

What's more, interest is calculated at the same rate as your home loan, whereas regular savings accounts offer you significantly less. If you have extra money on hand, this could mean a substantial saving on your interest repayments and puts your extra money to work for you.

Another great feature is the ability to make extra repayments and pay your loan off more quickly without penalty. Fixed rate mortgages and basic variable rate mortgages can often carry penalties for paying out your loan sooner than the agreed loan term.

Basic variable rate loans
Basic variable rate loans are simple, no frills loans. They usually carry a lower interest rate than standard variable rate loans but may not come with the flexible, money saving features like offset accounts and low rate credit cards. Extra repayments on basic variable rate loans are sometimes allowed, but frequently limited and they usually have no redraw facilities.

Additionally, basic variable rate loans often have much higher discharge fees if you choose to close the loan in the first three years, so this type of loan is better for first home buyers or owner-occupiers who plan to keep the property for a lengthy period of time and want to keep costs down.

How do you go about choosing the right loan?
Locking in the wrong loan product could be a costly mistake. As your mortgage broker, it's our job to help you make the right choice of loans according to your personal financial situation and financial goals. There are literally thousands of home loan options to choose from and we'll do all the leg work to help you compare your best loan options and secure the one that's right for you.

Want to find out more?
Feel free to call us any time for information about the type of loan products available and chat to us about which one will be right for you, considering the current interest rate environment, your needs, financial situation and goals.




Building Insurance – a true investment

Buying a home or investment property is a costly business. But the right insurance package is an investment that's absolutely essential for every property buyer. 'Murphy's Law' dictates that anything that can go wrong will go wrong, in the worst possible way, at the most inconvenient moment. If something happens to a large financial investment like a property purchase, you can be seriously out of pocket and set back for a long time if you don't have the right insurance in place.

What insurance do I get?
What if your new property were to burn down prior to the settlement date? Could you get out of the contract? Could you be out of pocket for your deposit or even be liable for the full amount?

It's a wise idea to organise insurance for your new property as soon as you sign the contract, before settlement even occurs. In the event something does go wrong, you know that your interests will be fully protected. Remember, the vendor's insurance will not be paid out to you. And in some states of Australia, the risk of damage to a property becomes the legal responsibility of the purchaser when the contract is signed. Make sure you check if this applies in your state.

You can't always rely on the vendor informing you if something has gone wrong in the period between when you signed the contract and when settlement occurs. You could pick up the keys only to open the door and discover all the fixtures and fittings have been stolen!

You can easily organise a cover note with an insurer over the phone on the day you sign the contract, without having to pay a cent. Insurers will usually give you a good period of time before you have to start paying premiums. If you don't know what insurance company to go with, ask us for a referral.

What does my insurance need to cover?
The insurance cover you require will depend on what you plan to do with the property you purchase. At the outset, you may only need a cover note for the building until settlement, but after that you will require a fully comprehensive package.

If you're planning on living in the property yourself, you will require Home Building insurance and it's also a good idea to take out Home Contents insurance. If you're purchasing the property as an investment and are planning to rent it out, you should consider Landlord insurance.

Home Building insurance typically protects the actual building itself. Most policies cover for key events such as fire, storm, burglary and most types of water damage including flood. Some packages even cover you for falling objects like meteorites and air planes! These policies usually cover all the buildings on your property including the garages and sheds.

Home Contents insurance typically protects your property inside the home. It covers most kinds of events including burglary/theft, fire, flood and public liability. You can often arrange optional extras like protection for your belongings when you take them outside your home too.

Landlord insurance is an insurance product that is specifically designed to assist property investors and make sure you will not be financially out of pocket if something goes wrong. Typical packages for the building cover damage to your property by natural disaster, fire, theft, storm and flood. Frequently, you can extend cover to include protection against loss or damage caused by your tenants, including malicious damage and unpaid rent. You can also get Landlord cover for contents and fixtures and fittings for apartments and units.

For more information about arranging the right insurance for your needs, make sure you talk with us today. We can help you decide exactly what insurance cover you need and help get it organised – not just for this particular property purchase, but for a secure financial future too!


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Contact us



Foster Finance Professional Mortgage Advice

Address: Level 5, 1 Chifley Square, Sydney NSW 2000
Phone: 02 9220 0396
Fax: 02 9012 0407

Will Foster
Mobile: 0433 141 559

Australian Credit Licence Number: 435022
ABN: 85686203959




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