Archive for category: Graeme Salt

You are here: / / Graeme Salt

Why Sometimes We Have to Use a Big Bank in Australia

Bank-bashing is one of those national past-times along with talking about property prices, the Melbourne Cup winner or the price of road tolls.

Very few of us feel that much affinity with our bank these days.  Yet, in the diverse and dynamic financial landscape of Australia, choosing the right bank can be a crucial decision. While there are numerous smaller banks and credit unions offering personalised services, there are compelling reasons why sometimes we have to rely on the Big Four. Here are some key factors that highlight the importance of big banks in Australia:

  1. Comprehensive Services and Products

Big banks in Australia, such as Commonwealth Bank, Westpac, ANZ, and NAB, offer a wide range of financial products and services. From everyday banking and savings accounts to complex investment options and international transactions, these banks provide a one-stop-shop for all financial needs. This comprehensive suite of services can be particularly beneficial for individuals and businesses looking for convenience and efficiency.

  1. Big Banks can cope with non-vanilla

It may seem illogical – those apparently stodgy big banks can often look at financing properties smaller banks can’t.

I recently financed a mortgage with CBA in Parramatta because the client’s (initially) preferred lenders could not look at higher density locations.  Sometimes the small lenders are not in the borrower’s interest.

  1. Advanced Technology and Innovation

Large banks have the resources to invest heavily in technology and innovation. This means they can offer cutting-edge digital banking solutions, such as mobile banking apps, online banking platforms, and advanced security features. These technological advancements make banking more accessible, secure, and user-friendly, catering to the needs of tech-savvy customers who prefer managing their finances on the go.

Some friends of mine have recently expressed frustration at having used a credit union for their loan and particularly offset.

  1. Financial Stability and Trust

Big banks are often perceived as more stable and trustworthy due to their size, reputation, and regulatory oversight. During economic uncertainties or financial crises, customers may feel more secure knowing their money is with a well-established institution. This trust factor can be crucial for those seeking peace of mind and reliability in their banking relationships.

Of course, deposits up to $250,000 are underwritten by the Australian government.  But, either way, some Aussies tend not to see tiny lenders as robust.

  1. Global Reach and International Services

For individuals and businesses involved in international trade or travel, big banks offer a significant advantage with their global reach. They provide services such as foreign currency accounts, international money transfers, and global investment opportunities. This global connectivity ensures that customers can manage their finances seamlessly across borders.

Conclusion

While smaller banks and credit unions have their unique advantages, there are situations where the services and stability of big banks in Australia become indispensable. Their comprehensive product offerings, advanced technology, extensive networks, financial stability, global reach, and expert advice make them a reliable choice for many customers. Ultimately, the decision to use a big bank should be based on individual needs, preferences, and the specific financial goals one aims to achieve.

Will banks pass on rate cuts?

By Graeme Salt

It’s been 15 months since the Reserve Bank changed interest rates, but now, finally, we are getting some changes.

Today’s interest rate cut shows that the economy is moving into a new phase and it will have a big impact on home borrowers.

Today’s interest rate cut could be (though it’s far from guaranteed) one of a few that Reserve Bank announces this year.

So, the question is how quickly will the banks pass the cuts onto homeowners (if at all)?

A review by financial comparison firm Canstar of the past decade looked at how many of the 10 rate cuts during that period the major banks had passed on either in full or partially.

It found Commonwealth Bank, ANZ and National Australia Bank had delivered borrowers just four of those 10 cuts in full, while Westpac fared even worse by passing on just two rate reductions in their entirety.

In February 2015, Westpac did deliver borrowers a rate cut of 28 basis points, which slightly exceeded the official decline by the RBA of 25 basis points.

Canstar also found banks typically passed on rate changes between 10 and 14 days after an RBA move.

It’s common place for the banks not to pass rate cuts on fully (there’s more than just the Reserve Bank cash rate that influences the rates we pay for our home loans).

However, generally, the Big Four banks tend to be less hungry for business and so are often not as good as passing on rate cuts as the mid-tier lenders; lenders such as Suncorp, Macquarie or ING.

If things follow the usual pattern, the medium sized lenders will be more aggressive than the big banks in passing on rate cuts.

So, what that means for you is that now is the time to monitor what your bank does with your home loan rate.

If your bank is not passing on rate cuts in full, the first thing you should do is call them and try to negotiate.

If your bank refuses to drop rates, then you need to talk to your broker who can advise where to take your loan.  We are already seeing some very sharp under-the-table rates come through from smaller lenders -it’s the best way of keeping the Big Four honest.

Graeme Salt is an award-winning mortgage broker.  For a no-obligations consultation on your home loan needs, please contact him on 02 9922 5055

Why Lenders Mortgage Insurance is Beneficial for First-Time Home Buyers

Buying your first home is an exciting milestone, but it can also be a daunting financial challenge. One tool that can help first-time buyers achieve their dream of homeownership is Lenders Mortgage Insurance (LMI). While some may view LMI as an additional cost, it actually offers several significant benefits.

  1. Lower Deposit Requirement

One of the primary advantages of LMI is that it allows buyers to secure a home loan with a smaller deposit. Traditionally, lenders require a 20 per cent deposit to mitigate their risk. However, with LMI, lenders are willing to accept a lower deposit, sometimes as low as 5 per cent.

This means that first-time buyers can enter the property market sooner, without having to spend years saving for a large deposit.  This is a major issue in some of our capital cities, where would-be first-time buyers can’t save their 20 per cent quickly enough when prices are in runaway mode.

  1. Access to the Property Market Sooner

The property market can be highly competitive, and prices often rise faster than the rate at which potential buyers can save. By enabling buyers to purchase with a smaller deposit, LMI helps them get a foot in the door before prices escalate further. This can be particularly advantageous in rapidly growing markets where waiting could mean being priced out.

  1. Increased Borrowing Power

LMI can also increase a buyer’s borrowing power. With the backing of LMI, lenders are more confident in offering larger loans. This can be crucial for first-time buyers who may need extra funds to purchase a home that meets their needs and preferences. It opens up more options in terms of location, size, and quality of the property.

  1. Potential for Investment Growth

Entering the property market earlier can also provide first-time buyers with the opportunity to benefit from property value appreciation. Real estate has historically been a sound investment and owning a home sooner rather than later can lead to significant financial gains over time. The equity built in the property can also be leveraged for future investments or renovations.

  1. Building Credit History

For first-time buyers, taking out a mortgage and consistently making payments can help build a strong credit history. This can be beneficial for future financial endeavours, such as applying for personal loans, credit cards, or even refinancing the mortgage at a better rate. LMI facilitates this process by making it easier to obtain a mortgage in the first place.

Conclusion

While Lenders Mortgage Insurance does come with an additional cost, its benefits for first-time home buyers are substantial. By lowering the deposit requirement, providing access to the market sooner, increasing borrowing power, and offering potential for investment growth, LMI can be a valuable tool in achieving homeownership.

For many first-time buyers, LMI is not just an added expense, but a stepping stone to realising their dream of owning a home.

Rate Cuts are Here! What happens next?

By Graeme Salt

So, this is the moment.

The moment when rate cuts are amongst us.

After more than a year of speculation, most economists think interest rate cuts are imminent.  What will be their impact?

Prices in many cities are currently either plateauing or trending downwards; only Perth and Adelaide are now showing robust growth.

While welcome news for borrowers, these rate cuts are unlikely to have an imminent impact on property prices.

Borrowing capacity has been slashed by 25 per cent since rates started rising in May 2022; cutting the amount people can afford to pay for homes, and even a further two or rate cuts this year would not be enough to ignite another strong increase in house prices.

Traders imply a 96 per cent chance of a February rate reduction to 4.1 per cent.  What the cuts are likely to do is arrest any falls to make them short and shallow.

CoreLogic figures show the median value of a Sydney house fell 0.4 per cent in January to $1.47 million. This took the decline over the past three months to 1.6 per cent.

Melbourne’s median house value fell 0.5 per cent to $917,132 in January. Over the past three months, Melbourne prices dropped 2 per cent to be 3.5 per cent lower over the year.

Despite edging down, values remain well above pre-COVID levels. Total dwelling values across Sydney are 27.3 per cent above their pre-COVID mark, Melbourne is up by 7.8 per cent, Brisbane values are 68.2 per cent higher and Perth’s have soared 76.7 per cent.

Graeme Salt is an award-winning mortgage broker.  For a no-obligations consultation on your home loan needs, please contact him on 02 9922 5055

House prices to rise by 3.3 per cent, units by 4.6 per cent in 2025

By Graeme Salt

House prices will rise nationally by 3.3 per cent over the next 12 months but a stronger 6 per cent in 2026, KPMG’s latest 6-monthly property report on Australia’s capital cities finds.

The Residential Property Market Outlook finds unit (apartments and townhouses) prices will gain by 4.6 per cent in 2025 and then 5.5 per cent the following year, as they represent a more realistic route into the housing market, given the ongoing affordability crisis.

Overall, house price growth this year will be down on 2024, which saw an average 5.1 per cent rise nationally, while unit price growth will be largely consistent with last year’s average 4.5 per cent rise. Price growth will be more pronounced in the second half of 2025, aligning with the interest rate cuts KPMG believes will start by the end of the second quarter.

City by city price growth forecasts over the next two years

For houses this year there will once again be some regional variation with Perth house prices rising by 4 per cent but Darwin seeing only 1.2 per cent growth.  Canberra and Melbourne will be solid performers on 3.5 per cent growth each, with Sydney a more restrained 3.3 per cent, Brisbane 3.1 per cent, while Adelaide and Hobart are expected to be lower on 2 per cent and 1.8 per cent respectively.

  House Unit
Dec 2025 Dec 2026 Dec 2025 Dec 2026
Sydney 3.3% 7.8% 5.0% 6.1%
Melbourne 3.5% 6.0% 4.7% 7.1%
Brisbane 3.1% 5.6% 4.1% 3.3%
Adelaide 2.0% 3.6% 4.6% 3.1%
Perth 4.0% 4.6% 5.0% 5.0%
Hobart 1.8% 2.7% 4.0% 4.2%
Darwin 1.2% 2.5% 3.8% 2.7%
Canberra 3.5% 3.5% 4.0% 3.9%

In 2026, where house price growth will be higher, Sydney will reclaim top spot on 7.8 per cent, with Melbourne and Brisbane next in line on 6.0 per cent and 5.6 per cent respectively.

Units

One of the key trends identified in the report as emerging in the housing market is unit prices being expected to modestly outpace house prices over the next two years.

The shift will be largely driven by ongoing affordability constraints, particularly in capital cities, where the escalating prices of detached houses have left a large portion of the population priced out of the market. As a result, there will be growing demand for units, as a more affordable housing option.  Attached dwellings offer relatively lower entry points compared to houses, making them more viable options for a larger pool of buyers, the report finds. ​

For units, the predicted increases for 2025 range from Sydney and Perth’s 5 per cent growth to Darwin’s 3.8 per cent.  In 2026, Melbourne at 7.1per cent and Sydney at 6.1 per cent will see the strongest growth.

Dr Brendan Rynne, KPMG Chief Economist, said: “While 2024 was a year of high interest rates and inflation and subdued consumer sentiment, the housing market withstood all those factors and still provided strong price growth, due to demand outstripping supply. Even the much-anticipated ‘fixed-rate cliff’ – the transition of mortgage holders off lower fixed rates to higher variable rates – had only had a mild impact and households generally coped well with the rate rises, due to a robust labour market and Australia’s historic low unemployment rate.”

Graeme Salt is an award-winning mortgage broker.  For a no-obligations consultation on your home loan needs, please contact him on 02 9922 5055.

For homeowners, offsets are the best things since sliced bread

By Graeme Salt

Finance Guru Warren Buffet once called compound interest ‘The Eighth Wonder of the World’ but I reckon he hadn’t heard of something intrinsically Australian that could give it a run for its money – the offset account.

Offset accounts are powerful financial tools that can provide significant savings and flexibility for homeowners with a mortgage. These accounts are especially popular in Australia and other countries with similar financial systems. Below, I have summarised some of the benefits of an offset account.

But, first, what is an offset account?

An offset account is a transaction account linked to your home loan. Instead of earning interest on the money in the offset account, the balance is offset against the outstanding balance of your home loan. This reduces the amount of interest you pay on your mortgage.

Key Benefits of Offset Accounts

  1. Interest Savings

The primary benefit of an offset account is the potential to save on mortgage interest. The money in your offset account reduces the principal amount on which interest is calculated. For example, if you have a $500,000 mortgage and $50,000 in your offset account, you will only be charged interest on $450,000.

  1. Flexibility and Access

Unlike making extra repayments directly into your mortgage, which can be difficult to access later, an offset account allows you to withdraw funds whenever you need them. This provides greater financial flexibility for unexpected expenses or investment opportunities.

  1. Tax Benefits

In some cases, the interest savings from an offset account can be more tax-efficient than earning interest in a traditional savings account (but you need to discuss this with your accountant).  This is because the interest saved on your mortgage is not considered taxable income, whereas interest earned on a savings account is subject to tax.

  1. Faster Mortgage Repayment

By reducing the amount of interest you pay, offset accounts can help you pay off your mortgage faster. The savings on interest can be substantial over the life of the loan, potentially shaving years off your mortgage term.

  1. Increased Financial Discipline

Having an offset account can encourage better financial habits. By regularly depositing funds into the account, you are effectively reducing your mortgage balance and saving on interest. This can motivate you to save more and manage your finances more effectively.

Some lenders will allow you to have multiple offset accounts which help homeowners save for specific things (like a holiday, wedding or education) – all while whittling away the mortgage.

Considerations

While offset accounts offer numerous benefits, it’s important to be aware of any fees associated with them. Some lenders may charge higher fees for offset accounts compared to standard transaction accounts. Additionally, the interest rates on your mortgage may be slightly higher with an offset account option. It’s essential to compare different mortgage products and consider the overall cost before deciding.

Conclusion

Offset accounts provide a range of benefits, from interest savings and flexibility to potential tax advantages and faster mortgage repayment. They can be a valuable tool in your financial strategy, helping you achieve your homeownership goals more efficiently. However, it’s crucial to weigh the costs and benefits carefully and choose the option that best suits your financial situation.

Feel free to get in touch with me if you want to talk more about offsets, mortgages and the wider homeownership game.

Graeme Salt is an award-winning mortgage broker.  For a no-obligations consultation on your home loan needs, please contact him on 02 9922 5055.

 

2025 property will be ‘game of two halves’

By Graeme Salt

 

The first half of this year presents opportunities for those looking to get on the property market.  But when the whistle blows, on key decisions in the second half, prices are likely to go up again.

Buyers with the means to purchase will be able to take advantage of an ongoing slowdown in the market next year, with the runaway price growth seen across much of the country over the past year finally easing.

Some prices are forecast to rise by between one and four per cent at the national level, according to PropTrack.

2025 property price predictions – PropTrack

That modest growth is slower than the 5.5 per cent growth recorded so far this year, with the high number of homes on the market and affordability constraints keeping prices in check.

However, much of these savings may well occur in the first half of the year, with price rises in the second half spurred on by policy changes.

Our two biggest markets, Sydney and Melbourne, ended 2024 with a whimper.  In fact, most capital cities have been seeing new listing volumes trending higher throughout 2024 as seller willingness to put properties up for sale has increased – this has made the market more pessimistic.

But the first key change that could spur the market is forthcoming interest rate cuts – once the whistle is blown announcing rate cuts, things could change.

The Reserve Bank of Australia has left interest rates at 4.35 per cent for more than a year. But many economists are predicting two or three cuts this year.  ANZ and NAB are both tipping the first cut in May; a second in July is likely too.

But also, we are due a federal election in May.  As we enter early 2025, we face a period of uncertainty as we wonder if there will be any major changes in Canberra.  Once the electoral dust has settled, Australians will have more confidence in the market and the economy.

The Australian property market has a good run; strong immigration has driven supply while construction costs have limited supply.  We are likely to more of this – though more likely in the second half of 2025.

Early 2025 will present buying opportunities – will you be on the field or sit on the sidelines?

House price changes My Housing Market

Graeme Salt is an award-winning mortgage broker.  For a no-obligations consultation on your lending needs, please contact him on 02 9922 505

Why property is so important to us

By Graeme Salt

Property may well be the biggest investment any of us make.  The Australian residential property market stands at $11trn v. Superannuation at $3.9trn and listed stocks at $3.2trn.

This is why the ups-and-downs of the property are a national pastime.  As the property market goes up, so does our wealth.

In fact, more than half our wealth (56.3 per cent) is held in housing.  So, for many, property is a key investment for their future.

That is why, the current market creates a major opportunity for many who could be just looking to get on the property market or looking to deepen their personal wealth.

The property market has had a pretty-good run over the past years – Sydney dwelling values are 29.2 per cent higher than pre-Covid levels.  But it does seem that the market is running out of steam.  This week saw many auction clearance rates well below 50 per cent – a sure sign that things are moving in buyers’ favour.

 

And, with properties talking longer to sell, it looks like this trend is likely to continue.

But look closer and you will see that there are multiple markets; while Sydney, Canberra and Melbourne may well be struggling, Brisbane, Perth and Adelaide are going gangbusters.

So, why are our two biggest markets and what could case them to change?  Traditionally Sydney, Melbourne and Canberra are our most expensive markets and there’s little doubt that potential buyers simply cannot borrow enough to purchase properties.

When banks have to assess someone’s borrowing capacity assuming a rate as high as 6.5 per cent (plus a 3 per cent buffer) – only the super-rich can justify some loans.

The good news is that rates are due to come down- it’s just that we don’t know when!  NAB is predicting rate cuts from February, though it does not recognise it is unsure how many cuts will occur, nor when.

For many, this may create a window of opportunity – rate cuts are likely to spur the market on to other highs (though I do recognise that there are other factors like the return of Donald Trump and the general malaise of the Melbourne economy).

For many, property is the prime source of their wealth and 2025 could be when opportunity beckons for many if they are prepared to get into the market just as rates start to come down.

Graeme Salt is an award-winning mortgage broker.  For a no-obligations consultation on your home loan, please contact him on 02 9922 5055.

Rate cuts are coming. But don’t get over-excited.

By Graeme Salt

Rates are coming down – but probably not as fast as we would like!

Australia is tipped to record the second-highest inflation rate out of 42 countries next year.  And as a result, the Reserve Bank is tipped to keep interest rates higher than other Central Banks.

https://originfinance.com.au/graeme-salt/

IMF advanced economy inflation forecasts

The good news is that a healthy economy is one reason our inflation rate is so high.

Australia has one of the strongest jobs markets in the developed world with employment growth hitting a 16-month high.  Plus, the rate of workforce participation has reached a record.

More than 64,000 people found jobs in September, the Australian Bureau of Statistics said this month.

Savvy home borrowers are asking themselves what they can do given that rates are not likely to come down till February 2025 at the earliest (and then by not as much as many might like).

The first option must always be to talk to your existing lender – you’d be surprised at how rates can tumble when you threaten to break up with your bank.

But sometimes, your existing bank can’t or won’t come to the party.  Here there are two options:

  • Look at a refinance.  For borrowers with an exemplary repayment record, you’d be surprised how some banks can make things happen to welcome a new customer
  • Think about fixing.  Seeing the writing on the wall, some lenders have now cut rates on more than 300 fixed mortgages.  This could ease the cash-flow burden for those struggling with rates that are high – and will remain so for a while!

Graeme Salt is an award-winning mortgage broker. For a no-obligations consultation on your home loan needs please contact Graeme on 02 9922 5055

Rates are tumbling

By Graeme Salt

Fixed interest mortgage rates are tumbling as the banks prepare for rate cuts likely next year.

Recently the country’s fifth-largest lender, Macquarie Bank, slashed a range of fixed rates by up to 0.40 percentage points.

Such that now, of the lenders I can work with, the cheapest 3-year fixed mortgage is 5.39 per cent, whereas the variable counterpart is 5.88 per cent

Twelve lenders including Teachers Mutual Bank and Adelaide Bank have how cut more than 300 different rates across both investor and owner-occupier loans.

Many current borrowers are paying interest rates of more than six per cent, so refinancing to rates around 5.39 per cent may well be major help to their cash flow.

But, with .75 per cent rate cuts predicted in 2025, it may be by the end of next year variable rates will below these fixed rates soon.

Looking at refinancing your mortgage may well be an option.  But with interest rate relief on the way, when to do this is the question.

If you want to discuss your finance needs, please contact me on 02 9922 5055.

Graeme Salt is an award-winning mortgage broker.  For a no obligations consultation on your home loan needs, please contact him on 02 9922 5055

 

At Origin Finance, We Put You First

Origin Finance is one of Australia’s most respected mortgage brokers. We provide our clients with access to a large panel of lenders with an extensive range of home loan products. Many of these lenders are well-known banks, many others are household names who only lend through brokers; others still are specialist lenders who can meet diverse financial circumstances. Origin helps you make the right home or investment loan choice. Call us today 1300 30 67 67.

MFAA LogoOrigin Finance is a
Credit Representative (No. 397786) of
BLSSA Pty Ltd ABN 69 117 651 760,
Australian Credit License 391237