The recent Reserve Bank’s rate rise to 0.35 per cent is expected to hit home loans hardest.

The Australian property market is coming out of a housing boom, in which prices are up around 25 per cent.  The rate rise is expected to put around 300,000 borrowers at risk of default, mostly first time homeowners. 
According to a 7News Australia interview with Hal Pawson of UNSW City Futures Research Centre, the areas most at risk of mortgage stress are the following: 

•    Toowoomba in Queensland
•    Campbelltown in New South Wales.
•    Cardinia, Casey and the Yarra Ranges in Victoria.
•    Huon Valley and Clarence in Tasmania.
•    And Swan and Wanneroo in Western Australia.

The Central Bank hasn’t raised rates since December 2010, and with the inflation rate at 5.1, experts believe the RBA has to act. 
So there’s a big possibility that the rates will increase, and to protect yourself from the looming crunch, here are ten things to do: 

1. Factor in the rate rise in your mortgage 
Ideally, you should have a plan in place that you can follow if rates suddenly increase. This will help you manage your budget to cover higher mortgage repayments.  If you are in the early stages of taking out a mortgage, you should ask your lender or mortgage broker to help you risk-proof your home loan. Otherwise, you’ll surely suffer from even a small increase. 

2. Ask for a rate review and see a mortgage broker
Once the rate hike is confirmed, you should contact your lender or broker and request a rate review. Lenders are still in tight competition, so you’ll likely get rate reductions if you submit a reassessment. Take this opportunity also to consult your mortgage broker or lender on how you can safeguard your mortgage against future increases.
 
Call Catherine (me) at Volare Home Loans on 0411 849 804 and I will do my best to help you.

3. Look for another lender
If your current lender declines to reduce your rates, you can apply for refinancing through a new lender. Mortgage refinancing may take some time, and you may have to undergo some processes, but it can be worthwhile if you can secure lower rates. 

4. Switch from variable to fixed rates 
Another way to protect yourself from the sudden increase is to consider fixed-rate mortgage loans.  This option will lock in your repayments for a specific period to help you better manage your cash flow.  But you need to be aware that a fixed rate mortgage has its pros and cons, depending on the movement of interest rates. So be sure to consult your mortgage advisor before you decide to switch. 

5. Overpay when possible 
The looming rate increase could be just the first in a series of credit crunch in the next few years, considering the inflation and the struggling economy.  So if you are capable, it is best to make higher repayments than the minimum amount.  This method will help you save thousands of dollars on interest and reduce the duration of your loan. 
Plus, this will get you in the habit of paying more, so when the interest rate rises again, your cash flow will not be heavily affected.

6. Fix your cash flow
You’ll surely feel the effects of rising rates if your finances are in a mess.  Use this uncontrollable event as a wake-up call to reassess your budget.  Are you earning enough to cover your expenses? Are you spending too much above your means?  Taking time to review how you earn and spend money can help you avoid mortgage default. 

7. Find a part-time job 
With the rise of the gig economy, there are many opportunities to work even in the comforts of your home.  Many Australians are now earning through online work such as writing, digital marketing, graphics design, translation, language tutorials, arts and crafts, and many more. 
Many websites can help you connect with people looking for skilled part-timers. You can use your additional earnings to cover your mortgage and other bills. 

8. Use your home as a source of income
Check if you can use your home to generate some income. Maybe you can rent a room to a uni student or offer your storage space for rent.  Some homeowners also use online platforms like Airbnb to rent out their spare bedrooms to travellers.  Just make sure you do your homework and check your local business regulations before becoming a host. 

9. Avoid other forms of debt 
Even without rates rising, it is still ideal to stay away from unnecessary debt. This includes credit card purchases or deferred payments.  There’s a recent boom in fintech platforms offering buy now pay later plans, making it easier for people to buy expensive gadgets on instalment plans. You can take advantage of these offers if you need to acquire things you need, but if it’s an item of luxury, it’s better to avoid them. 

10. Don’t panic 
​While a higher mortgage repayment can strain your budget and certainly cause concern, it’s not an endgame.  Rising rates, high inflation, and oil price hike are part of the economy, and there are many ways to survive and thrive.  We have listed here some of the ways you can try to get by, and you’ll surely get a good plan if you consult a financial planner or mortgage advisor to help you out.

Financial Counselling Australia runs a service, the National Debt Helpline Australia, which has lots of information to help you manage your debt and they also have a telephone number (1800 007 007) that you can call if you’d like personalised advice.

“If you’re thinking about that, talk to a financial counsellor. It’s free, non-judgemental and all the financial counsellors are trained.”

We all have that one friend, one colleague, or one person we know in our life who always seems to get things done, whether it's an hour-long task or simply a 20-minute one. These people exist and roam among us with their maximum efficiency while some of us still struggle to meet deadlines. 

Do you think they have secrets to their successes? Of course, they do. To become a productive person - the correct term to describe our friends, you should install some small foundational habits. 

1. Consistent morning routine:
A morning routine does not always entail getting up at 4 a.m. and going straight to the gym, unless you are The Rock, of course. Everyone's morning routine is different, so it's crucial to figure out what works best for you.  For example, you can get up at 6 or 7 am, slam down a deliciously nutritious smoothie before heading to the gym, then treat yourself to a big breakfast while catching up on news or emails. The options are varied, as long as you do it consistently, and you'll be ready to tackle each day. Remember that ideas are easy. Execution is hard. Consistency is harder. 

2. Prioritize tasks:
Productive people are aware of the distinction between essential and less critical tasks. When you only focus on checking items off your to-do list, you'll mix up the two, and it will also increase your procrastination level. It's all too tempting to spend the entire day checking off easier, less significant tasks rather than tackling complex tasks that require your immediate attention.
Instead, take a few minutes at the beginning of each day to choose 1 to 3 most important tasks you must complete by the end of the day, no matter what.

3. Eisenhower Matrix to the rescue:
The Eisenhower Matrix, which was named after Dwight D. Eisenhower, the 34th US President, and widely popularised by Stephen Covey in his best-selling book, "The 7 Habits of Highly Effective People”, is a simple decision-making tool that can help you distinguish between important, not important, urgent, and non-urgent tasks. According to Slab Blog, it divides jobs into four boxes, indicating which should be prioritized first and which should be delegated or deleted. 

Do you sometimes have a negative perception of money? Changing your perception of money to always have a positive outlook can help you maintain your financial wellness.

Not only that, having the right perception about money with open up opportunities for you and improve your life!

A big thank you to Clever Girl Finace for these tips. 

Here are 8 steps to guide you:

1. Be willing to change: Reflect on your past and current mindset and use it to make baby steps forward. Have an open mind about changing your view and habits. A willing attitude is how to change your perception for the better!
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2. Decide you’re in charge: Take matters into your own hands! Ask for that raise, start that side hustle, and pay down that crushing debt. Get started with investing and have your money work for you! ​
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3. Visualize the future you want: One of the best ways to help you visualize the life you want is to create a vision board. A vision board is a collage of pictures, quotes, and goals you want to achieve. It can be digital (on your phone) or on an actual physical board.
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4. Get clear on your goals: Once you have your vision, define how you’re going to get there. Use the SMART goal method to make your goals specific, measurable, achievable, relevant and time-bound.
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5. Gather all your resources: Think about your skills, savings, assets, and personal network. Then get creative about how you can leverage everything in your arsenal.
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6. Believe in yourself: Belief is one of the biggest factors in perception, so the more you believe in yourself, the closer you are to making your vision a reality.
   ​
7. Hold yourself accountable: Sometimes, tracking your goals may be enough to hold yourself accountable. But if not, you may need to find an accountability partner to keep you on track!
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8. Don’t settle: You deserve the best—whatever you define “the best” to be. Never give up on your dreams no matter how big they are because when you change your perception and believe in yourself, you won't settle for anything less. 

​Ultimately, changing your perception of money comes down to choosing happiness rather than resistance.

And if you want to discuss how you can work towards getting a home loan down the track, give me a call. We can work together to help you achieve that goal.

By Alex Tan - Finance and Coffee, Jan 2022

It’s hard to know exactly what to expect from the housing market amid constantly shifting circumstances. 

However, let’s have a look at the latest CoreLogic report on the housing values over the last year to identify a few trends that are giving shape to the markets to predict what we may be up against in 2022. ​
​

Despite many homeowners’ hopes, the total value of housing grew at the slowest pace of 1% last month, a slowdown from 2.8% in March 2021. The weakening demand for housing might be the direct result of : 

• Interest Rate Rise Loom: A significant rise in mortgage repayments is on the cards for Australians this year. 
• Stock Levels Normalise: An increasing number of houses are being listed for sale. There is less urgency for buyers to make the purchase.
• Worsening Housing Affordability: It takes very deep pockets to gain a foothold on the property ladder right now.

As you can see, the market has taken off over the past year but softened since the frenzied heyday of 2020. 

Expensive property prices are pushing rental yields to historic low as the rental market struggles to keep up. Despite climbing at their fastest rate in more than a decade, the dwelling rental growth is still at a single digit (9.4%) compared to the 22.1% jump in national housing value last year. 

Peeking into the crystal ball
Given no deviation from the current landscape, CoreLogic expects housing values to continue to rise in the short term. 

In the long term, the expectation is that a period of negligible house price growth is most likely as household finances come under pressure. Let’s be honest, the kind of price rises that we’ve seen are unsustainable. There is no doubt that affordability was becoming more stretched on the back of property values outstripping earnings.

Despite all our best predictions, the market would likely depend on many factors such as the path of the pandemic, overseas migration, the trends in the labour market, demographic patterns and supply levels.
​
If you think the time is right for you to buy, give me a call on 0411 849 804.​

Buy now pay later means you pay by installments over time, instead of paying the full amount upfront.

How buy now pay later works.
When you use a buy now pay later service, you can buy a product and delay payment. You usually pay off your purchase over a few weeks. For bigger purchases, it may be longer.

You don't pay interest on the purchase. Instead you're charged fees.
Lots of shops offer different buy now pay later options. Buy now pay later providers include:

• Afterpay
• Brighte
• Humm
• Klarna
• LatitudePay
• Openpay
• Payright
• Zip Pay

Some buy now pay later arrangements are also offered through credit card networks such as Mastercard and Visa.

Before you sign up to buy now pay later - what to look out for
While buy now pay later can be convenient, it can be difficult to juggle repayments with other financial commitments.

In 2020, ASIC research into the buy now pay later industry found that in order to meet repayments on time, one in five consumers:

• missed or were late paying other bills or loans
• cut back on or went without essentials such as meals

Before you sign up, keep in mind:

• It’s easier to over spend – you can over-commit to spending you can’t afford
• Fees can add up – you are charged fees to use the service
• It can be hard to manage – if you sign up for more than one service, it can be hard to keep track of payments
• It might affect a loan application – lenders consider buy now pay later spending when you apply for a car loan or mortgage
• Late repayments can appear on your credit report – this affects your ability to borrow money in the future
• Lay-by can be cheaper – lay-by has no account keeping or late fees

Compare the fees charged
Buy now pay later services are often advertised as 'interest free' or '0% interest'. But they charge fees that can add up quickly. They may charge:

• late fees — if you miss a payment or pay late, around $5 to $15
• monthly account-keeping fees — a fixed monthly fee, up to $8 a month
• payment processing fees — some charge an extra fee of around $3 each time you make a payment
• establishment fees — a fee to set up the account. For some there are no establishment fees, for others these fees can be up to $90.

To compare fees charged by different providers, see buy now pay later fees on the Australian Finance Industry (AFIA) website.

You may also have to pay bank fees:

• overdrawn fees — if you don't have enough money in your account to cover the repayment
• interest — if you are paying by credit card

Using a buy now pay later service
TranscriptWe explain how buy now pay later works and some tips on what to look out for if you use buy now pay later services

Tips for managing buy now pay later
To make the most of buy now pay later services:

• Stick to a limit and aim to have only one buy now pay later account at a time.
• Budget for bills, loan payments and buy now pay later payments.
• Consider linking your buy now pay later account to your debit card instead of your credit card. That way you're using your own money and avoid credit card interest.

​Use our budget planner

If you sign up for a buy now pay later option, add the repayments to your budget — and your calendar.

What to do if you get into troubleMost buy now pay later providers have dedicated complaints and hardship services. Contact your provider if you have a complaint or if you're having trouble making repayments.
​
If you need help to get your finances back on track, talk to a financial counsellor. They offer a free and confidential service to help you understand your options and deal with money issues.

Raising your kids to be smart with money gives them a vital life skill.  As a parent, you have the power to shape your child's relationship with money. Start early by showing them where money comes from, how to budget, how to spend wisely and how to set savings goals.

This article from moneysmart.gov.au provides some great tips on how you can start conversations about money with your children. 

You don't need to be an expert to teach kids about money. Just start a conversation about money when the opportunity comes up at home or when you're out.
Your kids will naturally ask you for the things they want. It's hard when you have to say no. Talk about how we all have limited money and we need to carefully decide what we spend it on.
How you earn moneyTalk about how you earn the money you have to spend. You get a certain amount of money each time you get paid. The money you earn has to cover the essentials, like food, clothes and housing.
Talk about how you choose what's the most important things to spend your money on.
Needs versus wantsDiscuss the difference between 'needs' and 'wants', and encourage your kids to think about these before spending their money.
When older kids get their first job, they're often tempted to spend all their money at once. Show them how to track their spending to see where all their money is going.

Show your kids where money goes
Use everyday situations to teach your kids about money, including where it comes from and where it goes.

When you tap and pay 
Explain that when you tap your card, it talks to your bank who has your money in your bank account. When you tap to pay it uses money that you've made by working and saving. Each time you tap and pay, you have less money in your account.

While shopping 
While shopping, teach your kids how much things cost by showing them:

• different prices for similar items
• how to compare deals
• how to work out which items are better value
• how to work out price differences and discounts

When paying bills
Show your kids an electricity bill or a phone bill. Explain how many hours or days you had to work to pay that bill.
This will help them start to see the connection between work and the cost of things.

Get kids involved in money decisions
As your kids get older, get them involved in budgeting, saving and spending.

Check deals 
Work with your kids to research online or shop around to find the best value for something they want.

Plan an event 
Involve your kids in planning and budgeting for an outing or a birthday party. Work through all the costs with them, including transport, food or tickets.

Do a budget
Do the family budget with your kids. Explain how much money you have each week and how it’s spent. They'll start to get a sense of the cost of living and how long it takes to save.

If they earn some of their own money, help them create their own budget.
Use our budget planner

Give kids pocket money
Pocket money can help children to understand the value of money. You can choose to pay them for certain tasks, for example:

• mowing the lawn
• vacuuming the house
• washing the car
• taking the rubbish out
• cooking dinner or making school lunches
• hanging out and bringing in the washing
• packing and unpacking the dishwasher
• walking the dog

Make sure you withhold or reduce their pocket money if the tasks are not done or not done properly. This helps to teach kids that they only get paid when work has been done to a certain standard.

Encourage your kids to save
Learning to save is a vital money lesson.

Piggy banks and bank accounts
Piggy banks are great for younger kids. They can see the money they’re putting away and watch it grow as they save.
Opening a savings account is a good way to introduce kids to banking, saving and interest.

Set money goals
Help your kids avoid impulsive purchases by teaching them to set goals and to prioritise what they spend their money on.
When your child wants to spend money on an impulse purchase, remind them about the goal they are saving for. Work out how much longer they'll have to wait to reach their goal if they decide to spend today.
Use our Savings goal calculator

Share their money
Encourage your kids to donate some of their savings to charity. This teaches them that money can be used to help people, and is not just for buying things.

Activities for learning about moneySee our range of online activities your kids can do to learn about money.
Ages 3-6: Play shop - Kids buy and sell items in their play shop.
Ages 5-8: Needs and wants - Kids consider the difference between needs and wants.
Ages 8-10: Party time - Kids organise their own birthday party. They decide between needs and wants, create a simple budget and learn about making wise financial decisions. 
Ages 10-12: The cost of cats and dogs?... and snakes? - Kids research the costs of owning a pet by following characters and helping them save, spend, plan, budget and make consumer choices. 
Ages 12-16: Savvy solutions to consuming questions - Kids follow three teenagers who each need to make decisions around spending, saving, investing and donating. 
Ages 14-18: Be Moneysmart (Module 1): Saving, budgeting and spending - Kids establish savings goals, create a budget and a savings plan.
Ages 14-18: Be Moneysmart (Module 2): Personal tax - Kids work through various tax topics and learn the essentials of preparing and lodging a tax return.
Hey, teacher! Our units of work and digital activities are aligned to the Australian curriculum and great for primary, secondary and VET students

By Alexa Tran on www.financeandcoffee.com.au
These days lenders have been aggressively competing on market share by offering up to $4,000 cashback for new borrowers and refinancers. Cashback specials are nothing new. In fact they’ve been used by lenders for years as a clever marketing strategy to grab people's attention. You choose a loan with a different lender and they promise cold hard cash deposited into your bank account when the loan settles to cover switching costs. But is it your friend?

Why do people fall for it?

According to the Australian Finance Group (AFG), seven out of ten borrowers are ‘Upgraders’ seeking finance to improve their home or the location of it or ‘Refinancers’ who want to reduce household costs and take advantage of lower rates. 

It seems the banks can see our blind spots to our relationship with money. A cashback reward program is hugely attractive to these customers who are looking for short-term gains or immediate cash flow, especially during an economic crisis triggered by COVID-19.

It works on the principle of urgency, cash backs are usually offered for a limited time, specifying that you have to apply by a certain date and have the loan settled by a certain date. Then your FOMO kicks in. That’s exactly why lenders capitalise on this behavioural phenomenon. 

This marketing strategy encourages customers to take advantage of the “free money” and feel good about being a “smart consumer”. But most people aren’t prepared for the miserable trap that is paying off high interests and fees. 

Be Mindful

Do you know that it may cost you six times more than you actually save? An exclusive analysis shows that borrowers of $1 million who accept a cashback from the big four bank lenders could end up paying an additional $7,300 to $12,000 over the first three years of the loan. 

Here’s a refinance with CBA on Canstar:

• Loan value: $1 million
• Loan term: 30-year principal
• Fixed interest rate for three years at 2.19%
• Cashback offer: $2000

The borrower ends up paying an extra $11,699 at the end of the term compared with a borrower on the lowest rate of 1.79%. 

“Many borrowers taking the cashback are only getting the equivalent of one month’s mortgage repayment on a 30-year loan. They’ve got to remember there are another 359 months to go,” says Steve Mickenbecker, Canstar’s group executive for financial services.

You may not realise it can be a package loan so you also get a credit card, an offset account plus home insurance policy and other financial services. It will come with an extra 400 dollars annual fee. And in just five years, it will eat up the full $2000 cash back. 

So, don’t get too caught up with these special offers. You always need to check whether the loan itself is a good deal regardless of the cash back. Ask yourself this question: “Would the loan product still be right for me if I take away the special offer?" 

Without fail, a lower interest rate will always save you more than a cash back offer, in most circumstances. Other features like an offset account and flexible repayment options also help you save money. 

Give me a call and I can do the hard work and compare loans for you. You could end up with a better rate and a better home loan package. 

By Alexa Tran from Finance and Coffee

The Australian Government has announced new increased property price caps for the First Home Loan Deposit Scheme (FHLDS) and the Family Home Guarantee, which apply from 1 July 2021.

If you are eligible, these schemes allow you to buy a home with as little as 2% deposit (for the Family Home Guarantee) or 5% deposit for the FHLDS. No Lenders Mortgage Insurance is payable as the Governement is the Guarantor. For more information click here

​Further information and scheme fact sheets are available on the NHFIC website ​or call Catherine on 0411 849 804 and she can walk you through your options.

If you have more than one form of debt i.e. personal loans or Credit Cards, it may sound like a good idea to roll them into one consolidated loan. Debt consolidation (or refinancing) can make it easier to manage your repayments. But it may cost you more if the interest rate or fees (or both) are higher than before. You could also get deeper into debt if you get more credit, as it may tempt you to spend more.

Here are some things to consider before deciding to consolidate or refinance.
If you're having trouble making repayments, there is help available. Contact your lender and talk to them about applying for financial hardship.

Avoid companies that make unrealistic promises. Some companies advertise that they can get you out of debt no matter how much you owe. This is unrealistic.
Don’t trust a company that:

• is not licensed
• asks you to sign blank documents
• refuses to discuss repayments
• rushes the transaction
• won't put all loan costs and the interest rate in writing before you sign
• arranges a business loan when all you need is a basic consumer loan

Check the company is on ASIC Connect's Professional Registers.
If they're not listed on one of these three lists, they're operating illegally:

• Credit Registered Person
• Credit Representative
• Credit Licensee

Make sure you will be paying less

Compare the interest rate for the new loan — as well as the fees and other costs — against your current loans. Make sure you can afford the new repayments. If the new loan will be more expensive than your current loans, it may not be worth it.  Use our mortgage switching calculator

Compare the interest and fees on a new loan with your current loans.

Remember to check for other costs, such as:

• penalties for paying off your original loans early
• application fees, legal fees, valuation fees, and stamp duty. Some lenders charge these fees if the new loan is secured against your home or other assets

​Beware of switching to a loan with a longer term. The interest rate may be lower, but you could pay more in interest and fees in the long run.

Protect your home or other assets

To get a lower interest rate, you might be considering turning your unsecured debts  (such as credit cards or personal loans) into a single secured debt. For a secured debt, you put up an asset (such as your home or car) as security.
This means that if you can't pay off the new loan, the home or car that you put up as security may be at risk. The lender can sell it to get back the money you borrowed.  

Consider all your other options before using your home or other assets as security.

Consider your other options first

Before you pay a company to help you consolidate or refinance your debts:
1. Talk to your mortgage provider
If you're struggling to pay your mortgage, talk to your mortgage provider (lender) as soon as possible.  All lenders have programs to help you in tough times. Ask to speak to their hardship team about a hardship variation. They may be able to change your loan terms, or reduce or pause your repayments for a while.

2. Consider switching home loans
A different home loan could save you money in interest and fees. But make sure it really is a better deal. See switching home loans.

3. Talk to your credit providers
If you have credit card debt or other loans, ask your credit provider if they can change your repayments or extend your loan. The National Debt Helpline website has information about how to negotiate payment terms.

4. Consider a credit card balance transfer
A balance transfer may be a good way to get on top of your debts. But it can also create more problems. See credit card balance transfers to help you choose wisely.

5. Get free professional adviceThere's free help available to help you get back on track. Financial counsellors can help you make a plan and negotiate with your mortgage or credit providers.
Free legal advice is available at community legal centres and Legal Aid offices across Australia. If you're facing legal action, contact them straight away.

You are also always welcome to call me on 0411849804 and see if I can help in any way.


With thanks to moneysmart.gov.au for the article