ANZ goes it alone.

Our world seems to be one in which interest rates go up!

ANZ has independently increased home loan rates for the first time since announcing, some months ago, that they were de-coupling from RBA rate decisions.

ANZ now reviews rates on the second Friday of each month - long enough after any RBA decision, which is always announced on the first Monday of the month. However this is the first time that ANZ has moved rates since this policy changed.

It hasn't proved tempting enough for any other lenders to make a move with them though. 

Before the GFC, all four major lenders had standard variable home loan rates with no more than 0.01% difference between them. This is where those standard variable rates sit now with the Big 4:

ANZ        7.42% pa

CBA        7.41% pa

Westpac  7.46% pa

NAB       7.31% pa

The discount offered by each of these lenders for loans over $250000 (under 'Wealth', 'Advantage', 'Breakfree' packages) also varies. One lender offers greater discounts through mortgage brokers than their branch network, reflecting the lower cost of the channel.

Which one? You'll have to contact us to find out!

Investment loans and pre-paid interest

If you have an investment loan and some spare cash, you might consider pre-paying interest to bring forward your tax deductions.

Basically, if you pay all of next year's interest in June (which will be here before we know it) you may claim the entire amount of interest in this year's tax return.

When would you do this?

• You'll earn less next year than this: If you're in the top tax bracket this year and believe that next year your income will be less, dropping your top marginal rate of tax, you might want to claim now so you get the better tax refund (speak to your accountant about what it might mean in dollar terms) OR
• Tax cuts are going to come into effect next year: rather than wait and get a refund at the lower tax rate, claim the interest expense now and get the better refund.

Check out the ATO's Rental Properties publication to confirm their view of your individual situation.

The interest rate is fixed for at least one year, although it's possible to opt for a longer term fixed rate (say 3 years). Just make sure you will have the cash flow available every year to pre-pay the interest. What you don't want is to find you can't pay it next year as you would have to break the fixed rate loan term, which can incur hefty costs.

The best bet is to talk to your accountant about the concept NOW so you can plan accordingly. If it's a good idea in principle, then speak to your mortgage broker (or us) to find out if your current lender offers this option and/or if there's a better deal available elsewhere. It's still a very competitive market out there for loans; you might just save some cash as well as get a bigger tax refund. But you need to get moving - if you do need to arrange a new loan for this purpose, allow enough time for it to be processed before 30th June - please!.  (It's not a great idea to make the decision on the 15th June as it's unlikely it will happen in time and then you're just paying all your interest upfront with no benefit.)

If you'd like to talk about it some more, feel free to get in touch with us. We'd be happy to help.

First NAB broke up with the other major banks, and now....

it seems all the banks have broken up with the Reserve Bank.

We've all been put on notice (in case you hadn't worked it out) that no longer will interest rates move when the Reserve Bank says they should. In fact the cash rate that the RBA sets is likely to become increasingly irrelevant, especially to you and me.

Not long ago, just a couple of years, there was NO difference in standard variable rates between the banks (well, maybe 0.1%). Now they're all moving in different directions.

Which is, frankly, an excellent reason to use a mortgage broker. How else are you going to know who's doing what? You could surf the net for a weekend - or have a life! Trust me, it's very very difficult to find what you're looking for on a bank's website. We should know - that's what we spend many hours each week doing!

When combined with Credit Licensing (meaning that brokers are now licensed by ASIC) brokers suddenly find themselves more relevant than ever. If you know someone who is thinking of taking out a loan, they should speak to a professional - and we'd be happy to help! Please refer them to us and we will take good care of them.

(If you didn't know about credit licensing, you should, as anyone you deal in obtaining credit - even Harvey Norman's interest free terms - has to be licensed. Find out more here: http://www.asic.gov.au/asic/asic.nsf/byheadline/Credit+regulation+-+background?openDocument )

In an alternate universe...

banking deregulation didn't happen and the government controls the interest rates charged by all banks. The variable rate is 8.5% in 2012.

There are no basic variable loans, no lines of credit, investment loans cost more and you need to book an appointment with your bank manager three months in advance.

This is because there is no competition, since all banks charge the same rate. Why try to be different?

In this, our actual universe, the government has no say at all in what the banks do with their interest rates. It's a double edged sword of course; if banking hadn't been deregulated in the '80s, there wouldn't have been the type of innovation that has driven the Australian mortgage market to be one of the most sophisticated in the world.

With deregulation, though, we are somewhat at the mercy of the banks' bottom line. (How many times do we need to say it? The only way to win with a bank is to be a shareholder, as that is clearly where their focus lies.)

Sorry but in this universe, the government can only use the media to try to shame them into 'doing the right thing' by their borrower customers.

Of course, doing the right thing for these customers is a completely different animal from doing the right thing by investor customers and/or shareholders.

And, at the end of the day, the interest rate is important but it's not the only thing. (If you don't get this, come see us......)

Why isn't this on the front page?

Just what every bank customer should know about.
http://www.smh.com.au/business/protecting-the-profit-margins-20120130-1qpre.html

Who do you trust?

Our clients sometimes comment that they're asked 'why would you use a mortgage broker?'. Presumably those who ask just go to their banks and trust that they're led in the right direction.

This trust could be misplaced, if you look at the current issues several (all?) banks are facing.

First up, provision of Key Fact Sheets for home loans became mandatory (when requested of a lender by a customer) on January 1. And yet consumer group Choice recently ran a shadow shopping exercise and found that not one bank provided them. Hmmmm....

Next, Bankwest is under fire from disgruntled business banking customers whose loans have been called in early, despite them not being in breach of their loan agreement. Nationals Senator John Williams has called for a federal enquiry into the bank's aggressive policies since its takeover by Commowealth Bank in December 2008. A class action suit is being prepared. Uh-oh.

CBA has also been in the headlines with ASIC very unhappy about recent advertising which advertised home loan rates applicable to Wealth Package holders without disclosing or including the annual package fee of $350. CBA reckon that package fees don't count. (Oh really? I bet the competitors rates shown in the ad included their fees.) The bank eventually backed down in response to what ASIC called "concerns that the rates used in ads were incorrect and potentially misleading".


So, how trustworthy is your bank? 


Some other 'issues' which we have recently resolved with lenders (especially those mentioned here) on behalf of our clients include: refund of overcharged Lenders Mortgage Insurance premium ($1300) to our first home buyer clients and a refund of over $6000 in overcharged interest, which we picked up when reviewing our existing client's home loan. ('Hang on, that's not the loan product we settled for you....').


So, why would you use a mortgage broker again?