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RBA Reduces Cash rate to historical low of 1.50%

1/8/2016

3 Comments

 

Statement by Glenn Stevens, Governor: Monetary Policy DecisionAt its meeting today, the Board decided to lower the cash rate by 25 basis points to 1.50 per cent, effective 3 August 2016.
The global economy is continuing to grow, at a lower than average pace. Several advanced economies have recorded improved conditions over the past year, but conditions have become more difficult for a number of emerging market economies. Actions by Chinese policymakers are supporting the near-term growth outlook, but the underlying pace of China's growth appears to be moderating.
Commodity prices are above recent lows, but this follows very substantial declines over the past couple of years. Australia's terms of trade remain much lower than they had been in recent years.
Financial markets have continued to function effectively. Funding costs for high-quality borrowers remain low and, globally, monetary policy remains remarkably accommodative.
In Australia, recent data suggest that overall growth is continuing at a moderate pace, despite a very large decline in business investment. Other areas of domestic demand, as well as exports, have been expanding at a pace at or above trend. Labour market indicators continue to be somewhat mixed, but are consistent with a modest pace of expansion in employment in the near term. 
Recent data confirm that inflation remains quite low. Given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this is expected to remain the case for some time.
Low interest rates have been supporting domestic demand and the lower exchange rate since 2013 is helping the traded sector. Financial institutions are in a position to lend for worthwhile purposes. These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.
Supervisory measures have strengthened lending standards in the housing market. Separately, a number of lenders are also taking a more cautious attitude to lending in certain segments. The most recent information suggests that dwelling prices have been rising only moderately over the course of this year, with considerable supply of apartments scheduled to come on stream over the next couple of years, particularly in the eastern capital cities. Growth in lending for housing purposes has slowed a little this year. All this suggests that the likelihood of lower interest rates exacerbating risks in the housing market has diminished. 
Taking all these considerations into account, the Board judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting.
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RBA Cash rate unchanged    1.75%

4/7/2016

0 Comments

 

Statement by Glenn Stevens, Governor: Monetary Policy Decision

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At its meeting today, the Board decided to leave the cash rate unchanged at 1.75 per cent.

The global economy is continuing to grow, at a lower than average pace. Several advanced economies have recorded improved conditions over the past year, but conditions have become more difficult for a number of emerging market economies. China's growth rate has moderated further, though recent actions by Chinese policymakers are supporting the near-term outlook.

Commodity prices are above recent lows, but this follows very substantial declines over the past couple of years. Australia's terms of trade remain much lower than they had been in recent years.

Financial markets have been volatile recently as investors have re-priced assets after the UK referendum. But most markets have continued to function effectively. Funding costs for high-quality borrowers remain low and, globally, monetary policy remains remarkably accommodative. Any effects of the referendum outcome on global economic activity remain to be seen and, outside the effects on the UK economy itself, may be hard to discern.

In Australia, recent data suggest overall growth is continuing, despite a very large decline in business investment. Other areas of domestic demand, as well as exports, have been expanding at a pace at or above trend. Labour market indicators have been more mixed of late, but are consistent with a modest pace of expansion in employment in the near term.

Inflation has been quite low. Given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this is expected to remain the case for some time.

Low interest rates have been supporting domestic demand and the lower exchange rate since 2013 is helping the traded sector. Financial institutions are in a position to lend and credit growth has been moderate. These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.

Indications are that the effects of supervisory measures have strengthened lending standards in the housing market. Separately, a number of lenders are also taking a more cautious attitude to lending in certain segments. Dwelling prices have risen again in many parts of the country over recent months. But considerable supply of apartments is scheduled to come on stream over the next couple of years, particularly in the eastern capital cities.

Taking account of the available information, the Board judged that holding monetary policy steady would be prudent at this meeting. Over the period ahead, further information should allow the Board to refine its assessment of the outlook for growth and inflation and to make any adjustment to the stance of policy that may be appropriate.
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Don't do these 6 things when selling your property

3/7/2016

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If selling your property was an exam, scoring 100 per cent would bring the reward of less stress and more money. Here’s a cheat sheet of mistakes to avoid in order to pass your exam with flying colours!
​      1. Don’t Wrongly Price Your Property
Over-pricing or under-pricing is a common mistake that occurs when property owners fail to do sufficient research about what buyers are looking for and what they are expecting to pay. Look at comparable sales in your area and use this data when you are discussing prices with your real estate agent.

       2. Not tidy up
Mess, dirt and clutter turns buyers off because it makes it harder for them to envisage themselves living in the property. Remove junk, personal items and family photos off countertops, shelves and walls.

       3. Don’t Spend too much on renovations
While a coat of paint or re-carpeting can help improve the value of your property, it’s never a good idea to spend considerable money on a major renovation that you may never get a return on.
Ways you can improve the presentation of your property without spending a lot of money include de-cluttering, cleaning windows, re-grouting bathroom tiles, adding plants to an outdoor space, fitting a new benchtop or splashback in the kitchen, installing new taps or a decorative light fitting in the bathroom.

      4. Don’t Hide problems
When you cover up a problem rather than fix it, the risk is that when the buyer finds out, they will quickly become suspicious about other problems the house might have. Your best strategy is to either repair problems properly or declare them outright.

      5. Don’t Sell your home empty
Homes devoid of furniture often look smaller and less appealing. It’s hard for potential buyers to imagine themselves living in an empty home or their furniture fitting into the space.
Professionally styling your home for sale (also known as property staging) is a great option to consider, with anecdotal evidence suggesting it can help sell your property faster and for a better price.
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      6. Don’t Get emotionally involved
Thinking with your heart, not your head, can often lead to hasty decisions when selling. It is important to detach yourself emotionally and start viewing your home as though you were a potential buyer. Choose an experienced and reputable real estate agent and be prepared to take their advice on board and allow them to lead negotiations with potential buyers.
Contact us to find out what lending options exist to help guide your way through the process of buying and selling.
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Studies show that Properties make Money

3/7/2016

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If there’s any doubt in your mind about the value of property as a creator of wealth, new research from CoreLogic RP Data has found that you can’t go past property when looking for a profitable long term investment.

Researchers used an automated valuation process to obtain current property valuation estimates, and from there calculated equity levels for homes around the country.

The results clearly showed that in Australia, the average property is now worth almost double the amount of debt against it. This means property owners in either city or regional areas with a mortgage have accumulated 48.4% equity in their properties on average, which is the equivalent of $242,642.

New South Wales and Victoria have the highest average level of home equity at 56.6% and 49.3% respectively.  The ACT came next at 42.8%, Queensland at 39.9% and South Australia at 39.4%.

Even the lowest equity level, in Tasmania, was still an impressive 32.7%, worth $95,427.

The research confirms what many property investors have long believed, that property is a solid basis for any wealth creation strategy.
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To find out more about your property’s potential, give us a call. We can help you work out how to access and use your property’s equity to expand your property portfolio or pursue your financial goals.
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How a Guarantor Loan can help you enter the Property Market

29/6/2016

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Struggling to save enough to buy a property? You may want to ask your family if they can provide a helping hand in the form of a family guarantee loan. This is when the equity in a family member’s home is used as security on your loan.Also known as a family pledge or guarantor home loan, it is a type of mortgage that allows you to borrow more money and provide less of a deposit. Usually when a loan is more than 80% of the purchase price (80% LVR) you will have to pay lenders mortgage insurance, but a family guarantee means you won’t have this extra expense.

It’s even possible to avoid paying any deposit because the equity in your family’s home can act as a deposit. This ‘guarantee’ makes it possible for you to borrow the full 100% cost of the home, plus stamp duty and legal fees. Lenders mortgage insurance will still be payable if you borrow over 80% of a property’s value.

There are many issues to consider when taking out family guarantees and it pays to keep in mind that loan terms and conditions can vary between lenders. Not all lenders even offer these type of loans, so give us a call and we can advise you which lenders would best suit your situation.

Here are some of the common questions we get asked about guarantor loans. For more detailed information about any of the following, don’t hesitate to get in contact.

Does the entire loan have to be guaranteed?
No, the loan can be split, enabling the equity in your family’s property to be used as security for a small portion of the loan, for example 20%. The lender will take a mortgage out over the guarantor’s property to this specified amount.

Who can act as guarantors?
Guarantors are usually parents, but some lenders under certain conditions will accept grandparents, siblings, a de facto partner or a former spouse. To be approved by a lender they must provide enough equity to cover the amount being guaranteed and show proof of income. Normal lending criteria will apply in all circumstances.

What are the risks for the guarantor?
There are risks involved, which is why it is important for the guarantor to know what they are getting into. Some lenders even require legal advice is sought to ensure the guarantor understands that if there is a default on repayments, they will be the ones held liable.
​
How long does the guarantee have to be in place?
If the loan is structured correctly, the guarantee doesn’t need to be in place for the entire duration of the loan. Once you have repaid the portion of the loan that is guaranteed or your property has increased in value, the guarantor can be released. 
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RBA Announcment - Cash Rate 1.75% (-0.25%)

3/5/2016

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At its meeting today, the Board decided to lower the cash rate by 25 basis points to 1.75 per cent, effective 4 May 2016. This follows information showing inflationary pressures are lower than expected.

The global economy is continuing to grow, though at a slightly lower pace than earlier expected, with forecasts having been revised down a little further recently. While several advanced economies have recorded improved conditions over the past year, conditions have become more difficult for a number of emerging market economies. China's growth rate moderated further in the first part of the year, though recent actions by Chinese policymakers are supporting the near-term outlook.

Commodity prices have firmed noticeably from recent lows, but this follows very substantial declines over the past couple of years. Australia's terms of trade remain much lower than they had been in recent years.

Sentiment in financial markets has improved, after a period of heightened volatility early in the year. However, uncertainty about the global economic outlook and policy settings among the major jurisdictions continues. Funding costs for high-quality borrowers remain very low and, globally, monetary policy remains remarkably accommodative.

In Australia, the available information suggests that the economy is continuing to rebalance following the mining investment boom. GDP growth picked up over 2015, particularly in the second half of the year, and the labour market improved. Indications are that growth is continuing in 2016, though probably at a more moderate pace. Labour market indicators have been more mixed of late.

Inflation has been quite low for some time and recent data were unexpectedly low. While the quarterly data contain some temporary factors, these results, together with ongoing very subdued growth in labour costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast.

Monetary policy has been accommodative for quite some time. Low interest rates have been supporting demand and the lower exchange rate overall has helped the traded sector. Credit growth to households continues at a moderate pace, while that to businesses has picked up over the past year or so. These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.

In reaching today's decision, the Board took careful note of developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to abate. At present, the potential risks of lower interest rates in this area are less than they were a year ago.
​
Taking all these considerations into account, the Board judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting.

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2016 Budget highlights 

3/5/2016

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We are pleased to provide you with our latest Economic Insights report on Australia's Budget 2016/17, produced by Craig James, CommSec Chief Economist and Savanth Sabastian, CommSec Economist.

At a glance.....
  • Budget deficit of $37.1 billion forecast for 2016/17
  • Small business tax rate will be lowered to 27.5%
  • Small business threshold increased from $2 million to $10 million
  • Middle income tax bracket to rise from $80,000 to $87,000
  • Further crackdown on multinational tax avoidance
  • Changes to concessional superannuation
  • Tobacco tax to raise $4.7 billion over the next four years
  • Inland Melbourne-Brisbane rail link
  • $50 billion spending on infrastructure
  • Youth jobs PaTH scheme
  • 10% GST levy on online purchases below $1000
  • $2.9 billion more for public hospital services

If you would like more detailed information on the budget then please contact drop us a line or give us a call
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5 Things you didn't know about Life Insurance

10/4/2016

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1. The Life insurance included in your superannuation policy may leave you short of cover
Unless you have chosen to increase your insurance level (and increase your premiums), the default life insurance provided by your super fund will be at a minimum level and probably won’t include trauma insurance or long-term income protection cover.
It is important to find out what you are covered for and consider the benefits of taking out a stand-alone life insurance policy.

2. Your age may affect the premium you pay

If you have a stepped life insurance premium, it is assumed that the older you get the more likely your health will deteriorate, therefore your premiums will increase with age.

3. Life Insurance is best taken out when you are young

It pays to take out life insurance when you are young and healthy because the premiums are less expensive than waiting until you are older and more likely to experience health problems.

4. Only the breadwinner needs life insurance

There are financial consequences if something happens to the stay-at-home parent in a family because the income earner may need to find the money to outsource child care, cooking and cleaning.
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Life insurance gives the surviving partner the added benefit of financial assistance if they need to take time off work to help the family adjust.

5. You don’t need to die to enjoy its benefits

Many people think that life insurance only comes into effect when you die, but it can also offer financial support for injury, illness or disability. In the event that you are no longer able to work, life insurance can cover loss of income and out-of-pocket expenses like medical treatment, debt repayments and the cost of living.

Rehabilitation can also be included as an optional benefit, helping you get back into the workforce by covering the cost of rehabilitation, equipment and workplace modifications. You should always get independent financial planning advice and read the Product Disclosure Statement (PDS) before making any decisions.

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Interest Rate Unchanged - Cash Rate 2.0%

5/4/2016

0 Comments

 
At its meeting today, the Board decided to leave the cash rate unchanged at 2.0 per cent.

Recent information suggests that the global economy is continuing to grow, though at a slightly lower pace than earlier expected. While several advanced economies have recorded improved growth over the past year, conditions have become more difficult for a number of emerging market economies. China's growth rate has continued to moderate.

Commodity prices have generally increased a little recently, but this follows very substantial declines over the past couple of years. Australia's terms of trade remain much lower than they had been in recent years.

Sentiment in financial markets has improved recently after a period of heightened volatility. However, uncertainty about the global economic outlook and policy settings among the major jurisdictions continues. Funding costs for high-quality borrowers remain very low and, globally, monetary policy remains remarkably accommodative.

In Australia, the available information suggests that the economy is continuing to rebalance following the mining investment boom. Consistent with developments in the labour market, overall GDP growth picked up over 2015, despite the contraction in mining investment. The pace of lending to businesses has also picked up.

Inflation is quite low. Recent information has confirmed that growth in labour costs remains quite subdued. Given this, and with inflation also restrained elsewhere in the world, inflation in Australia is likely to remain low over the next year or two.

Given these conditions, it is appropriate for monetary policy to be accommodative. Low interest rates are supporting demand, while supervisory measures are working to emphasise prudent lending standards and so to contain risks in the housing market.

Credit growth to households continues at a moderate pace, albeit with a changed composition between investors and owner-occupiers. The pace of growth in dwelling prices has moderated in Melbourne and Sydney and has remained mostly subdued in other cities.

The Australian dollar has appreciated somewhat recently. In part, this reflects some increase in commodity prices, but monetary developments elsewhere in the world have also played a role. Under present circumstances, an appreciating exchange rate could complicate the adjustment under way in the economy.

At today's meeting, the Board judged that there were reasonable prospects for continued growth in the economy, with inflation close to target. The Board therefore decided that the current setting of monetary policy remained appropriate.
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Over the period ahead, new information should allow the Board to assess the outlook for inflation and whether the improvement in labour market conditions evident last year is continuing. Continued low inflation would provide scope for easier policy, should that be appropriate to lend support to demand.
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Buying off the Plan

21/3/2016

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Buying off the plan can go horribly wrong or wonderfully right, so what can you do to ensure the scales tip in your direction?

When buying a property that has not yet been built, it is important to prepare thoroughly before you commit and engage your mortgage broker early on in the process.

Knowing what you are up against and what might go wrong can give you the winning edge. Here are some of the issues you may encounter.

Drop in value
If property values fall in the period between deposit and settlement, your property may be valued at less than you paid for it. This means topping up your deposit to meet the loan to valuation ratio, or making a new arrangement with your lender, an option that has become more difficult following changes to the lending environment.

Avoid this scenario by buying well in the first place. Research the growth potential and trends for the location, looking at statistics on employment, demographics, median apartment price growth, vacancy rates and rents. Is there transportation and infrastructure? Any other planned housing developments?

Variations in design and quality
The finished project may differ to what you anticipated. Even if you view display suites and artists’ impressions, the developer may later change the design and finishes.

To safeguard yourself against disappointment, it’s essential to have a comprehensive contract that sets out in plain English the details of the proposed development plans and quality of fixtures and fittings. The brand and model of the fittings should be clearly outlined, as well as information about whether the buyer can select appliances and what happens if an item is unavailable.

The contract should answer questions like: what are my rights if the design is altered? Can I make changes to the finishes? Can I visit the site during construction?

Construction delays
The development may never get off the ground or it may be delayed by planning approvals, poor weather or bankruptcy.
It’s important to check out the credentials of the developer, builder and architects - find out about past projects and financial performance. Obtain proof of insurance from the developer and know that the builders are licensed and qualified.
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Seek independent legal advice to ensure that the contract of sale contains all the relevant terms for the exchange, such as your rights if the construction is delayed, if the building doesn’t proceed or you withdraw from the contract. Contact us if you would like to find out more about when, where & how to invest in property.
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