Explainer: Open Banking, and What It Means for You

Do you know what Open Banking is, or how it’s set to impact you? Open Banking could be just about the biggest thing that’s happened in the Australian finance industry this century – so it’s probably a good idea that you have an understanding of exactly what it is, and what it means for you.

Regulatory changes, tech-driven innovation and evolving consumer preferences have all led to this new development, which will make the usually quite secretive and hard-to-navigate finance world much more accessible to the average person.

Essentially, Open Banking gives consumers unprecedented access to, and power over, their data.

In a nutshell, you’ll be able to share your selected banking data with accredited third parties (a process known as read access) and benefit from the new products, services and competition this change will generate.

But why is Open Banking important? How did it come about – and what will the end result be for borrowers?

The Open Data Economy

Open Banking forms part of the Consumer Data Right (CDR), which was passed by the Federal parliament in August 2019 and covers the telecommunications, utilities and banking industries.

That’s a real mouthful, but what this legislation represents is a major step towards an open data economy in our increasingly interconnected, online world. The UK and the European Union are already enjoying the benefits of Open Banking systems, so it’s about time we caught up!

The ACCC has given the four major banks from the 1st of February 2020 to the 1st of July 2020 to implement the sharing of consumer data, and will review the rest of the rollout through the year. Other banks and lenders will be ringing in the changes from 2021.

Savings accounts, term deposits and credit cards will be among the first products to join the Open Banking ranks, followed by mortgages and personal loans, and eventually business and investment accounts, retirement savings accounts and trusts.

By 2022, we should have a fully-functioning Open Banking system, and the ACCC will move on to applying the CDR to other sectors such as utilities.

True Transparency

Open Banking is a much more transparent system than we currently have. You will be able to instruct your bank to send your data to other banks, financial institutions and authorised organisations, so that signing up for a new mortgage, personal loan, credit card or bank account will be much simpler.

Instead of chasing up personal indentification documents or printing out page after page of transaction records, you will be able to direct your bank to send your data directly to the new institution on your behalf – a massive time-saver.

You will also find that the process of comparing products and services should become much easier. Working with an experienced and qualified mortgage broker remains the most effective way to get the best possible loan for your situation, as we are in the industry being updated on the latest market changes and credit card movements every day, which means we can direct you towards the loan product (and the lender) that best suits your needs.

However, Open Banking is a massive step in the right direction for a more robust and competitive banking industry overall, and I think we can all agree, that’s good news for borrowers.

The Nitty Gritty: Did You Know?

Relevant privacy legislation applies to Open Banking, and you are always in control of your data – organisations you are involved with can only send or receive your information at your request, and must be authorised under the government’s strict security protocols.

The CDR doesn’t allow for what’s known as write access – that is, you won’t be able to authorise accredited third parties to initiate payments or change account providers on your behalf. While this is part of the legislation in the UK and EU, and may be on the cards here in the future, for now Open Banking is purely a matter of data sharing.

What is the impact of consecutive rate hikes on household budgets?

Open Banking refers to a system where banks and other financial institutions provide access to consumer banking, transaction, and other financial data through the use of application programming interfaces (APIs). It allows third-party developers to build applications and services around the financial institution, enhancing consumer choice and competition.

How long does it take for a rate rise to affect my mortgage repayments?

Open Banking empowers consumers by giving them control over their financial data. It enables them to share their financial information securely with third-party providers, allowing them to access better financial products, services, and deals tailored to their needs and financial situations.

What can I do to prepare for rate hikes?

Yes, Open Banking uses advanced security measures, including encryption and secure APIs, to protect consumer data. Consumers have control over which data is shared and with whom, ensuring their financial information is safeguarded.

How does the RBA’s cash rate affect my mortgage rate?

Open Banking offers financial service providers the opportunity to access a wealth of consumer data, enabling them to create more personalized and efficient services. It fosters innovation and competition in the financial sector, leading to the development of new products and services.

Are there any strategies to mitigate the impact of rate hikes?

Yes, participation in Open Banking is entirely voluntary. Consumers have the choice to share their financial data and can decide which information they want to share and with which service providers.

How does Zippy Financial view Open Banking?

Zippy Financial sees Open Banking as an opportunity to enhance financial services and products for consumers. It allows for a more tailored approach to financial solutions, enabling consumers to make more informed decisions and access better deals and services based on their individual financial situations.

Look out for consumer education campaign coming this year, which is designed to help you work out how Open Banking will impact you, or chat to your broker or financial planner for more information.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.

About the Author:

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.

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Comparing Interest Rates: How to Outsmart Financial Institutions

If you haven’t revisited your home loan in the past couple of years, chances are you’re overpaying. Why? The competition among banks and lenders has reached new heights, and they’re eager to win your business often through discounts, incentives, and exclusive offers for new customers.

But how can you ensure you’re getting the best deal possible?

Enter comparison rates. These are tailored to help you calculate the complete cost of a home loan by incorporating known expenses like upfront fees and ongoing changes in the interest rate. For instance, a prominent Big 4 bank is currently advertising a fixed-rate loan at 6.54% per annum with a comparison rate of 6.95% per annum.

Navigating the labyrinth of rate comparisons between various lenders can be daunting, and that’s where the comparison rate comes in handy. This tool can potentially save you a significant sum, as the gap between a favourable, competitive rate and a burdensome mortgage rate can be as wide as 2% or more, translating to hundreds of dollars monthly.

Bit how much emphasis should you place on comparison rates? Is there a better way to make comparisons?

The Pros and Cons of Comparison Rates

If you are ready to explore better financing options, comparison rates can prove invaluable. Typically, the average borrower glances at the advertised interest rate and assumes that’s what they will be paying. However, the comparison rate aligns more closely with the actual rate you will be charged.

By legal mandate, banks must disclose both the interest rate and the comparison rate for a home loan, encompassing all fees and ongoing expenses. These regulations, instituted years ago, have proven beneficial in theory.

Before their introduction, a bank could advertise an enticingly low-interest rate, only for borrowers to later discover exorbitant annual fees and monthly account maintenance charges. It was akin to booking a budget vacation deal, only to find out that flights, meals, and other essentials were not included, effectively doubling the initial cost.

In the past, a bank might have touted a 4.99% interest rate, but then added a $30 monthly account fee and a $400 annual package fee, totalling an extra $760 per year on your home loan. A home loan with a 5.2% interest rate but without ongoing fees might be the most cost-effective option. Comparison rates were introduced to help consumers make apples-to-apples comparisons in such scenarios.

However, they are not without their imperfections. While they provide greater clarity by accounting for several fees and charges specific to a given loan, they do not include factors such as government charges, redraw fees, or fee waivers.

Comparison rates are calculated based on a loan size of $15,000 over a 25-year term. In 2023, the average Australian loan size is nearly $600,000 which is roughly four times the example used for comparison rates, with an average loan term of 30 years. These rates haven’t kept pace with rising property prices, rendering the advertised comparison rate somewhat realistic.

What’s the takeaway for borrowers?

As a seasoned broker, my advice is to always consider the bigger picture when choosing a lender for your mortgage. Factors to weigh include:

The interest rate

The comparison rate

Ongoing fees

Features like offset and redraw options

Other banking and financial requirements

Incentives and discounts, such as cashback

Benefits like credit card fee waivers

Why is it important to revisit your home loan regularly?

Regularly revisiting your home loan is important to ensure you’re not overpaying, as banks and lenders frequently offer new discounts and incentives.

What is a comparison rate?

A comparison rate helps calculate the total cost of a home loan by including known expenses like upfront fees and interest rate changes over time.

How does a comparison rate differ from an advertised interest rate?

A comparison rate provides a more comprehensive cost of the loan, including additional fees and charges, unlike the advertised interest rate which may only show the interest cost.

How can a finance broker assist in choosing a home loan?

A finance broker can help analyze the market, present suitable loan options, answer questions, and guide you through the loan selection process.

Why might homeowners be overpaying on their home loans?

Homeowners might be overpaying if they haven’t reviewed their loans recently and are missing out on newer, more competitive offers in the market.

What is the best way to ensure you’re getting a good deal on your home loan?

The best way is to compare interest rates and comparison rates from various lenders, consider all associated fees and features, and possibly consult with a finance broker for expert advice.

Navigating this multifaceted landscape can be overwhelming on your own. This is why collaborating with a trusted finance broker can prove beneficial. Instead of sifting through banks independently, we can analyse the market, present you with suitable options, address your questions, and offer guidance throughout the process.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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More Australians Turn to Mortgage Brokers for a Hand Managing Hikes

An avalanche of rate hikes over the past 18 months has supersized home loan repayments, but savvy homeowners are not panicking. In fact, more mortgage holders than ever before are reaching out to mortgage brokers for expert help.

A recent survey by the Mortgage & Finance Association of Australia (MFAA) shows 95% of mortgage brokers are meeting with homeowners who have never used a broker before… and it is a move that is paying off.

The MFAA reports nine out of ten brokers have successfully secured a rate discount for their clients this year. And more than eight out of ten have helped their clients refinance to a new lender.

If you are struggling with mortgage repayments, you don’t have to go it alone.

How Much Could You Slash from Your Home Loan?

Part of a broker’s service involves contacting your current lender to negotiate a lower rate, but if they don’t come to the party, real savings action can lie in refinancing.

Mozo has done the sums on the savings potential of switching from the average variable rates (6.6% for owner-occupiers and 6.96% for investors) to one of the lowest rates on the market. They have found that homeowners and investors in capital cities across the country who switch to a new lender can slash their repayments on average by $474 per month. That is as much as $5,691 annually.

The lowest rate loan might not be available to you in your situation (we would be happy to check), but it does highlight that there are big savings to be made if you can refinance to a lower rate.

What If You Have a Fixed-Rate Home Loan?

You have probably heard about the ‘mortgage cliff’. It is a term used to describe the financial shock that homeowners can face when their super-low fixed rate comes to an end. And we are not out of the woods (or away from the cliff) just yet.

The Reserve Bank of Australia says around one million borrowers will come off a fixed rate over the next 18 months.

A Finder survey shows more than one in ten people with a fixed rate home loan are in the dark about when their fixed rate will end. That matters because skyrocketing interest rates mean the average mortgage holder farewelling a fixed rate could face a $1,677 hike in their monthly loan repayments.

So, if you are on a fixed-rate home loan, it might be worth checking when the fixed rate period is due to end, and if it is soon, check what options are available to you.

Why Are More Australians Turning to Mortgage Brokers?

Due to the recent surge in interest rates, many homeowners are seeking the expertise of mortgage brokers to manage their home loan repayments effectively.

What Benefits Can a Mortgage Broker Offer?

Mortgage brokers can negotiate with lenders to secure a lower interest rate for you. They can also assist in refinancing to a new lender, potentially saving you a significant amount on your monthly repayments.

How Much Can I Save by Refinancing?

According to Mozo, switching from the average variable rates to one of the lowest rates on the market can reduce your repayments by an average of $474 per month, which amounts to as much as $5,691 annually.

What Is the ‘Mortgage Cliff’?

The term ‘mortgage cliff’ refers to the financial shock that homeowners may experience when their fixed-rate period ends, especially in a climate of rising interest rates.

How Can I Prepare for the End of My Fixed-Rate Period?

If you have a fixed-rate home loan, it’s crucial to know when your fixed rate will end. You should explore your options well in advance to avoid any sudden increase in your monthly repayments.

Time to Call the Experts

No matter whether you are feeling the pressures of higher rates, thinking of refinancing or unsure of what is happening with your fixed rate it is important to reach out for expert help. Give us a call today for a helping hand with your home loan.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

SERVICE LOCATIONS

Rate Hikes – is your lender behind them?

The Reserve Bank (RBA) may have kept the cash rate on hold in August but that has not stopped some lenders from hiking their variable home loan rates. Here is how borrowers are fighting back.

Homeowners may be celebrating two months of the RBA cash rate staying on hold, but Mozo reports that some lenders have sneakily hiked their variable home loan rates in July despite the cash rate holding firm. These hikes, known as ‘out-of-cycle rate rises, can fly under the radar.

It is important to keep an eye on what your lender is doing.

Who Is Hiking Rates?

Mozo says ANZ, Commonwealth Bank, Macquarie, Easy Street and Great Southern Bank are among the lenders that have topped up their variable loan rates even though the cash rate stayed on hold. In some cases, the upticks may be as little as 0.03%, but some lenders have lifted their variable rates by as much as 0.15%.

On a $500,000 loan, that could mean paying an extra $750 each year… and right now every dollar counts.

One in Two Have Changed Their Loan Payments

Research by Canstar shows almost half of Australian mortgage holders are navigating higher rates by doing the following:

35% are reducing extra repayments

29% are stopping extra loan repayments altogether

26% are tapping into redraw or offset funds to help with repayments

22% are refinancing to a lower rate loan

12% are extending their loan term

Other changes involve switching to interest-only repayments as well as more drastic moves such as selling a home or investment property.

Be Warned, Altering Repayment Strategies Can Come at a Cost

While the above strategies can help get you through a tough time, it would be remiss of us not to mention that some of them can come at a cost over the long term.

Reducing or stopping extra payments, for example, means you will likely have your home loan longer and then pay more interest.

Likewise, if you tap into redraw or offset funds, you will pay more interest each month.

Last but certainly not least, by extending the term of a $500,000 loan at 6.73% from 20 to 25 years you could cut your monthly repayments by $348. But according to Canstar calculations, it could also mean paying a whopping $123,464 in extra interest over the life of the loan.

What Can You Do?

Those sneaky out-of-cycle rate hikes aren’t just annoying, they can leave you out of pocket while beefing up your lender’s profits. But you don’t just have to wear the cost, the first step is knowing the rate you’re paying.

Check your loan statements or ask us to investigate for you. If you are not happy with the rate, we can help ask your current lender for a discount. And if they don’t come to the party, we can help you weigh up the possible costs of making a switch.

Why Are Lenders Increasing Variable Home Loan Rates?

Despite the RBA keeping the cash rate on hold, some lenders have increased their variable home loan rates. These are known as ‘out-of-cycle rate rises’ and can happen without much public attention.

Which Lenders Have Increased Their Rates Recently?

ANZ, Commonwealth Bank, Macquarie, Easy Street, and Great Southern Bank are among the lenders that have increased their variable home loan rates recently.

How Can These Rate Hikes Affect My Loan Payments?

Even a small increase like 0.15% can add an extra $750 each year on a $500,000 loan. It’s essential to keep an eye on your lender’s actions.

What Strategies Can Help Me Navigate Higher Rates?

Homeowners are using various strategies like reducing extra repayments, stopping extra loan repayments altogether, tapping into redraw or offset funds, and refinancing to a lower rate loan.

Are There Any Long-Term Costs of Altering Repayment Strategies?

Yes, altering repayment strategies like reducing or stopping extra payments can extend the term of your loan and result in paying more interest over the long term.

How Can Zippy Financial Help Me With Rate Hikes?

Zippy Financial can help you understand the rate you’re paying and negotiate with your current lender for a discount. If your lender doesn’t offer a better rate, Zippy Financial can assist you in weighing the costs of switching to a different lender.

We can help you crunch the numbers to reveal which strategy will help you save today – and tomorrow. So, give us a call to find out if your lender is quietly lifting your loan rate and what you can do about it.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

SERVICE LOCATIONS

Do You Have a High Net Worth and are Too Busy to Save Money?

High net worth borrowers generally earn more than they spend, which is obviously a great thing – but it can also be a double-edged sword.

Why? Because it can impact your ability to get finance.

Find yourself complaining that you never have enough time?

Does your ‘To Do’ list grows every day, but you barely seem to tick things off?

Are you running between work, gym, family and other commitments like a hamster in a wheel?

If any of this sounds familiar, you could benefit from having a broker help you get your finances and loans organised.

Why Do High-Income Earners Need Help to Get a Home Loan?

Borrowers with high incomes can find themselves spending more than they need to because they can afford a home loan.

They don’t need to check how much they’re paying for their internet service or shop for the cheapest groceries because their budget can afford it.

An extra $20 here and $50 there isn’t worth worrying about for you, the way it might be for someone living week-to-week on lower wages.

Where this can cause problems is when you want to apply for finance.

In fact, high-income earners can have a lot more trouble than they thought they would when they try to secure finance.

This is because with a high income comes high disposable expenditure – something banks don’t like at all.

So, What Can You Do About It?

The first step is to work out what you’re spending right now, and if that amount could be considered “too much” in the eyes of the bank.

But What’s “Too Much”?

Here’s the thing: lenders generally assess your spending using Household Expenditure Measure (HEM). This formula gives the lender an amount as a guide that the average person spends…

In your location (the HEM varies depending on the city you live in)

With your family size (it changes based on how many kids you have)

Your income (lenders assume a higher income means higher spending)

By figuring out how much it should cost you to live, the lender can look at your salary and determine how much you’ll have leftover to service the loan.

Lenders assess your spending against the HEM, and if your spending is way higher than the HEM guidelines, it can show up red flags.

Let’s say, for instance, you’re a couple with one child living in Sydney, and you earn $250,000 combined.

The HEM threshold might suggest spending of around $5,000 per month. But your actual spend is $9,000 per month.

The lender might view your spending habits as reckless, as they exceed the HEM by a large margin… and that’s not someone they want to loan hundreds of thousands of dollars to.

This Is Where an Experienced Mortgage Broker Can Help.

We can help you adjust your spending habits, to become a little more lender-friendly.

Don’t worry, you won’t be living on baked beans and toast. But you may need to reign in some of those recurring, non-essential expenses for a few months, so we can help you produce bank statements that reassure your lender you’re a good ‘credit risk’.

We help you restructure your debt.

You might also have large credit card limits thanks to your income, which we may need to reduce. Many people don’t realise, but even if you only owe $100 on a $20,000 card, the lender will assess this card as though it’s fully maxed out – bringing down your borrowing capacity. You can always bump the limit back up again down the track if you need access to more credit.

We help you find the best lender for your specific situation.

Every lender has a different loan policy, criteria and appetite for risk. As experienced mortgage brokers, we can assess your situation and help match you with a lender who will be most likely to approve your loan, as their policies suit your situation.

For every problem, there is a solution, and with our depth of knowledge and experience, we can help you move through these obstacles and become “finance ready”.

Why do high-income earners face challenges in securing finance?

High-income earners often have high disposable incomes, leading to higher spending habits. This can be a red flag for banks, especially if spending significantly exceeds the Household Expenditure Measure (HEM) guidelines.

What is the Household Expenditure Measure (HEM)?

HEM is a benchmark used by lenders to estimate a borrower’s living expenses. It varies based on location, family size, and income, helping lenders determine how much a borrower can afford to repay.

What role does a mortgage broker play for high-income earners?

A mortgage broker can help high-income earners restructure their debts, negotiate with lenders, and find the best loan options that suit their financial situation.

How can high-income earners adjust their spending habits?

They can start by reviewing their monthly expenses, identifying non-essential spending, and cutting back to reduce their overall expenditure.

Can high-income earners still maintain their lifestyle while becoming finance ready?

Yes, the goal is to make strategic spending adjustments without significantly compromising their lifestyle. This can be achieved by cutting back on non-essential expenses and being more mindful of spending patterns.

What long-term benefits do high-income earners gain by becoming finance ready?

Besides improving their chances of loan approval, they can also achieve better financial management, potentially save more money, and enhance their overall financial health.

The bonus is, you’ll probably save quite a bit of money in the process, and our service is 100% free for you, as we’re paid by the lender. Speak to one of our friendly team members and get the ball rolling on your loan application today!

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

SERVICE LOCATIONS

How to Get Pre- Approved Finance?

Many borrowers are complaining that banks are slow to process pre-approvals. Why is this happening? Is there anything you can do to speed up your pre-approval?

A home loan pre-approval means that a lender has agreed, in principle, to lend you a specific amount of money towards the purchase of a property. But they have not proceeded to a final or unconditional approval yet.

Getting a home loan pre-approval is an essential prerequisite to getting serious about looking for a property to buy. It will give you the confidence to buy as you know your limits. It can also allow you to bid at an auction with a set budget in mind. Overall, it helps give you a budget to shop within and give you the peace of mind of knowing if your offer is accepted, you are very likely to be approved for a home loan.

What do you do now that pre-approvals have become difficult to get?

The Pre-Approval Shortage

The issue is that many banks have stopped doing pre-approvals. They have taken this action because they have been so overwhelmed with demand and they have not had the resources to service potential new borrowers.

The banks that have continued to proceed with pre-approvals have had to take on extra volume, which is making their response and turnaround times a lot slower than usual.

Driving this home loan demand has been the record activity the market has seen by active first-time buyers. Low interest rates have also meant that existing homeowners have been refinancing for a better deal than they have.

Furthermore, the super low interest fixed rates have encouraged a massive amount of people to apply to fix their rates.

Some banks have got themselves into a sticky situation during covid and lockdowns as they have staff overseas in bulk call centres such as India and the Philippines. These regions have been hit hard by the pandemic and in turn, put an enormous amount of pressure on banks as they tried to equip staff to work from home in offshore countries. This has contributed to the slower service levels.

In some positive news, some banks have since decided to bring their credit departments back to Australia, but it has been a lengthy process of recruiting and training – so not an immediate solution.

This can explain the why. But if you are one of the unlucky borrowers who has applied for a home loan and are slow to get approval, you can miss opportunities to buy at an auction, secure a deceased estate or take action on a property for sale by motivated sellers who want a quick sale.

If this sounds like you, and you do not want to pay more than you need to in a rising market, time is of the essence. Getting a fast pre-approval can happen, and here is what you need to do:

1. Be organised and prepared from the outset. This means getting all your paperwork organised including your payslips and tax returns.

2. Do not start looking for a property until you have got your pre-approval. If you find your dream home, it can add pressure as you will feel compelled to act fast and make an offer, but this can add a lot of stress to the process.

3. Work with a mortgage broker that understands efficiency and speed. If you delay getting all the documents to them, they are hamstrung and your application can’t progress.

4. Ask your mortgage broker to do the research for you. Good mortgage brokers have exceptionally good systems and good relationships with banks and their credit managers, so they can find you a bank that best suits your needs and has the fastest turnaround times.

5. You can fast-track the process by being super organised on your end. If you get a list of the supporting documents required and provide everything correctly the first time to the mortgage broker, it can streamline the process significantly.

It is also important to let your mortgage broker know if you need a fast turnaround time. Under best interests’ duty, it is the mortgage broker’s obligation to give you the cheapest 3 options for you, which are not always the fastest loans.

Remember – mortgage brokers are on your side. If there is some urgency, make sure you advise them. They will know the majority of the turnaround times for the banks and can match you with the most suitable lender.

Why Are Banks Slow to Process Pre-Approvals?

Many banks have stopped offering pre-approvals due to overwhelming demand and limited resources. Some banks have also faced challenges due to offshore call centers affected by the pandemic.

What is a Home Loan Pre-Approval?

A home loan pre-approval means that a lender has agreed, in principle, to lend you a specific amount of money towards the purchase of a property. However, this is not a final or unconditional approval.

How Can I Speed Up My Pre-Approval Process?

Be organized and prepared with all your paperwork, including payslips and tax returns. Work with a mortgage broker who understands efficiency and speed, and be clear about your need for a fast turnaround.

What Are the Benefits of Getting Pre-Approved?

Pre-approval gives you the confidence to buy as you know your limits. It allows you to bid at an auction with a set budget and gives you peace of mind that your offer is likely to be approved for a home loan.

How Can a Mortgage Broker Help in Getting Pre-Approved Quickly?

Good mortgage brokers have systems and relationships with banks that can expedite the pre-approval process. They can also guide you on the required documents and help you choose a lender with faster turnaround times.

What Should I Do If I Need a Fast Turnaround Time?

Make sure to inform your mortgage broker about the urgency. They can then match you with the most suitable lender based on turnaround times.

If you have any questions about the home loan process and getting pre-approval, feel free to get in contact with our friendly team today.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

SERVICE LOCATIONS

Will the Interest Rate Hikes End Soon?

We have had a lot of interest rate rises over the last few months, with the cash rate now sitting at 1.85%. That is 1.75% higher than it was at the beginning of the year!

The cash rate determines the interest rate you will pay on your home loan, so a higher cash rate means a higher mortgage repayment. At the moment, on an average $600,000 loan, borrowers are paying around $600 more per month than they were six months ago, as a result of these interest rate increases.

Instead of adding to all the doom and gloom that we are all reading about, I want to add something positive to the conversation… or at the very least, I hope to inspire you to get back in the driver’s seat of your finances, so that you are not paying more than you need to for your home loan.

How High Are Interest Rates Likely to Go?

Nerida Conisbee, chief economist at Ray White Group, says that as inflation starts to pull back, so too does the need to raise interest rates.

“Importantly, the expectation of how high the peak will be continues tock,” she said in a recent report. “A few months ago, it was expected to be well over 4%.”

Now, expectations are changing. I’ve been saying for the last few months that I believe the cash rate will likely peak in the 2’s. I don’t believe the cash rate will reach 3% or above, as I think the massive increases that we have had in the last six months will do their job of keeping inflation in check.”

In just the last week or two, we have begun to see banks, economists and other industry experts start to share their forecasts of where they think interest rates will go. Interestingly, a number of them are predicting rates will settle and perhaps even start to fall next year.

Well-known chief economist at AMP, Shane Oliver, agrees that the cash rate will “peak with a two in front of it rather than a three”. MortgageBusiness reports that Oliver believes the cash rate will go no higher than 2.6%. The Commonwealth Bank also expects the cash rate to peak at 2.6% by the end of 2022, while NAB forecasts 2.6% by February 2023.

Should You Fix Your Home Loan Rates?

It’s a good time to consider what action you should take with your home loan. Here’s my suggestion for you, depending on your current situation:

If you currently have a fixed rate loan: check the date that it expires and make a note in your calendar before the expiry to compare your options in the home loans market. If you are a Zippy client, we already have a note in our calendar. We can then review the market and come back to you with options when your fixed contract ends.

If you have a split rate (part fixed/part variable): contact us and we can run the numbers on your specific situation, and provide guidance on the best next steps for you.

If you currently have a variable rate loan: you may be considering fixing. I want to urge you to consider the overall cost of fixing into a high fixed rate, as over the long-term, you may lose out if rates don’t go higher than high 4.5% to 5%.

What is the current status of interest rates?

The recent rise in interest rates has brought the cash rate to 1.85%, which is 1.75% higher than it was at the beginning of the year.

How are homeowners affected by these rate hikes?

Homeowners with an average loan of $600,000 are now paying around $600 more per month than they were six months ago due to these interest rate increases.

What are the predictions for future interest rates?

Experts like Nerida Conisbee and Shane Oliver predict that the cash rate will likely peak in the 2% range and may even start to decline next year.

Is it advisable to fix home loan rates now?

Those with variable rate loans might consider fixing, but it’s essential to weigh the long-term costs. Fixing into high rates now might not be beneficial if rates start falling soon.

What should I do if I currently have a fixed rate loan?

If you currently have a fixed rate loan, it’s advisable to check the date it expires and compare your options in the home loans market before the expiry.

What services does Zippy Financial offer?

Zippy Financial offers professional guidance to help clients make informed decisions about their home loans and other financial matters. They can provide insights on whether to fix or keep a variable rate, among other services.

If you fixed your rate in 2020 or 2021, then you’re on a winning track, but people fixing into high fixed rates now could lose out, if rates start falling sooner than later. In my 30-plus years in the banking and finance industry, I’ve seen more people lose on fixed rates than win. If you’re not sure what action to take next and you want some professional guidance to help you make the best decision for your situation, contact our team today for an obligation-free chat.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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The Tax on Luxury Cars Has Got a Little Cheaper

Have you got your eye on a luxury car or perhaps something that is a little more fuel-efficient and environmentally friendly? There is a new tax change that could help you buy something a little more la-de-da.

Have You Heard About the Luxury Car Tax (LCT) Threshold?

Basically, if you buy an imported car with a GST-inclusive value that is above the LCT thresholds, the tax man slugs you with an extra 33% on the exceeded amount (minus the GST component). But the good news is the LCT thresholds have just been given a decent boost – the third one in a row.

From the 1^st of July 2022, the threshold has been boosted by $5,257 for $84,916 for fuel-efficient vehicles, and by $2,697 to $71,849 for other regular vehicles (all include GST).

According to the ATO, a fuel-efficient vehicle is one with fuel consumption that does not exceed 7.0L/100km on the combine cycle.

So, before your fixed period ends, get in touch with us and we can help you explore your options. This takes us to refixing and refinancing.

How Does the LCT Threshold Work?

This threshold boost is not just good for people wanting to buy a vehicle under the threshold, it will also make cars above the threshold more affordable too.

For example, say you want to buy a Tesla Model 3 Performance which has a GST-inclusive price of $93,325. Under last financial year’s LCT threshold of $79,659 for fuel-efficient vehicles, you would have paid a LCT tax of $4,100 (exceeds LCT threshold by $13,666, subtract GST component paid, multiply by 33% – $4,100 LCT).

But now that the LCT threshold to fuel-efficient vehicles has been boosted to $84,916, you would only pay LCT of $2,522 ($8,409 – GST components paid x 33% = $2,522).

And if you wanted to avoid paying the LCT altogether, you could instead purchase a Model 3 Long Range, which has a GST-inclusive price of $81,725. That means this financial year it is below the LCT threshold, but last year you would have been slugged with an LCT of $620. Seeking advice on financial planning can help navigate such considerations effectively.

What is the Luxury Car Tax (LCT)?

The Luxury Car Tax (LCT) is a tax imposed on imported cars with a GST-inclusive value that exceeds certain thresholds. The tax rate is an extra 33% on the amount that exceeds the LCT threshold, minus the GST component.

What are the new LCT thresholds effective from July 1, 2022?

From July 1, 2022, the LCT threshold has been increased to $84,916 for fuel-efficient vehicles and $71,849 for other regular vehicles. Both amounts include GST.

How does the LCT threshold affect the cost of luxury cars?

The increase in the LCT threshold makes luxury cars more affordable. For example, if you want to buy a Tesla Model 3 Performance, which costs $93,325, the LCT would now be $2,522 compared to $4,100 under the previous threshold.

What qualifies as a fuel-efficient vehicle?

According to the ATO, a fuel-efficient vehicle is one with fuel consumption that does not exceed 7.0L/100km on the combined cycle.

How can Zippy Financial assist me in financing a luxury car?

Zippy Financial can help you explore various finance options to purchase a luxury car, whether for business or personal use. They specialize in home loans, property investment, and vehicle finance.

Are there any vehicles that are now below the LCT threshold due to the increase?

Yes, some vehicles like the Tesla Model 3 Long Range, which has a GST-inclusive price of $81,725, are now below the new LCT threshold for fuel-efficient vehicles.

Get in Touch to Explore Your Finance Options

If you have got your eye on a particular vehicle, luxury or not, and you would like to explore some finance options to help purchase it, give us a call! We can help you find the right loan for your circumstances, depending on whether the vehicle is for business, personal use or a mix of both.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

Explainer: Open Banking, and What It Means for You

The Open Data Economy

True Transparency

The Nitty Gritty: Did You Know?

Frequently Asked Questions

What is the impact of consecutive rate hikes on household budgets?

How long does it take for a rate rise to affect my mortgage repayments?

What can I do to prepare for rate hikes?

How does the RBA’s cash rate affect my mortgage rate?

Are there any strategies to mitigate the impact of rate hikes?

How does Zippy Financial view Open Banking?

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Comparing Interest Rates: How to Outsmart Financial Institutions

The Pros and Cons of Comparison Rates

By legal mandate, banks must disclose both the interest rate and the comparison rate for a home loan, encompassing all fees and ongoing expenses. These regulations, instituted years ago, have proven beneficial in theory.

What’s the takeaway for borrowers?

Why is it important to revisit your home loan regularly?

What is a comparison rate?

How does a comparison rate differ from an advertised interest rate?

How can a finance broker assist in choosing a home loan?

Why might homeowners be overpaying on their home loans?

What is the best way to ensure you’re getting a good deal on your home loan?

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More Australians Turn to Mortgage Brokers for a Hand Managing Hikes

How Much Could You Slash from Your Home Loan?

What If You Have a Fixed-Rate Home Loan?

So, if you are on a fixed-rate home loan, it might be worth checking when the fixed rate period is due to end, and if it is soon, check what options are available to you.

Frequently Asked Questions

Why Are More Australians Turning to Mortgage Brokers?

What Benefits Can a Mortgage Broker Offer?

How Much Can I Save by Refinancing?

What Is the ‘Mortgage Cliff’?

How Can I Prepare for the End of My Fixed-Rate Period?

Time to Call the Experts

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Rate Hikes – is your lender behind them?

Who Is Hiking Rates?

One in Two Have Changed Their Loan Payments

Be Warned, Altering Repayment Strategies Can Come at a Cost

What Can You Do?

Frequently Asked Questions

Why Are Lenders Increasing Variable Home Loan Rates?

Which Lenders Have Increased Their Rates Recently?

How Can These Rate Hikes Affect My Loan Payments?

What Strategies Can Help Me Navigate Higher Rates?

Are There Any Long-Term Costs of Altering Repayment Strategies?

How Can Zippy Financial Help Me With Rate Hikes?

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Do You Have a High Net Worth and are Too Busy to Save Money?

Why Do High-Income Earners Need Help to Get a Home Loan?

So, What Can You Do About It?

But What’s “Too Much”?

This Is Where an Experienced Mortgage Broker Can Help.

Frequently Asked Questions

Why do high-income earners face challenges in securing finance?

What is the Household Expenditure Measure (HEM)?

What role does a mortgage broker play for high-income earners?

How can high-income earners adjust their spending habits?

Can high-income earners still maintain their lifestyle while becoming finance ready?

What long-term benefits do high-income earners gain by becoming finance ready?

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How to Get Pre- Approved Finance?

The Pre-Approval Shortage

Frequently Asked Questions

Why Are Banks Slow to Process Pre-Approvals?

What is a Home Loan Pre-Approval?

How Can I Speed Up My Pre-Approval Process?

What Are the Benefits of Getting Pre-Approved?

How Can a Mortgage Broker Help in Getting Pre-Approved Quickly?

What Should I Do If I Need a Fast Turnaround Time?

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Will the Interest Rate Hikes End Soon?

How High Are Interest Rates Likely to Go?

Should You Fix Your Home Loan Rates?