Broker 2 Archives

Sometimes you have to spend money to save money

October 10, 2023

Buyers Agents are increasingly common in the Australian property market. The good bit is that they can:

Find you good investments
Negotiate on your behalf
Source properties that may not be publicly be available for sale

The bad news is that you will have to pay them a fee.

Some (naïve) property buyers struggle with the logic of paying an agent a fee and so choose to try to source a property themselves. And yet, these buyers understand that they have to pay a lawyer to settle the property.

But astute investors appreciate what buyers agents bring to the party; they save you money and find a damn-fine investment.

I recently used a buyers agent and my experience was positive. I wanted to buy interstate and realised that I did not know the Brisbane market well- enough.

In my initial conversations with my buyers agent, we agreed on possible growth suburbs, then she narrowed it down to a few properties.

Once we agreed which properties I was interested in, I left it to her to negotiate on my behalf. Even once I had agreed a price, she was even able to get $10k knocked off the sale price later (pretty-much covering her fees).

I wanted to buy a property that has strong rental returns but also the possibility of good capital growth (something which is hard to find together). I also wanted the space where I could create equity by building a granny flat. My buyers agent was able to do some site inspections for me (sending my photos and videos of the properties) so we could discuss how we could increase equity in the property. There’s no way I could have done all that from interstate.

Sure you have to pay a buyers agent a fee. But the risks of not doing so are high – how do you fancy over-paying for a property in location which is a dud investment? That loss will be way higher than the fee.

Next step – start the build on the granny flat!

Credit scores have changed. But bad scores still wreck your finances

September 28, 2023

Your credit score has a huge impact on whether you get a mortgage approved and the way it’s calculated has changed.

Once it was just a case of not making too many credit enquires, but now your credit score is influenced by so many things – particularly the way you handle your money. Here are some ‘dos and donts’ so that your credit history boosts your loan application.

Whenever you apply for a mortgage, banks normally run a credit check on you. But, today, credit checks are completely different to how they used to be. Nowadays, banks provide pretty-much live data to each other on all loans you may have – and how good you are a repaying their loans.

The better your loan repayments, the better your credit score.

Comprehensive Credit Reporting has changed many things. Now banks can see what loans you have with other banks, the balance and your repayments. Critically, it shows how good you are at making repayments.

Your credit score goes up the more you make your monthly repayments straight away. Your behaviours now have a bigger impact than how many credit enquiries you have made.

Today, one of my clients has just had a loan declined because they had a poor credit card repayment history (of which I had not been made aware) – the bank could see that they were five months behind on repayments to another bank.

The good news is that I will be able to finance them with another lender (their incomes and savings are strong).

But, the bad news is that they will be paying a much higher interest rate.

Banks are more likely to lend to someone who diligently makes loan repayments – they don’t have to earn megabucks.

I encourage all my clients to get some financial discipline (early on) if they want to get a mortgage. This includes:

Knowing when your payments are due (and having the funds available to pay them straight away)
Only having loan facilities that you need
Tracking what you spend your money on

Getting finance is complicated and I often spend months coaching my clients before we apply for a loan. If you want to know more about the steps to finance, please contact me.

For a no-obligations consultation on your home loan needs, please contact Graeme on 1300 30 67 67.

Roller coasters can be enjoyable

August 16, 2023

Ever been on a Roller Coaster?

You know the feeling as you slowly make it to the top, the sense of anticipation, then the excitement of the rush as you shoot down the other side?

That’s pretty-much where the property market is right now – we are at, or are close to, the top of the interest cycle.

And some economists are talking about rate cuts next year – cuts which normally drive the property market crazy.

Increasingly, the Reserve Bank (RBA) is implying it is done with interest rate rises (though it’s not a done deal). The 12 rate rises we have experienced increasingly appear to be doing their job, with Aussies spending less, the property market calming down and the jobs market turning.

In fact, some economists have said that, all these rises will deflate the economy so much that the Reserve Bank will soon be forced to drop rates.

The current cash rate of 4.1 per cent is way above the RBA’s inflation target of 2-3 per cent.

CBA has predicted the RBA would cut rates by a full percentage point next year; with a further two cuts in the first half of 2025.

And Betashares’ Chief Economist, David Bassanese, has predicted rate cuts will start as soon as April.

A percentage point reduction in the cash rate would save a household with a $600,000 mortgage about $400 in monthly repayments.

Rate cuts are normally the starting gun for a spike in the property market – when mortgages become more affordable and people are more prepared to buy, prices typically shoot up.

Many of my astute clients are now looking to buy before prices go crazy.

This change wont be this week. In fact, its unlikely to be this year. But, sooner-or-later, there will be a lift-off in the property market.

Graeme Salt is an award-winning mortgage broker. If you wish to discuss your property loan needs, please contact him on 02 9922 5055

Avoid a disaster – get pre-approved

July 19, 2023

I am on the lookout for a couple of investment properties currently – I reckon that in a few months some good opportunities will appear in the market.

In preparing myself to buy properties, I have arranged pre-approval with a bank. And I advise all my clients to arrange preapproval too.

Getting your finance pre-approved gives you confidence that you can borrow $x.

A pre-approval normally lasts 90 days and in the current market, having a pre-approval is important if you are looking to purchase a property. Here are some examples of the clients with whom I am currently arranging pre-approval:

A single male professional. The type of property he wants to buy is at the limit of his borrowing capacity (though he has an exemplary credit history). I want him to have confidence on how much he can spend when he bids at auction.

A young couple who work in the For Purpose sector. Their salary packages are unusual as charity employees can receive part of their salary tax free. However, some banks are more generous than others in how they assess tax free components for NFP employees. I want them to be sure the right bank will lend them the right amount.

A mature-aged couple who are looking to buy their forever home. Some banks are more cautious with older applicants and want to understand how someone will repay (potentially) a 30-year loan once they are retired. Choosing the right bank is key before the put an offer in.

Not all banks are the same. You may decide to submit a loan application to XYZ bank because its cheapest, but then discover that it will not lend to

People of job probation
Lifestyle farms
Small units
Casual employees

If the above applies to you and you have not arranged pre-approval, you may be in strife. Message me to discuss how to arrange a pre-approval for you.

For a chat about your finance, please feel free to contact Graeme on 02 9922 5055

Now You Can Avoid the Mortgage Cliff

June 1, 2023

By Graeme Salt

Almost 880,000 borrowers will need to find hundreds or thousands of dollars more each month when their fixed-rate periods expire this year.

And for many, refinancing loans with a new lender (and a cheaper rate) has proven impossible due to strict criteria from the banking regulator that force lenders to add as much as three percent onto a loan when assessing mortgage applications so that the bank can be sure borrowers can cope with possible rate rises.

Until recently, it looked like many borrowers were forced to stick with their current lender – and grin and bear these new sky-high rates.

With current interest rates roughly at 5.5 per cent, adding 3 per cent on top means new loans are assessed at 8.5 per cent – making it hard for borrowers to prove they can service a new loan should rates go up.

As a result, many are trapped with their current lender – but some banks are now adopting more generous policies for assessing applications.

Currently, households servicing a $550,000 mortgage will suffer an $891 increase in monthly repayments, with highly indebted households on the hook for an even larger increase. Someone with a $1 million mortgage would have to fork out an extra $1620 each month.

Until recently these borrowers looked trapped. But some banks have announced a softer policy for refinancing loans; rather than being assessed at 8.5 per cent, they are now likely to be assessed at 5.05 per cent.

While this new policy is great news for those who are trapped, the banks are not offering it to everyone, there are some conditions such as; borrowers must have good credit histories, excellent repayment histories and all they can do is a straight refinance.

Overall, the RBA estimates 90 per cent of the fixed rate loans rolling off this year or next year will have to wear mortgage repayment increases of at least 30 per cent.

But this policy softening may help some get out of mortgage prison.

If you want to discuss how to get out of mortgage prison and refinance at a lower rate, please contact Graeme on 02 9922 5055.

Black Friday, Negative Equity and why Australia WILL NOT experience them.

May 21, 2023

By Graeme Salt

Scarred by 22 per cent interest rates, many clients recount their fear of how hard it was to make loan repayments in the 80’s

Punitive interest rates can destroy property markets and livelihoods, but thankfully that’s unlikely to occur in Australia today.

And, sky-high interest rates have occurred throughout the world at various times. I remember when UK interest rates rose from 10 to 15 per cent all in one day in 1990 on what became known as Black Friday. The property market was destroyed such that we got used to the phrase negative equity – when a home was worth less than the mortgage on it.

People with negative equity live a miserable existence, but research from the Reserve Bank of Australia shows we are a long way from negative equity.

When borrowers are straddled with a mortgage bigger than their home’s value, they can’t sell up because they will still owe the bank money. They must keep paying sky-high interest rates and eking out a frugal lifestyle due to high interest rates.

Thankfully, research from the Reserve Bank shows that the share of loans in negative equity remains negligible and much lower than prior to the pandemic. And that If housing prices fell a further 10 per cent from January 2023 levels, the share of loan in negative equity is estimated to rise to just 2 per cent.

Given that over the past four months Sydney house prices have increased by more than 3 per cent, Melbourne lifted by 0.3 per cent, Perth by 1 per cent and Brisbane by 0.1 per cent, price drops and negative equity are looking less and less likely.

In fact, despite rate rises, many are behaving with a sense of optimism about the property market.

However, we are not out of the woods yet. Most economists predict at least one more interest rate rise.

And, with unemployment rising, the next six months may see caution coming into the market.

But the fundamentals are strong; Australia’s population continues to grow and there is evidence of overseas buyers looking to invest here again.

If you want to discuss your home lending needs, please feel free to contact me on 02 9922 5055

Australia enters a two-speed property market

May 5, 2023

By Graeme Salt

For the rest of the year Australia will have a two-speed property market.

For those with strong incomes and healthy savings, Australia is a land of opportunity with a property market starting to rise.

But for others, trapped by high interest rates, there’s limited opportunity. For them – refinancing or buying will be tough.

According to Corelogic housing values look to have bottomed out, with Sydney now 3.0 per cent higher than the recent trough recorded in January according and CBA now predicts prices will jump 5 per cent this year.

If you’re looking to get into the market – this could be your chance.

However, at the same time, up to 880,000 existing homeowners will need to find hundreds, or even thousands, of dollars more each month when their fixed-rate periods expire this year.

According to NAB close to 40 per cent of their existing home loan customers would struggle to meet the lending criteria of a different bank.

Get ready for six months of bad news as households servicing a $550,000 mortgage will suffer an $891 increase in monthly repayments. And someone with a $1 million mortgage would have to fork out an extra $1,620 each month.

As a result, it’s hard to envisage a really buoyant market for some time.

Until interest rates fall, or credit policies ease, house prices are unlikely to rise significantly.

But the long-term prediction for housing remains rosy. With 400, 000 arriving here from overseas this financial year alone, demand for property remains strong.

The bell has been rung for the bottom of the market – where to next?

If you want to talk to me about your lending needs, I can be contacted on 02 9922 5055 or message me here

How to get yourself out of mortgage prison

April 8, 2023

Refinance now to get out of Mortgage Prison

Think you’re the only one going through mortgage pain? Well you’re not.

Think you have to grin and bear it? Maybe you don’t

About 16 per cent of households with a home loan are in “mortgage prison”, unable to refinance to a lower rate because they do not meet banks’ tough serviceability assessment rules, the Reserve Bank of Australia has revealed.

The RBA’s semi-annual review of financial stability says rising interest rates mean an increasing number of existing borrowers cannot pass a bank serviceability assessment, which tests a person’s ability to cope with a three percentage point increase in interest rates.

It means hundreds of thousands of households are stuck with their existing lender and unable to directly reap the benefits of strong competition in the refinancing market, with banks offering discounted interest rates and $4,000 cashbacks.

However, this research does not consider the relief that non-bank lenders can provide to those in mortgage stress – these lenders are not legally required to apply the serviceability buffer tests. And non-bank lenders still offer competitive rates.

Non-bank lenders cover about 10 per cent of the market and often only go through brokers.

If you want to learn more about how to get finance with non-bank lenders, contact your Origin broker.

And, if all else fails, you can still talk to your existing bank about getting them to drop their rates. As the central bank said, about one-third of borrowers who are unable to refinance have managed to renegotiate their interest rate with their current lender.

Call Origin Now on 1300 30 67 67 or fill in the form on this page to find out what your options may be.

Rates on Hold?

April 8, 2023

Homeowners breathed a sigh of relief this week as the Reserve Bank of Australia (RBA) opted not to raise interest rates unlike at its previous 10 months.

However, we may have to endure a bit more pain until things get easier.

The RBA has indicated that further rates rises may be on the way. The Bank’s Governor said in a recent speech “the board expects that some further tightening of monetary policy may well be needed to return inflation to target within a reasonable timeframe.”

And the bosses of the Big Four banks have all said that further rate rises are on the way too.

The 10 consecutive increases have seen repayments on a 25-year, $500,000 loan rise $983 per month – is being taken as a sign the RBA is nearing the finish line on rates, or is already there.

But its increasingly clear that, if we have not reached the peak in interest rates, we are close to the top.

And, with inflation starting to dip, there is now talk of rate cuts being on the way. The Australian Financial Review’s survey of 36 economists puts the first post-pandemic rate cut in play by February 2024, according to the median forecaster. A quarter of respondents predict it could even happen this year.

None of us have enjoyed these rate rises. But the economy has coped well so-far and the worst may-well soon be over.

Call Origin Now on 1300 30 67 67 or fill in the form on this page to find out what your options may be.

Property Prices to Rise

April 8, 2023

It may be a case of ‘the only way is up’ for property prices with home prices showing the first rise since April 2022

CoreLogic’s national Home Value Index (HVI) rose by 0.6 per cent last month.

Values were higher across the four largest capital cities and most of the broad ‘rest-of-state’ regions, led by a 1.4 per cent gain in Sydney.

There were a number of reasons for this – but these reasons only look to be getting stronger

CoreLogic’s Research Director, Tim Lawless, put the rise down to a combination of low advertised stock levels, extremely tight rental conditions and additional demand from overseas migration.

And this week’s rate pause from the Reserve Bank will boost confidence in the property market

But long-term factors mean that demand for housing continues to boom. The surge in immigration and the return of international students has seen demand for housing increase. The extra half a million people have to live somewhere. They are competing with locals in the rental market, where vacancy rates are tracking at near-record-low levels and rents are rising at a strong double-digit pace.

Call Origin Now on 1300 30 67 67 or fill in the form on this page to find out what your options may be.

At Origin Finance, We Put You First