Finance Update from Matthew Kerr - Finance Manager
Well finally we are starting to see the banks get back to what they do best and this is good news whether you are looking for a home loan, an investment loan or a business loan now or in the near future. This coupled with historic low interest rates is seeing our lending volumes at record levels.
Over the last couple of years Bob Hope’s quote has been ringing loudly in my ears
“A bank is a place that will lend you money if you can prove you don’t need it”
The big things we have seen in recent months which have helped confidence in borrower’s as well as the willingness of banks to start lending more freely include:
- The election – This always seems to be a trigger for people to start making financial decisions again, and this time around the big factor with the Coalition hanging onto government was that negative gearing was to remain.
- Interest Rate cuts – I think the key thing here has been that rates simply don’t look like going up anytime soon which gives confidence to borrowers.
- Banks lowering assessment rates – This naturally improves everyone’s borrowing capacity
- Tax cuts – Freeing up some cash flow
- Conclusion of the Royal Commission – Banks have clear direction around responsible lending guidelines so can ease policy where appropriate.
This has been reflected in home and investment lending data which are both up in excess of 5% on 12 months ago.
NEW EQUIPMENT FINANCE PRODUCTS FOR SELF EMPLOYED
Hudson Finance now have a suite of lenders that can provide extremely competitive funding for self employed borrowers. This can be for:
- New/Used motor vehicles
- Cold Rooms
**to name a few**
Rates can be as low as 4.39% p.a. and if you have been in business (with an ABN) for more than 2 years and are a property owner (whether with a loan attached or not) we don’t even need your tax returns/financials.
CALL US TODAY FOR A QUOTE
TIP – Did you know that if your car dealer is offering you 1% finance then the price of your vehicle is likely to be a lot higher than if you were paying with cash. We can arrange you a pre approval so you can negotiate with the dealer knowing that they are not playing around with the figures on the loan they are also providing you.
Valuers are often the bane of my existence. This is normally when they value an existing property lower than what I/our member thinks it should be valued at which in turn can restrict the amount of money that can be borrowed or incur a costly mortgage insurance premium.
Recently though we came across some members who had purchased a property in Melbourne at auction sub $1m. It is extremely rare to see a valuation come in under purchase price for an established property in this scenario as valuers tend to run with the old adage of something is only worth what someone is prepared to pay.
In this case though the property was valued at $70,000 less than purchase price by the buyers lender who was offered to them due to a corporate arrangement with their employer.
The clients were prepared to push ahead but they would not have any funds left over at settlement to do the work required to the property so they were going to need to pay mortgage insurance and take a higher rate in order to retain some of their cash.
Their adviser at Hudson referred them through to our finance team and we were able to arrange a second valuation which came in at purchase price and align them with a lender who were offering a better rate (as standard) that what was offered under the “corporate deal”.
In the end, they had their $50,000 surplus funds on moving in to be able to do the improvements they wanted/needed to and they had a cheaper product.
This is the beauty of having access to over 30 different lenders on our lending panel.
If you would like to make an appointment with our Finance Manager please call Hudson on 1800 804 296 (freecall).
Read in full + comments 0 Comments
Written by Hudson Adviser Kris Wrenn
In July this year the age pension deeming rates were cut, predominantly off the back of lower interest rates meaning that pensioners would not be receiving as much on their savings.
Most Centrelink benefits in Australia, including the age pension, are subject to both an assets test and an income test and the “worst result” from these tests is the one that’s applied. So the more assets a pensioner has, the less pension they receive, and likewise the more income they receive the lower their pension. As assets and income rises, eventually they reach a point where their entitlement is zero.
Many pensioners find it a little confusing when the income test assesses their investments, and this is because Centrelink don’t actually consider how much is being earned. Instead they “deem” the asset to earn a certain amount of income, the rate at which they decide at any given time. It makes things a lot simpler for both the Government and the individual because things don’t have to be tracked as closely, i.e. interest on savings, or dividends from shares. You just total the assets and deem them.
The deeming rate is different depending on whether the pensioner is single or in a couple.
Single pensioner - A 1% deeming rate is applied to the first $51,800 of financial assets. Any amount over $51,800 is deemed at 3% p.a.
Couple pensioners (if one or both is age pension age) – A 1% deeming rate is applied to the first $86,200 of financial assets and 3% is applied to anything above.
These rates are 0.75% lower than what they were prior to July. It was argued this needed to happen because the reality is that most savings accounts and term deposits are no longer paying the likes or 4% or 5% and even 3% is quite competitive in the current climate.
They have the two different rates because it is generally assumed that those pensioners with quite a high level of investment assets, i.e. a single with more than $52k or a couple with more than $86k, are probably investing in some form of growth asset like shares and property, which tend to have a higher yield than current savings rates (and potential capital growth to boot).
Taking the example of a single pensioner with $250,000 in investment assets the change in deeming rates would result in an increase in entitlement of $36 a fortnight.
A couple with investment assets of $400,000 - the change in deeming rates would result in an increase in entitlement of $58 a fortnight.
This reduction in deeming rates does NOT correlate with the actual income that investment assets may be returning, so it is just as important as ever to maximise what these investments are yielding so as to potentially benefit from the change and improve one’s situation.
It’s worth noting that this change will only impact part-pensioners and also only those whereby the income test is the applicable test for them.
It’s possible that under the previous you were just ruled out of age pension entitlement, on the basis of the income test, so if you think that may be you, we recommend you book an appointment with Centrelink as soon as possible to have yourself reassessed. Qualifying for ANY part pension entitles you to the pensioners concession card which is very valuable in itself.
Read in full + comments 0 Comments
Written by Hudson Adviser Michal Park
With the last rate cut in July bringing official cash rates to 1% (the lowest level on record), it has also meant that average standard variable home loan rates are also sitting at levels not seen since the 1960’s (when the RBA began recording loan rates). Couple historically low loan rates with an easing in financial institution credit requirements (which tightened considerably during and post the Royal Banking Commission) and you could be forgiven for thinking that all of these factors were contrived to manipulate the price of housing.
And data certainly supports this idea. Housing finance figures released earlier this month by the RBA showed the value of housing finance increased 5.1% in July (the biggest one month increase in seasonally adjusted terms since March 2015 - when the RBA cut the cash rate to 2.25%. Albeit, in August, the value of housing loans was still 14% below where it was 12 months ago.
However, low loan rates, an increase in housing finance and potentially higher house prices are simply a by-product of reduced interest rates. The real point of the RBA lowering interest rates is to stimulate economic activity, achieve the inflation target over time (between 2 and 3% - currently sitting around 1.6%) “and support sustainable growth in the economy” according to the minutes of the RBA September meeting - also called Monetary Policy.
Rate cuts in June and July were specifically aimed at lowering unemployment, however, with recent unemployment data showing unemployment increased to 5.3% in August (0.8% higher than were the RBA needs unemployment to be), another rate cut in October seems highly likely as a direct response to this data.
Lower cash rates are also aimed at stimulating consumer spending which translates into economic growth – something that has been very weak given stagnant wages growth. Lower cash rates also drive the Aussie dollar lower which makes businesses more competitive.
But implementing Monetary Policy is simply not enough – cash rates can only drop so far. The government’s recent tax cuts to millions of households should help (in theory), as well as a brighter outlook for the resources sector and a lower Aussie dollar, but the RBA is imploring the government to boost infrastructure spending, amongst other things, to make Australia more productive. If all of these factors come together, RBA Governor Philip Lowe is hopeful of a “gentle turning point” in the economy with a modest increase in economic growth. Alas, there could very well be an extended period of low interest rates in Australia, making that gentle turning point a while away yet.
Read in full + comments 0 Comments
There is no shortage of suppliers when it comes to credit cards. In an ideal world we should never be paying interest on credit cards (ie they are cleared each month), however that is not the theory the banks work on. They of course work on the theory that those who do not clear their balance each month will end paying the exorbitant interest rates which are as high as 20%. I am still bewildered how that is even allowed given the current cash rates.
With high competition comes big marketing strategies and luring offers to entice you to their card which leads us to the ever popular Rewards systems.
But according to some research done by ME Bank, over half of reward-card holders say they’re getting rewards worth less than $50 annually and 40% believe their card is costing them money rather returning any value.
Based on these sort of statistics along with the high interest costs, one missed month of credit card clearing, can quickly wipe out any ‘Rewards’ advantage you are getting over the course of a year. These are odds that are stacked in favour of the house (the bank). The probabilities that the majority of us will miss one month (due to the ridiculously busy month, that holiday, the overspend at Christmas).
The ME study also found that one third of people simply don’t understand how much value they’re getting from their card. If you really want to know the value from your card rewards, you need to work out how many points it takes to achieve one dollar of reward.
Let’s say you need 5,000 points to get two free movie tickets normally costing $50 – that works out to 1000 points per dollar of reward. Assuming you get one point per dollar spend on your credit card that’s $5,000 spending to earn that $50. Now let’s say you are a good with your monthly finances and clear the credit card most months but there are some occasions where you are a bit slow to get to it. Suddenly you cop the full month of interest. For one month $5000 x 20% interest = $1000 p.a. which is $83.33 for any single month. This gives you a bit of insight to the odds the credit card provider is relying on. ON top of that it is never just one month of interest – once you miss the payment date your interest calculation can go back over all the days that were going to be free – which can go back to nearly 2 months worth in some cases.
There’s a reason why so many reward programs are on offer – they can be a big money spinner for banks and card issuers. They are not going to make you wealthy.
Source : Investsmart 4/6/19
- The all ords has climbed to 6,819 at the time of writing, which represents around a 2% rise since the start of the month.
- Over in the U.S they fared slightly better with a 3% rise for the Dow Jones, to land at 26,891 at the time of writing.
- The $AUS has basically ended up where it started the month at around 67.5c to the $US, having risen throughout the month to just under 69c.
Do you have a
Ask our advisers now
'Dear Adviser' question?
Issues by month/year
- Adviser hints and tips (23)
- Budget update (2)
- Budgeting Tips (11)
- Centrelink update (2)
- Consider this (61)
- Dear adviser (7)
- Dear editor (1)
- Did you know? (21)
- Estate planning (1)
- Finance matters (21)
- Hudson haha (40)
- In the news (20)
- Insurance corner (18)
- Interesting Topics (34)
- Investing fundamentals (43)
- Let us help you (9)
- Property investing (51)
- Retirement planning (10)
- Share market update (42)
- Something different (22)
- Superannuation (31)
- Talking solar (1)
- Tax time (5)
- Weekly share market (1)
Search all issues
Enjoy reading the Hudson Report?
Let us know your views on our news.Contact Hudson Online