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Australian homeowners are loading up their offset accounts in record amounts, so much so that the average household is now almost four years ahead on their mortgage payments.
Quick question: do you have an offset account (or several) attached to your mortgage?
They’ve become quite popular in recent years, especially since the RBA’s official cash rate has hit record low levels and impacted the amount of interest you can earn in savings accounts (which we’ll explain in more detail further below).
Research from the Australian Prudential Regulation Authority (APRA), provided to The Australian, shows the average balance sitting in offset accounts is now nearly $100,000 – up almost $20,000 since the pandemic kicked off in March 2020.
In total, $222 billion was in offset accounts across the country as of September 2021 – up almost $50 billion from $174 billion in March 2020.
In fact, in the September 2021 quarter alone, offset account balances increased by 10%.
All of this has helped contribute to mortgage holders now being, on average, 45 months ahead on their repayments – up from 32 months prior to the pandemic.
In terms of the various ways Australians have gotten ahead, 57% of prepayments came from offset accounts, 40% via available redraw balances, and 3% through other excess repayments.
Basically, an offset account is a regular transaction account that is linked to your home loan.
The advantage is that you only pay interest on the difference between the money in the account and the mortgage.
Some banks allow you to have 10 offset accounts attached to your mortgage, too, with cards linked to them that you can use for everyday spending.
Say you owe $350,000 on your mortgage, and have $50,000 in a savings account.
If you move that $50,000 into a full offset account, you’ll only pay interest on $300,000 (which is the loan value minus the amount in your offset account).
The offset account can then continue to be used for all your daily needs, like receiving your salary or withdrawing cash.
With the RBA’s cash rate at record low levels, the interest rate you’ll receive on the balance in your bank’s savings account is also at record low levels too.
Say for example that you had a savings account with a 1% interest rate and a mortgage with a 2.2% interest rate.
By allocating money into your full offset account, you’d save more money on interest than you would earn in your savings account.
Additionally, interest on your savings accounts is subject to tax, whereas the interest-saving on your mortgage isn’t.
Of course, there are additional factors you’ll want to consider, such as account keeping fees and the minimum amount needed in the account to make it useful.
And obviously, savings accounts and offset accounts are not the only two places you can park your hard-earned money. Depending on your risk appetite, there are other options you could consider that might yield a higher return.
The long and the short of it is everyone’s situation is different, but if you think an offset account might be for you, get in touch and we can help you explore your options.
For expert help in structuring finance https://calendly.com/fmsloans or call 0425341086
I'm not sure that foreigners are abandoning Sydney and Melbourne just yet.
NAB's September quarter residential property survey, which is a survey of market participants, reported that foreign buyers accounted for an incredible 19.4% (houses) and 16.5% (apartments) share of established sales in Victoria (which really means Melbourne), and 9.9% (houses) and 9.3% (apartments) sales in New South Wales (Sydney).
They're still very big numbers.
And the shares are even higher for newly constructed dwellings, with 28.5% (houses) and 26.0% (apartments) of sales in Victoria going to foreigners, whereas the share in New South Wales was 15.5% (houses) and 10.9% (apartments).
For further information please don't hesitate to contact Finance and Mortgage Solutions on our website.
Four major national government schemes are now available for first-home buyers or will be available within calendar year 2022:
60,000 Places From 1 July 2022
Beginning in financial year 2022-23, the government will provide a total of 50,000 places each year under the various schemes:
Help To Buy Scheme
The Help to Buy Scheme is a shared equity scheme wherein the government helps first-home buyers purchase a home by contributing up to 40% of the property price for a new home and up to 30% for an existing one.
The scheme is designed to help with the longstanding affordability crisis. There will be 10,000 places available for eligible Australians each year. It will be available from 1 July 2022.
First Home Guarantee
This scheme allows eligible first-home buyers to purchase a new or existing home with a deposit of just 5%, without paying tens of thousands of dollars in LendersMortgage Insurance LMI ) which banks charge when it’s a deposit less than 20%
The scheme will now have 35,000 places each financial year, beginning from 1 July 2022.
Tip: For your best chance to secure a place in the scheme, have your tax returns done as soon as possible. To apply, you’ll need your latest Notice of Assessment from the Australian Taxation Office (ATO).
Call Us Today
Let our Experts help you purchase your first home. Call us on 0425341086 or book a meeting https://calendly.com/fmsloans
Family Home Guarantee
This is an initiative to help eligible single parents with dependants purchase a family home sooner.
Under the scheme, single parents can buy a home with just a 2% deposit without paying Lenders Mortgage Insurance.
The Family Home Guarantee is available through financial year 2025.
This scheme originally offered 10,000 total places spread across four years. The government has now added 5000 new places each year, from 1 July 2022 to 30 June 2025.
Regional Home Guarantee
The new Regional Home Guarantee will allow borrowers to buy or build a home in select regional areas with a deposit as small as 5%, without paying Lenders Mortgage Insurance. The scheme will include 10,000 places each year, from 1 October 2022.
The Regional Home Guarantee is open to first-home buyers and anyone who has not owned property in the last five years. Permanent residents are eligible.
If the legislation passes, the scheme will be available from 1 October 2022 to 30 June 2025.
1. DE-CLUTTER YOUR BUDGET (AKA SPENDING PLAN)
After COVID, are you knee-deep in a year-end spending spree? Don’t worry; we’ve all been there. The holiday season often marks increased spending, so it’s a good time to haul out your family budget.
I’ll stop right there. First, stop thinking of your budget as, well, a “budget” as there are far too many negative connotations (spending anxiety, restrictive, feeling bad about purchases, fear of tiny little boxes, etc.)
Instead, start thinking of your Budget as a spending plan Your spending plan is a guide to help you use your money in ways that mean the most to you. When used correctly, it marries your money with your goals and values, which may mean higher spending months every now and then for travel, hosting, gifts, etc.
The key?
Take a close look at where, what, how, and why you’re spending money.
Knowing the answers to these questions can help you create a healthy cash flow plan. It can also help kick your not-so-awesome spending habits (we all have them!) like spontaneous purchases, retail therapy, keeping up with the Joneses, etc., to the curb.
By weaving in extra savings into your spending plan, you can have enough money to cover gifts, cook your fancy holiday dinner, and keep the lights on (literally).
2. MAX OUT YOUR RETIREMENT PLANS
Saving for retirement should be as commonplace as meal prepping for the week. By automating your investments, you create consistent, healthy habits to help you reach your goals.
When year-end rolls around, it’s a great opportunity to look at how much you saved relative to the annual maximums. Let’s take a look at 2021 numbers.
You can TOP up to $27,500 in your Super. The total contribution limit for this account is including an employer contribution see if this is an option for you). These numbers don’t include catch-up contributions
Examine how much money you’ve saved so far this year. Are you already maxing out your accounts? Can you contribute a little bit more to reach that number? A little goes a long way when it comes to investing and compound interest. If you really feel like you need to take baby steps, try increasing your contributions by 1% now or $100 a month and then set a reminder to do this again in 6 months.
Maxing out your retirement accounts isn’t only a huge bonus for “future you,” but it also provides a significant boost to your current financial situation. Contributions to your Super meaning that for every dollar you contribute, you actively lower your taxable income.
Government is targeting affordability and has a few new ways to help.
Help to Buy
Anthony Albanese pledged that a Labor government would cut the cost of a mortgage by up to $380,000 for some eligible Australians under its Help to Buy scheme.
The program involves the Labor government providing eligible home buyers with an equity contribution of up to 40 per cent of the purchase price of a new home and up to 30 per cent of the purchase price for an existing home.
Buyers will be able to purchase a property that they intend to live in with a deposit of as little as 2 per cent. Participating lenders finance the remainder of the purchase.
During the period of the loan, the home buyer is able to buy an additional stake in the property when they have the means to do so. Before that point, they will not have to pay rent for the portion of the home owned by the government. The government would recover its equity and its share of the capital gain when the house is sold.
National Housing Supply and Affordability Council
Following calls from housing advocates across the country, Mr Albanese pledged to establish a National Housing Supply and Affordability Council to address the two, interrelated issues.
The Council will reportedly be composed of experts from the finance, economics, urban development, residential construction, urban planning and social housing sectors.
The Council will work closely with states and territories on setting targets for land supply, in consultation with States and Territories, and play a key role in developing Labor’s National Housing and Homelessness Plan.
Regional First Home Guarantee
Under an expansion of the First Home Guarantee, the Labor party has promised to help 10,000 regional Australian families a year buy their first home.
The scheme aims to triple the number of places that Australians living in regional areas received last year under the current FHG scheme.
Places will be reserved for Australians who have lived in the region in which they apply from for more than 12 months. It will see approved applicants purchase a home with as little as a 5 per cent deposit, without needing to pay Lenders Mortgage Insurance (LMI).
Price cap reviews
Continuing on from the Labor party’s planned expansion of the first home guarantee, the party also promised to conduct six-monthly reviews of the scheme’s price caps in both the capitals and regional areas that determine the maximum price an eligible applicant can pay for their new home.
Negative gearing
Labor backed down from its earlier proposed changes to negative gearing in July 2021, promising to “maintain existing regimes for negative gearing and capital gains tax” during the party’s tenure in power following the 2022 election.
The decrease in migration due to border closures during the pandemic was offset by decreasing household sizes, according to the RBA’s assistant governor Luci Ellis.
Ellis said that many people had opted to move out of share or family homes and into their own places as lockdowns ended, which had an impact on the housing approvals data and demand for housing.
“The decline in average household size increased the demand for homes (by number),” Ellis said.
“This helps explain why rental vacancy rates quickly returned to low levels even though the international border was closed and population growth declined to be close to zero.”
The ABS has just released the biennial housing occupancy and costs for the 2019-20 financial year, giving an insight into the sector just before the pandemic.
The household size in 2020 pre-pandemic was 2.56 people, the smallest it had been in 12 years, with single person households at 25.2 per cent of all households—another 12-year record.
She also said that time limits on schemes such as Homebuyer had encouraged people to enter the market, driving up approvals.
“The second observation is that the decisions to rent or buy, and who to live with, are important margins of adjustment,” Ellis said.
“HomeBuilder and other subsidies lifted the number of first home buyers for a period.
“At the margin, this reduced the number of people wanting to rent.”
However, with the average construction time increasing from six months to nine months for new builds, Ellis also predicted delays in seeing the house completion data match up to the approvals data.
Prior to the federal election, both major political parties put forward housing policies with schemes targeting first home buyers via grants or shared equity.
The Liberal Party announced extensions to the current first home buyers’ scheme while Labour announced a shared equity scheme with the government taking up to 40 per cent of the loan.
▲ Both major parties proposed various extensions to and new housing schemes to resolve the housing affordability crisis.
Meanwhile, state-based policies to resolve the issue of not just generating housing stock but making it accessible and affordable meet their own obstacles.
The Victorian government’s attempt earlier this year to create a tax levied on developers working on new builds to help fund social and affordable housing was met with a backlash with property developers and lobby groups saying the cost would be passed onto homebuyers, raising prices even further.
The state government eventually dropped the policy.
And local government, trying to unlock land for development in the face of increased demand for residential housing, expressed concern at having to bear the costs of installing expensive trunk infrastructure before developers take on projects as well as being unable to manage the costs of it within the state’s financing system.
If you have a #garage and you're not using it to park your car, you have a lot of wasted space that you could be putting to good use.
A garage has all the basic elements of a livable space, all you need to do is add what's missing and you can convert your garage into a home office, #spare bedroom, or even a self-contained granny flat.
How much does a garage conversion cost?
A garage conversion can set you back anywhere between $10,000 and $40,000, depending on its inclusions. Keep in mind that this is still much less than the cost of a home addition or extension.
How do you make a garage 'livable'?
Your garage already has a 'house shell' - a concrete slab, walls and a roof. If you look at it as an unfinished house, you can really see the potential. To make it habitable, you need to add:
1. insultation 
2. internal cladding
3. a ceiling
4. flooring
5. lighting
6. entilation
7. heating and cooling
If you're ready to go ahead with your garage conversion, or just need a helping hand with a job around the home, no matter where you live you can contact 0425341086 or Finance and Mortgage Solutions on our website.
First home buyers in NSW can currently receive $10,000.
| New homes | Existing homes | Vacant land |
|---|---|---|
| Buy a new home valued at less than $650,000, apply for a full exemption, and pay no transfer duty.Buy a new home valued between $650,000 and $800,000, and apply for a concessional transfer duty rate. The amount will be based on the value of your home. | Buy an existing home valued at less than $650,000, apply for a full exemption and pay no transfer duty.Buy an existing home valued between $650,000 and $800,000, apply for a concessional transfer duty rate. The amount will be based on the value of your home. | You won’t pay transfer duty if your land is valued at less than $350,000.For land valued between $350,000 and $450,000, you’ll receive a concessional rate. |
For further information or just some innovative financial advice please don't hesitate to contact Finance and Mortgage Solutions today on 0425341086 or visit our contact page.
Ever dreamed about telling your boss to “shove it” and starting up your own business? Well, there’s been a big jump in Millennials and Gen Zs who are saving up to do just that (well, maybe except for the “shove it” part!).
There’s something romantic about the notion of starting your own business.
You know, opening up a hole-in-the-wall cafe or little alleyway bar, growing a loyal band of merry locals, and waxing lyrical with them into the wee hours of the morning.
Of course, as any small business owner will attest, the realities of running a business are very, very different.
Say one thing for the Millennials and Gen Zs of the country, and that is that they’re an entrepreneurial bunch who won’t let something like a once-in-century-pandemic get in the way of their business aspirations.
According to a ME Bank survey of young Australians with no children, 18% stated their current financial goal was “investing in their own business”.
That’s up from just 4% six months prior!
To put that into a bit of perspective – compared to some of the other 15 options they could choose from – the top response was “paying off a mortgage” at 34%, while 19% of respondents were aiming to “save enough to buy a property to live in”.
So, not far behind the top two responses at all!
What a lot of young Australians don’t realise is that you don’t have to bootstrap your way into starting up a business.
There are finance and funding options we can help you explore to accelerate your launch – and they’re not as scary as they might sound (5-in-6 businesses don’t find it difficult to pay back their business loans).
So whether your financial priority in 2022 is starting your own business, or trying to buy your first home, get in touch with us today. We’d be excited to help you take that first step.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
It’s a three-speed property market across the country right now, with two capital cities showing signs prices might’ve peaked, three cities looking like they could soon peak, and three still going strong. How is the market performing in your neck of the woods?
While national housing prices have increased a staggering 20.6% over the past 12 months, every capital city and broad ‘rest-of-state’ region is now recording a slowing trend in value growth, according to the latest CoreLogic figures.
However, some areas are faring better than others, as we’ll run you through below.
Sydney and Melbourne showed the sharpest slowdown in February, with Sydney (-0.1%) posting its first decline in housing values in 17 months (since September 2020), while Melbourne housing values (0.0%) were unchanged over the month.
That’s a pretty big drop off for Sydney in particular, which recorded 0.6% growth in January, while Melbourne recorded 0.2%.
A major contributing factor to this slowdown is that there’s now more property stock for buyers to choose from.
In Melbourne, advertised stock levels are now above average and tracking 5.5% higher than a year ago, while in Sydney advertised stock is 6.3% higher than last year.
CoreLogic’s director of research Tim Lawless says more choice translates to less urgency for buyers and some empowerment at the negotiation table.
“The cities where housing values are rising more rapidly continue to show a clear lack of available properties to purchase,” Mr Lawless explains.
The three capital cities that showed signs of slowing down in February – but not yet peaking – are Perth (0.3%), Canberra (0.4%) and Darwin (0.4%).
To put those figures into context, in January Perth (0.6%), Canberra (1.7%) and Darwin (0.5%) all recorded higher housing growth figures.
And over the past 12 months, Perth (8.3%), Canberra (23.8%) and Darwin (12.3%) have all performed quite strongly.
Conditions are easing less noticeably across Brisbane (1.8%), Adelaide (1.5%) and Hobart (1.2%).
Similarly, regional markets have been somewhat insulated from slowing growth conditions, with five of the six rest-of-state regions continuing to record monthly gains in excess of 1.2%.
The stronger housing market conditions in Brisbane and Adelaide in particular can be seen in the quarterly growth figures, with Brisbane housing values rising 7.2% over the past three months, and Adelaide up 6.4% over the same period.
So while Brisbane and Adelaide have slowed down a touch, a shortage of listings in those markets is helping to keep pushing prices up.
“Total listings across Brisbane and Adelaide remain more than 20% lower than a year ago and more than 40% below the previous five-year average,” explains Mr Lawless.
“Similarly, the combined rest-of-state markets continue to see low advertised supply, 24.9% below last year and almost 45% below the five-year average.”
With property prices slowing down around the nation, now’s a good time to take stock and work out what you can and can’t afford over the year ahead – be that buying your first home or adding to your investment portfolio.
And part of that process is finding out your borrowing capacity before you start house hunting, so you don’t stretch yourself beyond your limits.
So if you’d like to find out what you can borrow – and therefore afford to buy – get in touch today.
We’d love to sit down with you and help you map out a plan for your 2022 finance and property goals.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
