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Bank limitations create opportunities for non-bank lenders

Since the GFC, bank capital levels and the number of bank regulations have skyrocketed. The unquestionable thrust of Basel III has been for banks to massively increase capital, reduce leverage, limit risk-taking behaviour, and adhere to a far more stringent set of banking regulations.

The fallout from the Royal Commission will undoubtedly see a further reduction in risk-taking appetite and yet more regulatory burden placed on the banks.

In Australia, the non-bank lending market is growing rapidly but is still relatively small, with many players fighting for scale. We expect this trend to continue.

It is important to research the market and understand your options when considering how to fund your next property purchase.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Getting started in property investment

Some people get overwhelmed when considering a property investment and quit before they even begin. Reality is, property investing is relatively straightforward, especially when you partner with the right professional.

What does success look like to you? Property investors generally invest in property to secure their financial future or to be free to do what they want, when they want it.

Understanding the property market is the key to making the right investment decision.

Strategic Investor Group exists to create your unfair property advantage with advice regarding location, investment strategy, debt structuring and property acquisition.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Investor Mortgage interest rate payments rise despite no hike from the RBA

Australia’s banking and finance system delivers higher profits to only a few and rips off its most loyal customers, a Productivity Commission report has found.

The commission found loyal customers were “ripe for exploitation”, with one in two people still banking with their first bank. Only one in three have considered switching banks in the past two years, accepting interest rates on home loans up to 0.4 per cent higher than new customers.

Banks responded to orders from the Australian Prudential Regulation Authority to curb interest-only mortgages by raising interest rates – not just for new loans – but for all existing investor loans.

Now’s the time to seek professional advice and review your property investment strategy and mortgage interest rate.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

First home buyers on the rise

First home buyers increased their share of housing demand this quarter, hitting the highest level since 2011.

Overall, first home buyers accounted for almost two in five sales in new housing markets and around one in three in established markets.

Most of the first-time buyers were owner-occupiers rather than investors.

It is a trend expected to continue over the year ahead, with first home buyers, owner-occupiers and local investors tipped to increase their share as foreign demand continues to fall.

Now is a great time to obtain market-leading advice on your property investment strategy.

 

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Area X-Ray – Was your last property purchase average?

Strategic Investor Group’s Area X-Ray classifies over 180 suburbs within a target 20km radius of Sydney’s CBD based on 16 key growth criteria. Suburbs are rated A, B or C based on this assessment.

Over the past 12 months, all categories within Area X-Ray have outperformed the broader Sydney market.

 

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

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