Interest Rates

The RBA on Wednesday left rates on hold on what most economists believed to be a 50/50 call.

Only a month ago nearly all analysts were predicting stable rates until year’s end, but following the release of various economic data including strong inflation and retail figures, the tide turned very quickly.

As to what will happen in May and beyond? The change in expectation witnessed in April is further proof that interest rate speculation is exactly that!

Industry News

What changes to Super are doing to the Real Estate Market

There is plenty of evidence to suggest the recent changes to superannuation have lead to an amazing jump in real estate listings in the last few months.

The changes that have sparked this turnaround are that money received from a taxed super fund will be tax free for people over the age of 60 and in addition, transitional arrangements allows individuals to make up to $1m in after tax contributions before 1 July 2007.

As a result many property investors are selling their investment properties to gain the cash to place in their superannuation fund. Some real estate agents are reporting a 100% increase in listings against same time last year and most sellers are reported to be investors rather than owner occupiers.

So who is buying?

We are not sure whether this is an industry trend or not, but at Mortgage Force we have noticed a big increase in investor loans vs owner occupied loans. So on one hand we have a big increase in the number of investors selling whilst another group of investors are seeing it as a great opportunity to buy good investment property at reasonable prices.

Whilst it sounds contradictory it just depends on your situation and is probably a win win situation for both parties.

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Product News

Interest in Advance Loans - Reduce the interest rate and tax bill in one simple step.

Yes, it’s that time of year again when investors start looking at their tax situation and give consideration to pre-paying interest for the 2007-08 financial year.

By pre-paying the next financial year’s interest on an investment loan prior to 30 June, borrowers may be able to claim the interest on their 2006/07 tax return.

This lump sum claim may be of benefit to those expecting a large tax bill.

An additional benefit of pre-paying interest is that borrowers should receive a reduction in the interest rate for doing so.

One lender is providing discounts of 0.2% pa for prepaying interest and remember that you are now able to fix in interest in advance loans for as long as 5 years (you prepay the interest annually).

As you can imagine, pre-paid interest loans are very attractive in the lead up to June 30 and for that reason most lenders have a cut off date around mid May for pre-paid interest applications - so now is the time for people to give it consideration.

We recommend all our clients talk to their accountant or financial advisor to see if pre-paying interest will be of benefit. If it is, please make sure you or your clients don’t leave it to the last minute. It’s usually a simple task to organise a pre-paid loan but the cut off times are critical and cannot be extended. It’s best to organise it early so everything is in place and the transaction can take place when required, usually late June.

For more details please contact me by email or phone as listed above.

P.S. Remember to look at Rate Lock

If you are contemplating a fixed rate loan, you should also consider taking out a “Rate Lock” that will ensure the fixed rate quoted at the time of application will be the rate charged upon settlement of your loan. This is an excellent form of insurance against rate rise.

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New Product Alert

Equity Finance Loans

A new product has hit the market that is receiving lots of press and it’s called an Equity Finance Mortgage (EFM).

Whilst not for everyone, the EFM provides an avenue for struggling borrowers to reduce their mortgage repayments and for buyers to purchase a more expensive property than they may otherwise be able to afford.

This is how it works.

An EFM works in conjunction with a traditional home loan. You buy a house for $500,000. 75% (or $375,000) of the purchase price is provided by way of a traditional mortgage, 5% ($25,000) by way of client deposit and the other 20% ($100,000) by way of an EFM.

If refinancing and your house is worth $500,000 up to $100,000 can be provided by way of EFM. If your existing mortgage was $400,000 you could use the $100,000 EFM to reduce your interest paying mortgage to $300,000 and therefore reduce your monthly interest bill.

In either case no interest is charged on the EFM loan and you don’t have to make any repayments throughout the term of the EFM loan. However, when you sell the property or repay the EFM, you repay the EFM plus up to 40% of any increase in the value of the property.

There is much more to know about this product including what happens if the property value falls or what if you require additional borrowings in the future? If you are interested in finding out more, email or phone me as listed above and I’d be pleased to explain the EFM in more detail.

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Office News

CONGRATULATIONS TO LINDA CLUCAS ON CELEBRATING HER 5^TH ANNIVERSARY WITH MORTGAGE FORCE. 

Linda joined us after working in financial markets for over 10 years and has been working as a Mortgage Consultant for the past 5 years.  Her clients appreciate her hard work to help them achieve their goals and the friendly manner she shows.  Thanks to Linda for her loyalty and contribution to the team!

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We trust you continue to find MF News useful. If you have any suggestions as to how it can be improved, please email us at info@mortgageforce.com.au and let us know.

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