2009 was a very tough year for many people but the outlook for 2010 is very positive across the board.
Interest rates are on the way up again with many expecting them to have another increase in the new year and then further rises toward the middle of the year. It is expected that the average home loan rate, currently around 6%, will be at around 7% this time next year and probably peaking at around 7.5-8% the year after.
When calculating your repayments a general 'rule of thumb' is that if you can afford the loan at an interest rate of say, 10% then you will be able to cope with most economic fluctuations during the life of the loan. I always suggest that you pay more than you should with your regular repayments. The more you pay off the less you are paying in interest - effectively you are saving your self a lot of money and building your retirement plan.
Putting spare cash in a cash or term deposit will earn you around 3-4% pa whereas if you put it in your loan as an additional payment (which you can redraw later) you are saving yourself 6-7% in interest. Something to think about.
Have a prosperous New Year.
Richard and Doug.
Investors are starting to pour back into the market as the first home owner grant boost winds down. Australia's property market is picking up steam thanks to a bumper start to the spring season. Read more ...
From Friday 1 January 2010, eligibility for the existing FHOGS benefit of $7,000 will be restricted as follows: Read more ...
The global economy has resumed growth. With economic policy settings likely to remain expansionary for some time, the recovery is likely to continue during 2010 and forecasts have been revised higher. Read more ...
The prediction we made a year ago that housing values would rise during 2009 left us feeling very much "alone again", as a hoard of experts howled us down, forecasting price falls of up to 40%. Read more ...
CBA boss Ralph Norris says major banks lifting interest rates higher than the central bank's 0.25% increase in December may see the cash rate left on hold in February. Read more ...
Deck the Halls 2009 - Well dear reader, we are all another year wiser. The earth has rotated the requisite number of turns
about the sun and the big man with the sled and prezzies is firing up the turbo reindeer as some of us
look towards getting completely trolleyed at the office Xmas party in preparation for dealing with the
embarrassing aftermath come the next annum. Read more...
Check out www.marshegroup.com.au and talk to Mark Mendel. Mark knows his stuff and will provide a comprehensive research report on any property you are interested in. There are some great discounts available as Mark selects his developers carefully and negotiates hard to bring you good value, quality properties. Well worth checking out.
Our newsletter is designed to raise current business & tax issues that we believe you should be aware of.
In this newsletter are articles on:
ATO initiatives re data matching,
Dealing with the ATO in difficult times,
The risks of insolvent trading
and What the banks are up to. Read more ....(
It will be easier for consumers to lodge complaints to the Financial Ombudsman Service (FOS) following ASIC approving new terms of reference. Read more ...
Federal treasurer Wayne Swan has refused to concede that Westpac had any justification for raising its interest rates way above the RBA increase. Read more ...
The Reserve Bank of Australia has challenged bank rate hikes by pointing out that profits from lending have returned to pre-crisis levels. Read more ...
Average unit prices in Canberra, Darwin, Perth and Melbourne were all within the $370-395,000 range at 31 August, according to Residex. Read more ...
Non-banks are expected to capture market share from the major banks in the next 12 months as securitisation makes a comeback. Read more ...
Scam artists are falsely claiming to be conducting a customer satisfaction survey on behalf of the Australian Bankers' Association. Read more ...
Source: RP Data & Mortgage Business
|
Darwin
|
Brisbane
|
Sydney
|
Canberra
|
Melbourne
|
Adelaide
|
Perth
|
|
| HOUSES | |||||||
| Quarterly growth |
5.26%
|
-0.03%
|
2.88%
|
3.70%
|
4.89%
|
2.58%
|
-1.20%
|
| Annual growth |
16.04%
|
1.77%
|
6.71%
|
7.62%
|
9.61%
|
3.89%
|
0.17%
|
| Average annual growth |
14.03%
|
9.51%
|
2.26%
|
6.60%
|
5.90%
|
8.58%
|
10.94%
|
| Gross rental yield |
5.76%
|
4.36%
|
4.29%
|
4.55%
|
3.73%
|
4.27%
|
4.33%
|
| UNITS |
|
|
|
|
|
|
|
| Quarterly growth |
9.15%
|
-0.15%
|
2.63%
|
4.39%
|
4.59%
|
1.87%
|
-5.31%
|
| Annual growth |
28.80%
|
4.26%
|
7.97%
|
13.50%
|
9.84%
|
2.26%
|
-1.86%
|
| Average annual growth |
14.63%
|
10.32%
|
2.72%
|
10.00%
|
5.70%
|
8.53%
|
11.99%
|
| Gross rental yield |
5.99%
|
5.24%
|
5.24%
|
5.86%
|
4.36%
|
4.93%
|
4.98%
|
Changes to First Home Owners Grant Scheme
From Friday 1 January 2010, eligibility for the existing FHOGS benefit of $7,000 will be restricted as follows:
| • | NSW – purchase property value capped at $750,000. | |
| • | WA – purchase property value capped at $750,000 for post codes south of the 26th parallel (i.e. from Kalbarri 6536) and $1,000,000 for post codes north of the 26th parallel (i.e. from Denham 6537). | |
| • | VIC – purchase property value capped at $750,000 (a farm purchased as a principle residence is excluded from the cap). | |
| • | QLD – purchase property value capped at $1,000,000. | |
| • | NT – purchase property value capped at $750,000 (First Home Owner Transfer Stamp Duty Concession eligibility will also be capped at $750,000 for established dwellings and $385,000 for vacant land). | |
| • | SA/TAS/ACT – no purchase property value cap applies. |
New FHOG Forms
FHOGS forms will be updated in mid January.
- NSW, QLD and WA will accept the old version of the form where the contract date is prior to Friday 1 January 2010 and the transaction is processed prior to Friday 29 January 2010. NT will not accept old forms after Friday 1 January 2010.
- VIC, SA & TAS have not yet updated their forms and will continue to accept the old versions of the forms until further notice.
Conditions for land and construction
- NSW, QLD, WA and NT – Assessment of applications involving construction of a dwelling, including Off the Plan applications, will use the total land and construction value as at the date of the contract.
- VIC – Assessment of applications involving the construction of a dwelling, including Off the Plan applications, will use the construction value only as at the date of the contract.
Additional Documentation Requirements
- NSW, QLD, WA and NT - Evidence of land value will now be required as a part of the supporting documentation provided with the FHOG application.
- Acceptable evidence varies for each state/territory, which you can confirm via the FHOGS form or relevant OSR web site.
FHOGS and State Subsidy Summary
Refer to the attached updated FHOGS and State Subsidy Summary for the maximum amounts available to eligible customers. The Summary will be available on CommBroker shortly.
Extension of the NSW Housing Construction Acceleration Plan (HCAP)
The NSW Housing Construction Acceleration Plan (HCAP) due to expire on 31st December 2009 has been extended until 30th June 2010.
The concession is only available for customers entering into a contract for the purchase of a new home between Wednesday 1 July 2009 and Wednesday 30th June 2010. The concession reduces the Transfer Stamp Duty payable by 50% for transactions up to $600,000 for both new owner occupier and investment properties. The concession is not limited to one transaction.
Note: First home owners cannot claim the concession.
A new home is classified as one that has not previously been occupied or sold as a place of residence. The home must be complete and ready for occupation unless it is an off the plan purchase.
Northern Territory Registration Fee changes
Effective Friday 1 January 2010, the NT Registration fees increased as below:
- Registration of Mortgage fee - $105 (previously $95)
- Registration of Discharge of Mortgage fee - $105 (previously $95).
- Registration of Transfer of Mortgage fee - $105 (previously $95).
Source: Broker News
CBA boss Ralph Norris says major banks lifting interest rates higher than the central bank's 0.25% increase in December may see the cash rate left on hold in February.
Speaking on Sky Business, Norris said: "I think given the fact that there have been interest rate increases over and above the (official cash rate) then I think it is a possibility that we might not see an increase in February,"
The likelihood of an interest rate rise when the RBA monetary policy committee next meets at the start of February has diminished after GDP for the September quarter came in lower than expected (0.2% versus a forecasted 0.4%).
Furthermore, deputy governor Ric Battellino confirmed recently that because of the widening in the margins between bank lending rates and the cash rate, the banks have effectively done some of the RBA's work for it
Norris said minutes from the December monetary policy meeting indicated that the decision to raise rates by 25bps was a "finely balanced one"
While he admitted his comments were "pure speculation" he did receive support from Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors.
Oliver said because of the wider margin between the cash rate and major bank interest rates "the 3.75% cash rate is consistent with a 4.75% cash rate before the global financial crisis" and in the "normal range of interest rates in recent years, albeit still in the expansionary end".
"There is nothing particularly controversial in any of this, but it does suggest that RBA interest rate hikes will be slower going forward and it confirms the conclusion of many that the normal level for the cash rate has fallen. There is now a good chance that in the absence of really strong economic data over the next month or so, the RBA will leave rates on hold at its February meeting," he said.
Source: Broker News
It will be easier for consumers to lodge complaints to the Financial Ombudsman Service (FOS) following ASIC approving new terms of reference.
The FOS is one of two consumer complaints handling bodies that ASIC has approved as a qualifying EDR scheme for brokers wishing to register and apply for a credit licence.
The new terms of reference take effect from 1 January 2010.
ASIC said the new terms would "provide a more consistent treatment of consumers and industry Members than the currently operating five separate sets of rules and guidance of FOS' predecessor schemes".
For a summary of key changes under the new terms of reference compared with under predecessor scheme rules click here.
Source: Broker News
Federal treasurer Wayne Swan has refused to concede that Westpac had any justification for raising its interest rates way above the RBA increase.
In an interview on ABC radio, Swan was asked if he'd been a bit too tough on the bank in light of it continuing to lend during the GFC while other banks had closed shop, but the treasurer refused to back down.
"I most certainly haven't been too tough. The decision by Westpac had no justification at all in my view, and I think we've seen in some reportage in the last 24 hours the fact that the margins for banks like Westpac have in fact increased in recent times. In my view there was no justification for Westpac to move so aggressively above the Reserve Bank decision," Swan said.
And he responded equally vehemently when comments made by Westpac chairman Ted Evans (directed at Swan) that "correct decisions are sometimes unpopular" were repeated by the interviewer.
Swan agreed that correct decisions are sometimes unpopular, but said the Westpac decision "wasn't a correct decision".
"It is very unpopular because it was a wrong decision.
Source: Broker News
The Reserve Bank of Australia has challenged bank rate hikes by pointing out that profits from lending have returned to pre-crisis levels.
According to the SMH, RBA governor Ric Battellino stated that the difference between interest rates charged to customers and funding costs - or the net interest margins - are now 20 bps above pre-crisis levels.
"With the economy and business climate now improving, the economic justification for wider margins on loans is becoming less compelling, so it would be reasonable to assume that, in a competitive banking sector, we should see margins level out soon," said Battellino at the Australiasian Finance and Banking Conference in Sydney.
Meanwhile Westpac's chairman Ted Evans defended the bank's rate rise of 45 bps above the RBA's December hike, insisting it was time for homeowners to bear some of the cost of funding.
Evans told Members of the bank's annual meeting in Melbourne yesterday that it was not fair for small business owners to bear the brunt of rate increases in order than home loans could be subsidised.
Chief executive Gail Kelly indicated that interest rates will move even higher next year.
Source: Broker News
The Australian economy grew by 0.2% in the third quarter of 2009, according to national GDP figures.
Though a positive result, it was below economists' forecasts of 0.4% growth in the September quarter.
Bob Cunneen, senior economist at AMP Capital Investors, said the quarterly result meant "Australia's downturn now appears to be coming to a close and the economy is set to accelerate into a more prosperous 2010".
He called it a "subdued activity result", but one that comes after "a sequence of positive growth surprises that has seen Australia endure only a shallow & short downturn".
"Thus compared to the deep recessions recorded by the major developed nations (America, Europe, Japan), Australia has been remarkably resilient since the "Global Financial Crisis" started two years ago," he said.
The primary sources of strength in the quarter were consumer spending (+0.7% qoq), housing construction (+5.9% qoq), inventory rebuilding (+0.8% GDP contribution) and public investment (+6.2% qoq) .
"Consumer spending and housing construction were solid given the benefit of lower mortgage interest rates and fiscal incentives (first home owners scheme)," Cunneen said.
This was counterbalanced by contractions in private business investment with both machinery and equipment (-4.3% qoq) and construction (-4.1%) recording sharp falls.
Source: Broker News
Non-banks are expected to capture market share from the major banks in the next 12 months as securitisation makes a comeback.
According to a report prepared by Deloitte, 2010 would be a year of renewed competition.
"In 2010 lenders will seek to position for the opportunities ahead. Where 2009 was the year of the major banks, 2010 will provide opportunity for the re-emergence of other lenders in the marketplace," said James Hickey, a banking partner with Deloitte Actuaries and Consultants.
Deloitte's findings were based on a roundtable discussion of Australian lenders and distributors.
Audit Partner and Deloitte Australian Securitisation lead Graham Mott said, "The Big Four roundtable participants said they would welcome more competition and the smaller lenders said they intend to tackle them. So the game is on."
Industry players agreed that the return of the RMBS market was both "necessary and anticipated".
According to Mott, "We are already seeing solid evidence that the RMBS market is returning and at this rate it will reach 'break even' levels in 2010 - triggering the environment for more competition".
The report found that competition between the Big Four, from regional and non-bank players and from "left-field" participants, such as foreign lenders will drive evolution of the mortgage market.
Further change in the mortgage market is likely to take place in terms of differentiation around brand, strategy, pricing and operating models.
Roundtable participants, who included FAST CEO Steve Kane, indicated that there would be increased merger and acquisition activity in the coming year of third party broker groups and natural attrition driven by regulation.
Lastly, the group named innovation around product design, customer service, delivery channels and operating efficiency as being key to driving evolution of the mortgage sector in 2010.
By Broker News
Proposed liquidity rules could result in higher loan costs for borrowers and businesses, warns Reserve Bank of Australia governor Glenn Stevens.
Speaking at the Australian Business Economist dinner in Sydney last night, Stevens suggested that rates would climb as a result of the implementation of international liquidity rules designed to prevent repeats of the global financial crisis.
According to the AFR, Stevens said: "On the assumption that most of these regulatory changes go ahead, one effect will presumably be to make the process of financial intermediation more costly".
Nomura Holdings has predicted APRA's liquidity rules could cost the major banks $1.76 bn.
Banks have argued that the rules are unnecessary for Australian lenders, which have proved themselves capable of weathering financial storms.
However, Stevens said that the financial crisis has shown reform is needed, albeit a balance needs to be struck between regulation and higher costs.
