For most Australians, buying a home is their biggest goal in life, a survey shows.
According to the NAB survey, buying a home is better than world travel, having a family or volunteering - in that order.
Almost 80 per cent of 25- to 34-year-olds also put bricks and mortar near the top of their list, just behind seeing more of the world.
The research also showed that younger generations tended to have more goals and aspirations than their parents and grandparents.
While many young people list owning their own home as their number one goal it is still just one of many that they want to achieve during their lifetime.
People aged 16 to 24 tend to have about five big life goals while those in other age groups averaged two goals.
Other insights from the NAB Big Life Survey include Queenslanders listing overseas travel and owning their own home among their biggest goals in life.
Compared to other states Queenslanders were also most likely to list buying the car of their dreams.
Compared to other states, South Australians were the least likely to list a huge adventure, such as climbing Mt Everest, as one of their big goals in life.
The top three goals for South Australians included seeing more of the world, volunteering and owning their own home.
West Australians were among those most likely to list having a family among their big life goals but still listed overseas travel, volunteering and owning their own home before having children.
Victorians and Tasmanians were most likely to want to travel when compared against other states.
People in NSW tended to share the nation's top goals with travel, volunteering and home ownership heading the list.
Source: AAP
Monday, July 30, 2007
Sunday, July 29, 2007
No secret sauce on mortgage interest rates from Labor
Opposition Leader Kevin Rudd says he cannot guarantee interest rates will not rise under a Labor Government.
But he has promised to maintain budget surpluses and tackle capacity constraints in the economy to help the central bank keep rates down.
His comments came as Mr Rudd prepared to host a summit on housing affordability in Canberra today, amid predictions interest rates could rise following yesterday's inflation data.
Economists said the Reserve Bank of Australia is now highly likely to lift rates by a quarter percentage point as early as next month, after inflation rose to 1.2 per cent for the June quarter, well above expectations.
It would be the fifth increase since Prime Minister John Howard was re-elected, although the Government said rates are still at historically low levels.
"No government can make any promise in relation to interest rates, what you can do is make sure ... the budget policy takes as much pressure off the Reserve Bank as possible," Mr Rudd told Channel 9.
"The Reserve Bank sets rates. Governments don't set rates.
"My job is to make sure, as the alternative prime minister, that through the budget policy we pursue - which is to produce budget surpluses over the economic cycle - that we take as much pressure off the Reserve Bank as possible in order to keep interest rates as low as possible."
He said people were disappointed in Mr Howard because the prime minister had pledged before the last election to keep interest rates low, yet they had risen four times since.
Mr Rudd said he had no silver bullet solutions to the housing affordability crisis, but would consider tax breaks for first-home buyers to help them get into the market.
He warned political leaders had "a real challenge on our hands" to ensure Australians had access to affordable housing.
"If you go back 10 years, the average cost of a house was something like four times that of the average annual wage; today, 10 years later, it is seven times the value of an average annual wage," Mr Rudd said.
"People are particularly concerned about first home buyers.
"One of the proposals we've got on the table today is 'how do we help first-home buyers get into the market' in terms of encouraging them with first-home buyer deposit schemes which could be treated in a concessional way by the taxation system."
State housing ministers will join Mr Rudd and housing industry stakeholders today in nutting out the issues.
Opposition treasury spokesman Wayne Swan said the Federal Government's failure to invest in education and tackle skills shortages in the economy were partly to blame for the rise in inflation.
"This government has been complacent when it comes to the main drivers of productivity in the economy, and there's no doubt in the longer term that's put upward pressure on inflation and upward pressure on interest rates," said ABC Radio.
"We should have invested more in the training and the education of our people - that is one significant factor here."
Mr Swan said the housing affordability crisis was rapidly becoming an economic problem as some workers could not afford to live near job opportunities.
But he rejected suggestions buyers were being too picky.
"Some people may have unrealistic expectations or be aiming too high, but I think the great bulk of people are now struggling just to put a very basic roof over their heads," he said.
Source: AAP
But he has promised to maintain budget surpluses and tackle capacity constraints in the economy to help the central bank keep rates down.
His comments came as Mr Rudd prepared to host a summit on housing affordability in Canberra today, amid predictions interest rates could rise following yesterday's inflation data.
Economists said the Reserve Bank of Australia is now highly likely to lift rates by a quarter percentage point as early as next month, after inflation rose to 1.2 per cent for the June quarter, well above expectations.
It would be the fifth increase since Prime Minister John Howard was re-elected, although the Government said rates are still at historically low levels.
"No government can make any promise in relation to interest rates, what you can do is make sure ... the budget policy takes as much pressure off the Reserve Bank as possible," Mr Rudd told Channel 9.
"The Reserve Bank sets rates. Governments don't set rates.
"My job is to make sure, as the alternative prime minister, that through the budget policy we pursue - which is to produce budget surpluses over the economic cycle - that we take as much pressure off the Reserve Bank as possible in order to keep interest rates as low as possible."
He said people were disappointed in Mr Howard because the prime minister had pledged before the last election to keep interest rates low, yet they had risen four times since.
Mr Rudd said he had no silver bullet solutions to the housing affordability crisis, but would consider tax breaks for first-home buyers to help them get into the market.
He warned political leaders had "a real challenge on our hands" to ensure Australians had access to affordable housing.
"If you go back 10 years, the average cost of a house was something like four times that of the average annual wage; today, 10 years later, it is seven times the value of an average annual wage," Mr Rudd said.
"People are particularly concerned about first home buyers.
"One of the proposals we've got on the table today is 'how do we help first-home buyers get into the market' in terms of encouraging them with first-home buyer deposit schemes which could be treated in a concessional way by the taxation system."
State housing ministers will join Mr Rudd and housing industry stakeholders today in nutting out the issues.
Opposition treasury spokesman Wayne Swan said the Federal Government's failure to invest in education and tackle skills shortages in the economy were partly to blame for the rise in inflation.
"This government has been complacent when it comes to the main drivers of productivity in the economy, and there's no doubt in the longer term that's put upward pressure on inflation and upward pressure on interest rates," said ABC Radio.
"We should have invested more in the training and the education of our people - that is one significant factor here."
Mr Swan said the housing affordability crisis was rapidly becoming an economic problem as some workers could not afford to live near job opportunities.
But he rejected suggestions buyers were being too picky.
"Some people may have unrealistic expectations or be aiming too high, but I think the great bulk of people are now struggling just to put a very basic roof over their heads," he said.
Source: AAP
Wednesday, July 25, 2007
Mortgage rate rise to happen on the back of big spending election promises
There is still a risk of another interest rate rise as both sides of politics are likely to promise too much in this year's federal election, independent forecaster Access Economics says.
"That extra money will come atop the kerosene of the $70 billion of policy costs splashed onto a raging economy by the federal budget," Access director Chris Richardson said.
While country-wide inflation risks were probably worsening from a falling unemployment rate, a turn in the productivity cycle was expected, he said in Access Economics' June 2007 business outlook released today.
"There has been considerable pent up savings in labour costs from the surge in business investment in recent years," he says.
"Although wage gains are still picking up their pace, a lift in productivity is now underway. That is easing consumer pricing pressures by reducing the cost of doing business."
And business investment has been extraordinarily strong.
"Economists are naturally unflappable. We don't marvel at much. But it is not hard to marvel at the stunning cycle in business investment that has been running since early 2002," he said.
"After stripping out inflation effects, the lift in (capital expenditure) over the past five years is 85 per cent."
China's economic boom continues to drive a clear divide between Australia's "sunbelt" states of Western Australia, Queensland and the Northern Territory and the rest.
But there are signs that the country's most populous state, NSW, may soon be making an economic recovery.
Dr Richardson said the key preconditions for a NSW recovery were increasingly being met with the end of the drought and pent up demand for housing, and state output growth could outpace official forecasts as a cocktail of good news replaces the more "toxic mix" of recent years.
In the meantime, the "sunbelt state" beneficiaries of global growth have resource strengths and fast growing populations.
"Even the ACT is getting a cut of the boom, courtesy of surging federal tax revenues," Dr Richardson said.
"The federal Budget announced the creation of yet another 5,244 public servants, many of which will be in Canberra. That means the ACT's boom will continue for longer.
He said Queensland continued to look a picture of near perfect health.
"Capacity is tight - both unemployment and rental vacancies are very low, business investment spending is very high, and the state government is pouring money into water, hospitals, roads, rail and schools."
Elsewhere, in the west, the equation was simple.
"A stronger-for-longer China is a stronger-for-longer Western Australia,"
"This resource boom can't last forever, but it is not ending any time soon. And that is helping to ensure a relatively soft landing for WA's overly pumped up housing prices."
But he said while NT economic growth was sprinting as it played to its resource strength, the huge engineering spend up of recent years was tailing off, so a tapering off in demand and output was likely.
Victorian economic growth remained surprisingly close to the surging growth of its resource-based neighbours, helped by an increasing population and gaining from the struggles of NSW.
"But can Victoria rely on NSW to continue to fumble the ball? Relying on the competition to remain hapless is not a successful strategy for the longer term," Dr Richardson said.
On South Australia, he said the next few years would be crucial for the state's future as the risk of boomer retirement looms early and large for the "dodgy demographics" of Australia's oldest state.
"SA's job growth has to be strong enough to convince the boomers to stay in their jobs for longer,' he said.
Finally, the business investment boom in Tasmania that stalled in early 2006 may have further to fall, making for a more modest economic outlook.
Source: AAP
"That extra money will come atop the kerosene of the $70 billion of policy costs splashed onto a raging economy by the federal budget," Access director Chris Richardson said.
While country-wide inflation risks were probably worsening from a falling unemployment rate, a turn in the productivity cycle was expected, he said in Access Economics' June 2007 business outlook released today.
"There has been considerable pent up savings in labour costs from the surge in business investment in recent years," he says.
"Although wage gains are still picking up their pace, a lift in productivity is now underway. That is easing consumer pricing pressures by reducing the cost of doing business."
And business investment has been extraordinarily strong.
"Economists are naturally unflappable. We don't marvel at much. But it is not hard to marvel at the stunning cycle in business investment that has been running since early 2002," he said.
"After stripping out inflation effects, the lift in (capital expenditure) over the past five years is 85 per cent."
China's economic boom continues to drive a clear divide between Australia's "sunbelt" states of Western Australia, Queensland and the Northern Territory and the rest.
But there are signs that the country's most populous state, NSW, may soon be making an economic recovery.
Dr Richardson said the key preconditions for a NSW recovery were increasingly being met with the end of the drought and pent up demand for housing, and state output growth could outpace official forecasts as a cocktail of good news replaces the more "toxic mix" of recent years.
In the meantime, the "sunbelt state" beneficiaries of global growth have resource strengths and fast growing populations.
"Even the ACT is getting a cut of the boom, courtesy of surging federal tax revenues," Dr Richardson said.
"The federal Budget announced the creation of yet another 5,244 public servants, many of which will be in Canberra. That means the ACT's boom will continue for longer.
He said Queensland continued to look a picture of near perfect health.
"Capacity is tight - both unemployment and rental vacancies are very low, business investment spending is very high, and the state government is pouring money into water, hospitals, roads, rail and schools."
Elsewhere, in the west, the equation was simple.
"A stronger-for-longer China is a stronger-for-longer Western Australia,"
"This resource boom can't last forever, but it is not ending any time soon. And that is helping to ensure a relatively soft landing for WA's overly pumped up housing prices."
But he said while NT economic growth was sprinting as it played to its resource strength, the huge engineering spend up of recent years was tailing off, so a tapering off in demand and output was likely.
Victorian economic growth remained surprisingly close to the surging growth of its resource-based neighbours, helped by an increasing population and gaining from the struggles of NSW.
"But can Victoria rely on NSW to continue to fumble the ball? Relying on the competition to remain hapless is not a successful strategy for the longer term," Dr Richardson said.
On South Australia, he said the next few years would be crucial for the state's future as the risk of boomer retirement looms early and large for the "dodgy demographics" of Australia's oldest state.
"SA's job growth has to be strong enough to convince the boomers to stay in their jobs for longer,' he said.
Finally, the business investment boom in Tasmania that stalled in early 2006 may have further to fall, making for a more modest economic outlook.
Source: AAP
Monday, July 23, 2007
'Super-size my home" urge is driving the housing crisis
Liberal backbencher Bruce Baird, chairman of a parliamentary inquiry into home lending practices, told The Australian yesterday he would investigate the phenomenon of people unwilling to live in suburbs in their price bracket.
"I've heard others say ... there's a wish to go for the McMansion and they want to be in nice suburbs, with ducted cleaning systems, airconditioning and plasma screens," he said.
But Queensland Liberal backbencher Steve Ciobo - who has been urging John Howard to consider doubling the first-home buyers' grant to $14,000 - strongly rejected the idea.
He said people were "self-regulating" but they also had a right to be "aspirational".
"I find it hard to believe that someone would say: 'No, I will not purchase a home because I want four bedrooms and four bathrooms but it's well out of my price bracket' when there's an opportunity to purchase something smaller, further away, within their price bracket," he said yesterday.
The Opposition is due to hold a national housing summit in Canberra on Thursday.
Several Coalition backbenchers have told The Australian they are concerned that Labor is "owning" the issue of housing affordability.
They said it was made worse by the fact the Coalition did not have a dedicated housing minister to develop ideas and take on the ALP.
Mr Baird said he had noticed resistance among home buyers to moving "out to other suburbs which are cheaper, where expectations are not quite as high".
However, Mr Ciobo said families did not need lectures: "From my perspective, it's like saying to people, well you shouldn't be aspirational.
"I don't think there's anything wrong with being aspirational."
Mr Baird said housing affordability would be a key issue in this year's federal election.
"The Government has done quite a bit in terms of the first-home owners' scheme, but it remains an issue."
He said his inquiry would investigate whether banks were to blame for lending people too much money.Source: The Australian
"I've heard others say ... there's a wish to go for the McMansion and they want to be in nice suburbs, with ducted cleaning systems, airconditioning and plasma screens," he said.
But Queensland Liberal backbencher Steve Ciobo - who has been urging John Howard to consider doubling the first-home buyers' grant to $14,000 - strongly rejected the idea.
He said people were "self-regulating" but they also had a right to be "aspirational".
"I find it hard to believe that someone would say: 'No, I will not purchase a home because I want four bedrooms and four bathrooms but it's well out of my price bracket' when there's an opportunity to purchase something smaller, further away, within their price bracket," he said yesterday.
The Opposition is due to hold a national housing summit in Canberra on Thursday.
Several Coalition backbenchers have told The Australian they are concerned that Labor is "owning" the issue of housing affordability.
They said it was made worse by the fact the Coalition did not have a dedicated housing minister to develop ideas and take on the ALP.
Mr Baird said he had noticed resistance among home buyers to moving "out to other suburbs which are cheaper, where expectations are not quite as high".
However, Mr Ciobo said families did not need lectures: "From my perspective, it's like saying to people, well you shouldn't be aspirational.
"I don't think there's anything wrong with being aspirational."
Mr Baird said housing affordability would be a key issue in this year's federal election.
"The Government has done quite a bit in terms of the first-home owners' scheme, but it remains an issue."
He said his inquiry would investigate whether banks were to blame for lending people too much money.Source: The Australian
Labour to retain negative gearing for property investors and the first home home buyer grant
Home rental affordability is a key election issue and so Opposition Labor would retainnegative gearing as a way to make housing more affordable, according housing spokeswoman Tanya Plibersek said.
Ahead of the party's national housing summit in Canberra this week, the Opposition was looking at several strategies but, Ms Plibersek said, negative gearing would not be among them.
"We're not touching negative gearing," she told the Ten Network yesterday. "We are interested in . . . ways of attracting investment into the lower end of the market and there might be things you can do with the tax system to improve that, including a national affordable rental incentive scheme."
"Negative gearing" means that the outflow of cash to keep an investment, such as a rental property is greater than the the inflows of rent and taxation reduction. This means that the investor is effectively subsidising the housing of the tenant. The payoff for the investor is capital growth, which needs a long term view.
In these cases, the Australian Taxation Office allows investors to offset the loss against their income tax assessment.
Ms Plibersek said negative gearing was not the way to make housing more affordable. Labor would look at other solutions.
She said Labor also retain the first home buyers grant.
Ahead of the party's national housing summit in Canberra this week, the Opposition was looking at several strategies but, Ms Plibersek said, negative gearing would not be among them.
"We're not touching negative gearing," she told the Ten Network yesterday. "We are interested in . . . ways of attracting investment into the lower end of the market and there might be things you can do with the tax system to improve that, including a national affordable rental incentive scheme."
"Negative gearing" means that the outflow of cash to keep an investment, such as a rental property is greater than the the inflows of rent and taxation reduction. This means that the investor is effectively subsidising the housing of the tenant. The payoff for the investor is capital growth, which needs a long term view.
In these cases, the Australian Taxation Office allows investors to offset the loss against their income tax assessment.
Ms Plibersek said negative gearing was not the way to make housing more affordable. Labor would look at other solutions.
She said Labor also retain the first home buyers grant.
Thursday, July 19, 2007
Mortgage reduction on Steroids can get you owning your home sooner
Mortgage interest rates are sitting at a six-year higher and could rise even more. If you're a borrower, there are some basic steps you can take to reduce interest costs.
Step 1: Shop around for your mortgage
It's never been a better time to negotiate with lenders as the big banks are undercutting each other on interest rates to win your business.
A slowing property market in 2006 scared many of the big lenders and competition shot up in the home loan market.
So if you're after a home loan, go to ALL of the big banks and other lenders and ask them for a discounted interest rate.
At the moment, the big banks advertise standard discount of 70 basis points to 7.37 per cent if you borrow larger amounts, usually more than $250,000, but banks are giving bigger discounts to people who ask and shop around.
The more you borrow, the more likely they are to chop 80 or even 85 basis points of the standard variable rate (SVR) of 8.07 per cent.
If you haggle hard enough and trade lenders off against each other, you'll probably get a better deal than if you simply went to one lender and asked for the best deal.
Step 2: Fix your mortgageloan
Fixed rates on home loans currently sit well below the standard variable rate (SVR) of 8.07 per cent.
Three-year and five-year fixed rate home loans are priced below the 8.07 per cent standard variable rate.
Locking in your home loan could provide also good security against a rate rise. With today's strong economy, there's a chance we'll get another rate rise this year or next after three in 2006.
But the risk of fixing is that if interest rates fall, you might miss out on a cut in official interest rates. You're stuck with the rate you locked in at for the duration of your fixed loan. And the loan might limit extra repayments so check this.
Step 3: Make more mortgage repayments
One of the easiest ways to cut your interest costs is to repay in fortnightly instalments rather than monthly.
You'll save thousands of dollars each year on your loan repayments and you'll be surprised by the numbers.
There are 26 fortnights in one year but only 12 months. If you split your monthly repayment into two, paying fortnightly means you would effectively be making 13 monthly repayments each year.
If your loan is worth $200,000 and you repaid in fortnightly instalments at an interest rate of 8.07 per cent rather than monthly, you'd save almost $100,000 in interest costs over 30 years (or $99,647 to be exact).
If you borrowed $400,000, you'd save almost $200,000 in interest costs over the life of your loan, or $193,295 to be exact.
Step 4: Go for a basic home loan
Most lenders offer basic loans with few frills. Interest rates start from about 7 per cent and for that, you might get a simple principal and interest loan on which you make monthly repayments.
Some lenders offer loans online without the personal support and some just offer cheaper no-frills loans, especially the non-bank lenders. These loans may suit you if you've got a tight budget and can't afford to make extra repayments and simply want the lowest cost home loan.
But there might be traps here so watch out. Some basic home loans limit extra repayments and redrawing, which allow you to save interest.
Some simple loans don't allow fortnightly repayments, only monthly, so what you save in up-front interest costs you may lose in flexibility which allows you to limit interest costs over the longer run.
Step 5: Repay extra on your mortgage
If you've got extra money and you don't need it, put it straight onto the home loan and save money. The more of the principal you repay, the more you'll save, especially if you repay extra earlier on in your home loan when interests costs suck up most of your mortgage repayments.
Take an example. If you've got a home loan of $200,000 taken over 30 years at a rate of 8.07 per cent, you can save almost $50,000 in interest costs simply by putting an extra $50 on your loan each month, or $47,965 to be exact. You'll also reduce your loan term by 3 years and 5 months. So you'll also be free of debt sooner.
Step 6: Use an offset account with your mortgage
Offset accounts are great strategies to reduce your. Offset accounts into which you put your salary and surplus cash link your home loan to a savings or transaction account.
The balance in the savings account is then used to offset the home loan balance, thus reducing interest costs. As interest is calculated daily on a home loan, the benefit to borrowers accrues as soon as there is cash in the transaction account.
Using a credit card to pay for expenses allows you to keep your money in the offset account for any interest-free period given by the card.
There are tax benefits to an offset account. Tax is not paid on interest credited to your savings account because the interest is not actually being earned, but it instead offsets the home loan interest.
These accounts are ideal for people who don't want to pay off their home loan so they can use the money, but who want to reduce their interest bill.
Step 7: Check with non-bank lenders mortgages
Non-bank lenders have lower overheads and their main aim is to grab market share from the big banks.
Lately, many lenders have been missing out to banks. So if you're in the market for a cheaper interest rate, check with the non-bank lenders, including building societies and credit unions.
These lenders price their variable loans to undercut the banks and they may even negotiate their advertised rates lower to win your business.
Bank lending now accounts for about 70 per cent of home loans taken by borrowers. In June 2002 the banks only held around 60 per cent of new home loan approvals. So the banks are moving onto the turf held by non-bank lenders and they aren't happy about this. So check what they can do for you.
Step 8: Reduce your mortgage loan term
When you've got a home loan, time means money. So the quicker off you pay your loan, the less interest you'll pay off.
Take two scenarios. You take a $200,000 loan over 30 years. At an interest rate of 8.07 per cent, you'll pay $331,828 in interest costs over the life of the loan if you repaid in monthly instalments. But if you repaid the loan over 20 years, you'd pay $203,585 in interest.
So that is a saving of $128,243 if you repaid your loan 10 years earlier. So if you have the funds, it's a great option and effective in reducing your borrowing costs by getting rid of it earlier.
Step 9: Know your loan costs
In today's competitive market, many lenders are waiving establishment fees on loans and other start-up fees such as valuation costs and legal fees. So ask them to waive your up-front fees and you could save hundreds of dollars.
Don't forget to ask about any ongoing fees on the loan such as monthly account keeping fees or transaction fees. Check whether early-repayment and other common fees apply such as redraw costs and break fees associated with ending the loans.
These fees aren't picked up by the loan's comparison interest rate on the loan so ask about them. And it's how the banks make money. So don't hand over your cash too freely.
Step 10: Save a bigger mortgage home loan deposit
The fact is, time is money. The more you borrow, the more you will repay in interest. So, if you are saving for your first home, save as much as you can before you buy.
Start making the sacrifices before you buy your home and get the mortgage and life will be a little easier. Make sure you claim the first home owner's grant and any other subsidies your state government offers.
Source: NewsCorp
Step 1: Shop around for your mortgage
It's never been a better time to negotiate with lenders as the big banks are undercutting each other on interest rates to win your business.
A slowing property market in 2006 scared many of the big lenders and competition shot up in the home loan market.
So if you're after a home loan, go to ALL of the big banks and other lenders and ask them for a discounted interest rate.
At the moment, the big banks advertise standard discount of 70 basis points to 7.37 per cent if you borrow larger amounts, usually more than $250,000, but banks are giving bigger discounts to people who ask and shop around.
The more you borrow, the more likely they are to chop 80 or even 85 basis points of the standard variable rate (SVR) of 8.07 per cent.
If you haggle hard enough and trade lenders off against each other, you'll probably get a better deal than if you simply went to one lender and asked for the best deal.
Step 2: Fix your mortgageloan
Fixed rates on home loans currently sit well below the standard variable rate (SVR) of 8.07 per cent.
Three-year and five-year fixed rate home loans are priced below the 8.07 per cent standard variable rate.
Locking in your home loan could provide also good security against a rate rise. With today's strong economy, there's a chance we'll get another rate rise this year or next after three in 2006.
But the risk of fixing is that if interest rates fall, you might miss out on a cut in official interest rates. You're stuck with the rate you locked in at for the duration of your fixed loan. And the loan might limit extra repayments so check this.
Step 3: Make more mortgage repayments
One of the easiest ways to cut your interest costs is to repay in fortnightly instalments rather than monthly.
You'll save thousands of dollars each year on your loan repayments and you'll be surprised by the numbers.
There are 26 fortnights in one year but only 12 months. If you split your monthly repayment into two, paying fortnightly means you would effectively be making 13 monthly repayments each year.
If your loan is worth $200,000 and you repaid in fortnightly instalments at an interest rate of 8.07 per cent rather than monthly, you'd save almost $100,000 in interest costs over 30 years (or $99,647 to be exact).
If you borrowed $400,000, you'd save almost $200,000 in interest costs over the life of your loan, or $193,295 to be exact.
Step 4: Go for a basic home loan
Most lenders offer basic loans with few frills. Interest rates start from about 7 per cent and for that, you might get a simple principal and interest loan on which you make monthly repayments.
Some lenders offer loans online without the personal support and some just offer cheaper no-frills loans, especially the non-bank lenders. These loans may suit you if you've got a tight budget and can't afford to make extra repayments and simply want the lowest cost home loan.
But there might be traps here so watch out. Some basic home loans limit extra repayments and redrawing, which allow you to save interest.
Some simple loans don't allow fortnightly repayments, only monthly, so what you save in up-front interest costs you may lose in flexibility which allows you to limit interest costs over the longer run.
Step 5: Repay extra on your mortgage
If you've got extra money and you don't need it, put it straight onto the home loan and save money. The more of the principal you repay, the more you'll save, especially if you repay extra earlier on in your home loan when interests costs suck up most of your mortgage repayments.
Take an example. If you've got a home loan of $200,000 taken over 30 years at a rate of 8.07 per cent, you can save almost $50,000 in interest costs simply by putting an extra $50 on your loan each month, or $47,965 to be exact. You'll also reduce your loan term by 3 years and 5 months. So you'll also be free of debt sooner.
Step 6: Use an offset account with your mortgage
Offset accounts are great strategies to reduce your. Offset accounts into which you put your salary and surplus cash link your home loan to a savings or transaction account.
The balance in the savings account is then used to offset the home loan balance, thus reducing interest costs. As interest is calculated daily on a home loan, the benefit to borrowers accrues as soon as there is cash in the transaction account.
Using a credit card to pay for expenses allows you to keep your money in the offset account for any interest-free period given by the card.
There are tax benefits to an offset account. Tax is not paid on interest credited to your savings account because the interest is not actually being earned, but it instead offsets the home loan interest.
These accounts are ideal for people who don't want to pay off their home loan so they can use the money, but who want to reduce their interest bill.
Step 7: Check with non-bank lenders mortgages
Non-bank lenders have lower overheads and their main aim is to grab market share from the big banks.
Lately, many lenders have been missing out to banks. So if you're in the market for a cheaper interest rate, check with the non-bank lenders, including building societies and credit unions.
These lenders price their variable loans to undercut the banks and they may even negotiate their advertised rates lower to win your business.
Bank lending now accounts for about 70 per cent of home loans taken by borrowers. In June 2002 the banks only held around 60 per cent of new home loan approvals. So the banks are moving onto the turf held by non-bank lenders and they aren't happy about this. So check what they can do for you.
Step 8: Reduce your mortgage loan term
When you've got a home loan, time means money. So the quicker off you pay your loan, the less interest you'll pay off.
Take two scenarios. You take a $200,000 loan over 30 years. At an interest rate of 8.07 per cent, you'll pay $331,828 in interest costs over the life of the loan if you repaid in monthly instalments. But if you repaid the loan over 20 years, you'd pay $203,585 in interest.
So that is a saving of $128,243 if you repaid your loan 10 years earlier. So if you have the funds, it's a great option and effective in reducing your borrowing costs by getting rid of it earlier.
Step 9: Know your loan costs
In today's competitive market, many lenders are waiving establishment fees on loans and other start-up fees such as valuation costs and legal fees. So ask them to waive your up-front fees and you could save hundreds of dollars.
Don't forget to ask about any ongoing fees on the loan such as monthly account keeping fees or transaction fees. Check whether early-repayment and other common fees apply such as redraw costs and break fees associated with ending the loans.
These fees aren't picked up by the loan's comparison interest rate on the loan so ask about them. And it's how the banks make money. So don't hand over your cash too freely.
Step 10: Save a bigger mortgage home loan deposit
The fact is, time is money. The more you borrow, the more you will repay in interest. So, if you are saving for your first home, save as much as you can before you buy.
Start making the sacrifices before you buy your home and get the mortgage and life will be a little easier. Make sure you claim the first home owner's grant and any other subsidies your state government offers.
Source: NewsCorp
Sunday, July 15, 2007
Homeowners stuck with higher mortgage repayments according to Labor treasury.
Mortgage repayments have soared in New South Wales since 2001 thanks to eight interest rate rises under the Coalition Government, Federal Opposition treasury spokesman Wayne Swan said.
Census data released today shows the number of households paying more than 30 per cent of their income to mortgage repayments has nearly doubled across the state in the five years to 2006, Mr Swan said.
In 2001, 106,044 households had mortgages over the 30 per cent repayment mark.
That number increased to 203,569 in 2006, which equals a 92 per cent increase.
In metropolitan Sydney, the increase over the same period went from 64,510 to 127,384 households - a jump of 97 per cent, Mr Swan said.
Outside the metropolitan areas of NSW the five year increase to 2006 of homeowners paying over 30 per cent of their income to mortgage repayments rose by 83 per cent.
Mortgage holders in Prime Minister John Howard's electorate of Bennelong have seen the figure jump 101 per cent, Mr Swan said.
The Opposition treasury spokesman said the census data shows neither Mr Howard nor Federal Treasurer Peter Costello can be trusted to look after the interests of Australian mortgage holders. Source: AAP
Census data released today shows the number of households paying more than 30 per cent of their income to mortgage repayments has nearly doubled across the state in the five years to 2006, Mr Swan said.
In 2001, 106,044 households had mortgages over the 30 per cent repayment mark.
That number increased to 203,569 in 2006, which equals a 92 per cent increase.
In metropolitan Sydney, the increase over the same period went from 64,510 to 127,384 households - a jump of 97 per cent, Mr Swan said.
Outside the metropolitan areas of NSW the five year increase to 2006 of homeowners paying over 30 per cent of their income to mortgage repayments rose by 83 per cent.
Mortgage holders in Prime Minister John Howard's electorate of Bennelong have seen the figure jump 101 per cent, Mr Swan said.
The Opposition treasury spokesman said the census data shows neither Mr Howard nor Federal Treasurer Peter Costello can be trusted to look after the interests of Australian mortgage holders. Source: AAP
Friday, July 13, 2007
Easy home mortgage finance with no physical home appraisals
Mortgage lenders are approving home loans without inspecting properties, forking out to applicants without a deposit and encouraging clients to shoulder debts far beyond their means.
More than half of all standard mortgage applications are now done without an onsite inspection and lending competition is encouraging banks and other institutions to extend loans quickly and cheaply, Fairfax reports today.
Banks are also urging people to take on debts which swallow up to half their income.
One-quarter of loans to people with bad or incomplete credit histories had been approved without on-site inspections, relying instead on a drive-by or statistical analysis of local sales data.
The average loan-to-value ratio of new loans in NSW has risen from 51 per cent in 2003 to 75 per cent this year.
Australian Property Institute president Gregory Preston said borrowers were at risk.
"If they get caught out and are forced to sell the borrower is sort of out on a limb," Mr Preston said.
Source: AAP
More than half of all standard mortgage applications are now done without an onsite inspection and lending competition is encouraging banks and other institutions to extend loans quickly and cheaply, Fairfax reports today.
Banks are also urging people to take on debts which swallow up to half their income.
One-quarter of loans to people with bad or incomplete credit histories had been approved without on-site inspections, relying instead on a drive-by or statistical analysis of local sales data.
The average loan-to-value ratio of new loans in NSW has risen from 51 per cent in 2003 to 75 per cent this year.
Australian Property Institute president Gregory Preston said borrowers were at risk.
"If they get caught out and are forced to sell the borrower is sort of out on a limb," Mr Preston said.
Source: AAP
Monday, July 09, 2007
Housing crisis concerns as Treasurer Costello orders Commonwealth audit to find housing development land
Peter Costello will "audit" all commonwealth-owned land to identify areas that should be released for new housing as he tries to blunt Labor's winning housing affordability campaign.
The Treasurer has called on the states to work with him to identify all land that could be released for development to address the housing affordability crisis.
But Labor claims that Mr Costello's effort will not work, arguing that high interest rates are the main cause of housing unaffordability.
Mr Costello said high property prices were affecting first homebuyers and one way to balance prices was to release more land for development.
"It's not a demand problem, it's a supply problem - you've got to boost the supply of housing," Mr Costello said. [It is a demand problem, that needs to be solved by increasing supply of housing stock.]
"We should do an audit of all land, particularly in outer suburban areas, that should be released for new housing."
Mr Costello called on the states to work in conjunction with the commonwealth on the audit. "We will ask the states to look at any land that they have that could be released for housing," he told the ABC's Insiders program.
Queensland Premier Peter Beattie welcomed the move, but NSW Acting Premier John Watkins said his Government's land release program was sufficient to meet demand.
"We've got a plan to release properties throughout southwest and northwest and western Sydney because of the needs of this city," Mr Watkins said.
"We're releasing that land as appropriately and as quickly as we can to cater for the needs of this growing city.
"I think anyone that is critical of that actually doesn't know the level of detail or the level of land release that is occurring."
Documents obtained under Freedom of Information last week embarrassed the federal Government when they revealed that the impact of land release on housing affordability had been overstated.
"While better land release and land-use policies by the states and territories are likely to improve affordability to some extent, the various reports probably overstate this effect," the document read.
Kevin Rudd said a national audit ignored the fact that high interest rates were making mortgage repayments unaffordable. "Mr Costello's response today was simply to talk around the edges of this debate," the Opposition Leader said.
"What this shows is that after 11 years, Mr Howard's Government has gone stale and has lost touch with working families across Australia who are doing it tough meeting their mortgage repayments."
Labor Treasury spokesman Wayne Swan said the typical first homebuyer was paying the highest percentage of their disposal income in mortgage repayments in history.
Source: The Australian
The Treasurer has called on the states to work with him to identify all land that could be released for development to address the housing affordability crisis.
But Labor claims that Mr Costello's effort will not work, arguing that high interest rates are the main cause of housing unaffordability.
Mr Costello said high property prices were affecting first homebuyers and one way to balance prices was to release more land for development.
"It's not a demand problem, it's a supply problem - you've got to boost the supply of housing," Mr Costello said. [It is a demand problem, that needs to be solved by increasing supply of housing stock.]
"We should do an audit of all land, particularly in outer suburban areas, that should be released for new housing."
Mr Costello called on the states to work in conjunction with the commonwealth on the audit. "We will ask the states to look at any land that they have that could be released for housing," he told the ABC's Insiders program.
Queensland Premier Peter Beattie welcomed the move, but NSW Acting Premier John Watkins said his Government's land release program was sufficient to meet demand.
"We've got a plan to release properties throughout southwest and northwest and western Sydney because of the needs of this city," Mr Watkins said.
"We're releasing that land as appropriately and as quickly as we can to cater for the needs of this growing city.
"I think anyone that is critical of that actually doesn't know the level of detail or the level of land release that is occurring."
Documents obtained under Freedom of Information last week embarrassed the federal Government when they revealed that the impact of land release on housing affordability had been overstated.
"While better land release and land-use policies by the states and territories are likely to improve affordability to some extent, the various reports probably overstate this effect," the document read.
Kevin Rudd said a national audit ignored the fact that high interest rates were making mortgage repayments unaffordable. "Mr Costello's response today was simply to talk around the edges of this debate," the Opposition Leader said.
"What this shows is that after 11 years, Mr Howard's Government has gone stale and has lost touch with working families across Australia who are doing it tough meeting their mortgage repayments."
Labor Treasury spokesman Wayne Swan said the typical first homebuyer was paying the highest percentage of their disposal income in mortgage repayments in history.
Source: The Australian
Saturday, July 07, 2007
Savings plan for first time home buyers
In a new savings plan from the Labor Party, families would be able to divert some of their pre-tax earnings into special accounts to save for a home deposit in a similar fashion to top-up superannuation, under a plan being considered by Kevin Rudd.
Signalling housing affordability as a major election issue, Labor says it is examining a range of options to help first-home buyers.
John Howard remains under pressure from backbench MPs to offer solutions to the housing affordability crisis but has ruled out doubling the $7000 first-home buyers' grant on the grounds it would only increase prices.
The Opposition Leader will today unveil a plan under consideration by Labor to allow new home deposit savings vehicles, with the potential higher returns than an ordinary deposit account and tax advantages that could help young families to save the deposit required to buy their first home.
"Government policies could create the financial framework for such accounts, running it in the same way superannuation works – as a low-tax, low-overheads savings vehicle," Mr Rudd said yesterday.
The accounts are intended to have a concessional rate of tax like super accounts.
But decisions about when tax would be applied still have to be determined. Exit taxes on superannuation payment for people over 60 were abolished by the Howard Government yesterday.
Mr Rudd said the accounts would help young Australians see the benefits of their financial sacrifices and would help create a new culture of saving.
"Savings accrued in these accounts could only be withdrawn to purchase a first home," he said.
"Federal Labor is considering innovative policies to help young Australians save for a home and reduce the mortgage burden – as part of a debate on declining housing affordability."
Labor says that first and foremost it is committed to using macroeconomic management principles to keep downward pressure on interest rates, but there other ways of helping Australians realise the "dream of home ownership".
"The decline in affordability and shortage of homes is the result of a lack of leadership and innovation over the last 11 years at the federal level by the Howard Government," Mr Rudd said.
"One of the greatest challenges facing first-home buyers in Australia now and into the future is saving a deposit – particularly for those caught in the rental trap."
Those saving for a home now use accounts that pay low interest taxed at the account holder's marginal tax rate. For most, this results in 31.5 to 41.5 per cent of interest being lost in tax.
Source: The Australian
Signalling housing affordability as a major election issue, Labor says it is examining a range of options to help first-home buyers.
John Howard remains under pressure from backbench MPs to offer solutions to the housing affordability crisis but has ruled out doubling the $7000 first-home buyers' grant on the grounds it would only increase prices.
The Opposition Leader will today unveil a plan under consideration by Labor to allow new home deposit savings vehicles, with the potential higher returns than an ordinary deposit account and tax advantages that could help young families to save the deposit required to buy their first home.
"Government policies could create the financial framework for such accounts, running it in the same way superannuation works – as a low-tax, low-overheads savings vehicle," Mr Rudd said yesterday.
The accounts are intended to have a concessional rate of tax like super accounts.
But decisions about when tax would be applied still have to be determined. Exit taxes on superannuation payment for people over 60 were abolished by the Howard Government yesterday.
Mr Rudd said the accounts would help young Australians see the benefits of their financial sacrifices and would help create a new culture of saving.
"Savings accrued in these accounts could only be withdrawn to purchase a first home," he said.
"Federal Labor is considering innovative policies to help young Australians save for a home and reduce the mortgage burden – as part of a debate on declining housing affordability."
Labor says that first and foremost it is committed to using macroeconomic management principles to keep downward pressure on interest rates, but there other ways of helping Australians realise the "dream of home ownership".
"The decline in affordability and shortage of homes is the result of a lack of leadership and innovation over the last 11 years at the federal level by the Howard Government," Mr Rudd said.
"One of the greatest challenges facing first-home buyers in Australia now and into the future is saving a deposit – particularly for those caught in the rental trap."
Those saving for a home now use accounts that pay low interest taxed at the account holder's marginal tax rate. For most, this results in 31.5 to 41.5 per cent of interest being lost in tax.
Source: The Australian
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