Global Monetary Tightening

Australian banks’ “continued reliance” on wholesale funding from overseas institutions may see pressure on local interest rates.

One reason is “global monetary tightening”, especially given the European Central Bank (ECB) is starting to wind back the massive monetary stimulus which it pumped into the European economy since the global financial crisis.

In addition, Fitch expects the US Federal Reserve to lift interest rates four times this year.

America’s official rate is currently sitting in the 1.25-1.5 per cent range, so even one rate hike would mean US rates would be more competitive than Australia’s (currently at 1.5pc).

Stable customer deposits are the Banks preferred funding source.

Should the Banks be unable to raise sufficient deposits they will need to access the more expensive option of global wholesale funds.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

2018: The year to set up your financial future

Based on the expectations of most economists, mortgage holders have between nine and 18 months of the current record low-interest rates before the Reserve Bank will begin the process of moving them up towards more long-term historical norms.

Despite some projections from economists that the RBA will move rates up mid to late 2018, the central bank will be keeping a very close eye on the housing market and will be loathed to become accountable for any precipitous fall in house prices.

Low wages growth and inflation and very weak consumer spending will provide it with the conditions to retain interest rates at 1.5 per cent.

Interest rates are more likely to go nowhere this year.

Now is the perfect time to secure your financial future by securing the best possible borrowing solution.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Commercial property behaved mostly as expected in 2017

Yields continued to firm, tenants were back in the market and the office sector did particularly well, benefiting from business growth and, in the case of Sydney, withdrawal of stock.

Australia quietly moves towards its 27th year of positive economic growth. With high levels of transparency, a comparatively stable government, strict planning controls and strong performance of most commercial property types, why wouldn’t you want to buy?

If you are considering entering the commercial property market, or have already taken advantage of the sound conditions present, contact Strategic Investor Group to ensure you get the right advice regarding any potential loan structure.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Most Australians indicate their biggest life goal is a financial one

Most Australians indicate their biggest life goal is a financial one, but many admit failing to plan is a roadblock.

Popular dreams and aspirations

Interestingly, nearly half of all Australians recently surveyed said they dreamed about the future every few weeks, with people’s major life goals including things such as:

  1. Full financial freedom and independence – 59%
  2. Having the lifestyle of their choice – 58%
  3. Being able to pursue interests and hobbies – 50%
  4. Having more free time to spend with loved ones – 43%
  5. Having a family – 19%.

Let Strategic Investor Group remove the roadblock and help you reach your dreams and aspirations.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

How much is it costing you for being loyal to your Bank?

What’s your bank loyalty worth? The better part of $5 billion a year. Well that, of course, is what it’s worth to the banks – what it’s theoretically costing existing customers who don’t shop around.

What it quantifies for the first time is how much more banks are prepared to discount interest rates for new customers, compared with what they charge their existing, loyal customers.

The RBA’s analysis of the securitisation numbers clearly shows how keen the banks are to attract new mortgages. The average outstanding loan is itself at a substantial discount to the advertised rates, but new loans – those taken out over the past three months – are more than 30 points cheaper again.

The bottom line is that, on average, we end up paying about as much as the RBA wants us to pay for money. To make up the average though, people on higher incomes with bigger loans who shop around pay substantially less than trusting, loyal customers

While investor loans are more expensive than those for owner-occupiers, the discount offered for new business remains attractive.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

What are the Best Performing Property Markets over the past decade?

Sydney and Melbourne regions have experienced the strongest value growth over the past decade while the other capital cities have generally seen comparatively moderate value increases.

When analysing the regions with the greatest value increases, the top 10 regions nationally are all located in either Sydney or Melbourne. This highlights how much stronger value growth has been in Sydney and Melbourne relative to other capital cities over the past decade.

The top 5 list for each state and territory shows a significant slant towards capital city regions rather than regional housing markets.

Overall the data highlights the strength of value growth in Sydney and Melbourne over recent years. Furthermore, it details just how moderate growth has generally been outside of these two cities.

Strategic Investor Group is unashamedly Sydney centric and dedicated to assisting you find value for money.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Coffee with Kiril – Episode 17: Prepare to Lose Money in Property

Prepare to Lose Money in Property

To view other Coffee with Kiril episodes and other Strategic Investor Group videos – please visit our YouTube channel

Ask for a better interest rate on your mortgage

Almost half of all borrowers fail to ask for a better interest rate on their mortgage.

Of almost 1300 homeowners with a mortgage that were surveyed last month, 9 per cent didn’t know they could ask for a discount, while a further 36 per cent simply did not bother to ask.

For a lot of people, it’s a very daunting conversation to have, as there’s that chance of rejection. But if you don’t ask, you won’t get it, so it’s worth asking as you could save tens of thousands of dollars.

It costs banks a lot more to lose you as a customer, than to give you a discount.

It’s time to let Strategic Investor Group have the hard conversation with the Banks and source you the best possible deal.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

RBA finds property owners ‘more financially secure’ than renters

While the first step on the property ladder can be a bit of a stretch, those who make it are, on average, better placed.

Young Australians who bit the bullet and bought their first homes since the financial crisis – in the face of galloping prices – are more financially secure than previous generations and show fewer signs of being vulnerable to a downturn, the Reserve Bank of Australia has found.

In a potentially controversial study into what it describes as the “bittersweet” reality of home ownership, the Reserve Bank concludes that while saving a deposit “is a stretch” in today’s market, for those who make the step, they are better placed to pay off their loans than prior to the crisis.

The findings challenge the oft-heard warnings that recent first-home buyers are taking on more debt than they can afford, and will be left badly exposed in a downturn.

Households that manage the transition from renting to ownership – which the RBA says is becoming more difficult – end up “more financially secure than earlier cohorts” of first-home buyers.

“The underlying desire to become a first-home buyer has not changed since the financial crisis. However, people’s ability to, or comfort with doing so, has been affected.”

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Stable Economic Conditions Continue

Growth in housing debt has been outpacing the slow growth in household income for some time. To address the medium-term risks associated with high and rising household indebtedness, APRA has introduced a number of supervisory measures. Credit standards have been tightened in a way that has reduced the risk profile of borrowers.

The low level of interest rates is continuing to support the Australian economy. Taking account of the available information, the Reserve Bank Board judged that holding the stance of monetary policy unchanged at their most recent meeting would be consistent with sustainable growth in the economy and achieving their inflation target over time.

Regulatory changes have significantly changed how Banks assess your ability to service which in turn will impact your overall borrowing power. Should you have intentions to enter the property market sound professional advice is a must. We are here to help.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group