With the mercury in every Australian city except Perth and Darwin expected to dip to a  single digit during the nights this week, it feels like winter has finally blown in, full of cloudy days and toe-freezing evenings.

If you want to avoid feeling like you’re living in a tent, now is the time to get your house sorted for winter.

Dragging the ankle biters across the countryside recently on one of those family road trips that feels more like three weeks of endless work rather than relaxing, we had the chance to stay at two different relatives’ houses in the same town on successive nights.

They were both pretty chilly evenings but neither that much colder than the other, and it was fascinating to see just how much warmer one house was.

The first property, a bare-fronted brick home that was well-sealed with wall-to-wall carpet, and heavy curtains with pelmets, was comfortable overnight to the point that it didn’t really feel cold at all.

The next was an older fibro house whose foundations had shimmied and shifted overtime. There were no pelmets and mostly light curtains. It was freezing and had me  reaching for a thick jumper and woolly socks.

It really drove home the point that it’s not just important to artificially heat our homes, but vital to seal them up and insulate them too.

Ten tips to keep warm

1. Seal up all the gaps. Windows and doors can leak in substantial volumes of cold air. But some simple draught stoppers fitted in or around door and window frames and at the bottom of doors can make a huge difference.

This was job number one at our place on the weekend. We opted for brush-strip seals on the bottom of the doors. They are basically an aluminium strip that has a narrow but dense nylon brush sticking out one side.

I like this option a lot better than “door snakes” which rely on someone remembering to put them back in place every time they come inside. As if that is going to happen!

The door strips were super-easy to put on. They did have to be cut to size, but it was one snip with some bolt cutters and they were ready.

For the windows I chose a woven pile self-adhesive strip. It squashes down a bit more easily than the foam strips, and if it’s a tad to bulky you can easily trim the length of the pile or furry stuff with a pair of sharp scissors.

Plus, if they ever need to come off they’ll be a lot easier to remove than old foam strips, as I found out on the weekend when attacking one ageing seal with a pocket knife.

2. Stop the gaps around internal doors. If you have rooms you are not heating, such as laundries and bathrooms, you should draught-proof these too, so that when you close them off, there’s no unwanted air leakage happening.

3. Cover those windows. Single-pane glass has little insulation value, so you’ll need to cover it to keep the cold air out (or warm air in), especially overnight. The idea is to provide an air-trap between the window covering and the window. That’s why heavy curtains that extend across to the sides of the windows, and down to the floor are recommended.

A pelmet at the top is also needed to contain the warm air in the room. Pelmets stop the warm air from being drawn behind the top of the curtain by a thermal current created as the warm air from the top of the curtain travels behind it, and falls towards the floor as it cools, and travels back into the room.

I prefer the look of blinds, and find curtains a bit of a hassle, so we’re going to put in honeycomb or cellular blinds that have pockets within them to trap the air.

They aren’t the cheapest option but because they meet the top of the window frame, we should avoid having to install pelmets and save money there.

Because we are thinking of doing some renovations in a few years, we’ve opted for cheaper cellular blinds on the windows that may not be staying, and have invested in better-quality versions for the permanent windows.

Of course, if the blinds aren’t doing the trick, we’ve still got the option of adding curtains later, but hopefully shouldn’t need to.

4. Use the sun. Harness nature by drawing back the curtains and blinds during the day to letting the sun’s rays warm up the house, especially if you have north-facing windows.

5. Floor coverings. Timber floors really became popular a decade or so ago and show no signs of waning.

They can be a bit cold in winter though, especially if there is no insulation underneath. So it’s time to roll out the carpet, or the winter rugs at least. The good news is, in summer you can lift them up and store them.

If you have tiles or polished cement in areas that get the sun in winter, you may be better off leaving them uncovered to let the sun work its magic by heating the floor during the day.

6. Buy a caulking gun. And a tube of no more gaps, or three. Attack any gaps with the vengeance of any angry bee. Remember to look up high, and down low. If you clean up any overfills straight away with a damp cloth it saves a bit of difficulty later.

7. Throw me a blanket. Keep a couple of throws draped over the back of your lounge to use when you’re watching tele. Even a light blanket will make you a lot warmer.

8. Insulate your ceiling. So much heat is lost through uninsulated ceilings that it’s a no brainer to get this sorted. Make sure you use a reputable installer though.

9. Set the thermostat. The experts say 18-21 degrees is warm enough for the inside of your home in winter. I think I’ll be opting for 21, but keeping in mind that every degree cooler you make the house can save you about 10 per cent on your energy bills.

10. Shut it out. Close air-conditioning vents, and cover up with some cardboard and bluetack, or a similar removable covering, any permanent vents on your walls. We’ve got an older style house so we have at least one fixed vent in every room.

Luckily our walls are white so we can just use some white cardboard, or I might invest in a little bit of painted plywood. That’s next weekend’s job…

If you want to find out more about keeping your home warm in winter, visit Environment Victoria, the NSW Environment, Climate Change and Water site, or this interesting little presentation from the Portland Sustainability Workshop.

Story by Carolyn Boyd www.domain.com.au

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Australia’s largest independently-owned mortgage broker, Mortgage Choice strongly supports today’s Senate economic references committee recommendation that the Federal Government reconsider its plan to abolish exit fees on new home loans.

Non-bank lenders, which are vital to the health of a competitive lender market, raise funds at a higher cost to their banking counterparts and lack the same economies of scale. As such, exit fees are brought in to recover their reasonable costs should a loan be discharged early.

ASIC recognises this and made clear in November 2010 what it regards as a reasonable exit fee and what it regards as unconscionable. Mortgage Choice continues to support the guidance paper issued by ASIC at the time (Regulatory Guide 220).

The national mortgage broker lobbied the government last year to cease moving ahead with a home loan exit fee ban. In doing so, CEO Michael Russell wrote to Treasurer Swan:

“A unilateral ban on exit fees will have the unintended consequence of actually reducing lender competition by damaging the competitive offering of non-bank lenders and some second tier banks. These lenders have up until now only been able to compete on price by deferring or back-ending certain establishment fees. If this option is removed, then by default they would need to increase their customer interest rates and/or ongoing fees. The major banks would then be sure to follow or perhaps wait until the non-banks suffocated.

Mortgage Choice supports the guidance paper issued by ASIC (RG220) endorsing exit fees that represent a reasonable recoupment of costs upon the early termination of a loan. Smaller lenders would then be able to continue to compete on upfront interest rates and fees. As previously mentioned, and as you are aware, greater competition will deliver improved product innovation, pricing and service.

Should the Gillard Government unilaterally ban exit fees, then it will unwittingly hand over on a plate the heads of the non-banks to the major banks. Why? They are reliant upon this fee to be able to remain competitive at the front end, where real competition counts for the consumer.

The decline in competition will hit mortgage holders hard where it counts most – interest rates and fees and most importantly future product innovation and customer service.”

A consumer champion that has written home loans for over 300,000 Australians, Mortgage Choice stands by these statements in calling for a reversal of the decision to abolish home loan exit fees.

Visit MortgageChoice.com.au or Twitter.com/MortgageChoice.

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It’s amazing what you read in the doctor’s surgery. In between all the warnings about giving up smoking and regular check-ups was, of course, a magazine that was, oh, just six years old.

But it provided an eye to the future – apparently. This 2005 mag talked about the houses of the future. It predicted that within just a few years we’d have the widespread use of smart glass that changed with the light conditions, intelligent paint that integrated nano sensors to detect, among other things, smoke, with cameras in each room streaming heat-sensing vision back to the television so you could check what was happening. (I assume they weren’t suggesting this was a good idea for the bedrooms.)

It gave a scenario of someone sitting on the couch, being alerted by the phone to smoke in the back entertainment room. They would switch views on the TV and see it was their teenage son lighting up a ciggie.

Not that that precludes you from adding a few tricky techno bits, but if we can’t even get basic house design right, you have to wonder how we will ever get really innovative.

If I got to pick my ideal house of the future, I’d be less interested in surround-sound music that switched on as you drove into the garage (already possible through home automation) and more into creature comforts.

Houses that react intelligently to the outside environment to naturally adjust the temperature indoors by sensing when it is time to absorb or reflect heat, pull down the shutters, open the windows, and switch on the fans, keeping everything at a comfortable 22 degrees or thereabouts. They’d have smart glass in the windows that changed with the conditions.

There would be solar cells integrated into the whole exterior fabric of the home (or the bits that get enough sun).

A green builder recently pitched a story idea to me about developing green homes. He included a journal of keeping his green home cool on a really, really hot day.

It sounded great, but quite a lot of work with lots of opening and shutting windows and blinds, and closing doors to section off some warmer rooms etc. It’s something I do already instinctively at my own place but seeing it in words showed just how much time and effort is required to manually control our little micro environments.

Instead, the dream would be to return home on a really hot day, when you may have forgotten to shut all the windows or pull down all the blinds as you rushed off to work, and the house has done it all for you. It’s outside coating has sensed it’s a scorcher and has reflect heat out.

And if you stay back at an after-work function and get home really late, the house has automatically opened up the appropriate windows to let the cooling night breezes in once the outside air hit the right temperature.

When rain strikes, the house automatically closes up any windows that let in water, and collects the washing off the line (just kidding – but wouldn’t that be nice?).

Surely it’s all possible, at some stage? I mean, who would have dreamed lights could turn on and off automatically as you entered a room, the bathroom floor could preheat in the morning and rain sensors would close up your vergola?

You can sense it won’t be long until we move closer to the really intuitive automated house that does more than just the whizz bang. Already there are the early beginnings of turning our own homes into giant touchscreens, or at least parts of them such as bathroom mirrors, and fridge doors.

And there’s a growing interest in having houses wired up for technology, and the National Broadband Network, when it does roll out.

The one thing that’s a block to “smart homes” is, of course, money. Many people are struggling to pay the mortgage already without having to fork out for extra technology. But it’s nice to dream…

Story by Carolyn Boyd www.domain.com.au

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HSBC’s chief economist says he expects the central bank to leave interest rates on hold until mid-year, even though inflation is showing signs of picking up.

Paul Bloxham, a former Reserve Bank economist, said last week’s CPI numbers were “the beginning of the upswing in inflation.”

“I think it is the beginning of a sequence of inflation numbers that will start to look stronger than the previous set,” he told ABC’s Inside Business program on Sunday.

The Australian Bureau of Statistics (ABS) surprised economists last Wednesday, after it reported that the Consumer Price Index (CPI) had risen by 1.6 per cent in the March quarter for an annual inflation rate of 3.3 per cent.

“It will start to be a concern for the RBA, they will start to then be thinking about having to lift rates, particularly given that it was underlying inflation that picked up,” Mr Bloxham said.

Mr Bloxham said HSBC expects borrowers to be spared an interest rate rise on Tuesday, despite the signs of rising inflation.

“We expect that the next rate rise will be in July or August and that we’ll get another 50 basis points this year, by the end of this year,” he said.

Over the coming year, Mr Bloxham said he expected the cash rate to rise 100 basis points.

Of 13 economists surveyed by AAP, 11 expected the central bank to make its first rate hike in the third quarter of the year.

Story source: http://finance.ninemsn.com.au

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Loans provided by Australian banks and finance companies increased 0.6 per cent in March from the previous month, matching the biggest monthly increase since January 2009, the Reserve Bank of Australia said today.

Lending for housing increased – but at the slowest pace in at least 35 years.

Loans to consumers to buy houses rose 0.4 per cent from February and advanced 6.6 per cent from a year earlier, according to today’s statement.

While housing credit increased, the gain was the smallest since June last year, while the annual increase was the smallest in the history of the RBA data series, which extends back as far as 1976.

The weakening demand for housing loans adds to signals pointing to softening demand for real estate. Reports out this week indicated capital city home prices are flat or falling, including RP Data-Rismark’s series showing median prices posted their biggest quarterly drop in the survey’s history dating back to 1999.

St George chief economist Besa Deda said the weak borrowing numbers showed a softer housing market.

“This provides further evidence of weakening housing conditions, which has been reflected in moderating house prices,” she said.

“Historically low housing affordability is significantly weighing on house purchases,” Ms Deda said.

“In particular, the last RBA rate hike in November where the variable mortgage rate increased about 40 basis points appears to have put a dent in demand,” she said.

Overall credit nudges higher

The overall credit increase in February was revised to 0.6 per cent from 0.5 per cent, the central bank said. The median estimate of 22 economists surveyed by Bloomberg News was for a 0.4 percent increase. Lending gained 3.6 per cent from a year earlier.

Credit provided to consumers for purchases other than housing advanced 0.6 per cent from a month earlier for an annual rise of 1 per cent.

Lending to companies climbed 1 per cent from February and declined 0.6 per cent from a year earlier.

The annual increase in total credit of 3.6 per cent marks a relatively subdued pace compared with an average annual growth rate of 11 per cent for the preceding decade.

Half of the latest annual rise was recorded in the most recent four months.

Other personal credit outstanding rose 0.6 per cent in March, the biggest monthly rise since December 2009, but an increase of only 1.0 per cent through the year.

Business credit rose by 1.0 per cent in March, the heftiest monthly increase since October 2008, when the global financial crisis came to a head. However, annual growth remained negative, with a fall of 0.6 per cent.

The last time business credit posted an annual rise was in June 2009, the RBA figures showed.

BusinessDay, AAP, Bloomberg

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The March 2011 quarter Consumer Price Index (CPI) for the housing group, increased 1.3 per cent, compared to the all groups increase of 1.6 per cent. These figures increased 4.8 per cent and 3.3 per cent respectively over the twelve month period. Whilst the housing group is up from the 0.6 per cent level of the previous quarter, the annual rate of increase is the lowest since the September quarter of 2007.

Contributing to the annual increase of 4.8 per cent for the housing group, were substantial increases in the price of utilities – 11.7 per cent for electricity, 12.8 per cent for water and sewerage and 6.2 per cent for property rates and charges.

Rents increased by 4.5 per cent for the year on a weighted average eight capital city basis and the cost of house purchase increased 2.6 per cent.

President of the Real Estate Institute of Australia (REIA), Mr David Airey said, “The Reserve Bank of Australia (RBA) consumer prices measures of weighted median and trimmed median are 2.2 per cent and 2.3 per cent respectively for the year – well within their target zone of 2-3 per cent.”

“The March figures include increases of 16 per cent for vegetables and 14.5 per cent for fruit, which are to be expected as one-off occurrences, following this year’s flooding and cyclones in
Queensland and Victoria,” he continued.

“The message for the RBA is clear; rates do not need to be increased next week. Increasing rates will only cause greater mortgage stress for home owners and discourage buyers,” Mr Airey concluded.

Story Source: http://au.ibtimes.com

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By allowing ordinary taxpayers to deduct their losses from investing in residential property against their other (mainly wage and salary) income, the current system provides a significant tax incentive for people to invest in rental accommodation across Australia.

Encouraging this demand, by the simple laws of the market, does hold property prices higher than they would otherwise be. But it also ensures a significant supply of rental housing, which also holds down rents.

As the Treasurer looks at a range of measures to cut the deficit, there are reports that senior Labor figures have had discussions with some union leaders about plans to bring in measures that could change the current tax arrangements.

Suggestions have ranged from a new sales tax on property investors to cutting back the negative gearing incentives for investors who have more than one investment property.

The ideas are being mooted as part of a strategy to make housing more affordable — while at the same time they might have the advantage of cutting back on some tax concessions that, in theory, could also help to reduce the budget deficit.

While property markets will eventually react to changes in tax arrangements, any changes will involve some risky politics.

There is a real danger that a “soak the rich” style approach to cutting back negative gearing will lead to a significant reduction in the availability of rental housing, which will only be overcome — over time and after some significant market disruption — by an increase in rents.

The people most likely to be hit by the dislocation of the investment housing market as it adjusts to cope with new tax changes — and expected future cutbacks on tax concessions — will be those who can least afford it. . . people who rent.

Those investors who might be discouraged from the investment housing market by the changes can just as easily sit back and put their money into a term deposit and get 6 per cent risk-free guaranteed (as opposed to the current average rental yield on investment property of between 2 per cent and 4 per cent).

They will have none of the hassles of dealing with tenants and real estate agents, nor will they have to pay stamp duty, land tax, conveyancing fees, insurance and repair bills.

But for the millions of Australians who will be making the decision of whether to buy or sell residential property in coming months, Swan needs to make the federal government’s position clear.

If not, would-be sellers would be better off getting rid of their property as fast as possible and buyers would be wise to hold off buying until they have a clear guarantee about what the federal government’s plans are.

Any change to the current negative gearing arrangements would only mean one thing — cutting or eliminating the tax benefits of investing in rental property.

With property prices cooling off in many areas, some investors are already rethinking their plans for investment in residential property — even with the incentive of the tax concessions provided by negative gearing.

Any further changes — or feared changes — could see a rush by investors for the exits.

Even a small reduction in the government’s tax concessions could lead to a much more substantial reduction in investment.

Investors who look at residential real estate as a long-term investment might well take the view that any announcements made this year may be the thin edge of the wedge, the beginning of a more substantial cutback in the negative gearing arrangements in coming years.

And with property, as everyone knows, in a falling market, it is a case of first out, best dressed.

As the latest figures from the Australian Taxation Office show, there are almost 1.7 million taxpayers out of a total of 12.3 million in Australia who report they have at least one rental property.

A rough calculation of figures provided by the ATO of how many taxpayers have one or more properties shows that these 1.7 million taxpayers own at least 2.3 million properties.

Put a potential 2.3 million properties on the market across Australia and one will certainly achieve a big fall in property prices.

That, or some version of it, may be what those advocating a cutback in the current concessions are trying to achieve. But there will be a lot of market pain getting there for everyone with an exposure to the housing market.

For a start, it could also take out of the market a potential 2.3 million properties that are currently occupied by renters.

Over time, of course, the total rental market will decline somewhat as lower house prices will make it easier for some existing renters to buy their own home.

And rents will rise to the point where investors may be willing to come back into the market.

Of course, an abolition of negative gearing would not suddenly result in 2.3 million properties coming on the market, because not all investors will decide that having money in residential property is no longer worthwhile.

But the figures do provide some indication of the potential implications for any treasurer who starts to tinker with the system.

The ATO figures show that almost 1.2 million taxpayers have only one investment property.

A decision to cut out negative gearing for those with more than one property, according to the ATO figures, would affect 475,000 taxpayers.

These collectively own at least 1.1 million properties, which is still a fair swag of real estate that might come on the market if investors with more than one investment property were discouraged.

And for those who think that investing in residential property is only a rich man’s sport, the figures show that by far the biggest swag of properties are owned by people earning $80,000 a year or less.

As the accompanying table shows, there were just over 1.1 million taxpayers in 2008-09 (the latest figures available) who hold rental properties that are losing money (in other words, the cost of interest and other expenses outweighs the rental income).

These are the ones, of course, who are taking advantage of negative gearing.

Of those, the biggest single grouping is people who are earning between $34,000 and $80,000 a year. Just under 80 per cent of the total number of taxpayers who own properties that are losing money earn $80,000 or less.

Story by Glenda Korporaal  www.theaustralian.com.au/

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Franchise owners for Australia’s largest independently-owned mortgage broker, Mortgage Choice, continue to meet people planning to buy property who have no idea their credit file may hold details that will see their home loan application declined.

Some are unaware certain aspects of their debt history, including bill defaults and applications for loans and credit cards, are on file and made available to lenders and other credit providers.

Mortgage Choice spokesperson, Kristy Sheppard said, “There is still a lack of knowledge about the existence of individual credit files and that one or two debt-related mistakes, such as a missed or late bill payment, are often enough reason for someone to be denied a home loan.”

“Younger borrowers are especially likely to be oblivious to the importance of keeping their credit file clean. Defaults and credit applications are usually displayed loud and clear to lenders researching a potential customer’s suitability for and ability to repay a home loan.

“Be aware that if you have been active in applying for credit within the last five years and/or have not met deadlines with bill or other debt payments in that time, you have a credit file. Some records are kept on file for seven years.

“The good news is defaults are preventable in many cases. If you are unable to meet repayments it is up to you to contact your lender or credit provider and make arrangements to pay the outstanding balance before a default is noted on your credit.”

Mortgage Choice suggests these top five tips for keeping your credit file clean:

1. Understand where your money is going and pay on time. Know your cashflow back to front and ensure responsible payment of your credit cards, bills and personal loans by contributing the funds required before the due date. Make time to monitor your accounts closely and look for any discrepancies. Once familiar, you will understand your spending habits better. Do you know the exact balance of your credit card and other loans, their interest rates and fees? Do you keep utility bills on the top of your ‘to do’ pile and file them after paying?

2. Make it automatic. Missed and late payments are one of the most common defaults on a credit file. Paying bills and minimum repayments before or on time will help prevent unwanted fees. A good way to ensure you don’t miss one is to set up auto transfers from your savings account.

3. Don’t go overboard. It is easy to go over your credit limit, miss paying bills or fall into the habit of thinking “another debt won’t hurt”. You can quickly lose track of spending and fall behind, which is when defaults appear on your credit file. Have a budget and stick to it. Lost motivation? Consider what life will be like if you can’t apply for a home loan or other credit in years to come.

4. Just say no. Credit providers may tempt you to increase your limit. Resist unless absolutely necessary; don’t increase spending simply because you can. If you are only just getting by you should think about reducing your limit until in the clear and perhaps cut up your credit card/s.

5. Pay more than the minimum. By repaying only the minimum required amount on your credit card or personal loan you end up paying a great deal in interest and may never pay it off. Paying debts off in full or making repayments above the minimum amount and restricting your spending will help ensure you pay your balance off and do not tarnish your credit file.

To order a copy of your credit report visit www.mycreditfile.com.au.

Call Mortgage Choice customer service on 13 MORTGAGE. Or, visit MortgageChoice.com.au, Facebook.com/MortgageChoice or Twitter.com/MortgageChoice.

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In the minutes of the monthly monetary policy meeting on April 5, the RBA said its board had noted that loan rates facing businesses and households were “a little above average levels”, thanks to earlier official rate increases.

The RBA said that was appropriate, given the need to keep inflation consistent with the two to three per cent medium term target the central bank imposed on itself in 1993.

The minutes revealed an understandable preoccupation with the disastrous events in Japan and the floods in Queensland.

But the RBA said that in making its decision to keep the cash rate steady it would “look through” the effects of the floods, which would lift headline inflation and depress gross domestic product growth in the March quarter.

And despite the earthquakes and tsunami in Japan, the most likely outcome was that the prices for Australia’s main exports would “remain at high levels for some time to come”.

As a result, businesses investment, particularly in the extractive industries, was still expected to rise sharply.

“A strong pick-up in business investment remained the central element in the medium-term outlook,” the RBA said in the minutes.

“Members noted that a major challenge was whether the economy could accommodate the expected high rate of investment without undue pressure on costs.”

So far, however, pressures in the labour market had been localised.

“Liaison with firms suggested that wage growth was increasing in mining and related industries and some skilled occupations, though pressures in the labour market had not become widespread.”

And the RBA acknowledged that the pace of employment growth had not only slowed since late 2010 but that forward indicators suggested it would continue “at a more moderate pace than seen last year”.

The minutes show the RBA sees no likely need to raise the cash rate in the near term.

The closing comment in the minutes made it clear it was not a line-ball decision to keep the cash rate steady, especially since the lending rates were already on the high side of normal.

“Members therefore did not see a case to change the cash rate.”

The RBA’s view on monetary policy tends to change bit by bit over time until the case to move becomes stronger than the case to sit pat.

Accordingly, the “no case to hike” assessment should remain dominant for a few months at least, barring some sudden, unanticipated change in the economic outlook.

AAP

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Undeterred by a steady cash rate, abundant retail store sales and holiday destination discounts, many Australian borrowers are determined to save these Easter holidays.

A national survey by Australia’s largest independently-owned mortgage broker of first homeowners who purchased in the last two years found 32% will spend less during the Easter holiday period compared to last year. 54% will spend the same and only 14% will spend more*.

Spokesperson for Mortgage Choice, Kristy Sheppard, said, “Taking a battering from the November rate rises and recent hikes to other living costs while witnessing, and in some cases experiencing, the destruction of natural disasters means a leaner, more conservative Easter for many Australians.”

“Our 2011 Recent First Homeowner Survey found almost one third will spend less this Easter and only one in seven will spend more, despite five months of steady interest rates. Borrowers are determined to either put money back in their hip pockets or make sure their outgoing cashflow doesn’t increase.

“Astute mortgage holders are spending less to repay their debts sooner and create a savings buffer. Some of these and other borrowers may be unaware there are repayment strategies that reduce the overall interest owed on their home loan by utilising their savings, knocking time off the loan term.”

Borrowers looking to save more on their home loan this Easter can adopt these three steps:

1. Double your savings. An offset account or redraw facility puts regular savings to good use. Adding extra funds into an offset account reduces the interest owed and the loan term. Plus, funds are not taxable whereas interest earned from an ordinary savings account is. Alternatively, if your loan has a redraw facility you can reduce your interest owed and loan term by paying extra into your loan account and redrawing this if necessary. Keep in mind some lenders request a minimum redraw amount and/or charge a fee per withdrawal whereas others may have unlimited redraw. Consider the outcome if you contributed savings (big or small) via a lump sum deposit into your offset or loan account after each holiday.

2. Save on the extras. Review your loan’s features and fees to see if you are paying a higher price for things you don’t need. For example, many professional packages give you access to a wide range of loan features, which is great if you use each of them to your advantage. However, it may be that a more basic loan suits your needs and reduces your costs. Be sure to weigh up the expense of switching home loans with the rewards.

3. Dare to compare. Possible savings made by switching to a loan with fewer features isn’t the only reason to review your home loan regularly. Utilising loan comparison websites such as HelpMeChoose.com.au can help you determine if a cheaper and better suited loan exists. When doing so, remember to compare the features, interest rate and fees of each loan plus the cost of switching lender and/or loan. Your comparison needs to ensure the long term savings and benefits outweigh the expense of moving.

Call Mortgage Choice on 13 MORTGAGE. Or, visit MortgageChoice.com.au, Facebook.com/MortgageChoice or Twitter.com/MortgageChoice.

*Unreleased statistics from the Mortgage Choice 2011 Recent First Homeowner Survey, which asked a range of questions to 803 Australians who purchased their first home in the two years prior to February.

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If you’re struggling with mortgage repayments, dealing with it early can lead to a much better outcome.

The rising cost of living, higher interest rates and the financial stretch to buy a home in the first place are believed to be behind a surprise spike in mortgage arrears in the last quarter of 2010. With the mortgage stress expected to have continued in the past three months, borrowers are being advised to seek help quickly if they start to fall behind on their repayments.

The ratings agency Fitch found in a quarterly survey that mortgage payments more than 90 days late were 12.5 per cent higher in the final three months of 2010 than they were in the preceding quarter.

The agency described the result as unexpected, saying mortgage stress usually reared its head after Christmas, not before. It said mortgage performance was likely to have worsened in the first three months of this year because of the usual holiday hangover, the rate rise in November and the Queensland floods and cyclone that followed.

It did note, however, that the mortgage arrears rate in Australia remains relatively low compared with that in other developed countries.

The percentage of households more than 90 days behind on repayments – which means they’re in serious danger of their lender foreclosing – is just 0.54 per cent, it says.

RBA statistics released late last month show non-performing home loans in Australia to be less than 1 per cent of total loans, compared with more than 2 per cent in Britain and about 8 per cent in the US.

HOUSEHOLDS SQUEEZED

Leading home lender Commonwealth Bank of Australia is believed to have seen the same blip in arrears late last year but is thought not to be overly concerned. However, one industry observer, who has asked not to be named, says research also shows an increase in arrears and believes this is because of a ”systemic” issue with housing affordability, not just a Christmas squeeze.

Rate rises have happened much quicker than people expected, the costs of living are rising faster than wages and the number of people who simply cannot afford the homes they have bought is ”the real story”, the source says. The insider estimates that one in three first-home buyers – many of whom entered the market thanks to juiced-up government incentives – is finding it difficult to make payments.

A spokeswoman for Mortgage Choice, Kristy Sheppard, says the broker network records below-average customer arrears but finds that the people having difficulties fall into two broad categories: those whose personal circumstances have changed, perhaps because of job loss; and those who have gone into additional debt after taking out a mortgage.

RESTRUCTURE DEBT

The Mortgage Choice 2011 First Home Owner Survey found that 19 per cent of respondents had taken on ”significant” extra debt since buying a property in the past two years.

Half of these people had spent more than $20,000 since becoming a home owner and 8 per cent had spent more than $100,000.

”If a customer is experiencing financial difficulties due to a change in their personal financial circumstances, then their broker will review their loan and repayment strategy immediately,” Sheppard says. ”It may be that cutting back spending in other areas of their life could help put them back on track or it could be that the broker needs to talk to their lender about restructuring the home loan in some way.”

A review by the broker might find that switching to a loan with fewer fees or a lower interest rate, or that restructuring the existing loan – for instance, by moving to interest-only payments – might help the client over the hump.

”If the mortgage stress is the result of extra debt … then a different strategy may be taken,” Sheppard says.

Consolidating credit-card debt, store-card debt, ”interest-free” purchases and/or personal loans into a home loan at a lower interest rate is one option to reduce the total commitment.

”However, doing so will stretch these debts over a longer term, increasing the interest owed – debt consolidation isn’t to be taken lightly,” Sheppard says.

Brokers may have to refer such clients to a financial adviser.

HARDSHIP PROVISION

Under codes of practice covering the home-loan sector, customers can invoke ”hardship” provisions that say lenders will ”work with” customers to overcome financial difficulties. The National Consumer Credit Protection Act also contains hardship provisions.

The, Banking Ombudsman, Philip Field, says people going through a rough patch should consider how long the difficulty may last.

They should prepare a budget so they can work out what they can realistically afford to pay their lender and by when. ”There’s no point proposing something that’s just going to fall over next week,” Field says.

They might want to do this with the help of a financial counsellor.

”Next, go and have a conversation with those people – the bank, the utilities,” he says. ”Get on the front foot and raise it with them first.

”The earlier you let the lender know, the more options they have available to them. I would hope and I would be surprised if this didn’t happen, that if you spoke to them early and had a realistic proposal based on a budget, you’d get a much fairer hearing than if you had kept your head in the sand.”

OMBUDSMAN’S ROLE

People who feel that their lender could have been more helpful can take a dispute to the Financial Ombudsman Service (fos.org.au).

”What we do with a lot of them is we set up a telephone conference with the lender, customer and us and we try in the space of an hour or two to come to a resolution about how the debt might be repaid,” Field says.

”What an appropriate arrangement might be if things are really looking bad may be giving people time to sell, themselves, rather than having to go through a mortgagee auction.”

The FOS handled a few hundred such disputes last year and about 70 per cent were resolved, usually with some type of repayment variation.

”Again, it’s about being realistic and having these discussions,” Field says. ”Sometimes customers have an unrealistic expectation and sometimes lenders have an unrealistic expectation of what might be appropriate – some customers might want the whole debt written off; some lenders want their money yesterday.

”It’s a case of trying to find the right balance. If you give people time, are they going to be able to get back on track, or is it hopeless and therefore we have to look at other options?”

Field says if selling the home is inevitable, as a general rule it’s better to sell earlier than to delay.

”The longer it goes with you not making payments, or only minimal payments, all you’re doing is eroding your own equity,” he says.

In other words, it may be best to take the proceeds and use them to find a rental property, or to downsize.

? There has been an unusually timed spike in mortgage arrears.

? People who are having trouble making repayments should check their budget.

? They should talk to their lender to work out a repayment plan.

? Lenders have an obligation to work with people in financial hardship.

? If help isn’t forthcoming, the Financial Ombudsman Service can mediate a dispute.

Story by Lesley Parker, www.domain.com.au

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OVERSEAS money is increasingly driving the recovery of the Australian commercial property market, with net foreign investment last year at its highest level since 1994, according to research from Jones Lang LaSalle.

Combined with the steady growth of superannuation money and the repatriation of funds from the sale of offshore assets by Australian investors, a big pool of capital is looking for real estate investments in Australia.

JLL’s report, Values, Vacancies and Transaction Volumes – A Checklist of Real Estate Trends for 2011, said the Australian property market would be driven over the next two years by five short-term trends.

These were offshore investment, increasing sales, accelerating rental growth, tightening yields and rising capital values, and a continued thawing of capital markets.

The report’s author, David Rees, JLL’s head of research and consulting in Australasia, said offshore investors accounted for 19.9 per cent of commercial transactions (office, industrial and retail) last year – the highest proportion since 1994.

”In the hotel sector, Asian buyers accounted for 58.3 per cent of transactions, a proportion exceeded only once before, in 2002,” he said.

Dr Rees said the latest annual survey by the Association of Foreign Investors in Real Estate ranked Australia fifth – behind the US, China, Britain and Brazil – as the country offering the best chance of capital appreciation this year. As well, the 2010 JLL transparency index survey ranked Australia No. 1 globally.

Key factors were Australia’s stable economic growth, transparent capital markets, close links with product markets in Asia and financial markets in the US and Europe.

Recent changes in the regulations governing tax structures for managed investment trusts had further increased Australia’s appeal.

Dr Rees’s conclusions dovetailed with those of CB Richard Ellis executive director Kevin Stanley. Mr Stanley said in CBRE’s outlook that a potential $22 billion pool of capital was available globally, much of it from Asian pension funds.

”Regulations in Asia are changing to allow for these pension funds to pursue global investments,” he said. Asian investment in real estate had usually been quite low, but this was changing.

”If bumped up to a global standard of 10 per cent, this would release an estimated $20 billion for real estate investments on a global basis – or $2 billion for Australia if 10 per cent of that pie was allocated to the Pacific,” he said.

Dr Rees said superannuation assets in Australia had grown by 62 per cent between 2005 and 2010. Despite the global downturn, the volume of funds available for investment had been rising and ”will be a big potential driver for demand in the Australian commercial property market in 2011-2012”.

“New sources of debt are emerging, debt markets are continuing to thaw, Australian REITs (real estate investment trusts) have recapitalised and are reweighting portfolios back to the domestic market and there is the long-term growth potential of super funds,” he said.

Mr Stanley said super funds still had 13 per cent of their capital sitting in cash – twice the long-term allocation. ”If this was reduced to 6 per cent, that would create a $100 billion investment pool, some $10 billion of which could potentially be allocated to real estate,” he said.

Other sources of real estate capital includes wholesale funds, with potentially $1 billion to invest; a $1.5 billion buy-up of real estate by A-REITS was not out of the question; and a likely $1 billion outlay by private investors.

Dr Rees said the ”wall of money” evident in Australia from 2000 to 2007 was now re-emerging. ”After going offshore, the money has now been repatriated back to Australia and ”we are now looking at a rerun of the 1990s where too much money was chasing too few assets”, he said.

In 2006, Australian investors invested aggressively offshore, with a net balance of $13 billion in offshore asset bought compared to their sales in offshore markets. This net balance dropped to $3 billion in 2007 but nevertheless Australians continued to be net buyers offshore. ”In contrast, offshore investors returned to the Australian market in 2007 as net buyers, with a net balance of positive $2 billion between their purchases and sales in the domestic market,” he said.

“Since 2008, Australians have been divesting offshore and repatriating capital while foreign investors have continued to be net buyers in the Australian market. The net balance of Australians selling assets offshore and foreign investors bringing capital in was $2 billion in 2008, $3.4 billion in 2009 and $4.2 billion in 2010.”

Dr Rees said the mismatch between the flow of funds and available assets was likely to persist. Implications could include asset price inflation or a bubble effect, increased development activity, growing interest in alternative forms of real estate exposure and an early return to offshore investment by A-REITs.

“This mismatch between capital and assets could kick start development as investors look to build assets if they can’t find suitable assets to buy,” he said.

Story by Philip Hopkins www.smh.com.au

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BROKERS are predicting share buybacks and earnings downgrades in real-estate investment trusts because of the strong Australian dollar and a slowdown in transactions.

Another concern is the repatriation of funds to Australia, although analysts are not expecting a wholesale decline in real estate investment trusts after a buoyant few months.

Westfield Group is one of the first casualties: its share price briefly dipped under $9 yesterday as investors switched to sectors that are less sensitive to currency fluctuations.

Share prices fell in other property groups with overseas exposures, such as Investa, Charter Hall and Goodman, as the dollar rose. Investors cited the rising dollar as a growing concern, and analysts are said to be seeking meetings with Westfield directors in coming weeks.

Expectations are growing that Westfield could soon announce sales of up to 10 per cent of its mall portfolio in North America to improve the the share price. The group has said it is reviewing its underperforming malls in and is keen to sell them.

The executive director of property research at Goldman Sachs, Simon Wheatly, said there was an increasing risk that the dollar’s strength could lead to a downgrade in its guidance on Westfield’s earnings.

After a review of Westfield’s recently published 2010 annual report, Mr Wheatley said he had ”mildly downgraded the 2011 year funds from operations estimate”.

”The more important earnings impact is over the medium term, where our growth has been lowered at an increasingly greater rate,” he said.

”This relates to the low effective interest rate on debt in 2011, which has a larger negative impact on earnings growth than we previously factored, as the derivatives assisting this low interest rate mature over the next three years. As such, our earnings per securities’ growth rate has moderated, even with the benefit of our assumption of a weakening $A/$US in future years. We retain our ‘sell’ investment view.”

To allay further price falls in real estate investment trusts, share buyback programs mooted by many trust managers in the February reporting season is expected to become a reality for some trusts. Challenger Diversified Property Trust has proposed a buyback of up to 10 per cent of its issued stock.

Story by Carolyn Cummins www.smh.com.au

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Dear Lois,  
On behalf of Katie Thompson and The RiverCity Centre (C3 church), we would like to extend our sincere appreciation for your support of the recent “Pamper Day for single mums” event.    We especially thank you for your generous financial donation.  The Pamper Day would not have been such a success if it hadn’t been for your support and generosity.
We had many single mums from the local community attend the event and we received a significant amount of positive feedback and appreciation from the mums.  Given the success of the day, we hope to make this an annual event. 

Thank you again for your support.

Yours sincerely,

Shannon White on behalf of Katie Thompson.

The federal government’s announcement on 25 March that home loan exit fees are banned from July 1 onwards is causing confusion with a number of borrowers who are trying to decide whether to switch now or later.

Many are unsure whether it will be more beneficial for them to wait until this expiration date passes before committing to a new loan, says Australia’s largest independently-owned mortgage broker.

The answer? Timing isn’t the real issue. Finding the home loan situation that works best depends on the new lender and product they choose to match their financial situation, lifestyle and goals.

Mortgage Choice spokesperson Kristy Sheppard said, “Borrowers considering switching to a new product with the same lender or refinancing their loan to a new lender altogether should note the government’s abolishment of mortgage exit fees applies only to home loans approved after July 1.”

“If your home loan has an exit fee and/or you switch to such a home loan before 1 July, you may have to pay that fee after the abolition date has passed– but only if moving to a new product within the period outlined in the contract. In comparison, if refinancing after July 1 you need to consider exit fees only if one is attached to your existing home loan because the new loan will be exempt.

“Given the wide variety of special offers and incentives in today’s competitive market, potential refinancers must ask themselves: will I miss out on the home loan best suited to me because I was worried about possibly coming across an exit fee down the track? Our recent refinancers survey* found 46% didn’t pay exit fees and 22% paid $500 or less.

“Two other important points are that the exit fee ban does not include break costs, charged when borrowers switch or repay their fixed rate loan before the fixed term expires, and a number of lenders have already removed exit fees from their home loans. Some never had exit fees.

“So, many people need not be concerned about the July 1 deadline, however it’s best to be informed and understand the fine print. Exit fees should be part of the consideration equation but not the sole basis for choosing to refinance or stay put. It is important to factor in all aspects of a loan. A professional, experienced mortgage broker can help with this.”

Borrowers should also consider the:

· New loan’s interest rate – will refinancing help you lower your repayments?

· Availability of features – does the new loan offer you the ones you need (eg. the ability to make extra repayments, an offset account or redraw facility) and are there costs attached?

· Pros and cons of a fixed rate versus a variable rate loan – given interest rates are often volatile and with rises expected next 12 months how will you tackle higher repayments?

· Difference between principal and interest repayments as opposed to interest only – which best suits your investment strategy?

· Other fees such as loan registration and account fees, lenders’ mortgage insurance and stamp duty expenses – will the new loan cost you more than it is worth?

Borrowers who want to learn more about refinancing can visit Mortgage Choice’s new infographic: www.MortgageChoice.com.au/tips-and-checklists/refinance-home-loan-infographics.aspx.

Call Mortgage Choice on 13 MORTGAGE.

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