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With official interest rates trending downward, shrewd mortgage holders may take the opportunity to call their lender to ask for a better deal.

But when even a small interest rate reduction means potential savings of thousands of dollars, is a simple phone call really enough to get you there?

In 2019, ‘your interest rate should have a three in front of it’, is common advice for home owners considering the competitiveness of their loan settings.

But while a number of lenders offer lower rates to new customers, it’s not always so simple for existing customers to secure the same outcome.

Paul Fox , our Senior Finance Broker, says there are two options if you want a better deal on your mortgage:

  1. Call your bank and ask them to match the new rate, or
  2. Contact your broker and vote with your feet.

And although the first option is usually the easiest and commonly recommended, many mortgage holders find that lenders aren’t always so obliging when it comes to rate-matching to get you a more competitive rate.

“Being an existing client and not getting the same low rate offers as new customers can be very disappointing.

“Lenders use low rate offers to ‘win’ new customers, which is a great strategy if you are in the market to switch, but if you are an existing customer and your refuses to match your current rate to this new offer, you can always contact a broker and refinance with a lender who is hungry to win your business.

“Whichever option you choose, make the call to either your current lender and ask, or call 1300 ASK FOX and let us do the leg work for you.”

As an accredited finance and mortgage broker we have access to a panel of over 30 lenders and this gives us access to a wide range of products, some at very competitive rates. We are also in a position to offer you a more in-depth and customised level of service, allowing us to find you a mortgage product that may suit your current needs, wants and circumstances.

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The Australian Prudential Regulation Authority (APRA) has finalised it’s recommendations and will allow lenders to make changes to the current serviceability assessments. In a letter to ADIs (Banks and lenders) issued today (5th July), APRA confirmed its updated guidance on residential mortgage lending will no longer expect them to assess home loan applications using a minimum interest rate of at least 7 per cent. Common industry practice has been to use a rate of 7.25 per cent.
 
So, what does this mean? Currently applications for residential mortgages are assessed basing your proposed mortgage repayments at a minimum of 7%, with most lenders assessing at rates between 7.25% and 8%. Assessments rates will continue to be calculated at a higher rate, but the buffer will now be at 2.5% over the loans interest rate. With the majority of new loans being below 4% this lower assessment rate is expected to counter some of the recent policy changes around living expenses and existing debt calculations that have meant many potential purchasers (and refinancers) have been unable to acquire a loan due to falling short.
 
In the press release issued by APRA, Chair Wayne Byres said APRA believes its amendments are appropriately calibrated.
 
“In the prevailing environment, a serviceability floor of more than seven per cent is higher than necessary for ADIs to maintain sound lending standards. Additionally, the widespread use of differential pricing for different types of loans has challenged the merit of a uniform interest rate floor across all mortgage products,” Mr Byres said. “However, with many risk factors remaining in place, such as high household debt, and subdued income growth, it is important that ADIs actively consider their portfolio mix and risk appetite in setting their own serviceability floors. Furthermore, they should regularly review these to ensure their approach to loan serviceability remains appropriate.”
 
The current guidelines have been in place since December 2014.
 
Mr Byres said: “The changes being finalised today are not intended to signal any lessening in the importance APRA places on the maintenance of sound lending standards. This updated guidance provides ADIs with greater flexibility to set their own serviceability floors, while maintaining a measure of prudence through the application of an appropriate buffer that reflects the inherent uncertainty in credit assessments.”
 
The new guidance takes effect immediately. Lenders are anticipated to make those changes in the coming weeks.
 
More information can be found on the consultation here: APRA Consultation
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Many Australian families ask the same question…. “Where does my money go?” If this is you, then you’re not alone. Many people find the sheer thought of finance and budgeting stressful and decide to bury their heads in the sand!

We’ve teamed up with our local Savvy Saver mum Terri Watson from The Healthy Wallet Project and Luke Grundy, a budgeting specialist and financial planner from Humblebee Financial Planning to do the first of a series of events aimed at helping Australian families become more financially literate.

The first Budget Boot Camp is 7th August at The Local’s Porter, Kinross, tickets are $5 with all proceeds going to Kinross Primary School. Get your tickets here: Budget Boot Camp

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This year the write-off threshold increased from $20,000 to $30,000 and extended to 30 June 2020.

Under the scheme, eligible businesses with an annual turnover of under $50 million are able to claim an immediate tax deduction on items purchased that are valued up to $30,000. There’s also no limit to the amount of individual assets that can be claimed.

Tools for tradesmen or coffee machines for cafes have been suggested as examples of using the accelerated depreciation changes, but you can also use the small business incentive to buy a new or used car.

When is it available until?

The incentive has changed since it’s introduction on Budget Night 2015 (Tuesday, 12th May) and will now run up until 30 June 2020. Many small businesses are hoping that the scheme will be made permanent.

So, how does the small business tax break help to get you a new car?

First up, you need to be running an eligible small business with an annual turnover of less than $50 million.

If so, you can start looking at cars under $30,000. Only purchases under the $30,000 limit will be eligible for accelerated depreciation.

Depending on your particular circumstances, you may then be able to claim a deduction up to the full purchase price of the vehicle in the year of purchase.

What type of car can you buy?

Businesses have the option of purchasing a new or used vehicle that will be used for commercial purposes.

Don’t be surprised if new car manufacturers start offering sub-$20,000 deals in order to tempt buyers into a purchase.

What about cars over $30,000?

If you’re looking at a car over $30,000 it can still be deducted, but would not qualify for accelerated depreciation.

These purchases would be subject to existing deprecation rules as per the relevant tax law.

Financing your purchase to utilise the small business tax break

So, you’re a small business owner and you’ve got a car under $30,000 in mind. The only thing missing is the finance required to complete the purchase.

The good news is that the small business tax break remains whether you’re purchasing the vehicle through finance or not. That means you can go to a finance company, work out the appropriate package for you, and be enjoying your new car sooner.

It is important to consult with your tax agent/tax advisor to ensure the loan facility you are considering entitles you to take advantage of the accelerated depreciation scheme.

An important aspect to note, as always, is to organise your finance before selecting your car, which will give you a better idea of your budget.

Key takeaways

•Be an eligible small business with under $50 million in annual turnover
•Choose a vehicle under $30,000 to ensure you maximise your tax deduction
•Organise finance before shopping to clarify your budget

This page is intended to provide you with general information relating to accelerated depreciation.

You should always consult your tax advisor prior to making any decisions on purchasing a vehicle for your business and using such schemes. We accept no liability for any reliance placed on the information provided on this page. More information can be found at https://www.ato.gov.au/Newsroom/smallbusiness/General/$30,000-instant-asset-write-off/

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Keystart has made changes to the income limits for applicants for the second half of 2019. The move will mean an estimated 11,000 additional West Australian households will qualify for the low deposit loan scheme.

The scheme set up in 1989 has helped in excess of 100,000 West Australians into home ownership. The scheme allows a low deposit of 2% and removes the requirement for lenders mortgage insurance enabling applicants to get into a property sooner.

Currently the facility is only available to those who earn up to $90,000 (single), $115,000 (couples) and $135,000 (families) in the Metro area for purchases of up to $480,000 of established properties or building a new home. The caps will be increased for properties settled between 1st July and 31st December 2019.

Region Current Income Limits New Income Limits Property Purchase Price Cap
Metropolitan area $90,000 (Singles) $105,000 (Singles)  
$115,000 (Couples) $130,000 (Couples) $480,000
$135,000 (Families) $155,000 (Families)  

If you’d like to see if you qualify, book an appointment by calling 9304 9682 or email admin@foxmortgages.com.au

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CoreLogic’s Hedonic Home Value Index, March 2019 showed another national drop in values with a 0.6% decrease in March. Locally Perth ‘s decline continued but at a much slower rate, seeing a 0.4% drop.

Nationally the values dropped by 0.6% for the month. For the capital cities only Hobart saw an increase in values (0.6%), Canberra held with no change and the biggest drops were felt in Sydney (-0.9%) and Melbourne (-0.8%).

The 0.6% decline in national dwelling values in March takes the annual decline to -6.9%. If there is a positive it is that last month was the lowest month-on-month decline since October last year (-0.5%).

Over the last five years values in most cities have increased with the exception of Perth and Darwin as shown in the chart below.

Capital city rents slipped 0.1% lower over the twelve months ending March 2019.

Mr Lawless said, “Sluggish rental conditions are likely the result of higher rental supply coupled with a reduction in rental demand. Higher supply can be attributed to the surge in investment activity over recent years, while the reduction in demand is the result of more renters converting to first home buyers.”

Despite sluggish rental conditions, gross rental yields are generally trending higher as rental rates outperform dwelling values.

Gross rental yields have moved off their record lows in Sydney and Melbourne, however, these cities are still recording the lowest gross rental yields amongst the capital cities at 3.5% and 3.6% respectively. Most other capital cities are recording gross rental yields
around the mid 4% range, with Darwin and Hobart showing a higher yield profile.

Regional markets are generally showing a higher gross rental yield relative to the capital cities which is a long standing trend.

Tim Lawless says that although the market is still losing that the downturn is starting to lose some steam.

With the federal election on the horizon, there may be more uncertainty ahead with tax implications for investors should there be a change of government.

The above information is taken from the CoreLogic Hedonic Home Value Index

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The Coalition is throwing a few pre-election sweeteners in the direction of low- to middle-income earners, by doubling the tax cuts they will receive the next time they file a tax return.

Last year, the Government announced it would give people earning up to $90,000 an instant tax cut of up to $530.

That will now be more than doubled to $1,080 for singles, and increase up to $2,160 for double-income families.

The tax offsets start to flatten out for people earning between $90,000 and $126,000.

The Government is also promising to reduce the 32.5 per cent tax rate to 30 per cent by July 2024, which will impact around 70 per cent of the nation’s taxpayers.

We’ve provided a snapshot below to show how the budget may impact you.

  • $200.2 million over four years to support up to 80,000 new apprenticeships in industries with skills shortages
  • $132.4 million over four years to further improve the quality of the Vocational Education and Training (VET) system and pilot new skills organisations in key areas of future job growth
  • $263.3 million over seven years to improve access to youth mental health services across the national headspace network
  • $67.5 million over five years to trial 10 national training hubs to support school-based vocational education in regions with high youth unemployment
  • $62.4 million over four years from 2019-20 to expand second chance learning in language, literacy, numeracy and digital skills to upskill at-risk workers.

  • Tax relief for low-and middle-income earners of up to $1,080 for singles or up to $2,160 for dual-income families. The offset will be available for the current tax year and up until 2022
  • Personal income tax rates will be reduced from 2024-25, with the Government replacing the 32.5% and 37% thresholds with a single 30% threshold
  • The low-income threshold for the Medicare levy will be increased from 2018-19. The family threshold will rise from $37,089 to $37,794. The threshold for singles will be increased from $21,980 to $22,398. For each dependent child or student, the family income thresholds increase by a further $3,471, instead of the previous amount of $3,406
  • $187.2 million to bring forward the indexation of all remaining GP services items on the Medicare Benefits Schedule (MBS) to 1 July 2019. Ultrasound and x-ray diagnostic imaging items will also be indexed from 1 July 2020 at a cost of $198.6 million
  • $328 million over four years from 2018-19 towards initiatives to reduce domestic and family violence against women and children. The initiatives include $64 million in additional funding over two years to ensure that 1800RESPECT can meet forecast increases in demand, and $75.4 million to provide emergency accommodation for women and children escaping domestic violence.

  • Increasing the instant asset write-off threshold to $30,000 and expanding access to businesses with an annual turnover of up to $50 million
  • Fast-tracking the company tax rate cut to 25% for small and medium‑sized companies with an annual turnover of less than $50 million by 2021-22
  • $1 billion over four years to extend funding for the ATO’s Tax Avoidance Taskforce, which targets multi-nationals, large public and private groups and high wealth individuals
  • Employers will be eligible for a $4,000 incentive payment under the Additional Identified Skills Shortage Payment. Apprentices will be eligible for $2,000, paid at key milestones in their apprenticeship
  • $30.7 million to pay compensation owed to small businesses from unpaid external dispute resolution determinations dating back to 1 January 2008.

  • Increasing the instant asset write-off threshold to $30,000 and expanding access to businesses with an annual turnover of up to $50 million
  • Fast-tracking the company tax rate cut to 25% for small and medium‑sized companies with an annual turnover of less than $50 million by 2021-22
  • $1 billion over four years to extend funding for the ATO’s Tax Avoidance Taskforce, which targets multi-nationals, large public and private groups and high wealth individuals
  • Employers will be eligible for a $4,000 incentive payment under the Additional Identified Skills Shortage Payment. Apprentices will be eligible for $2,000, paid at key milestones in their apprenticeship
  • $30.7 million to pay compensation owed to small businesses from unpaid external dispute resolution determinations dating back to 1 January 2008.

Some huge spending plans on infrastructure nationally with over $13 billion pledged in projects. WA set to receive $857 million on the four projects below.

Albany Ring Road $140 million
Bunbury Outer Ring Road $121 million
Tonkin Highway upgrades $348 million
Karratha to Tom Price corridor $248 million
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Big changes in the way lenders view our credit histories are transitioning into place. 

In March 2014, changes to the Privacy Act 1988 came into effect to allow for this inclusion of extra information about your credit history in your credit file. The move across to Comprehensive (Positive) Credit Reporting (CCR) was optional, but following limited take up by financial providers, in late 2017 the Australian government announced it was making CCR mandatory. This required that big four banks have at least 50% of their positive consumer credit data provided to credit bureaus by the 1st of July last year. They will then be required to have all of it reported by 1st July 2019.

Smaller lenders will need to start reporting fully to benefit from receiving the data.

What has changed?

The new categories of information included in your credit file under Comprehensive Credit Reporting include repayment history information and consumer credit liability information. Repayment history information includes:

  • Repayment history for credit accounts such as credit cards, home loans and personal loans
  • Whether you have made a payment or minimum payment required
  • Whether the repayment was made on time or not

Your repayment history is stored on your credit file for two years. Only your repayment history from licenced credit providers who hold an Australian Credit Licence can be recorded. The good news is that teleco and utility companies are not licenced credit providers, so your repayment history will not include these providers and they will not be able to see repayment details either.

Consumer credit liability information includes:

  • The type of credit account opened
  • The date the credit account was opened and/or closed
  • The name of the credit provider and whether they are a licensee
  • The current limit on the credit account
What does it mean?

Comprehensive Credit Reporting means that a more complete picture of an individual’s credit profile can be held on their credit file.

People demonstrating good credit-based behaviour (paying debt on time, not over limits) will now see that reflected on their file and credit score. It will allow people to take greater control of how they can be perceived by potential lenders reviewing their credit file. The good news is if you have had issues in the past it could allow people to recover quickly from adverse situations or to establish a credit history more quickly.

We are now slowly seeing risk-based pricing structures coming in with some lenders adopting this for credit cards and personal loans. These practices are well established in other markets such as the US, UK and New Zealand who already have this type of reporting in place.

For lenders and financial institutions, it should ultimately result in more informed lending decisions, leading to fewer outstanding debts and less defaults. It may also present the opportunity to develop new lending processes and product offers to market.

It will take time for all lenders to switch across, so additional information may not appear on your credit file if your credit provider has chosen not to share this information with credit bureaus yet.

You can contact your credit provider if you are unsure whether they have adopted CCR or if you want more information about their credit reporting practices.

What can I do?

As more credit providers opt in to CCR, it has never been more important to stay on top of your finances.

You can ensure you maintain a good credit score:

  • Set up direct debits to help ensure bills are paid on time
  • Be careful about constantly switching credit card providers
  • Notify your credit providers of your new address when you move
  • Research thoroughly before applying for credit and only apply when you really need it
  • Protect your identity from fraud

Get your free Experian credit score: Free Credit Report

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It’s been pretty difficult to get away from the news, but if you are not aware the Royal Commission into Banking has ended and the recommendations if implemented will signal the end of mortgage broking and possibly competition in the Australian mortgage market.

It’s been a month since Commissioner Kenneth Hayes delivered his recommendations on his review into the misconduct of banks. Whilst the banks were little more than chastised, mortgage brokers (who were not called on to represent themselves) were singled out with recommendations to change remuneration.

Recommendations are as follows:

  • Best Interest Duty This is common sense and I’m sure that 99.9% of brokers are already acting in the best interest of the borrower. This recommendation is that the best duty requirement becomes law, much the same as is required of financial planners.
  • Stop trail commissions. Whilst some in the media (and Kenneth Hayes) feel that trail commission is money for nothing it is worth noting that trail commissions came to fruition due to the lowering of up-front commission and spreading that across the term of the loan. The removal of trail commission will be a more than 50% income reduction for mortgage brokers.
  • Stop upfront commissions and move to borrower paying a fee – This is recommended to be implemented over the next few years and would mean borrowers would be expected to pay a fee for the service of a mortgage broker or lender.

So, what would fee upfront actually do? It seems baffling that a commission set up to ensure that consumers benefit will in fact make getting a loan more expensive. If you want to get a loan you will be forced to pay an upfront fee. Whilst some clients (a recent survey by Momentum Intelligence) said they would, 58% said they would not be willing to pay a fee and only 11% said they would be willing to pay $1,000 only 3.5% would be willing to pay up to $2,000.

The fees would be more likely in excess of $2,300. This would impact the borrower, especially first home owners and those on low incomes. It would also put many brokers who rely solely on residential mortgages out of business. $2,000 would not cover the costs associated with the processing a mortgage application or the running of a small business alone.

The decrease in broker numbers would limit choice as the smaller lenders in the market will struggle to access customers. The big banks will not only benefit from increased fees upfront they would also increase revenue as the need to be competitive diminishes.

If you’d like to maintain competition and assist the 17,000 small mortgage broking businesses in Australia then please support our cause by signing one of our online petitions:

Broker Behind You Campaign

Save the Mortgage Broking Industry – change.org

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CoreLogic’s Hedonic Home Value Index, February 2019 doesn’t make happy reading for property values nationally continued to drop. The rate of decline has eased slightly though compared to the previous couple of months. Locally Perth has since a sharper decrease in values after easing off slightly. 

Nationally the values dropped by 0.7% for the month. For the capital cities only Hobart saw an increase in values (0.8%), Adelaide held with no change and the biggest drops were felt in Darwin (-1.7%) and Perth (-1.5%).

The 0.7% decline in national dwelling values in February takes the cumulative decline to -6.8% since values peaked in October 2017. National dwelling values have returned to levels last seen in September 2016, and have fallen over fourteen of the last sixteen months.

Although home values have been falling for almost a year and a half, nationally dwelling values remain 18% higher than they were five years ago highlighting that most home owners remain in a strong equity position.

On a positive note, CoreLogic head of research Tim Lawless said, “The national rate of decline eased relative to January and December, when dwelling values were down by around 1%, however the February results remain overall weak, with the geographic scope of negative conditions broadening.”

Hobart (+1.1%) was the only capital city to record a rise in values over the past three months, while Canberra values were flat and the remaining capital cities recorded lower values over the rolling quarter.

Mr Lawless said, “The fact that we are seeing weakening housing market conditions across regions where home values were previously rising at a sustainable pace and economic conditions are relatively healthy is a sign that tighter credit conditions are having a broad dampening effect on buyer activity.”

The CoreLogic estimates of national settled sales activity were down 12.8% year-on-year, with steeper falls in settled sales activity recorded in Sydney (-20.6%) and Melbourne (-22.1%).

On an annual basis, only three of Australia’s eight capitals have recorded a rise in values over the past twelve months, led by Hobart where values were up 7.2%. Brisbane (-0.5%) now shows a negative annual change for the first time since 2012 and Sydney’s housing market moved into double digit annual declines for the first time since the early 1980’s. Mr Lawless said, “If Melbourne’s downturn continues at a similar pace we are likely to see the annual decline move into double digit falls over the coming months as well, with values currently 9.1% lower over the year.”

Both Perth and Darwin appear to have caught a second wind in the market downturn with the annual pace of decline previously improving but now worsening. This renewed downwards pressure on home values coincides with a softening in labour market conditions, with weaker housing market results likely compounded by credit scarcity.

Regional housing market values are generally holding firmer than capital city markets, with dwelling values down 1.4% over the past twelve months compared with a 7.6% fall in capital city dwelling values.

Rental markets have generally improved in February. All capital cities with the exception of Darwin has seen rental rates increase. Canberra and Hobart still lead the way for returns with rents increasing by 4.7% and 4.6% respectively. Locally Perth has seen an increase of 10% from last year with returns increasing from 3.9% to 4.3%.

Tim Lawless highlights a few areas that have impacted and will continue to impact the market. Credit availability being the major component to driving slower conditions.  Fewer foreign buyers (17% in 2014 lowered to 6.5% currently) in the market which will slow further as the introduction of the foreign buyer surcharge is implemented across some states.

He also anticipates the possibility of a cash rate cut by the RBA, however not sure that this would have a significant impact on the values as this comes at a time of increased servicing requirements from lenders and increased funding costs making the possibility of the big banks passing down a full rat cut unlikely.

The above information is taken from the CoreLogic Hedonic Home Value Index

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